# FEDERAL TRADE COMMISSION > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Aftc%3Aaa5fa98470f3e0b6 ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text FEDERAL TRADE COMMISSION Marketing Food to Children and Adolescents A Review of Industry Expenditures, Activities, and Self-Regulation A Report to Congress Federal Trade Commission July 2008 Marketing Food to Children and Adolescents A Review of Industry Expenditures, Activities, and Self-Regulation July 2008 Federal Trade Commission William E. Kovacic, Chairman Pamela Jones Harbour, Commissioner Jon Leibowitz, Commissioner J. Thomas Rosch, Commissioner Report Contributors Bureau of Consumer Protection Sarah Botha, Division of Advertising Practices Keith Fentonmiller, Division of Advertising Practices Carol Jennings, Division of Advertising Practices Mary Johnson, Division of Advertising Practices Kial Young, Division of Advertising Practices Heather Hippsley, Assistant Director, Division of Advertising Practices Mary Koelbel Engle, Associate Director, Division of Advertising Practices Bureau of Economics Pauline M. Ippolito, Deputy Director, Bureau of Economics Research Assistants Todd Dickey, Bureau of Consumer Protection, Division of Advertising Practices Diana Finegold, Bureau of Consumer Protection, Division of Advertising Practices Conor McEvily, Bureau of Consumer Protection, Division of Advertising Practices Colin Conerton, Bureau of Consumer Protection, Honors Paralegal Program Micah B. Burger, Bureau of Economics Michelle Y. Kambara, Bureau of Economics Dane M. Vrabac, Bureau of Economics ii Contents List of Tables....................................................................................................................................v List of Figures............................................................................................................................... vii Executive Summary................................................................................................................. ES-1 I. Introduction..............................................................................................................................1 A. Background: Marketing, Self-Regulation, and Childhood Obesity..................................1 B. Conducting the Study.........................................................................................................3 1. Marketing Expenditures..............................................................................................4 2. Marketing Activities and Other Information Requested by the Special Order...........5 C. Role of the FTC Study........................................................................................................6 II. Expenditures for Marketing Food to Children and Adolescents.........................................7 A. Introduction........................................................................................................................7 B. Expenditures Analyzed by Food Category.........................................................................8 C. Expenditures Analyzed by Promotional Activity Groups................................................12 1. Traditional Measured Media: Television, Radio, and Print......................................15 2. New Media: Websites, Internet, Digital, Word-of-Mouth, and Viral Marketing.....17 3. Packaging and In-Store Marketing............................................................................18 4. Premiums...................................................................................................................19 5. Other Traditional Promotional Activities ................................................................20 6. In-School Marketing.................................................................................................23 7. Use of Cross-Promotions and Celebrity Endorsements............................................24 III. Food Marketing Activities Directed to Children and Adolescents....................................27 A. Introduction......................................................................................................................27 B. Specific Promotional Activities........................................................................................28 1. Cross-Promotions and Third-Party Licensed Characters..........................................28 2. Brand Recognition Activities....................................................................................38 3. Other Promotional Activities.....................................................................................39 4. In-School Marketing.................................................................................................51 C. Target Companies’ Market Research on Child and Teen Audiences................................54 D. Marketing Directed to Children or Adolescents by Gender, Race, Ethnicity, or Income Level....................................................................................................................57 1. Television, Print, Radio, and Internet........................................................................57 iii 2. 3. Athletic and Other Event Sponsorships....................................................................58 Packaging, In-Store, Premiums, and School-Related Marketing..............................58 IV. Assessment of Food Company Health Initiatives and Recommendations.......................60 A. The 2005 Workshop on Marketing, Self-Regulation & Childhood Obesity and the 2006 Report......................................................................................................................60 B. Developments Since the 2005 Workshop and 2006 Report.............................................61 1. Children’s Food and Beverage Advertising Initiative...............................................62 2. “Better for You” products..........................................................................................65 3. Innovative Packaging................................................................................................67 4. Nutritional Labeling..................................................................................................68 5. Competitive Foods and Beverages in Schools..........................................................72 6. Healthy Messages......................................................................................................75 7. Media and Entertainment Company Initiatives.........................................................78 C. Measuring the Success of Company Initiatives................................................................80 V. Conclusion..............................................................................................................................81 Endnotes........................................................................................................................................83 Appendices Data and Research Methods.................................................................................... Appendix A Federal Trade Commission Order to File Special Report........................................ Appendix B Expenditure Data Tables by Food Category and Promotional Activity Category... Appendix C FTC Survey of Food and Beverage Display Advertising on Child- and TeenOriented Websites and Select Data on Food Company Websites.....................Appendix D CBBB Children’s Food & Beverage Advertising Initiative: Tables Summarizing Individual Food Company Commitments Regarding Food Marketing to Children...................................................................................... Appendix E Tables Summarizing Alliance for a Healthier Generation School Beverage and Competitive Food Guidelines.....................................................................Appendix F iv List of Tables Table II.1: Total Youth Marketing for Reported Brands and Percent of Total Marketing, By Food Category, Ranked by Youth Spending..................................................................9 Table II.2: Reported Child and Teen Marketing Expenditures and Overlap.................................11 Table II.3: Reported Child and Teen Marketing That Uses Cross-Promotions, Ranked by Percentage....................................................................................................................25 v vi List of Figures Figure II.1: Reported Child and Teen Marketing Expenditures and Overlap.................................7 Figure II.2: Reported Youth Marketing and Total Marketing for Reported Brands, Ranked by Youth Expenditures................................................................................................9 Figure II.3: Child and Teen Marketing, Ranked by Youth Expenditures.....................................11 Figure II.4: Reported Total Youth Marketing Expenditures by Promotional Activity Group......12 Figure II.5: Food Category Share of Total Youth Spending For Each Promotional Activity Group.........................................................................................................................13 Figure II.6: Reported Child Marketing Expenditures, By Promotional Activity Group..............14 Figure II.7: Reported Teen Marketing Expenditures, By Promotional Activity Group...............14 Figure II.8: Television Advertising Expenditures - Top 3 For Youth...........................................15 Figure II.9: Television Advertising Expenditures on Top 5 Teen (12-17) Broadcast Shows.......16 Figure II.10: New Media - Top 3 for Youth....................................................................................17 Figure II.11: In-Store and Packaging/Labeling - Top 3 for Youth.................................................18 Figure II.12: Premiums - Top 3 for Children..................................................................................19 Figure II.13: 2006 Child Traffic for Kids’ Meals with Toys, 99¢ or $1.00 Menu Items, and Older Kids’ Meals (All QSRs versus Select QSRs)..................................................20 Figure II.14: Percent of 2006 Child Traffic for Kids’ Meals with Toys (All QSRs vs. Select QSRs)........................................................................................................................20 Figure II.15: Other Traditional Promotions - Top 3 for Youth.......................................................21 Figure II.16: In-School - Top 3 for Youth.......................................................................................23 Figure II.17: Reported Child Marketing Expenditures and Portion Using Cross-Promotions.......26 vii Executive Summary Executive Summary Concern about the dramatic increase in childhood obesity in the United States prompted Congress to request that the Federal Trade Commission conduct a study of food and beverage marketing to children and adolescents. The results of that study – an analysis of 2006 expenditures and activities by 44 companies – are presented here. Included are not only the traditional measured media – television, radio, and print – but also activities on the Internet and other new electronic media, as well