Marketing Food to Children and Adolescents - Federal Trade ...

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Marketing Food to Children and Adolescents 13. Request for Information and Comment: Food Industry Marketing Practices to Children and Adolescents, 71 Fed. Reg. 10,535 (Mar. 1, 2006). 14. A copy of the FTC Special Order is attached as Appendix B. 15. As explained in Appendix A, in certain instances, the data obtained from the companies have been supplemented by data purchased from third-party sources. 16. Prepared foods and meals were defined in Attachment A to the Special Order to include frozen and chilled entrees, frozen pizzas, canned soups and pasta, lunch kits, and non-frozen packaged entrees (such as macaroni and cheese). 17. Section 6(f) of the FTC Act, 15 U.S.C. § 46(f), constrains the FTC from disclosing publicly materials that contain or constitute trade secrets or privileged or confidential commercial or financial information. See also 16 C.F.R. § 4.10(2). 18. As with the expenditure data, care has been taken to protect the confidentiality of this proprietary information. 19. See Appendix A for a detailed discussion. 20. For example, a significant number of QSRs in the U.S. are independent franchisee-owned establishments, rather than corporate-owned establishments. For most of the QSR companies that received the Special Order, franchisee- and affiliate-owned restaurants far outnumbered company-owned restaurants in the U.S., with franchisees and affiliates representing approximately 70-85% of the establishments in the QSR systems. In addition, QSRs vary in their management of advertising funds, in some cases participating in national and local cooperatives or programs to which corporate-owned and franchisee-owned establishments contribute funds. Franchisees also may contribute to separate advertising funds in individual local markets. Consequently, the reported expenditures generally do not account for local advertising expenditures by independently owned franchisees. The Commission is confident, however, that the reported expenditures for QSRs provide an accurate estimation of advertising costs by corporate-owned restaurants and advertising expenditures by national cooperatives to which franchisees contribute funds. 21. 2006 Report at 10. 22. For several reasons, the total cost of marketing to youth reported here for 2006 is significantly lower than some estimated numbers cited elsewhere, such as in the 2006 IOM Study on food marketing to children and youth. See IOM Study, supra note 3, at 4-32 to 4-33. The IOM Study estimated that more than $10 billion is spent per year “to market food, beverage, and restaurant products to children and youth,” including about $1 billion to advertise directly to young consumers, primarily via television. Id. at 4-33. One source cited for this estimate is James U. McNeal, The Kid’s Market: Myths and Realities 14-15, 141-44 (1999) (the other source relied upon in the IOM study for this total – Kelly D. Brownell & Katherine B. Horgen, Food Fight: The Inside Story of the Food Industry, America’s Obesity Crisis, and What We Can Do About It 100 (2004) – did not provide a citation for its estimate of $10 billion for food advertising to children). McNeal’s estimates for the $10 billion figure encompass “annual marketing communications expenditures related to kids as a market,” rather than marketing directed to youth specifically by members of the food and beverage industry. McNeal at 14-15. For example, McNeal’s estimate of $4.5 billion spent on promotions, relied upon by IOM, includes promotions for motels, airlines, and banks, as well as restaurants. See McNeal at 15, 156-57. Moreover, McNeal’s promotions estimate includes couponing, price packs, cash refunds, and patronage rewards, whereas the Commission’s criteria for youth-directed food advertising excluded such promotions (e.g., children stay or eat free) because they are directed to adults. In another example, IOM cited McNeal’s $3 billion estimate for product packaging designed for children and youth. This figure, however, likely covered all packaging costs, including packaging materials such as cardboard and plastic. By contrast, the Commission’s Special Order requested only the costs of design and development of change-overs in youth-directed packaging, not baseline costs of manufacturing or packaging materials that would have existed regardless of whether the packaging featured youth-directed promotions. Notably, McNeal estimated that “media spending” (including television, print, radio, and Internet advertising; direct mail; product placements; movie theater advertising; and in-school advertising) for “advertising targeted at kids” totaled approx- 84
85 Endnotes imately $1.3 billion annually – a number that is close to the Commission’s total of $1.6 billion. See McNeal at 142-44. 23. As discussed in Appendix A, some of the companies’ reportable expenditures could not readily be divided as directed only to children (ages 2-11) or to adolescents (ages 12-17). For example, some expenditures were targeted to a “tween” audience that included older children and younger teens (a group generally between the ages of 8 or 9 and 13 or 14). As a result, for each promotional activity category, companies were asked to state any amount that was duplicated in the reported child and teen expenditure amounts. In most cases, the total amount directed to “youth” (ages 2-17) is less than the sum of the child and teen totals because of overlap in the reported child and teen expenditures. 24. The Special Order defined digital advertising to include promotional content transmitted to personal computers and other digital devices, including PDAs (personal digital assistants), mobile phones, and other portable devices, whether or not Internet-enabled. The category included email messages, SMS or text messages, instant messaging, mobile broadcasts, downloads, and podcasts. 25. Youth-directed marketing expenditures for particular brands within several food categories well exceeded 40.8%. 26. When a company had reportable child- or teen-directed marketing expenditures in a given promotional category for a particular brand, the company also reported expenditures directed to all audiences in the promotional category for that brand. For example, if a company reported spending $10 million on child-directed television ads for a brand, it also reported the total amount spent on all television ads for that brand (e.g., $25 million). The companies were not required, however, to report general audience expenditures for any promotional activity category in which they had no child- or teen-directed expenditures for a particular brand. As a result, the percentages of youth-directed marketing expenditures within the promotional activity categories are based only on the brands for which the companies reported youth-directed advertising in those particular promotional categories. In a few instances, reporting companies stated they were unable to calculate allaudience expenditures. In those instances, the totals were under-reported and therefore the percentage of expenditures directed to youth may be slightly too high. 27. When reporting television, radio, and print advertising expenditures, the Special Order instructed companies to report the creative costs associated with production of the advertising, as well as all ad placement costs. 28. The companies reported about $89 million in overlapping expenditures for child- and teen-directed television advertising. 29. In 2006, no broadcast television programs met the 20% teen audience share threshold for advertising directed to adolescents. Source: The Nielsen Company. 30. Source: The Nielsen Company. These figures are based on audience data for airings that occurred on the Nickelodeon cable channel only. 31. Market research submitted by a few companies examined the appeal of some of these shows to youth audiences. 32. In 2007 and 2008, McDonald’s ran American Idol cross-promotions. Children who purchased a Happy Meal or a Mighty Kids Meal could collect a variety of toys inspired by American Idol and, in 2007, enter a sweepstakes to attend the season finale of American Idol. Press Release, McDonald’s USA, McDonald’s Debuts American Idol-Inspired Toys in Happy Meals and Mighty Kids Meals (Apr. 18, 2007), available at www.mcdonalds.com/usa/news/current/conpr_04182007.html. 33. Kellogg’s sponsors the Pop-Tarts American Idol Live! tour as a way to reach tweens and teens. Tim Parry, American Pop Idol, PROMO Mag., May 1, 2004, available at http://promomagazine.com/awards/emmas/ marketing_american_pop_idol/ (quoting official from the brand communication firm that facilitated Pop- Tarts’ sponsorship of the American Idol tour as “resulting in the partnering of two brands that are relevant to teens and tweens heightening the connectivity of their collective message”; noting that, through the tour,
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