by Michael Moss
In 1990, the battalion of attorneys who worked for Philip Morris gathered for a retreat in La Jolla, California, where the company’s general counsel, Fred Newman, issued a call to arms. The Marlboro brand, he said, “ranks as one of the great product success stories of all time,” having skyrocketed from a 1 percent share of the cigarette market in 1954 to 26 percent that year; the number of smokers it had attracted equaled the population of New England plus the cities of Dallas, Detroit, and Washington, D.C. But as an expanding conglomerate, he added, Philip Morris was saddled with a slew of new consumer issues. “These concerns involve not just tobacco, but also alcohol, red meat, dairy products, saturated fat, sugar, sodium, caffeine, and other common ingredients in many of our products,” he said. “You already know a great deal about the challenges we face in the tobacco business—challenges ranging from excise taxes and disputes over labeling, marketing, and advertising restrictions to product liability. In the future, we can expect these challenges to also confront us in alcoholic beverages and food. And, as these brand categories come to represent larger and larger parts of our business, our need to protect our interest in them will also rise proportionately. Clearly, many of the people in this room will have a key role to play in building and maintaining our interests in these areas. Your actions on that ultimate battleground—the courtroom—will have impact all over the country. Growth from working together is the cornerstone of the future success of all the companies and brands of Philip Morris.”
That same year, in addressing the food-side managers at Philip Morris, the chief executive, Hamish Maxwell, said that they—like the company’s attorneys—would also have to be sensitive and responsive to a wide range of public concerns. “As new management coming into our companies, I’m sure you also have thought about public health concerns and some of the more controversial aspects of our business,” he said. “We want to respond to the whole range of consumer concerns. We’ve modified our food products to remove fat or lessen the calories, and we’ve developed lighter cigarette products.”
To be sure, in these early days of handling fat, Philip Morris viewed the public’s worries as entirely manageable. It merely had to deploy a strategy, used by the entire consumer goods industry, known as the line extension: When people clamor loudly enough for healthier products, enough so that they are willing to sacrifice some of the pleasure these products provided, companies produce a better-for-you formulation. Whether it’s low-tar cigarettes, low-calorie beer, or lower-fat potato chips, these healthier versions are no threat to the mainline products. In fact, if done right, they can boost sales for the original full-calorie and full-fat versions by attracting new shoppers to the overall brand. The food managers working for Philip Morris put line extensions in motion throughout the grocery store.
As for the mainline versions of its brands, Philip Morris showed little inclination to do anything but market these products with all the skill and vigor that had once made Marlboro such a resounding success. Having learned with cigarettes that being first was not as important as being quick and aggressive in responding to trends, Philip Morris urged this same tactic upon its food managers. If Americans were craving foods that were fast and convenient, Philip Morris wouldn’t try merely to best its competitors in the grocery store; it would aim to capture a piece of the huge market owned by the fast food chains, adopting their formulations and, in some cases, even their mega-brands. Among these achievements was an ultra-convenient meal called the Taco Bell dinner kit—a boxed set of tortillas, cheese sauces, and recipes that Kraft started selling in 1996 after acquiring the rights to the brand name. With clinical precision, Philip Morris touted these efforts to Wall Street.
“In order to continue to deliver strong financial performance, Kraft will need to respond to several major environmental trends,” the chief operating officer, William Webb, told a gathering of investors and analysts in 1999. “First, consumers are becoming busier. Seventy-seven percent of women in the U.S. age 25 to 54 are now in the work force, versus 51 percent in 1970, and this is expected to increase to about 80 percent by the year 2010. As consumers have gotten busier, the number of meals prepared at home has declined. Since 1990 the average consumer is preparing one half of a meal less per week at home, preferring instead to eat out or take-out from restaurants or other food-away-from-home venues. Kraft is responding to this trend. For example, we’re helping busy consumers with an extensive lineup of easy-to-prepare meal products like Taco Bell dinner kits, Easy Mac single-serve macaroni and cheese, and Lunchables lunch combinations; ready-to-eat snacks like Jell-O pudding, Handi-Snacks gels and Kraft cheese cubes; and ready-to-drink beverages like Capri Sun, Kool-Aid Bursts and Kool-Aid Splash. We also know that the number one question in America at 4 P.M. is not, ‘How did the market do today?’ It’s, ‘What’s for dinner?’ And most consumers don’t have a clue.” The Taco Bell kits, he noted, had quickly reached $125 million in annual sales.