as previously unmeasured forms of marketing to young people, such as packaging, in-store advertising, event sponsorship, and promotions that take place in schools. Integrated advertising campaigns that combine several of these techniques and often involve cross-promotions – linking a food or beverage to a licensed character, a new movie, or a popular television program – dominate today’s landscape of advertising to youth. The data presented here tell the story of food and beverage marketing in a year just preceding, or early in the development of, industry self-regulatory activities designed to reduce or change the profile of such marketing to children. These initiatives – some of which grew out of a 2005 joint FTC and Department of Health and Human Services (HHS) Workshop on Marketing, Self-Regulation & Childhood Obesity – are described in Section IV of this Report, which also sets forth recommendations for future actions by food and entertainment industry members, as well as the organizations that have spearheaded self-regulatory efforts. This Report, which compiles information not previously assembled or available to the research community, may serve as a benchmark for measuring future progress with respect to these initiatives. The data in this Report were obtained by issuing compulsory process orders to industry members, including beverage manufacturers and bottlers; companies that produce packaged food such as snacks, baked goods, cereals, and prepared meals; makers of candy and chilled desserts; dairy marketers; fruit and vegetable growers; and quick-service restaurants (QSRs). These are the foods most frequently advertised to children (ages 2-11) and adolescents (ages 12-17), and the 44 target companies are the primary marketers to youth (ages 2-17) in those food categories. The companies were required to provide expenditure data in each of 20 advertising or promotional activity categories for marketing directed to children, adolescents, and all audiences. Samples of marketing activities or descriptions of techniques used in 2006 were also obtained. Dollars Spent on Marketing to Children and Adolescents The 44 reporting companies spent approximately $1,618,600,000 to promote food and beverages to children and adolescents in the U.S. in 2006. Approximately $870 million was ES-1 Marketing Food to Children and Adolescents spent on food marketing directed to children under 12 and a little more than $1 billion on marketing to adolescents. About $300 million of these expenditures were addressed to both age groups; hence, the total spending is less than the sum of the separate expenditures for the two age groups. Previous estimates of food marketing directed to children and adolescents by other researchers have been significantly higher than $1.6 billion. There are several reasons for this disparity. Other researchers have not had access to the confidential company financial data obtained by the Commission. Moreover, prior estimates appear to have included advertising directed to children for products other than food. In addition, these estimates have included price promotions, such as coupons or discounts for children at hotels and restaurants, that generally are targeted to adults. For those food and beverage brands promoted to children and adolescents, the overall expenditures for promotional activities directed to all audiences, including additional adultoriented marketing, was more than $9.6 billion. Therefore, the expenditures directed to those between the ages of 2 and 17 represented 17% of the total 2006 marketing budget for those brands. Carbonated beverages, restaurant (QSR) food, and breakfast cereals accounted for $1.02 billion of the $1.6 billion, or 63% of the total amount spent on marketing to youth by the reporting companies. For carbonated beverages, the total was $492 million, with $474 million (or 96%) of that amount directed to adolescents. Nearly 24%, or $116 million, of carbonated beverage youth marketing consisted of in-school expenditures. QSRs reported spending close to $294 million on promotions to youth, divided fairly evenly between activities directed to children and those targeted to adolescents. For cereals, the total was $237 million, with $229 million targeted to children. Television advertising still dominates the landscape of marketing techniques used to promote foods and beverages to youth; companies reported spending $745 million, or 46% of all reported youth marketing expenditures, on this medium. More than 50% of the television advertising was directed to children under 12, with breakfast cereals and restaurant food accounting for more than half of that advertising. Carbonated beverages and restaurant food dominated adolescentdirected television advertising. All told, traditional “measured media” (television, radio, and print) accounted for $853 million, or 53% of the reported youth-directed marketing expenditures. New media – the Internet, digital (such as email and text messaging), and word-of-mouth/ viral marketing – have become an important component of promotional activities intended to reach children and adolescents. In an attempt to quantify the use of online marketing, Appendix ES-2 Executive Summary D to this Report explores the amount of display advertising for food and beverages that appeared on child- and adolescent-oriented websites in 2006, as well as traffic on company websites that promote food or beverage products through branded entertainment and activities designed for children and adolescents. In terms of expenditures, however, the new media accounted for only $77 million, or 5% of reported youth-directed marketing. Expenditures on specialty items (premiums) and prizes for children and adolescents totaled $67 million, or 4% of reported youth marketing dollars. However, this number does not include toys distributed by QSRs with children’s meals because, in those cases, the consumer purchases the toy when paying for the meal. If the cost of QSR toys – which is estimated to total $360 million – were added to the reported premium expenditures, this category would jump to $427 million and would rank second only to television as a promotional technique targeted to children. Moreover, if added to QSRs’ reported child-directed marketing expenditures of $161 million, these costs would result in total spending on child-directed marketing by the reporting QSRs of over $520 million – more than twice the amount spent on child-directed marketing in any other food category. Companies reported spending $195 million on packaging and in-store display materials to reach children and adolescents, or 12% of all reported youth marketing expenditures. Marketing in schools totaled $186 million, or 11% of reported youth marketing, and 90% of those expenditures were for beverages, both carbonated and non-carbonated. The remaining $241 million (15%) of reported youth-directed marketing was spent on other traditional promotional activities, such as event and athletic sponsorships; celebrity endorsement fees; movie theater, video, and video game ads; product placements in movies, television, and video games; crosspromotion licensing fees; and promotional activities conducted in connection with philanthropic endeavors. Expenditures for cross-promotions, including the use of licensed characters and tie-ins with television programs, movies, toys, or other entertainment events, were compiled across promotional categories – generally including television, the Internet, premiums, packaging, and in-store displays. A little more than $208 million, representing 13% of all reported youth marketing, was devoted to cross-promotions. For some food categories, such as restaurant food and fruits and vegetables, cross-promotions were nearly 50% of reported child-directed expenditures. Cross-promotional activities directed to children were used for restaurant food, breakfast cereals, snack foods, prepared foods, dairy products, baked goods, and fruits and vegetables. Cross-promotions targeting an adolescent audience were used for snack foods, candy, and carbonated drinks. ES-3 Marketing Food to Children and Adolescents Methods of Promoting Foods and Beverages to Children and Adolescents For most food and beverage products, advertising to a young audience employs the full spectrum of promotional techniques and formats. Promotional campaigns directed to youth tend to be fully integrated, with themes encountered in television ads carried over to package materials, promotional displays in stores or restaurants, and the Internet. Packaging promotes the company or food product website, where entry of a code found on the package might enable the young consumer to participate in a contest, play a game that features the product, or receive “points” to redeem for premiums. Cross-promotions were widespread in 2006, tying foods and beverages in all of the covered categories to about 80 movies, television shows, and animated characters that appeal primarily to youth. Superman Returns and Pirates of the Caribbean were prominent that year – promoting QSR children’s meals, frozen waffles, fruit and fruit snacks, breakfast cereals, popcorn, lunch kits, candy, carbonated and non-carbonated drinks, pasta, snack chips, and milk. Superman and the Pirates characters appeared in ads on television, in movie theaters, on the Internet, and on packaging and in-store displays. Companies created special limited edition snacks, cereals, frozen waffles, and candies based on the movies. Children or adolescents could go online to play “advergames” related to the characters and their stories and to enter contests or sweepstakes using special codes obtained from food packages or beverage containers. Prizes ranged from video games to trips to Disney parks to a $1,000,000 reward for the “capture” of Superman villain, Lex Luthor. Related premiums included skull-shaped bowls, bandanas, strobe light key chains, movie posters, outdoor flying toys, Superman action figures, activity books, and digital downloads. For some food products marketed to children, companies have created their own successful “spokescharacters” – animated versions of animals, people, or even the food itself. Stories and biographical information about the characters appear in television ads, on packages, and in online videos. The stories are augmented by websites that use the characters in games, afford children the opportunity to help them solve problems or mysteries, and offer related prizes or premiums, such as character cards or comic books to collect. Food company characters occasionally even make “live” appearances at events. Some food companies also sell – or license third parties to sell – merchandise, such as toys and clothing branded with food products or their spokescharacters. The Internet – though far less costly than television – has become a major marketing tool of food companies that target children and adolescents, with more than two-thirds of the 44 ES-4 Executive Summary companies reporting online, youth-directed activities. Some devote space on a company website to child or adolescent content, while others have developed independent websites for foods or beverages that particularly appeal to children or adolescents. Advergames, directed