by Michael Moss
In 2005, the research arm of Coca-Cola sought to answer that question with another shopping report, this one aimed at the owners of convenience stores. Focused on “building loyalty with the next generation,” it revealed that the most profitable person who walks through the door is not who the owner may think it is.
“Who’s worth more to your store?” the study said. “The 32-year-old who just spent more than $10.00, or the teen who rang up a Coke, a sandwich and a candy bar? Surprisingly, the teen is worth nearly as much as the 30+ shopper today. Teens spend less, but they visit more often. If C-stores can hold on to teens’ business as they move into their 20s, these customers have the potential to be worth substantially more.” Even in the suburbs, where older teens visit convenience stores most often to buy gasoline, their second most-cited reason is to “satisfy a craving,” and these urges present a huge opportunity for growth. “Teens buy a little gas, a lot of times a month,” the study said. “Retailers need to recognize and take advantage of this frequency by making it easy for them to enter the store.”
Suburban or inner city, kids offered an opportunity to create lifelong brand loyalty. Or, as the study put it, “Teens are at a crucial stage on the learning curve of ‘how to be me.’ ”
Jeffrey Dunn wasn’t around when that study’s findings confirmed what he already knew.
One day in 2000, a book arrived at Dunn’s corner office in the Coca-Cola headquarters complex, unsolicited, and set in motion a chain of events that would convert him from the loyal soldier to the disbeliever he is today. The book was called Sugar Busters!, and the team of authors included two physicians from New Orleans. In it, they argued that the rapid increase in sugar consumption had caused a massive disruption to America’s health, and they placed much of the blame on soda. “During the meteoric rise in adult and childhood obesity in the last thirty-five years, the consumption of soda has roughly tripled,” they wrote. “To put 10 teaspoons of added sugar per regular soft drink into perspective, how many of you would scoop 10 teaspoons of sugar into a glass of tea and then sit and drink it?” Even when mixed with healthy snacks, the physicians argued, the sugar in soda encouraged the body to store the calories as fat.
Dunn took the book home to read, and as he turned the pages, two thoughts began running through his head: This makes sense, and this isn’t good.
That same year, he became engaged to a woman who unsettled his view of Coke even more. She was a free spirit, rail-thin, who consumed no sugar and was very anti–junk food. She traveled repeatedly to the Amazon rain forest, and after every trip she returned home with new arguments for why Dunn should apply his talents to something other than selling Coke. “I’m marrying her, I’m reading this book, and I’m simultaneously in the running to be the next president of the company,” he said.
In early 2001, at age forty-four, Jeffrey Dunn was already directing more than half of the company’s $20 billion in annual sales as president and chief operating officer for Coca-Cola in both North and South America. He made frequent trips through Mexico and on to Brazil, where the company had recently begun a push to increase consumption of Coke. Brazil was a huge potential market with a surging economy and a booming young generation that was poised to become the country’s new middle class. But many of these Brazilians still lived in barrios, had limited savings, and had little familiarity with processed foods. The company’s strategy was to take over the barrios by repackaging Coke into smaller, more affordable 6.7-ounce bottles, just twenty cents each. Coke was not alone in seeing Brazil as a boon or in embracing the strategy of miniaturization. The food giants, Nestlé and Kraft, were starting to shrink much of their grocery lineup, too, from Tang to Maggi instant noodles, putting them into smaller containers so that they could be sold for less. Nestlé began deploying battalions of ladies to travel the barrios hawking these American-style processed foods door to door, enticing people who, although they still cooked from scratch, aspired to the trappings of middle class. But Coke was Dunn’s concern, and as he walked through one of the prime target areas, an impoverished barrio of Rio de Janeiro, he had an epiphany. “A voice in my head says, ‘These people need a lot of things, but they don’t need a Coke.’ I almost threw up. From that moment forward, the fun came out of it for me.”
