The Economy

Good Week/Bad Week: Morning Becomes Electric

General Mills set to ramp up marketing of sugary cereals to kids; sales of Kevlar to pre-school teachers skyrockets. Plus: Bulgarians nix inflated ...
John GoffJuly 1, 2005

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While Good Week/Bad Week is based on true news items, much of the material contained in the article floated up in our alphabet soup this morning. When perusing this column, litigious types should refrain from getting their knickers in a twist. Side effects from reading Good Week/Bad Week may include irritability, drowsiness, or an overwhelming sense of disbelief and/or incredulity. Go with it.

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Good Week:

General Mills

Now here’s a novel corporate approach to warding off potential lawsuits and/or regulatory action. This week, General Mills Inc., the $11 billion-in-revenues purveyor of cereal and snack foods, launched a national ad campaign trumpeting the virtues of — of all things — sugar-laced breakfast cereals.

Industry watchers see the campaign as a preemptive strike. The new promotion, called “Choose Breakfast,” comes in the midst of a national debate about child obesity and the role of s’mores in ecological pyramids. That debate was initially touched off by educators, who in the mid-’90s began reporting a marked rise in the number of first-graders who required two mats for nap time.

In response, lawmakers in Washington (along with elected officials) began drafting a law aimed at protecting minors from predatory advertisers. But critics charged that because of language suggested by food-industry lobbyists — spelling, too — the bill would merely bar advertisers from targeting current and former members of the UMW.

The legislation never came to a vote. However, renewed threats from regulators — and continued criticism from Inside Voice, a group representing skittish pre-school teachers — have many cereal manufacturers rethinking their marketing for youngsters. Last year, for example, Kraft Foods Inc — maker of Cheese Whiz, Velveeta, and other non-food food products — stopped advertising some of its sweeter breakfast offerings on Pinky Leereruns.

And in a move apparently intended to head off truth-in-advertising lawsuits, management at industry giant Kellogg Co. recently revealed plans to scrap the company’s long-running campaign for it’s popular Apple Jack cereal. According to sources close to Kellogg’s (they live in East Battle Creek), a revised advertising slogan for Apple Jacks will state that “A is for partially hydrogenated soybean and/or cottonseed oil, J is for Yellow #6.” Says a lawyer for the company, who requested anonymity: “It doesn’t scan, but at least it’s not actionable.”

Executives at General Mills appear to be taking a different tack, however. The new advertisements, which are slated to begin airing this week, tout the health benefits of breakfast cereals — including sugary brands like Cocoa Puffs and Trix. Reportedly, the “Choose Breakfast” ads won out over several other campaigns proposed by Saatchi & Saatchi, including “Feel the Rush” and “Abscess Makes the Heart Grow Fonder.”

According to advertising buyers, the television spots will run for a year on Nickelodeon and the Cartoon Network. Demographic polling conducted by Saatchi indicates the ads will be seen by at least 80 percent of the children in the United States. Of that audience, Saatchi estimates 65 percent eat cereal at least three times a week. Another 40 percent remain “sort of confused” or “way confused” by the various spellings of Kaitlyn.

In a press conference that included a Q&A with General Mills CEO Stephen Sanger and a review of consolidated financial results conducted by both the White and Yellow Power Rangers, executives at the company defended its new campaign. “We have a different point of view than Kraft,” said Mark Addicks, the (unfortunately named) chief marketing officer of the company. “We think that kids should be eating cereal, including pre-sweetened cereal.”

Not all agree with that point of view. “The makers of these cereals have done a fabulous marketing job of making people think that these are healthy foods when these are cookies,” said New York University professor of nutrition Marion Nestle (no, we’re not sure how he pronounces it).

In his latest book, “A Pinwheel by Any Other Name,” Nestle lambastes food makers for producing cereal in the shape of superheroes, aiming advertisements at toddlers, and failing to disclose that, under FDA guidelines, pink hearts and blue moons qualify as narcotics. [Editor’s note: According to a personality test used by many HR executives, people who prefer Lucky Charms cereal usually become accountants, Internal Revenue Service auditors, or librarians. As with The Real Gilligan’s Island, there’s no good explanation for why this is.]

To counter media criticism of the upcoming campaign, General Mills rolled out a series of experts at its press conference. Jeannie Moloo, a spokeswoman for the American Dietetic Association, a professional group that gets funding from dieticians and the food industry, claimed that cereal is good for kids. Said Moloo, “Most kids’ breakfast cereals are better than no breakfast at all.” A General Mills ad executive declined to comment on whether the company would turn Moloo’s comment into a commercial jingle.

