Soft drink producers must heed school ban warning

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By January 2004, some 677 schools in Los Angeles County will have stopped offering carbonated soft drinks (CSDs) to their 750,000 pupils following a measure recently passed by the Los Angeles County Unified School District board. The measure will affect both sales in the school cafeterias and through vending machines.

The response from the soft drinks industry has been predictable in tone though not as vocal as one might have imagined. PepsiCo and Dr Pepper/Seven-Up both declined to comment, leaving the National Soft Drinks Association to speak for them, while the Coca-Cola Co. directed media to its Californian bottler.

That suggests that this is a sensitive issue. It may only be one schools district - albeit the largest in Los Angeles County - but it is arguably the toughest such measure taken against soft drinks companies in the US to date. It followed one other ban in Oakland and a few other similar measures in other areas but if it were widely replicated, the impact would clearly be colossal.

But the issue is not only near the bone because of the health concerns over CSD consumption by children. Like companies in other sectors, soft drinks manufacturers have become big players in the school sponsorship arena in the US. It is quite simple.

"By providing extra and much needed funding, the major beverage companies can ensure that their brands are sold in the schools"
By providing extra and much needed funding, the major beverage companies can ensure that their brands are sold in the schools.

So the issue is highly emotive for many reasons. Those who find the involvement of companies in schools' education funding unethical feel the measure has struck an important blow. On the other hand, many schools and parents are concerned that an increasingly important source of funding could be under threat.

The NSDA's rhetoric has a familiar ring to it. It refutes the notion that sugar-laden carbonated soft drinks are the prime reason behind the staggering rates of child obesity in the US and that the other health and dental problems associated with the consumption of CSDs by children are exaggerated.

In addition to disputing some of more extreme figures quoted for consumption of CSDs in school, the NSDA maintains that "it's the couch not the can" that is responsible for the health and weight problems. "Policymakers who are seeking restrictions on the sale of soft drinks are ignoring the single most important action that could make a real difference," the NSDA said. "They could demand that their schools implement the Surgeon General's recommendation that every school-aged child in grades K-12 receive at least 60 minutes of physical activity every day. Virtually no school system in the country meets this most basic step. Any public policy that does not address increased physical activity will fail in its efforts to reverse rising obesity rates."

This line of argument also serves the NSDA well in justifying the involvement of soft drinks producers in school funding. A survey of the National Association of Secondary School Principals (NASSP) in 2001 revealed that the number one use of the extra funding generated by partnerships with beverage companies was the purchase of sports and physical education equipment.

That parents and principals should be genuinely concerned that such funding of sports facilities, computer equipment, drama clubs, field trips and other extra-curricular activities might disappear of course strikes at the very nub of the issue. The degree to which such donations will be affected is a matter of conjecture at this stage. But Sean McBride of the National Soft Drinks Association has no doubt that the level of revenue going into LA schools from beverage companies will diminish once the ban is in place. "

"What you are going to see is decreasing revenue levels to the schools and virtually no reduction in obesity rates"
What you are going to see is decreasing revenue levels to the schools and virtually no reduction in obesity rates," McBride told Just-drinks. "At this point they can't make up all of what they will lose in CSD sales through non-carbonated beverages. I think what is important to remember is that this is really an issue about parental choice. We don't think it is appropriate for Federal, State or local government to make these decisions. It should be something that local schools should be deciding in consultation with parents."

However, the message coming from the Coca-Cola bottler which owns the Coke franchise for the area in question is rather more conciliatory. The company is very keen to retain its current relationship with schools in spite of a moratorium on the products which make up the majority of its sales. "We offer a wide variety of products to the schools beyond carbonated drinks.  And those products will continue to be sold," said Bob Phillips, spokesman for Coca-Cola Bottling Company of Southern California, a division of Coca-Cola Enterprises, the largest Coke bottler in the US. "At the end of the day we have to respect teachers, parents and pupils' decisions about what they want in those schools and that is absolutely critical."

However, significantly Phillips stopped short of guaranteeing that levels of funding could be maintained. While sales of non-carbonated beverages are increasing - according to the NSDA over 60% of schools offer water, juice and sports drinks in their vending machines - some doubt remains as to whether volumes could be retained and whether funding would be cut back if sales fall.