He returned to Atlanta, determined to make some changes. He didn’t want to abandon the soda business, but he did want to try to steer the company into a healthier mode. First, he developed Dasani, Coke’s bottled water company. Then he pushed to stop marketing Coke in public schools, where the financial incentives to sell soda soon became all too apparent. The independent companies that bottled Coke viewed his plans as reactionary. The largest bottler’s chairman, Summerfield Johnston, wrote a letter to the Coke chief executive and board asking for Dunn’s head. “He said what I had done was the worst thing he had seen in fifty years in the business, just to placate these crazy leftist school districts who were trying to keep people from having their Coke,” said Dunn. “He said I was an embarrassment to the company, and I should be fired.”
In February 2004, the company underwent a restructuring, and Jeffrey Dunn was indeed fired by one of his rivals for the presidency, Steven Heyer. Before leaving, Dunn gave one last speech to his colleagues, who gathered in the auditorium to say goodbye. “I had asked Peter Ueberroth, who was on the board and was kind of my mentor. I said, ‘They’re not going to want me to do this, but I really would like to say goodbye. The company has been in my family since I was born.’ And so Steve introduced me and I walked by and I hugged him and whispered in his ear, ‘Thank you.’ He looked at me and said, ‘For what?’ And I said, ‘You did for me what I would never have done for myself. I would have never left Coke.’ ”
Dunn told me that talking about Coke’s business today was by no means easy, and, given that he continues to work in the food business, not without risk. “You really don’t want them mad at you,” he said. “And I don’t mean that like I’m going to end up at the bottom of the bay. But they don’t have a sense of humor when it comes to this stuff. They’re a very, very aggressive company.”
Dunn does not see himself as a whistleblower, not like the tobacco industry insiders, anyway, who accused their companies of manipulating nicotine to increase its potency. “I may know more about it than other people,” he says, “but it’s not like there’s a smoking gun. The gun is right there. It’s not hidden. That’s the genius of Coke.”
On April 27, 2010, Jeffrey Dunn walked into the Fairmont Hotel in Santa Monica with the blueprints for selling America on a novel snack. He was meeting with three executives from Madison Dearborn Partners, a private equity firm based in Chicago with a wide-ranging portfolio of investments. They had recently hired Dunn to run one of their newest acquisitions—a food producer in the nearby San Joaquin Valley—and had flown out to California to hear his plans for marketing the company’s product.
As they sat in the hotel’s meeting room, however, with the stunning views of the Pacific Ocean just outside, the men from Madison listened to a pitch like none they’d ever heard before. Dunn was certainly formidable enough for them. His résumé was superb. His twenty years with Coca-Cola had clearly left him with an elite set of marketing skills, and in his presentation he deployed them all.
He talked about giving the product a personality that was bold, irreverent, confident, clever, and playfully confrontational, with the goal of conveying a promise to consumers: that this was the ultimate snack food. He went into detail on how he would target a special segment of the 146 million Americans who are regular snackers—people, he said, who “keep their snacking ritual fresh by trying a new food product when it catches their attention.”
He helped the investors visualize these people by flashing mock bios up on a screen. The targets were people like Aubree, thirty-four, the on-the-go mom who wants to give her kids “all the fun in the world” and feeds them Oreos, Go-Gurts, and Delmonte fruit packed in syrup; Kristine, twenty-seven, the busy professional who i
s drawn to Starbucks, trail mix, and the new, dip-ready chip; and college student Josh, twenty-three, on his own for the first time, seeking adventure fueled by Doritos and Mountain Dew Code Red.
He explained how he would deploy strategic storytelling in the ad campaign for this snack, using a key phrase that had been developed with much calculation: “Snack on That.” He had considered other wording, including “Snack That,” and “Snack This,” but adding the word on made it more thought-provoking. “It’s language we use in culture for evaluation and reappraisal,” he said. Snack on That, as a marketing tool, would “work harder” for them.
He then went through the details of the proposed product launch, including a media buy with commercials on House, CSI, and Survivor; a grassroots guerilla PR campaign with the product’s own video game; and digital media with blogger outreach and seeding message boards to accelerate the pickup.
Forty-five minutes later, he was done. He clicked off the last slide. “Thank you,” he said.