Nevertheless, another Bell Institute dietician defended cereal as a good breakfast food: “A bowl of cereal with milk provides a wide variety of important nutrients including calcium, iron, folic acid and B vitamins.” When asked by reporters to list the nutrients in a glass of milk, the dietician hesitated, then responded, “They made me get up here.”

But others supported General Mill’s practice of quoting its own internal research. “This is exactly what a leader in the food industry should be doing,” said Bunny Rabb, national director of the HFCS Institute, a not-for profit organization dedicated to the advancement of high fructose corn syrup. “If cereal makers want to cite their own studies while fobbing it off as independent research, so be it. If it means another Quisp, another Quake, I’m all for it.”

General Mills, which this week reported a 65 percent increase in profits for the fourth quarter, did reference one independent study: a two-year survey conducted by the University of Minnesota’s Center for Applied Research and Education Achievement. The study indicated that when students started the day with a nutritious breakfast, exam scores increased over a period of time and discipline problems dropped as much as 50 percent.

But critics point out that General Mills failed to disclose other findings from the Minnesota research. Experiments with one control group, for example, found that students who consumed unlimited amounts of Count Chocula and Yoo-Hoo for breakfast tended to speak at such a rapid pace that they eventually disappeared up their own mouth holes.

Still, General Mills executives defended selling pre-sweetened cereals to youngsters, arguing that the vitamins, calcium, and whole grains in its cereal outweigh any negative effects of sugar. Said Addicks, “Most consumers understand the fundamental nutrition of cereal.”

Maybe not. In late March, a San Diego woman sued the three big cereal companies, accusing them of misleading advertising through prominent “low sugar” packaging. Reportedly, Hardee was surprised to learn from press reports that new low-sugar offerings from General Mills, Kellogg’s, and Kraft (Post Cereals) have no real nutritional advantage over regular versions of the breakfast cereals.

A lawyer for the mother of three said the plaintiff “was extremely upset” to find that most of the reduced-sugar cereals had the same calories as the regular versions. He noted that Hardee was also considering suing sugarless gum maker Trident after she discovered that the company’s name actually means “three teeth.” Said the attorney: “I ask you, what kind of orthodontic role model is that?”

Kellogg’s declined to comment about Hardee’s suit. But a spokeswoman for Post said: “There are some consumers who prefer an option with reduced sugar. And we’re looking to see if there are ways to add additional nutrients like whole grain and fiber in the future.” The spokeswoman went on to add that “the lower-sugar version is part of the evolution of Fruity Pebbles,” a statement that, according to scientists at the University of Minsk, marks the first time in anthropological history that the words “evolution” and “Fruity Pebbles” have ever been used in the same sentence by an upright primate.

Bad Week:

Bulgarian Privatization Authorities

The government agency handling privatization (GOAGHAPRI) announced this week it had canceled the planned sale of a coal-fired power plant in the western town of Bobov Dol (BOBDOLE). The agency said in a statement that it had cancelled the process because it was not satisfied with any of the offers it received. The state-owned Greek Pulib Power Corp. had come in with a bid of $127 million for the plant, an offer that stunned some analysts, considering that the second-highest bid — in fact, the only other bid — was $180,000, from Italy’s ENEL.

In fact, the Greek bid was so incredibly high that management at the Athens-based utility unilaterally issued a press release in May stating that 1) the company had acquired the Bulgarian power plant and 2) Turkey stinks.

Insiders in Sofia say government authorities were initially thrilled by the generous offer from Pulib Power. They became concerned, however, at a dinner held in honor of the deal. Following the meal at a local restaurant, recalls one Bulgarian ministry official, “The finance guys from the Greek company insisted that a 10 percent tip for the $400 tab worked out to $40 million. That seemed high to us.”

Assorted Nuts

• On Wednesday, officials at Credit Suisse First Boston announced that the company will be officially dropping “First” and “Boston” from its corporate name as of January 1. Analysts say this could be the beginning of a slew of similar branding initiatives launched by major investment banks. Says one marketing expert: “You’re going to see a lot of these firms strip their names down to the smallest recognizable increment. Beyond the branding value, it saves them millions in signage alone.” Indeed, on Thursday, cash-strapped Baltimore-based firm Alex Brown & Sons announced it will henceforth be known as &.

• A Taiwan stock trader mistakenly bought shares worth $251 million this week when placing a purchase order. Apparently, the error occurred when a trader at Fubon Securities miskeyed a tiny order from Merrill Lynch. A Fubon executive said the trader was unfamiliar with new computer systems and would be terminated. As a result of the error, the P/E ratio of Ed’s Mood Ring Emporium of Bayonne, N.J., now stands at 8,032 to 1.