"We don't anticipate any fallout in volume at all.  Already do a significant volume in non-carb in schools and non-carb is increasing all the time," said Phillips. "Our projection is that it is going to take some work but we will not have any negative impact from a volume perspective with the business we are doing with the schools. We are looking at it from a point of view as making at as seamless as possible.  We can't guarantee it but it's a way off."

Phillips was also understandably keen to stress that while his company is a part of Coca-Cola Enterprises, which is itself part-owned by Coca-Cola and very much an integral part of the Coca-Cola corporate machine, this was not about "Corporate America" extending an unholy influence over the nation's youth. Rather, it is about a local company sustaining a relationship going back more than 50 years with the local community.

Whether one wholly accepts this rather cuddly interpretation of what is going in US schools,

To say that soft drinks companies are holding the Sword of Damocles over their school partners might be harsh
to say that soft drinks companies are holding the Sword of Damocles over their school partners might be harsh. But they are clearly suggesting that it will be harder to sustain the funding without their big-selling lines.
So we come back to the question of how much harm carbonated soft drinks do to children and exactly how many cans children on average get through in school hours.

Notwithstanding the NSDA's point about physical exercise, there seems little doubt that over-consumption of CSDs does contribute to the problems of childhood obesity. The ban in question was precipitated by a study which found that almost half the children in that area were either overweight or obese. Another study indicated that children of high school age receive 11% of their calories through soft drinks

In his book, Fast Food Nation, Eric Schlosser, writes that "a significant number of teenage boys are now drinking five or more cans of soda a day. Each can contains the equivalent of about 10 teaspoons of sugar." Twenty years ago, American teenage boys drank twice as much milk as fizzy drinks; today the ratio has been reversed.

What the authors of the measure were looking for was a switch from CSDs to healthier products which, judging from Bob Phillips' comments, they will get. Pragmatic school officials will also be hoping for sustained levels of commercial sponsorship. That might be harder to achieve.

Whilst not huge in relation to the entire soft drinks market, the ban has been thought provoking. It also forms part of the growing pressure on food and drinks companies to address the formulations of their big-selling and most popular lines to make them less unhealthy. Chairman and CEO of PepsiCo, Steven Reinemund, is pushing to make at least 50% of PepsiCo's food and beverage products "nutritious", reducing fat and adding healthier ingredients.

Reinemund has even gone on record as saying that consumers shouldn't eat or drink too much of PepsiCo's "fun foods", such as Pepsi-Cola and Fritos. "Overindulgence in any of our products is not something we encourage or recommend," Reinemund said. The company is expected to announce soon that it plans to take some unhealthy oils out of some snack brands. PepsiCo has also recruited experts such as Kenneth Cooper and Dean Ornish to work with the company's researchers. Cooper says the company's goal is to make PepsiCo, which made 75% of its $26.9 billion sales last year through snacks and CSDs, the "most health-oriented corporation in America."

Reinemund may be an extremely healthy-looking former Marine but it is not health and fitness evangelism that has motivated this change. He knows that the pressure is mounting on snack and soda companies and that taking the initiative may be their best form of defence.

Expert Analysis

The Market for Soft Drinks in the US

This report investigates off-trade versus on-trade sales of soft drinks and value and volume growth in addition to supplying forecasts to 2006. Products covered are carbonates, fruit/vegetable juice, bottled water, functional drinks, ready-to-drink (RTD) concentrates, ready-to-drink (RTD) tea and ready-to-drink (RTD) coffee.


Only last December, the surgeon-general warned that obesity had reached epidemic levels in the US. Lobby groups opposed to junk food are thought to be planning lawsuits against food producers similar to those brought against tobacco companies. Until now, fast food restaurants have taken most of the fire but Reinemund understands that companies like PepsiCo are next in line.

What is being seen in the snack business could soon be seen in the CSD sector as pressure from public health lobby groups, not to mention the threat of punitive taxation from the government, begins to tell. Even if it is not replicated in other areas, soft drinks companies are unlikely to view the LA Unified School District ban on CSDs as a local snag. Rather, they will see it as being in step with the general view legislators are beginning to take towards less healthy foods and drinks. And they would be right so to do.

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