to both children and adolescents, were featured on websites for snacks, cookies, candy, cereals, dairy products, frozen meals, beverages, soups, frozen waffles, fruit, and restaurant food. Websites appealing to adolescents often featured sports or music, and many offered free downloads, such as screensavers, wallpapers, ringtones, music, and layouts for MySpace pages. Downloads for children included activity sheets, pages to color, stickers, iron-on decals, and games. Some beverage companies contacted adolescents by text messaging, and a few companies used podcasts and “webisodes” (online video episodes) to reach children and adolescents. A by-product of Internet marketing is viral marketing, in which consumers are encouraged to share electronic promotional messages with other consumers. Typically, these efforts consist of “e-cards” (electronic greeting cards) and “send-to-a-friend” emails that can be sent from food product websites and contain hyperlinks back to the site. These techniques were used to reach both children and adolescents, and often were linked to a cross-promotional campaign. Word-ofmouth activities involved electronic and non-electronic peer-to-peer communications about food products, in which consumers were recruited to act as product “ambassadors” or “connectors” by handing out promotional materials or samples. Most of these activities were directed to adolescents. Product packages and point-of-sale materials in stores were used heavily for movie or television program cross-promotions, displays of company spokescharacters, and premium or sweepstakes promotions. Sports themes and offers of sports paraphernalia were a popular means of attracting adolescent consumers. Other store promotions featured mini-events, with branded vehicles, product samples, carnival-type activities for children, and distribution of toys or other items. Fruit and vegetable companies used Sesame Street and other characters on produce displays, packaging, and the produce itself to appeal to young children. Premiums – available free with the food product or at a discount with proof of purchase – ran the gamut from small toys, trinkets, or collectible cards to DVDs, video games, music or ringtone downloads, and amusement park or event tickets. Prizes available through contests or sweepstakes were often in the form of cash. Other prizes included electronic equipment, such as televisions, digital music players, and cell phones; sports equipment, apparel, camps, or clinics; vacations and trips to theme parks; and tickets to concerts or sporting events. Some companies ES-5 Marketing Food to Children and Adolescents offered a point system tied to accumulated proofs of product purchase; points could be redeemed for merchandise, usually through a company website. Celebrity endorsers – actors, athletes, singers, and musical groups – were featured in television and print ads, on the Internet, and in store displays, primarily in ads directed to adolescents or “tweens” (those between the ages of 8 or 9 and 13 or 14). Often they were tied to sweepstakes, such as a contest for the opportunity to meet a basketball star in person. Food and beverage promotion took place at sponsored events, including local fairs or festivals with children’s activities, performances at mall and retail sites, concerts, athletic events, circuses, children’s movie premieres, and other venues appealing to children or adolescents. Some companies sent branded cars, vans, or buses on tour to distribute samples and engage with children or adolescents at stores, community events, amusement parks, athletic events, or “impromptu” events created by the food marketer itself. Sponsorship of athletes, athletic teams, and competitive sporting events, including those for extreme sports, was a common promotional activity directed to children or adolescents. The sponsorship of professional athletic teams also included opportunities for children or tweens to meet players, participate in pre-game or sideline events, and attend sports camps, clinics, or training programs. Product placements – such as a character drinking a soda or offering it to another character, a can or bottle appearing on a table, or a brand name mentioned in dialogue – occurred in a few television programs popular with children or adolescents and in some PG and PG-13 movies appealing to youth. Food and beverage ads also appeared in movie theaters, on videos, and before video games, and occasionally food products were integrated into video game content. Marketing in elementary, middle, and high schools occurred primarily through displays on or around vending machines or in cafeterias. Companies sponsored athletic events, programs, equipment, or apparel; provided product samples and branded merchandise to schools; and sometimes sponsored contests with student prizes. A few provided instructional materials about nutrition and fitness or sponsored reading encouragement programs. Food Company Health Initiatives Since the 2005 FTC/HHS Workshop on Marketing, Self Regulation & Childhood Obesity, and the subsequent Report issued in April 2006, members of the food and beverage industry, as well as entertainment and media companies, have taken important steps to encourage better nutrition and fitness among the nation’s youth. The Children’s Food and Beverage Advertising Initiative, established by the Council of Better Business Bureaus (CBBB) in November 2006, represents a significant effort to change the mix of food and beverage advertising messages ES-6 Executive Summary directed to children under 12 and to encourage them to eat healthier foods and be more physically active. To date, 13 of the largest food and beverage companies – estimated to account for more than two-thirds of the food and beverage television advertising expenditures directed toward children – have joined the Initiative, pledging either not to direct television, radio, print, or Internet advertising to children under 12 or to limit their advertising to foods that meet specified nutritional standards. Other aspects of the pledges include limiting the use of licensed characters to the promotion of healthier products or lifestyles, not seeking product placements in child-directed media, not advertising food or beverages in elementary schools, and using only “healthy dietary choices” in interactive games directed to children. The Alliance for a Healthier Generation – a partnership of the William J. Clinton Foundation and the American Heart Association – has joined with industry in a significant effort to change the array of “competitive” foods and drinks (i.e., those sold outside the school meal program) sold to children and adolescents in schools. The School Beverage Guidelines, adopted in May 2006, impose size and calorie limitations that vary based on educational level. The Competitive Food Guidelines, adopted in October 2006, impose restrictions on calories, as well as fat, sugar, and sodium content. Other efforts by food industry members include: product reformulation; development of new “better for you” products; more nutritious products available in QSR children’s meals; single-serving packages to assist with portion control; nutritional labeling initiatives, such as company icons, third-party seals, and front-of-package nutrition information; and public education directed to children and adolescents regarding nutrition and fitness. Some media and entertainment companies have also stepped forward with new initiatives, such as limiting the licensing of popular characters to promote only foods meeting minimum nutritional requirements; requiring program sponsors to meet nutritional guidelines; and incorporating healthy messages into children’s programs. The Commission notes that significant progress has been made in implementing the recommendations that evolved from its 2005 Workshop and 2006 Report, although there remains room for improvement. Based on the results of this study, the Commission has developed the following recommendations for future actions by industry members and others, including the organizations that have undertaken new initiatives to address the childhood obesity problem: ES-7 Marketing Food to Children and Adolescents Recommendations for Food and Beverage Companies General: •• •• All companies that market food or beverage products to children should adopt and adhere to meaningful nutrition-based standards for marketing their products to children under 12. A useful first step would be to join the CBBB Initiative. •• Companies should broadly construe “marketing” to include all advertising and promotional techniques, including but not limited to: advertising on television and radio, in print media, and on the Internet (including third-party and company-sponsored websites); product packaging and labeling; advertising preceding a movie shown in a movie theater or placed on a video (DVD or VHS) or within a video game; promotional content transmitted to personal computers and other digital or mobile devices; advertising displays and promotions at the retail site; specialty or premium items distributed in connection with the sale of a product; promotion or sponsorship of public entertainment events; product placements; character licensing, toy co-branding and cross-promotions; sponsorship of sports teams or individual athletes; word-of-mouth and viral marketing; celebrity endorsements; and in-school marketing. •• In cases where a product line contains some product varieties that meet the nutrition-based standard and others that do not, companies should strictly limit all components of a promotion or advertising campaign directed to children under 12 to those varieties that meet the standard. Thus, for example, television or print advertisements promoting a sweepstakes would feature only the “better for you” varieties of the product, and licensed characters would appear only on packages of the “better for you” varieties. Companies should consider limiting branded merchandise intended for children to products or brand lines meeting meaningful nutrition-based standards. Improving the Nutritional Profile of Product Offerings: •• Companies should continue and increase efforts to improve the nutritional profiles of their products – especially those marketed to children and adolescents – through product innovation and reformulation. •• Companies should improve upon the nutritional criteria adopted for “better for you” products as they find ways to lower sugar, fat, sodium, etc., without sacrificing taste and appeal. •• In applicable cases, companies should re-examine whether the fact that a product has “less” of, or is “reduced” in, calories or certain nutrients (e.g., sodium, sugar, or fat) is, by itself, a sufficient basis for qualifying as a “better for you” product. ES-8 Executive Summary •• Companies should continue and expand efforts to package more nutritious products in ways that are more appealing to children. •• Companies should continue efforts to use product packaging to help consumers control portion sizes and calories, by offering smaller portions and single-serving packages. Nutrition Labeling: •• Companies should conduct research on the effectiveness of various labeling devices to determine