This was a fairly typical meeting for the executives from Madison, except that Dunn was a cut above the brand managers they were used to having on their side. The rub in the presentation, however, came in the snack that Dunn was now preparing to promote. This wasn’t a new concoction of salt, sugar, and fat whose appeal was well known to these investors. Madison’s $18 billion portfolio had contained the largest Burger King franchise in the world, the Ruth’s Chris Steak House chain, and a processed food maker called Pierre whose lineup includes a champion of handheld convenience, the Jamwich, a peanut butter and jelly contrivance that comes frozen, crustless, and embedded with four kinds of sugars, from dextrose to corn syrup.
The snack that Dunn was proposing to sell: carrots. Plain, fresh carrots. No added sugar. No creamy sauce or dips. No salt. Just baby carrots that are peeled, washed, bagged, and then sold into the deadly dull produce aisle. Carrots were the flip side of Coke. They weren’t selling because of the way they were being sold. To fix this, Dunn said, would require unleashing the proven techniques of processed food marketing.
“We act like a snack, not a vegetable,” he told the investors. “We exploit the rules of junk food to fuel the baby carrot conversation. We are pro–junk food behavior but anti–junk food establishment.”
In describing this new line of work, Dunn would tell me he was doing penance for his years at Coca-Cola—or, as he put it, “I’m paying my karma debt.” That day in Santa Monica, however, the men from Madison were thinking about sales. They had come all the way from Chicago to hear this pitch, and they loved it. They had already agreed to buy one of the two biggest farm producers of baby carrots in the country, and they’d hired Dunn to run the whole operation. Now, after his pitch, they were relieved. Dunn had figured out that using the industry’s own marketing ploys would work better than anything else. He drew from the bag of tricks that he mastered in his twenty years at Coca-Cola, where he learned one of the most critical rules in processed food: The selling of food matters as much as the food itself. If not more.
* Similarly, hard economic times in the United States, including the recession that started in 2008, have proven to be boons for large parts of the processed food industry, as shoppers pinching their pennies find it easier to buy soda, snacks, and frozen entrees than more costly groceries, like fresh fruits and vegetables.
chapter six
“A Burst of Fruity Aroma”
At 2 P.M. on a Monday afternoon in late February of 1990, twelve of the most senior Philip Morris executives gathered in a conference room at company headquarters in midtown Manhattan. The austere, gray-granite building stood on Park Avenue, twenty-six stories tall and situated directly across from the main entrance to Grand Central Station, with features that bespoke the company’s affluence. It had underground parking for the executives, a high-ceilinged lobby with art curated by the Whitney Museum, and sweeping views of the New York harbor far to the south. As the operations center for the largest tobacco company in the world, it also had a special accommodation for employees who smoked: Most of the office floors had ceiling fans. The executives met on the top floor, in a space called the Management Room, where six tables had been pushed together to form a large block, with a pad, pen, and water glass placed at each seat. These dozen men formed the brain trust at Philip Morris, and they assembled like this once a month, in what they called the Corporate Products Committee, to hear from the managers of the company’s most valuable brands.
As usual, the chief executive, Hamish Maxwell, took a seat at the table. He was joined by two of his predecessors—Joseph Cullman III and George Weissman—who, though now in their seventies, continued to serve as high-level advisers. Cullman, the great-grandson of a German cigar maker, had set the stage for the company’s first diversification beyond tobacco when he bought the Miller Brewing Company back in the late 1960s. Weissman, a two-pack-a-day smoker and one-time reporter for the Star Ledger in Newark, New Jersey, had helped develop the masculine image for Marlboro cigarettes and famously said in 1978, when he became the company’s chief executive, “I’m no cowboy and I don’t ride horseback, but I like to think I have the freedom the Marlboro Man exemplifies. He’s the man who doesn’t punch a clock. He’s not computerized. He’s a free spirit.”