But even as Philip Morris pushed more fatty products into the American diet, its executives were tracking the public’s concern about how fat, as well as salt and sugar, related to obesity. And on this front the news was growing increasingly worrisome. Between the 1960s and 1980s, obesity rates had held fairly steady. Among children, it hovered around 5 percent. In 1980, however, the rates had begun to surge for all ages. Moreover, the media was starting to draw the public’s attention to the implications of the country’s weight gain. Philip Morris had long used tracking surveys to monitor issues of public concern, and when obesity was added to the list of questions in 1999, the company’s polling identified it as a significant threat to the manufacture of processed food: Eight in ten people viewed obesity as a serious risk to public health. And while one in three cited “lack of exercise” as a cause, a far greater number of people, nearly half of the respondents, blamed “unbalanced diets.” In other words, too much fatty and sugary food.
“Obesity is literally an epidemic in this country, and some people’s ideas for addressing this public health issue could directly or indirectly affect the entire agriculture industry, from farm to consumer,” a Philip Morris vice president, Jay Poole, warned an agricultural economics group that year. “They’re talking about punitive taxes on certain foodstuffs, limits on marketing of certain foods, regulation of others.”
Just as Philip Morris was gearing up to defend its food from attacks like these, however, the nature of its battle over cigarettes took a sudden turn, an event that altered the company’s view on how Kraft should deal with obesity. Through much of the 1990s, the tobacco giant had remained steadfast in its determination to fight the antismoking lawsuits being brought by individuals and the government alike. It might not win every case, the company would tell investors, but the damage would be contained. Then a lawsuit emerged to end all tobacco lawsuits. It was brought by more than forty states, whose health-care systems were buckling from having to cover the growing numbers of people made sick by smoking-induced illnesses. The states accused the tobacco industry of a wide range of deceptive and fraudulent practices, and they rallied behind Mississippi’s formidable attorney general, Mike Moore, who said that the lawsuit was “premised on a simple notion: You caused the health crisis, you pay for it.” In 1998, the states won. Philip Morris joined the other big tobacco manufacturers in settling the litigation by agreeing to pay the states a stunning $365 billion to revive their moribund health care systems. They also agreed to endure possible regulation of cigarettes by the FDA and to add stronger warnings on their cigarette packs.
What worried Philip Morris even more than this states’ case, however, was the sea change in public opinion that seemed to arise from the accusations of fraud and deception. Where people used to see smoking as a willful decision by individuals, they were now starting to hold the industry responsible, given their marketing tactics and the foreknowledge they had about smoking’s risks. In the months after the settlement, tacticians at Philip Morris conducted a sweeping review of the company’s operations, p
roducing a 1999 strategy paper that they dubbed “Lessons from the Tobacco Wars.”
This manifesto called for a new accommodation to consumers on the part of Philip Morris: “Pay close attention to public concerns and, most important, address them. Denial is not enough, think about solutions. It’s like good marketing. Don’t argue with the customer. Respond to the customer’s need and belief. Our business interest lies with public acceptance.” While nicotine had become a yoke around the tobacco industry’s neck, the strategy paper warned, the food divisions were saddled with more than just one big potential disaster. They had three, or more. “The media are ready and eager to write alarming stories about fat, salt, sugar, or biotech products in people’s diets,” it said. “And just because your critics are shrill or even slightly nuts—and just because some reporters are irresponsible—does not mean you can afford to ignore them. They won’t go away by themselves. If your opponents do enough shoveling—while you just stand there shaking your head—some of the stuff they throw at you will stick. And before long, the public may not be able to see you through the muck.”