how consumers interpret such labeling and to identify those devices most effective at conveying meaningful, truthful information. •• Companies should work toward consistency among the standards used by individual food and beverage companies to determine what constitutes a “better for you” product, such as through the development and use of third-party standards, icons, or other devices. The Commission supports the work of the Keystone Center and others in this regard. Healthy Messages: •• Companies should expand public outreach efforts – through company-sponsored initiatives, third-party partnerships, and innovative and varied media techniques – to educate children and adolescents about the importance of healthy eating and exercise. •• •• Companies should devote particular attention to outreach aimed at ethnic minority populations that are disproportionately affected by childhood overweight and obesity. Companies should continue researching the effectiveness of their campaigns to educate and motivate youth to engage in healthier lifestyles. The CBBB Initiative: •• The CBBB should closely monitor participating companies’ compliance with their pledges. •• The CBBB and participating companies should enhance the Initiative in the following ways: •• Expand the scope of “advertising to children” to encompass all advertising and promotional techniques, including, for example, product packaging and in-store marketing; •• Require that 100% of food advertising directed to children under 12 promotes healthy dietary choices; ES-9 Marketing Food to Children and Adolescents •• •• In cases where a product line contains some product varieties that meet a company’s nutrition criteria for a “healthy dietary choice” and others that do not, the company should strictly limit all components of a promotion or advertising campaign directed to children under 12 to those varieties that meet the criteria. Thus, for example, television or print advertisements promoting a sweepstakes would feature only the varieties of the product that represent healthy dietary choices, and licensed characters would appear only on packages of the varieties that are healthy dietary choices. Work toward standardizing the nutrition criteria for “healthy dietary choices” that may be marketed to children, such as by product category (e.g., for beverages, cereals, snack foods, soups, canned pastas, frozen entrees, etc.); •• In applicable cases, companies should re-examine whether the fact that a product has “less” of, or is “reduced” in, calories or certain nutrients (e.g., sodium, sugar, or fat) is, by itself, a sufficient basis for qualifying as a “healthy dietary choice”; •• Work toward developing meaningful, standardized definitions for what constitutes advertising “directed to children under 12.” In considering how to define “directed to children,” the CBBB and participating companies should consider, where relevant to the advertising medium, factors such as the percentage of the audience under 12; the total number of children reached; the time of day and venue in which the advertising appears; and whether the advertising features characters, performers, or celebrities who are popular with children, or contains themes, language, or other attributes designed to appeal to children. •• Require companies not to engage in, approve, or allow placement of their product in media directed to children under 12; •• Require participating companies to ensure that their franchisees are bound by the companies’ pledge commitments, such as by incorporating the pledge commitments into any franchisee contracts. Foods & Beverages in Schools: •• Companies should continue efforts to improve the nutritional profile of foods and beverages sold in schools. •• All companies that sell “competitive” food or beverage products in schools should join the Alliance for a Healthier Generation or otherwise adopt and adhere to meaningful nutrition-based standards for foods and beverages sold in schools, such as those recommended by the Institute of Medicine. •• Participating companies should consider incorporating their Alliance commitments into distributor contracts. •• Companies should cease all in-school promotion of products that do not meet meaningful nutrition-based standards. ES-10 Executive Summary •• The Commission encourages schools and school districts, as part of their school wellness policies, to adopt and implement meaningful nutrition-based standards for competitive foods sold in schools. Recommendations for Media and Entertainment Companies •• More media and entertainment companies should limit the licensing of their characters to healthier foods and beverages that are marketed to children, so that cross-promotions with popular children’s movies and television characters will favor the more, rather than the less, nutritious foods and drinks. •• Media companies should consider adopting uniform, objective standards that limit advertising placements on programs “directed to children” to healthier food and beverage products. •• Media and entertainment companies should continue to incorporate health and nutrition messages into programming and editorial content, and to create public education campaigns aimed at the problem of childhood obesity. •• Media and entertainment companies should test the effectiveness of any health and nutrition messages and public education campaigns aimed at the problem of childhood obesity. •• Media and entertainment companies should consider the feasibility of instituting a self-regulatory initiative to facilitate implementation of the recommendations above. The companies should consider working with the CBBB in this endeavor. Conclusion The food and beverage companies surveyed for this Report spent more than $1.6 billion marketing their products to children and adolescents in 2006. The Commission believes that these companies were responsible for a substantial majority of the industry expenditures for food and beverage marketing to children and adolescents during 2006. The companies used myriad techniques, including traditional measured media, the Internet and other “new” media, as well as product packaging, in-store advertising, and event promotions, to name a few. Integrated advertising campaigns that combined several of these techniques were prevalent. Whether there is a link between food marketing to children and childhood obesity is a question not addressed by this Report. What is clear, however, is that childhood obesity is a complex problem, with many social and economic contributing factors. The Commission believes that all segments of society – parents, schools, government, health care professionals, food companies, and the media – have an obligation to contribute to finding and implementing solutions. This Report – with its detailed assessments of the kinds of foods being marketed to ES-11 Marketing Food to Children and Adolescents children and adolescents and how these foods are being marketed – informs one aspect of the ongoing dialogue about how to address the problem. Participants in the 2005 Workshop generally agreed that, regardless of the causes of childhood obesity, food and beverage marketers can employ a wide range of strategies to play a positive role in reversing the trend. Participants also recognized that consumers expect the industry to help both adults and children improve their diets by providing more healthy choices and helpful nutrition information, and by engaging in responsible marketing practices. Based on this study, the Commission has formulated its recommendations for future actions by members of the food industry, the media and entertainment industries, and others. These recommendations, set forth above, are also included in Sections IV and V of the Report. ES-12 Introduction I. Introduction At the request of Congress,1 the Federal Trade Commission (FTC) has conducted a study of the marketing of foods and beverages to children and adolescents.2 This Report presents the results of that study. It analyzes data from both public and non-public sources to provide a comprehensive picture of expenditures and activities directed toward children (ages 2-11) and adolescents (ages 12-17, also referred to as “teenagers” or “teens”) by 44 food and beverage producers, marketers, and quick-service restaurants (QSRs) in the United States during 2006. While the study does not include the entire universe of companies marketing food to children and adolescents (collectively referred to as “youth”), or the entire range of foods promoted to them, the Commission believes that this Report covers a substantial majority of such expenditures and activities for the relevant time frame. As requested by Congress, the study addresses not only marketing activities in traditional measured media – television, radio, and print – but also analyzes the Internet and other new media, as well as older, but mostly unmeasured, forms of promotional activities directed to youth. The Report presents a great deal of information not previously collected and not otherwise available to the research community.3 Significantly, the Report gathers data from a year just before, or very early in the inception of, industry selfregulatory activities aimed at reducing or changing the profile of food and beverage marketing to children. As a result, the Commission study may serve as a benchmark for measuring the future success of voluntary efforts to modify that advertising. A. Background: Marketing, Self-Regulation, and Childhood Obesity In recent decades, the incidence of childhood overweight and obesity in the United States has increased rapidly. According to the Centers for Disease Control and Prevention, the prevalence of overweight youth has increased about three-fold over the last 25 or 30 years. Today nearly 14% of children ages 2-5, 19% of children ages 6-11, and about 17% of adolescents ages 12-19 are overweight.4 The long-term health consequences – with increased risk for cardiovascular disease and greater prevalence of type 2 diabetes – are very serious.5 Growing awareness of the health issues has focused public attention on what and how much children consume and which foods and beverages they are encouraged to eat and drink. Government agencies, private organizations, and food and entertainment industry members have endeavored, in recent years, to explore the contributing factors and develop new initiatives to address the problem.6 In July 2005, the FTC and the Department of Health and Human Services (HHS) jointly convened a two-day Workshop on Marketing, Self-Regulation 1 Marketing Food to Children and Adolescents & Childhood Obesity.7 This event brought together some of the largest food manufacturers and entertainment companies, as well as government officials, health experts, and consumer advocates. The purpose of the Workshop was not to attempt to determine the causes of childhood obesity nor to assess blame; rather, the goal was to focus attention on positive initiatives that industry members and others could take to encourage healthier eating and living by the nation’s young people. Out of the 2005 Workshop came a 2006 Report with a series of recommendations for the food and media industries, including suggestions for self-regulatory