Salt Sugar Fat: How the Food Giants Hooked Us (20 page)

The industry marketing strategy that begat this boom in C-stores has a name: “up and down the street,” as in driving the delivery truck up and
down the streets of a neighborhood, from one C-store to the next. For the soda and snack companies, the goal in this wasn’t just selling more goods; they wanted to win the loyalty of the kids who frequent these stores. “Up and down the street” became a rally cry among marketers, something they returned to time and again to boost sales and expand their customer base.
“Coke was doing it and Pepsi was doing it, and the candy guys were figuring out the same thing,” Dunn said. “All the food companies started to engineer a strategy around immediate consumption, and as they put more effort into it, the sales in those stores went up, and there was a huge build out of convenience stores. So now you go to a city like Atlanta, and on every corner there’s a convenience store.”

“You start to get into the question of what drives what,” Dunn said. “Does the preference for soda and snacks drive the availability of soda and snacks, or does availability drive the preference? None of the players stop to think about whether people should really be eating a bag of chicken wings and a bag of potato chips and a 2-liter Coke. They’re thinking, ‘Is this going to get me an increase in sales?’ ”

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.’ ”

J
effrey 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.”

O
n 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 is 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.

A
t 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.