The person in charge of Philip Morris during this tumultuous period was Geoffrey Bible, who was also the one tobacco executive who knew the most about the company’s food business, having spent eighteen months at Kraft’s operations center near Chicago. Now, in 2001, as the chief executive of Philip Morris, he drew on this experience in handling the food managers as they faced the growing public concern about the health effects of their foods. “We’d been through a pretty hard time,” Bible told me. “You need to have been there to understand it. Eyes were being focused upon food, and so we were asking, ‘If we are working hard to align our tobacco business with what we call society’s needs, how does the food industry look?’ Because we don’t need to go through the ringer again.”
One of the main lessons from the tobacco wars had to do with Philip Morris’s relations with other tobacco companies—or, rather, the lack thereof. Instead of relations, there was growing suspicion and alarm. When Philip Morris took the step of publicly accepting some responsibility for the public health crisis caused by smoking, its rivals looked darkly upon its motives. They saw it at best as a public relations gambit, and at worst, a ploy to buy time so that Philip Morris could shift more of its focus to selling tobacco overseas, where there was less public concern about lung cancer. For this reason, Philip Morris also assumed that it would be on its own—nay-sayed and nit-picked by its rivals—when it came to handling the food division’s problem.
So Bible did not try to engage the whole food industry on obesity. Nor did he simply come out and order his food managers to act, having learned from his time in Chicago that they did not have the same depth of loyalty to the company as did executives in the tobacco industry. “The food people were a different breed,” he said. “There’s not the same sort of allegiance that we had in our company. It’s also very hard to convince them of things. They’d say, ‘Well, you don’t understand, it’s what the consumer wants, and you’ve got to make it.’ So it’s balancing your business objectives and targets with what’s the right product for the consumer.”
Rather, Bible began to talk more subtly about salt, sugar, and fat—about the high levels to which Americans had become accustomed; about how “the right product for consumers would probably have no sugar, and no fat, but you’d have no sales”; about how Kraft could perhaps best position itself by straddling the line between junk and health foods, “finding something in the middle.” He began speaking like this in private discussions with Kraft officials, including a man named John Ruff, a Kraft executive and food product developer who had joined General Foods in 1972. World-wise and savvy, Ruff listened with mixed emotions, finding it difficult at first to swallow Philip Morris’s sudden about-face on food. It was hard not to think begrudgingly, Who are you to be telling us about corporate responsibility? “Most of us had lived through and watched Philip Morris for many, many years, basically saying, ‘We make a legal product and we inform people of the risks, and it’s not our fault, blah, blah, blah,’ ” Ruff told me. “That was the defense, for many years, and Geoff Bible, initially that was his perspective.”
The more Bible talked, however, the more his message began to resonate. Ruff recalled one moment in 2001 when Bible explained in some detail the company’s change of heart on tobacco. “He talked about why Philip Morris had gone through this mental mind check,” Ruff told me. “And he said, ‘For many years we had had this “not our fault” point of view. But what we started to see is that more and more consumers were feeling like we were partly to blame, and we needed to do something about that.’ ”
That a company’s own loyal customers would suddenly turn against it was a nightmarish concept that riveted the Kraft officials. Then Bible, having described the price being paid by tobacco for ignoring the public sentiment for so many years, cut to the chase. The same day of public reckoning was now likely to befall processed food, he said. The only difference was the nature of the public health concern. For cigarettes it had been cancer. “My prediction,” Bible told his food executives, “is it’s going to happen in the food industry around obesity.’ ”
In 2003, six years before he retired from Kraft as a senior vice president, John Ruff paid a visit to his orthopedist to see about the pain he’d been having while he exercised. The cartilage in his knee, the doctor told him after his MRI exam, was nearly gone. Daily workouts had long been his strategy to avoid getting fat, and even at that he was failing. He had run at least three miles a day for twenty years to “offset the excesses in diet and travel, and I was still overweight,” he told me. Now, on his doctor’s advice, he could only walk and bike, which would burn fewer calories. “I had to do something about my intake, and that’s when I started to change all my eating habits,” he said.