initiatives to change the way food is marketed to children.8 In July 2007, the FTC and HHS conducted a follow-up Forum to review progress in the implementation of self-regulatory and educational initiatives.9 The agencies were encouraged to learn that the 2005 Workshop and 2006 Report had provided a stimulus for new programs, in particular the Children’s Food and Beverage Advertising Initiative, established by the Council of Better Business Bureaus (CBBB) and the CBBB’s National Advertising Review Council. To date, 13 of the largest food and beverage companies – estimated to represent more than twothirds of children’s food and beverage television advertising expenditures10 – have joined the Initiative, making pledges that, when fully implemented, will significantly alter the landscape of food marketing to children. Most of these companies have committed either not to advertise directly to children under 12 or to limit such advertising – including television, radio, print, and the Internet – to foods that qualify as “healthy dietary choices” by meeting specified nutritional standards, such as limitations on calories, fat, sugar, and sodium and/or providing certain nutritional benefits to children. In addition, the companies have pledged to limit the use of licensed characters to promote “healthy dietary choices” or healthy lifestyles, not to seek product placements in child-directed media, not to advertise food or beverages in elementary schools, and to use only their “healthy dietary choices” in interactive games directed to children. The Children’s Food and Beverage Advertising Initiative, and other voluntary efforts such as the Alliance for a Healthier Generation, are described in Section IV of this Report. In preparing this Report, as in sponsoring the 2005 Workshop and follow-up Forum, the Commission has not attempted to address the question of whether there is a link between food marketing to children and childhood obesity. An Institute of Medicine study released in 2006 included a comprehensive survey of research addressing the relationship between exposure to food advertising on television and requests for, preferences for, and consumption of the advertised products by children and adolescents. (The relevant research did not address forms of marketing other than television advertising.) The IOM concluded there is strong evidence that television advertising influences the food and beverage requests and preferences of children ages 2-11, but found insufficient evidence for teens ages 12-18. With respect to actual food 2 Introduction consumption, the IOM concluded there is strong evidence that television advertising influences the short-term consumption of children ages 2-11, but again found insufficient evidence with respect to teens. When looking at usual dietary intake, or long-term, as opposed to short-term, food consumption, the evidence of a relationship to television advertising was much weaker. Finally, the IOM found strong statistical evidence that exposure to television advertising is associated with adiposity in children and adolescents; however, the IOM could not make a finding about a causal relationship between the two.11 Another significant study regarding advertising on children’s television was published by the Commission last year. Economists in the FTC’s Bureau of Economics compared children’s exposure to television advertising in 1977 with their exposure in 2004. They concluded that children’s exposure to food ads on television has not risen and has actually fallen modestly. In 2004, children ages 2-11 saw approximately 5,500 food ads on television, which constituted 22% of their total annual television ad exposure. This is about 9% less than the 6,100 food ads children were estimated to have seen in 1977. In 2004, however, children’s ad exposure was more concentrated on children’s programming; about half of the food ads seen by children were during programs in which children were at least 50% of the audience, compared to about one quarter in 1977. In both years, the advertised foods were concentrated in the breakfast cereal, candy and dessert, and restaurant food categories.12 This Report will complement the Bureau of Economics study, providing information on expenditures and promotional activities in the newer media that did not exist in 1977. Although children’s exposure to food advertising on television has remained fairly constant over the past 30 years, marketing to children has become omnipresent, and promotional campaigns have become more integrated because of the Internet, other new electronic media, and the burgeoning of cross-promotions with products, movies, and characters popular with children and teens. B. Conducting the Study Based on its own research, as well as public comments received in response to a preliminary Federal Register notice,13 the Commission concluded that the data necessary to prepare the comprehensive report sought by Congress could be obtained only through the use of compulsory process. Therefore, on July 31, 2007, the FTC issued an Order to File Special Report (Special Order)14 to 44 food and beverage manufacturers, distributors, and marketers, as well as QSRs, in the U.S.15 As noted in Appendix A, those 44 companies included the top television advertisers in programs or time segments where 30% or more of the audience was between the ages of 2 and 17. In addition, for the primary products in the selected food categories, the companies accounted for 60% to 90% of U.S. sales. Therefore, the Commission believes that the companies 3 Marketing Food to Children and Adolescents that received and responded to the Special Order were responsible for a substantial majority of expenditures for food and beverage marketing to children and adolescents during 2006. Also included among the 44 companies were 12 fruit and vegetable producers, distributors, and marketers. Fresh produce companies traditionally have not engaged in significant marketing efforts directed toward children; however, some have now begun to use innovative techniques, such as placing popular licensed characters on labels or in supermarket displays, to reach children. Although the expenditures and range of activities for marketing these products to children may be small when compared to those for packaged foods (such as snacks, baked goods, cereals, and prepared meals) and beverages, the Commission decided that it was important to include the marketing of fresh fruits and vegetables in this study. The new, child-friendly promotions by some growers are a creative way to encourage healthier eating habits among children; it is likely such efforts will gain momentum with heightened public awareness of children’s health issues. In addition, four major beverage bottlers were included among the 44 companies. The bottling companies are responsible for many beverage marketing activities on a local level, such as in-school marketing, event sponsorship, and in-store promotions. The Commission therefore concluded that major bottlers should be included in the study in order to provide a more complete and accurate picture of beverage marketing to children and adolescents. The Special Order required information about marketing activities and expenditures in 2006 for brands in 11 categories of food products: breakfast cereals, snack foods, candy, dairy products, baked goods, carbonated beverages, fruit juice and non-carbonated beverages, prepared foods and meals,16 frozen and chilled desserts, fruits and vegetables, and restaurant (QSR) food. A detailed explanation of the criteria used in the Special Order and the methodology of conducting this study is set forth in Appendix A. 1. Marketing Expenditures The companies were required to submit expenditure information for their marketing activities directed toward children (ages 2-11), adolescents (ages 12-17), or both, in each of 20 separate promotional activity categories: television, radio, and print advertising, company websites, other Internet advertising, packaging and labeling, advertising in movie theaters/ videos/video games, other digital advertising (such as email and text messaging), in-store marketing, premium distribution, public entertainment events, product placement, character licensing/cross-promotions/toy co-branding, sponsorship of sports teams or athletes, word-ofmouth marketing, viral marketing, celebrity endorsements, in-school marketing, advertising in conjunction with philanthropic endeavors, and other promotional activities. 4 Introduction For food products marketed to children or adolescents in any particular promotional category, the companies also were required to report the total amount spent in that category to market the product to all audiences. Finally, for any product marketed to children or adolescents, each company also was required to report its overall marketing budget for that product. The information about promotional category totals and overall expenditures for those products marketed to children or adolescents was included in the request so that the reported expenditures for children and adolescents could be placed within the appropriate context. To protect the confidentiality of financial information reported by the individual companies, as required by the FTC Act and Commission Rules,17 the expenditure data are reported, in Section II of this Report, only in aggregated amounts, by food category and by the promotional techniques used. 2. Marketing Activities and Other Information Requested by the Special Order The Commission Special Order requested samples or descriptions of advertising and marketing in all promotional categories, except for television, radio, and print. The nature of advertising to children in the traditional broadcast and print media is well known, readily accessible, and described in other research studies. Therefore, the Commission limited this aspect of the request to the other promotional activity categories. These comprise the newer forms of marketing to children, such as use of the Internet, as well as traditional venues, like packaging and in-store promotions, that generally have not been documented and described elsewhere. Of course, as noted in Section III of the Report, cross-promotional advertising campaigns generally include television advertising as a key component. Therefore, information regarding television advertising that was part of a cross-promotional campaign involving a licensed character, for example, was included in the company reports. In addition, companies were asked to provide samples or descriptions of promotional activities for which they did not incur expenditures. Therefore, Section III of the Report affords a comprehensive look at the nature of promotional activities targeted toward children, adolescents, or both in 2006. Companies also were asked to provide any marketing research regarding the appeal to individuals under the age of 18 of any particular types of advertising or promotional techniques. Research findings of particular interest are described in Section III as well.18 In addition to responding to the congressional request, this Report serves as a followup report on the recommendations set forth in the FTC/HHS 2006 Report. Accordingly, the Commission