This month’s meeting was chaired by one of Maxwell’s direct reports, a fifty-two-year-old Australian-born financial manager named Geoffrey Bible. He wouldn’t take over the chief executive spot himself for another four years, but the job of chairing the meeting rotated among the executives. It was fitting that Bible should take the lead at this particular session, where much of the agenda would be devoted to company products other than cigarettes. Just one month earlier, Maxwell had asked him to immerse himself in—and gain some control over—the newest addition to the company’s roster of consumer goods: the vast and unwieldy division of processed food.
Thanks to its acquisitions of General Foods and Kraft, ten cents of every dollar that Americans spent on groceries now belonged to Philip Morris, which dramatically altered the balance sheets at the tobacco giant. Philip Morris was amassing mountains of cash from its cigarette sales and saw the food business as a way to diversify and put those profits to work. When it finished merging the two food giants in 1989, their combined annual sales of $23 billion accounted for 51 percent of the total revenue at Philip Morris. Food had not only become its largest division, the tobacco executives were suddenly also running the largest food company in the country, in charge of icons like Cool Whip, Entenmann’s, Oscar Mayer, Lunchables, Shake ’n Bake, Macaroni & Cheese, Velveeta, Jell-O, Maxwell House, Tang, and the Post cereal lineup of Raisin Bran, Grape-Nuts, and Cocoa Pebbles.
Once tidy and contained, the agendas of these monthly product meetings were now careening wildly through the aisles of the grocery store, and everywhere the Philip Morris executives looked, they saw battles under way with rivals intent on stealing their turf. In getting ready for this particular meeting, the food brand managers had spent days preparing strategy memos, sales charts, and testing reports, but the tone in the room remained low-key and cordial, as always. The Philip Morris executives were seasoned corporate brawlers, supremely confident in their ability to win the loyalty of consumers. The Marlboro brand had been a loser back in the 1940s, pulled from the market and taken for dead, before the Marlboro Man ads started running in the 1960s and turned the cigarette into the country’s—and eventually the world’s—top seller. Geoffrey Bible, moreover, had developed an empathy for the managers in the Kraft General Foods division (whose name was later shortened to Kraft Foods), who were in an endless struggle to fend off their many competitors. He had spent time in the field with their salesmen, and he came away awed by the challenges they faced, from the arduous task of convincing the grocers to give them space on the shelf to creating the emotional lures in their advertising and packaging that, along with the actual formulas, would compel shoppers to pick their products up.
I met Bible in late 2011 in the office he used i
n Greenwich, Connecticut, after retiring from Philip Morris in 2002. At seventy-three, he was twenty years older than Jeffrey Dunn, the former Coca-Cola executive, but both men had strong handshakes and deep tans and were careful eaters, avoiding too much of the kind of foods and drinks their companies sold. Where Dunn could exude laid-back California and Bible still had traces of his Australian upbringing, they were also each known to their peers as fierce corporate gut-fighters with an instinct for the jugular and no tolerance for fools.
When Bible took a seat at his desk, the place where he monitors the stock market and engages in varied business activities, one artifact seemed conspicuous in its absence: There was no ashtray. He had smoked as much as a pack a day until 2000, when he stopped on his doctor’s advice. “We were very blessed in tobacco, because we had the biggest brand in the world,” he told me. “The trade was desperate to get our brand. Not the case in food. You were desperate to get their business. I was shattered to find the attitude of the buyers in these various grocery chains towards even large companies like Kraft and General Foods. It’s brutal stuff. ‘What are you doing in here? I told you to get out of my office the last time you came. That promotion was a disaster. Get out.’ You’d move from the meat buyer to the mayo buyer, and he’d say the same thing.”
The effort required in marketing food to consumers was, if anything, even more demanding and also very different from tobacco, which was promoted through idealistic imagery like the rugged cowboy in the Marlboro Man commercials. “Cigarettes are much the same to look at, and their advertising and marketing is much more aspirational than it is for food,” Bible said. “In food you have to really find a way to convey the product better, and its worth. It’s much more, ‘This product is good for you because it has the following ingredients, or it has whatever pizzazz.’ And it’s got to have that product differentiation, that reason to buy it and consume it.”
