To read the report released this week by the American Beverage Association (ABA), the Alliance School Beverage Guidelines have been an unqualified success in reducing the calories available to schoolkids. In a joint venture between the American Heart Association and the William J. Clinton Foundation (together, the Alliance for a Healthier Generation), the ABA, and the three major global soft drink companies, the guidelines required that beverages available for sale at elementary, middle and high schools be severely limited. And they have been, says the ABA, to the tune of a 95% reduction in full-calorie sodas shipped to schools and a 72% reduction across all categories sold by bottlers for Coca-Cola (KO), PepsiCo (PEP) and the Dr. Pepper Snapple Group (DPS).
Full-calorie soft drinks were out altogether; for high schools and some middle schools, sports drinks and diet sodas were fine but were limited to 12-ounce serving sizes. All beverages were limited calorically, with milk the highest at 150 calories for eight ounces; juice, without additional sweeteners, at 120 calories for eight ounces; and "other drinks" at 66 calories per eight-ounce serving. In elementary and middle schools, the sale of any beverage other than water, milk and no-sugar-added fruit juices is prohibited entirely.
The ABA, through the economic and public policy research firm that wrote its report, is pleased as fruit punch with itself for meeting these goals. Its press release touts the 88% decline in beverage calories at schools. The conclusion to the report reads, "This report demonstrates that the beverage industry succeeded in changing the beverage landscape for our country's schoolchildren... This success is due to the massive nationwide effort by the beverage industry, in concert with their school partners, to overhaul the beverage choices available in schools."
In several places throughout the report, which will be the last one put out by the group given its stated success in reaching its goals, the bottlers pointed out how very difficult the whole endeavor was. Oh, the time, the effort ("the challenges associated with educating and training bottlers and schools alike, revising contracts between bottlers and schools, and reconfiguring product lines and equipment") and the money ("the beverage industry has invested thousands of hours and millions of dollars in implementation") it took to achieve these caloric declines!
A Word From the President
The ABA isn't the only one singing the praises of the thousands of hours and millions of dollars in investment that resulted in less revenue for bottlers. President Bill Clinton was quoted in the press release, too; his eponymous foundation is one of the three prime movers behind the initiative. "A critical component of the Alliance's national effort to end childhood obesity has been our work with the beverage industry to reduce the amount of calories our kids consume in schools," he said.
The Center for Science in the Public Interest agreed, with slight reservation, saying in a statement that the organization's members "congratulate the beverage industry for working to remove sugary sodas from schools. Together with stronger state laws and local school wellness policies, the country is making good progress in getting sugary drinks out of schools." (Can you see the "but" coming?) "But, there is still much work to be done... It's time to pass national legislation to finish getting sugary drinks out of schools and to also address junk foods."
Oh yes, junk foods. Given all this terrific effort to remove caloric beverages from the vending machines and other sales outlets on school grounds, that must mean that children in our schools are consuming only healthful foods and drinks, and the soda companies' revenues must be dropping precipitously, yes?
Problem Solved, Right?
Wait a minute. When children don't consume soda from school vending machines, that must mean they aren't consuming soda or sugary beverages at nearly such high rates, right? This should be bad for the beverage companies' bottom lines. After all, school-aged children constitute an enormous market for these corporations. In 1999, a USDA report showed that while children under age five consumed only about five ounces of soft drinks a day, school-aged children consumed between 15 and 30 ounces each day on average. (It's worth noting that highest number is for middle- and high-school-aged boys; the girls in that age range consumed "only" about 18 ounces of soda daily.)
Between the time that data was gathered and 2006, when the Alliance School Beverage Guidelines were established, a reasonable guess would be that soda consumption only increased. Obesity rates, linked in many reports over the past decade to soda consumption, continued to rise, along with other diseases linked to high-sugar diets, like childhood heart disease and Type II diabetes. In 2005 and 2006, soda companies' revenues were on the rise. Pepsi's revenue increased 20% between 2004 and 2006; Coca-Cola's revenue rose almost 11% in the same period.
To hear all this talk of struggle and success, a person would expect some revenue shortfalls -- and would expect them to be blamed on schoolchildren. And yes, Coca-Cola did see a decline last year of about 3% over 2008. However, revenue was still up 47% since 2004, not half bad. At Pepsi, revenue fell just a smidgen ($20 million) in 2009 from 2008 and was, yes, 47% higher than in 2004. I searched the companies' 10-K reports for mention of the hurt brought on by the Alliance School Beverage Guidelines. I didn't find any.
Commie Sin Taxes Work
You'd expect to find mention of declining sales thanks to soda-abstinent children, were that ever a real worry for these companies, especially after the inflammatory statements made by Coke's CEO when President Barack Obama suggested that he would support a tax on soda. How inflammatory? He compared Obama's ideas to Communism. Yet these taxes have been shown to decrease consumers' purchases. This leads me to believe that if a measure meant to curb soda consumption actually worked, the beverage companies would oppose it, loudly and often.
I asked Susan Neely of the ABA about this: Did the commitment to these new guidelines affect the soda companies at all? Her answer was an unequivocal NO.
"Before we enacted these guidelines, the school market was less than 1% of the overall beverage industry," Neely said. "It has not had any real impact on the beverage companies." In her view, the changes are largely symbolic, showing the industry's commitment to schools as "sacred places to teach children how to have healthy behavior." The fact that there is "almost no impact on beverage companies" is a selling point for the companies whose interests her organization represents.
One data point illuminates how little soda there was to take out of schools. "In 2004, high schoolers were drinking one can of soda a week in schools," said Neely. Now it's about 1 1/2 cans of soda a year. But it's hardly reflective of any actual shift in high schoolers' total soda consumption.
Where Does All the Soda Go?
I wasn't able to find any data about where children are still getting their soda fix. Someone is drinking all that soda, after all, probably at the fast food restaurants and convenience stores located on the drive between childrens' homes and schools. Or it could be the supermarkets where parents buy snacks for after-school activities and lunchbox treats. It's pretty obvious, though, that these guidelines (nice token though they may be) are not reducing the actual caloric intake of children overall.
Part of it, as the CSPI notes, is the junk food that's still available in vending machines and school cafeterias. Sodas may be empty calories, but cookies, candy bars and chips are empty calories plus fat and lots of fun chemicals, too. Pepsi, especially, has a big stake in the other vending machine business with its Frito-Lay division.
And then there are school cafeterias, where so-called "flavored milk" is pushed on children as a healthy choice, even though, as I wrote in November, the amount of added sugar in a carton of chocolate milk is equal to the maximum amount the American Heart Association recommends children should consume in one day. The other choices on a child's lunch tray are often packed with sugar, unhealthful white flour, poor-quality fats and preservatives, as many organizations have noted, but most recently British chef Jamie Oliver, in his virally famous TED talk. In that speech, Oliver has a helper bring out a wheelbarrow full of sugar cubes to illustrate just how much sugar is in these daily chocolate milk cartons over a year, or the five years a child is in elementary school. It's a lot.
No matter how few of U.S. school children's calories are coming from the soda companies' vending machines on school property, the data indicate children aren't eating and drinking fewer calories each day. As revenues for soda, fast food and packaged food companies rise, so does incidence of childhood obesity and other diet-related diseases. Unlike the ABA, I'm not ready to call this a victory.
Improve your investing savvy with the right financial toolset.View Course »