Special Order sought information regarding company policies pertaining to food advertising and promotional activities directed to children or adolescents that were in 5 Marketing Food to Children and Adolescents effect on or after January 1, 2006. The Special Order also requested information regarding company initiatives to promote healthy eating, such as product reformulation, packaging to make nutritious and lower calorie products appealing to children or adolescents, nutritional icon or seal programs, efforts to improve the nutritional profile of foods marketed to children and adolescents, public education efforts regarding nutritional issues, and efforts to improve the nutritional profile of products sold in the schools. Section IV of the Report presents the information received in response to this part of the request. C. Role of the FTC Study The data presented in this Report represent a substantial majority of expenditures and promotional activities in the marketing of food and beverage products to children and teenagers during 2006. The study does not represent the entire universe of such marketing. However, the Commission believes that it received data from a sufficient percentage of marketers to afford an accurate picture of food marketing to American youth between the ages of 2 and 17 years old. The Commission recognizes that some companies believe the Special Order required overreporting of expenditures in certain promotional categories.19 It is also true that there was underreporting in some categories.20 The Commission recognizes that the companies included in the study were asked, in some instances, to provide information they do not normally compile in the manner requested and that they may have had to re-structure their usual accounting methods to comply with the Special Order. The Commission believes the companies were thorough and conscientious in preparing their responses, and it appreciates that effort. Because childhood obesity is a complex problem, with many social and economic contributing factors, the Commission believes that all segments of society – parents, schools, government, health care professionals, food companies, and the media – have an obligation to contribute to finding and implementing solutions. This Report – with its detailed assessments of the kinds of foods being marketed to children and adolescents and how these foods are being marketed – informs one aspect of the ongoing dialogue about how to address the problem. Participants in the 2005 Workshop generally agreed that, regardless of the causes of childhood obesity, food and beverage marketers can employ a wide range of strategies to play a positive role in reversing the trend. Participants also recognized that consumers expect the industry to help both adults and children improve their diets by providing more healthy choices and helpful nutrition information, and by engaging in responsible marketing practices.21 Based on this study, the Commission has developed a series of recommendations for future action by members of the food industry, the media and entertainment industries, and others.These recommendations are set forth in Sections IV and V of the Report. 6 Expenditures for Marketing Food to Children and Adolescents II. Expenditures for Marketing Food to Children and Adolescents A. Introduction The 44 reporting companies spent more than $1.6 billion to promote food and beverages to children and adolescents in the U.S. in 2006.22 The reporting companies spent $870 million on food marketing directed to children under 12 and just over $1 billion on food marketing directed to adolescents ages 12 to 17. As shown in Figure II.1, approximately $300 million of the reported child- and teen-directed expenditures was directed at age groups that encompassed both children and adolescents.23 Figure II.1: Reported Child and Teen Marketing Expenditures and Overlap Child 2-11 $870,328,898 Teen 12-17 Duplicative $303,274,647 $1,051,546,191 Total: $1,618,600,442 The reporting companies promoted their youthadvertised brands to adults or to a general audience, as well as to consumers under age 18. Indeed, the reporting companies’ overall marketing expenditures for these brands exceeded $9.6 billion. Thus, the youth-directed portion of the marketing expenditures for these brands represented 17% of total marketing expenditures. Carbonated beverages, restaurant food, and breakfast cereals accounted for $1.02 billion of the $1.6 billion, or 63% of the total spent on youth-directed food marketing. Carbonated beverage companies reported $492 million in youth-directed expenditures, with $474 million (or 96%) of that amount directed to adolescents. Close to 24%, or $116 million, of the carbonated beverage youth marketing consisted of in-school expenditures, the bulk of which were vending machine commissions paid to the schools based on beverage sales, rather than traditional marketing expenses. The reporting QSRs spent close to $294 million on youth marketing, and split their expenditures almost evenly between children ($161 million) and teens ($145 million), with little duplication. Breakfast cereal producers reported a total of $237 million in 7 Marketing Food to Children and Adolescents youth-directed marketing expenditures; nearly all, $229 million, of that amount was reported as directed to children. In terms of promotional techniques, the $745 million spent on television advertising accounted for the greatest share (46%) of total youth-directed food and beverage marketing expenditures. An additional $108 million (7%) was spent on other traditional measured media, namely radio and print advertising. The reporting companies spent $77 million on new media – company websites, Internet, digital,24 and word-of-mouth and viral – which represented 5% of all reported youth-directed marketing. The companies reported spending $195 million on in-store marketing and packaging to reach children and adolescents, accounting for 12% of overall youth-directed expenditures. Premium expenditures represented $67 million, or 4% of all reported youth-directed expenditures. However, there is an important caveat to this figure; if the per unit cost of QSR toy premiums is included (see discussion in Section II.C.4.B below), premium expenditures jump to $427 million, ranking second only to television advertising as a promotional technique directed to youth. An additional $241 million (15%) of youth-directed marketing expenditures was allocated among other traditional promotional categories, such as product placement, movie, video, and video game advertising, cross-promotion license fees, athletic and event sponsorship, and celebrity endorsement fees. Finally, the companies reported in-school marketing expenditures of $186 million, representing 11% of all youth-directed food marketing expenditures. Expenditures on cross-promotions – including the use of licensed characters and tie-ins with television shows, motion pictures, toys, or other entertainment events – included not only the licensing fees but also the cost of implementing the cross-promotion across various activity categories, such as television and Internet advertising, premiums, and packaging. Just over $208 million, or 13% of all reported youth-directed marketing expenditures, involved the use of licensed characters or other forms of cross-promotion. B. Expenditures Analyzed by Food Category As previously noted, the Special Order was sent to 44 food and beverage companies, each of which then reported child- and teen-directed marketing expenditures for any food brands contained within the 11 specified food categories (see supra Section I). Because expenditure data were reported for only four brands in the frozen desserts category, the frozen desserts and candy categories were combined for purposes of this Report. For each brand with youthdirected marketing expenditures, the companies also reported the total marketing expenditures for that brand – i.e., all dollars spent to promote the brand to consumers in 2006. In general, the food categories that accounted for the largest youth-directed marketing also accounted for 8 Expenditures for Marketing Food to Children and Adolescents Table II.1: Total Youth Marketing for Reported Brands and Percent of Total Marketing, By Food Category, Ranked by Youth Spending Marketing That Meets Youth Criteria ($1000) Total Marketing ($1000) Percent of Total Marketing Meeting Youth 2-17 Criteria Carbonated Beverages 492,495 3,186,588 15.5 Restaurant Foods 293,645 2,177,306 13.5 Breakfast Cereal 236,553 792,042 29.9 Juice & Non-carbonated Bevs. 146,731 1,252,022 11.7 Snack Foods 138,713 852,342 16.3 Candy/Froz. Desserts 117,694 456,677 25.8 Prepared Foods & Meals 64,283 434,978 14.8 Baked Goods 62,549 153,393 40.8 Dairy Products 54,475 255,697 21.3 Fruits & Vegetables 11,463 46,769 24.5 1,618,600 9,607,815 16.8 Food Category TOTAL Note: Youth 2-17 marketing includes all marketing that meets either the Child 2-11 criteria or the Teen 12-17 criteria, without duplication. the largest overall marketing for the reported brands. Table II.1 presents total youth-directed expenditures (without duplication between child- and teen-directed expenditures) for each food category, ranked in descending order, and also expressed as a percentage of the total marketing expenditures for those brands within that food category. Figure II.2 illustrates the youth-directed expenditures for each food category, as well as the total marketing for these reported brands. Figure II.2: Reported Youth Marketing and Total Marketing for Reported Brands, Ranked by Youth Expenditures 3500 3,187 Youth 2-17 Marketing 3000 Total Marketing 2500 Dollars (in millions) 2,177 2000 1500 1,252 1000 500 852 792 492 457 294 237 147 139 118 435 64 63 153 256 54 0 Carbonated Beverages Restaurant Foods Breakfast Cereal Juice & Noncarbonated Bevs. Snack Foods 9 Candy/Froz. Desserts Prepared Foods & Meals Baked Goods Dairy Products 11 47 Fruits & Vegetables Marketing Food to Children and Adolescents The reporting companies with brands in the carbonated beverages, restaurant food, and breakfast cereal categories spent the most on food marketing to youth; spending in those three categories comprised 63% of all youth-directed spending. However, spending to promote carbonated beverages and restaurant food to children and teens constituted a relatively small percentage of the companies’ overall marketing budgets for their reported brands – 15.5% for carbonated beverages and 13.5% for restaurant food. The baked goods category had the highest proportion of youth-directed expenditures relative to total marketing expenditures on youthadvertised brands – 40.8% of the total.25 The juice and non-carbonated beverage category had the lowest proportion (11.7% of the total). Fruit and vegetable growers and producers spent $11.4 million on youth-directed marketing, 24.5% of their overall marketing expenditures for the reported products. Breakfast cereals ($229 million), restaurant food ($161 million), and snack foods ($113 million) accounted for the largest amount of expenditures directed to children under 12, representing more than half of the total child-directed expenditures. It is important to note, however, that the restaurant food figure does not include the cost of the toys distributed as premiums with QSR children’s meals, although such premiums were a key component of QSR food marketing activities directed to children. As explained in detail below, toy premiums were excluded because they did not meet the definition of “premiums” set forth in the Special Order. Technically, the QSRs sold these toys to consumers as part of packaged children’s meals; the toys were not free promotional premiums given away with the food. The Commission estimates that in 2006, the reporting QSRs paid $360 million for the toys distributed as premiums. If these costs were added to other QSR expenditures, the total cost of QSR marketing to children for the reporting companies would increase to approximately $521 million, which would be more than twice the marketing dollars directed to children in any other food or beverage category. The greatest reported expenditures directed to teens were in the carbonated beverages ($474 million), restaurant food ($145 million), and non-carbonated beverages ($109 million) categories. Table II.2 lists the reporting companies’ total expenditures for both child- and teen-directed marketing by food category and indicates the amount of overlapping expenditures. Figure II.3 illustrates the total marketing expenditures directed to youth in each food category and the breakout between child- and teen-directed expenditures, as well as the overlapping expenditures, for the reported brands. 