His new diet called for avoiding his own company’s products in the grocery store.
Ruff knew about the emerging research in nutrition that found that the body’s weight control systems were much less adept at handling liquid calories than solid food, so he stopped drinking anything with added sugar. He also dropped high-fat, high-calorie snacks. “I used to come home from work and get one of those giant bags of potato chips,” he said. “The little bags are two servings, so god knows what the giant one is. There’s probably 800 calories in there, and twice the amount of fat you need. Along with a martini, I would consume half that bag. On a good day I could eat the whole damn thing.” Instead, Ruff swapped the martinis for diet ginger ale and the chips for a handful of nuts. “I lost forty pounds in forty weeks,” he said. “I went from 210 to 170, and I’ve been 170 pounds ever since.”†
By happenstance, Ruff was in the midst of reforming his personal eating habits when Kraft put him in charge of the company’s own anti-obesity effort, and this couldn’t have been a better fit. Ruff, as a worried consumer, was already walking around the grocery store muttering to himself, “I can’t eat this, I can’t eat that.” Now, as a Kraft executive, he could walk around the same store saying, “We shouldn’t sell this, we shouldn’t sell that.”
Joining Ruff on the obesity team was Kathleen Spear, the Kraft attorney and senior vice president who sought to distinguish products that were merely alluring from those that compelled overeating. Another member was the company’s senior vice president for external affairs, Michael Mudd. It was Mudd who, back in 1999, had stood before the chief executives of the largest food companies in America and tried to enlist them in the war on obesity. When, instead, he got a scolding from these men, he had regrouped and was now making a new, more improbable proposition: that Kraft go it alone. Thus, it was Mudd who organized the panel of outside experts to advise Kraft on obesity in 2003, and it was Mudd who convinced Ellen Wartella, the kids marketing expert, to join the panel.
That fall, as the panel met, the three Kraft executives—Ruff, Spear, and Mudd—lost little time in advancing their agenda. No longer a mere cabal of company insiders conspiring on the
ir own, their mission had been officially sanctioned by Kraft. They now had permission to roam through the company’s entire operations, with an eye toward challenging any practice or policy that contributed to the obesity epidemic. When Wartella presented her damning evidence of Kraft’s aggressive marketing to kids, the three executives championed that as their first reform. They urged Kraft to put the brakes on its advertising, which it did. No longer would Kraft pitch products to kids that lacked nutritional value. Now, these products had to have substantial amounts of whole-grain fiber, fruits or vegetables, and key vitamins and minerals.
The anti-obesity team turned next to Kraft’s labeling, with the intention of making it honest. Their primary concern was the fine print known as the “nutrition facts,” which the FDA had required starting in the 1990s. This information is usually listed on the back or side of the package, framed by a thin black line, and while it doesn’t say “Warning,” that is precisely how the obesity team came to view these disclosures: warnings to consumers about the ingredient loads inside. The nutrition facts tell you how many calories are inside, as well as how much salt, sugar, and fat.
As the obesity group saw it, the problem for consumers was the way the FDA let Kraft and other companies do the math. All this critical information was couched in terms of a single serving. Instead of telling consumers how much the whole package contained, the nutrition facts said only how much there was in a serving. This gave the manufacturers an obvious advantage: It shrank all the numbers and downplayed the nutritional risk. Take a bag of potato chips. Instead of saying 2,400 calories and 22.5 grams of fat, which were the true contents, the nutrition facts said 160 calories and 1.5 grams of fat, which were the contents per serving. Moreover, these things called serving sizes had been established by the FDA in the early 1990s, based on surveys from the 1970s, and had little to do with the way people really ate, especially when it came to junk food that compelled overeating.