10 Expenditures for Marketing Food to Children and Adolescents Table II.2: Reported Child and Teen Marketing Expenditures and Overlap Food Category Marketing That Meets Child 2-11 Criteria ($1000) Marketing That Meets Teen 12-17 Criteria ($1000) Overlapping Marketing ($1000) Carbonated Beverages 77,171 474,192 58,868 Restaurant Foods 161,479 145,008 12,841 Breakfast Cereal 228,983 71,266 63,696 Juice & Non-carbonated Bevs. 70,432 108,606 32,307 Snack Foods 112,607 51,354 25,248 Candy/Froz. Desserts 60,708 98,998 42,012 Prepared Foods & Meals 59,821 17,931 13,468 Baked Goods 61,147 39,649 38,248 Dairy Products 29,572 38,307 13,404 Fruits & Vegetables 8,410 6,236 3,183 870,329 1,051,546 303,275 TOTAL Figure II.3: Child and Teen Marketing, Ranked by Youth Expenditures 500 Teens Minus Overlap Child/Teen Overlap 450 Child Minus Overlap 400 Dollars (in millions) 350 300 250 200 150 100 50 0 Carbonated Beverages Restaurant Foods Breakfast Cereal Juice & Noncarbonated Bevs. Snack Foods 11 Candy/Froz. Desserts Prepared Foods & Meals Baked Goods Dairy Products Fruits & Vegetables Marketing Food to Children and Adolescents C. Expenditures Analyzed by Promotional Activity Groups The Commission’s Special Order sought information about 20 separate promotional activity categories. For purposes of this Report, these categories have been consolidated into six groups: 1) Traditional Measured Media, consisting of television, radio, and print advertising; 2) New Media, consisting of company-sponsored websites, Internet, digital, word-of-mouth, and viral marketing; 3) Packaging and In-Store Marketing; 4) Premiums; 5) Other Traditional Promotions, consisting of product placements, movie theater, video, and video game advertising, character or cross-promotion license fees, athletic sponsorships, celebrity endorsement fees, events, philanthropic activities tied to branding opportunities, and other miscellaneous marketing expenditures; and 6) In-School Marketing. Figure II.4 shows how the reporting companies allocated the $1.6 billion in youth-directed food marketing across the six promotional activity groups. Appendix Tables C.1 and C.2 provide detailed data on these expenditures within each of the 20 individual promotional activity categories for each food group and each age category.26 Figure II.4: Reported Total Youth Marketing Expenditures by Promotional Activity Group (In Millions of Dollars) Traditional Measured Media $852.9 53% In-Store and Packaging/ Labeling $195.4 12% New Media $76.6 5% Other Traditional Promotions $241.2 15% Premiums $66.9 4% In-School $185.5 11% Within these six promotional activity groups, Figure II.5 illustrates the percentage of total spending within each group contributed by each food category. The figure demonstrates, for example, that carbonated and non-carbonated beverages comprised a majority of the reported inschool expenditures, that cereals had the largest reported premium expenditures, and that nearly all food categories used traditional measured media, primarily television. Appendix Table C.3 provides further detail on expenditures within the six promotional activity groups. 12 Expenditures for Marketing Food to Children and Adolescents Figure II.5: Food Category Share of Total Youth Spending For Each Promotional Activity Group 100% Fruits & Vegetables Dairy Products 80% Dollars (in millions) Baked Goods Prepared Foods & Meals 60% Candy/Froz. Desserts Snack Foods 40% Juice & Noncarbonated Bevs. Breakfast Cereal Restaurant Foods 20% Carbonated Beverages 0% Traditional Measured Media ($852.9 Million) New Media ($76.6 Million) In-Store and Packaging/Labeling ($195.4 Million) Premiums ($66.9 Million) Other Traditional Promotions ($241.2 Million) In-School ($185.5 Million) By comparison, figures II.6 and II.7 illustrate the extent to which the various promotional activities are used in each of the food categories for marketing to children and adolescents, respectively. In addition to the six promotional activity groups identified above, the Report analyzes all expenditures associated with the use of cross-promotions and celebrity endorsements. This category (Use of Cross-Promotions and Celebrity Endorsements) includes character licensing fees paid to the media property owners, as well as all costs associated with use of the licensed property in other promotional categories; it also includes endorsement fees paid to celebrities, and costs associated with promotional activities featuring the celebrity endorser. Therefore, the category is comprised largely of expenditures already reported in the other six groups (e.g., Traditional Measured Media, Packaging and In-Store Marketing, and Premiums). 13 Marketing Food to Children and Adolescents Figure II.6: Reported Child Marketing Expenditures, By Promotional Activity Group 250 In-School Other Traditional Promotions Premiums In-Store, Packaging/Labeling New Media 200 Dollars (in millions) Traditional Measured Media 150 100 50 0 Carbonated Beverages Restaurant Foods Breakfast Cereal Juice & Noncarbonated Bevs. Snack Foods Candy/Froz. Desserts Prepared Baked Goods Dairy Products Foods & Meals Fruits & Vegetables Figure II.7: Reported Teen Marketing Expenditures, By Promotional Activity Group 500 In-School 450 Other Traditional Promotions Premiums In-Store, Packaging/Labeling New Media 400 Dollars (in millions) 350 Traditional Measured Media 300 250 200 150 100 50 0 Carbonated Beverages Restaurant Foods Breakfast Cereal Juice & Noncarbonated Bevs. Snack Foods Candy/Froz. Desserts Prepared Baked Goods Dairy Products Foods & Meals Fruits & Vegetables Note: The child-directed expenditures shown in Figure II.6 are on a scale of zero to $250 million, whereas the teen-directed expenditures shown in Figure II.7 are on a scale of zero to $500 million. 14 Expenditures for Marketing Food to Children and Adolescents 1. Traditional Measured Media: Television, Radio, and Print Traditional Measured Media (television, radio, and print) comprised 53% of youth-directed marketing expenditures – $853 million.27 The bulk of the reported expenditures in traditional measured media was for television advertising. As noted above, the reporting companies spent more than $745 million on youth-directed television marketing, accounting for roughly 46% of all youth-directed marketing expenditures and 21% of the companies’ $3.6 billion in total television advertising expenditures for their reported brands. a. Television The companies spent $458 million on child-directed television advertising. Breakfast cereals accounted for more than 31% of those expenditures, or $142 million, and restaurant food accounted for 20%, or $91 million. Other food categories with child-directed television advertising were snacks ($69 million), prepared foods ($42 million), baked goods ($37 million), and candy/frozen desserts ($33 million). Carbonated beverage companies reported $1.8 million in child-directed television expenditures, representing only three-tenths of 1% of their total television advertising expenditures for their reported brands. The reporting companies spent $376 million on teen-directed television advertising.28 QSRs accounted for nearly 28% of those expenditures, or $105 million, although this amount comprised only 8% of the QSRs’ $1.3 billion in total expenditures for television advertising. Carbonated beverage companies spent $99 million, and the candy and frozen desserts category spent $69 million on teen-directed television advertising. Other food categories with teendirected television advertising were snacks, juice and non-carbonated beverages, and baked goods; they reported between $20 and $25 million each in teen-directed advertising expenditures. Figure II.8 shows the total youth-directed television expenditures for the top three food categories using this promotional category. Figure II.8: Television Advertising Expenditures Top 3 For Youth 350 300 Dollars (in millions) The Special Order also sought expenditure data for advertisements placed during American Idol, American Dad, Family Guy, Unan1mous, and The Simpsons. Among broadcast television programs, these five shows commanded the largest percentage share of teens 1217 in the audience during the 2005-06 television year, according to The Nielsen Company. Because these programs did 250 200 309 150 100 187 149 50 0 15 Restaurant Foods Breakfast Cereal 100 Carbonated Beverages All Other Marketing Food to Children and Adolescents not meet the 20% teen audience share threshold,29 the reported expenditures for these shows are not included in the aggregated television expenditures. However, the data serve to illustrate the point that children and teenagers are exposed to a great deal of advertising that may be targeted to a general audience comprised mainly of adults. On average, more than two million teens watched American Idol, and more than one million watched American Dad and Family Guy during the 2005-2006 time frame. Some of these shows were even more popular with children. On average, more than three million children watched American Idol, and more than one million watched Unan1mous and The Simpsons. (By comparison, for the same year, the 2-11 audience for Nickelodeon’s popular youth-directed show SpongeBob SquarePants ranged from 576,000 to over 2.4 million, with an average child audience of about 2 million.30) Most of the companies that advertised on these five broadcast programs stated that their ads were not child- or teen-directed. One carbonated beverage company, however, acknowledged that ad placements on these shows were part of its marketing strategy to reach teens.31 In addition, at least two companies have affiliated their brands with shows such as American Idol in order to reach children and teens – one through toy premiums for children’s meals32 and the other through sponsorship of the American Idol Live! Tour.33 shows. Figure II.9: Television Advertising Expenditures on Top 5 Teen (12-17) Broadcast Shows 70 60 Dollars (in millions) Advertising expenditures on these top five broadcast shows – a total of $116 million – were reported for all food categories except fruits and vegetables. As shown in Figure II.9, QSRs reported $60 million, and carbonated beverage companies reported $41 million; these two categories combined accounted for 87% of reported expenditures for the top five 50 40 30 41 20 10 0 b. 60 Restaurant Foods Carbonated Beverages 8 7 Juice & Noncarbonated Bevs. All Other Radio and Print Child-directed expenditures for radio and print ads were relatively small in comparison to those for television. Only in the juice and non-carbonated beverage category were there significant expenditures – $2.5 million for child-directed radio advertising.34 Teen-directed radio advertising was more significant, with carbonated beverage companies spending more than $41 million, and QSRs nearly $30 million. Candy/frozen dessert and non-carbonated beverage companies reported more than a million dollars each for teen-directed radio advertising. 16 Expenditures for Marketing Food to Children and Adolescents For print advertising, five food categories – breakfast cereals, candy/frozen desserts, dairy, baked goods, and restaurant food – reported more than $1 million of child-directed expenditures; spending for candy and frozen desserts was $4 million. Dairy products accounted for 52% of all reported teen-directed print advertising, with expenditures of $11.4 million. In five other categories – candy/frozen desserts, baked goods, carbonated beverages, juice and non-carbonated beverages, and restaurant food – between $1 million and $3 million was spent on teen-directed print advertising for the reported brands. 2. New Media: Websites, Internet, Digital, Word-of-Mouth, and Viral Marketing New Media, which includes company-sponsored websites, Internet, digital, word-ofmouth,35 and viral marketing,36 accounted for approximately 5% of all reported youth-directed marketing expenditures. Of the $77 million spent on these activities for the reported brands, $32 million was for company-sponsored websites; $39 million was for advertising on thirdparty Internet sites; and $1 million was for other digital marketing, such as mobile marketing. Reported expenditures for youth-directed word-of-mouth or viral marketing were $5 million.37 Figure II.10 shows the top three food categories with youth-directed promotions in new media. Figure II.10: New Media Top 3 for Youth 35 Breakfast cereals accounted for the highest spending on company-sponsored websites directed to youth ($6.7 million), followed by carbonated beverages, snack foods, and candy/frozen desserts, which each had expenditures between Dollars (in millions) 30 25 20 15 29 21 10 5 0 Carbonated Beverages 14 13 Breakfast Cereal Snack Foods All Other $5 and $5.9 million.38 With regard to other Internet advertising, $12.1 million was spent on teen-directed advertising for carbonated beverages; $7.5 million was spent on breakfast cereal advertising directed to children; and $6.7 million was spent on youth-directed advertising for snack foods. A focus on expenditure data, however, may underestimate the degree to which food and beverage marketers used the Internet to reach children and teens – both through online display advertising and company-sponsored websites featuring entertainment content like “advergames.”39 Accordingly, Appendix D to this Report explores the amount of display advertising for food and beverages that appeared on childand teen-oriented websites during 2006, as well as traffic on company websites that feature branded entertainment and activities directed to children and teens. 17 Marketing Food to Children and Adolescents The snack, candy/frozen desserts, dairy products, baked goods, and carbonated beverage categories accounted for digital expenditures ranging from $100,000 to $434,000, most of which was teen directed. The companies reported spending just under $5 million on youth-directed viral and word-of-mouth marketing.40 With the exception of $392,000 that the QSRs reported as child directed, word-of-mouth expenditures were primarily teen directed.41 Teen-directed word-of-mouth expenditures included $2 million for carbonated beverages, $1.3 million for dairy products, and about $811,000 for juice and non-carbonated beverages. 3. Packaging and In-Store Marketing The companies reported that they spent more than $195 million on packaging and in-store marketing to reach the youth audience.42 In every food category, a total of more than $3 million was spent on packaging and in-store marketing to reach children. QSRs led spending in these two promotional categories with nearly $22 million directed to children, followed by companies producing snacks ($18.2 million), breakfast cereals ($14.3 million), carbonated beverages and candy/frozen desserts ($11.6 million each), and juice and non-carbonated beverages ($10.2 million). Relative to overall in-store and packaging expenditures for the reported brands, the child-directed expenditures for these two categories ranged from 5% for carbonated beverages to 70% for dairy products.43 and in-store marketing for the reported brands. Figure II.11 presents the top three food categories in terms of total costs on packaging and in-store marketing directed to youth ages 2-17. Dollars (in millions) In the carbonated beverage category, nearly $90 million was spent on teen-directed packaging and in-store marketing for the reported brands, while teen-directed restaurant food expenditures totaled $280,000. The Figure II.11: In-Store and Packaging/Labeling carbonated beverages’ $90 million in teenTop 3 for Youth directed expenditures represented 67% of 100 90 teen-directed expenditures, and 46% of all 80 youth-directed expenditures, for packaging 70 60 50 40 91 61 30 20 10 0 18 Carbonated Beverages 22 22 Restaurant Foods Snack Foods All Other Expenditures for Marketing Food to Children and Adolescents 4. Premiums a. Reported Expenditures Figure II.12: Premiums Top 3 for Children Dollars (in millions) The companies reported $67 45 million to reach youth consumers 40 35 through premiums, accounting for 4% 30 of all reported youth-directed marketing 25 expenditures. Far and away, breakfast 20 40 15 cereals accounted for the largest 10 expenditures on premiums. As shown in 5 10 4 4 Figure II.12, cereal companies reported 0 Breakfast Cereal Snack Foods Prepared Foods & All Other Meals close to $40 million in child-directed premiums, representing 93% of all expenditures on premiums for the reported breakfast cereal brands and 69% of child-directed premium expenditures across all food and beverage categories. For other food categories, companies reported no more than $4 million and as little as $450,000 on child-directed premium expenditures. Some companies explained that a cross-promotional partner, such as a toy or media company, often covered the premium costs, such as sweepstakes prizes or DVD rebates. In addition, as noted previously and explained below, the reported premium expenditures do not include the QSRs’ self-liquidating premiums (toys), which were a large component of childdirected marketing for QSRs. b. Self-Liquidating Premiums The Special Order instructed companies with expenditures for premiums directed to children or adolescents to deduct payments made by consumers for the premium item. As a consequence, premiums distributed as self-liquidating promotions – where the companies’ premium costs were entirely covered by the incremental revenue generated by the promotions – would not have triggered a reportable expense. Nevertheless, such promotions can be an important, indeed a critical, component of a QSR food marketing campaign directed to children.44 According to data obtained from The NPD Group, in 2006, QSRs sold more than 1.2 billion children’s meals with toys to children ages 12 and under, accounting for 20% of all child traffic at QSRs. As shown in Figure II.13, the ten QSR chains responding to the FTC’s Special Order (the “Select QSRs”)45 delivered more than 900 million of those meals. For those Select QSRs, Figure II.14 illustrates that children’s meals with toys accounted for nearly 38% of the meals served to children. 19 Marketing Food to Children and Adolescents television advertising. The Select QSRs reported spending $161 million on all child-directed marketing. If their toy acquisition costs were added to this total, child-directed marketing by QSRs would exceed $520 million – more than twice the amount spent on child-directed marketing by any other food category. 5. Other Traditional Promotional Activities Figure II.13: 2006 Child Traffic for Kids’ Meals with Toys, 99¢ or $1.00 Menu Items, and Older Kids’ Meals (All QSRs versus Select QSRs) Child Traffic (# of QSR visits in millions) 1,400 All QSRs 1,200 Select QSRs 1,000 800 600 400 1,224 901 486 200 0 398 117 Kids' Meals with Toys Purchases 99¢ or $1.00 Menu Item Purchases 93 Older Kids' Meal Purchases Source: The NPD Group/CREST Figure II.14: Percent of 2006 Child Traffic for Kids’ Meals with Toys (All QSRs vs. Select QSRs) 40 % of Child QSR Traffic for Kids' Meals with Toys Based on an assumed average unit cost of 40 cents per toy,46 it is estimated that the Select QSRs spent more than $360 million to acquire the toys promoted with the children’s meals. If the Select QSRs’ expenditures on self-liquidating premiums were added to their reported child-directed premium expenditures, premiums as a child-directed promotional technique would rank second only to television – $427 million for premium promotions versus $458 million for 35 30 25 37.6 20 15 10 19.5 5 0 All QSRs Select QSRs The 44 companies reported youthSource: The NPD Group/CREST directed expenditures for various other promotional activities for which expenditures are not systematically tracked by commercial data companies. These “non-measured” activities included product placements; ads appearing before or within a video game or preceding a home video or theatrical movie feature; license fees paid to use a third-party animated character in advertising or for cross-promotional arrangements; sponsorships of sports teams and athletes; fees paid for celebrity endorsements; public events; advertising or other product branding in conjunction with philanthropic endeavors; and other miscellaneous marketing expenditures. Together, these non-measured activities accounted for $241 million or 15% of all reported youth-directed marketing expenditures. As shown in Appendix Table C.1, no single one of these activities exceeded 6% of total youth-directed marketing expenditures. The top three food categories in terms of spending on these other traditional media for youth 2-17 are shown in Figure II.15. 20 Expenditures for Marketing Food to Children and Adolescents Figure II.15: Other Traditional Promotions Top 3 for Youth 140 Dollars (in millions) 120 100 80 60 117 40 67 20 0 a. 37 Carbonated Beverages 21 Restaurant Foods Juice & Noncarbonated Bevs. All Other Product Placements and Movie Theater, Video, and Video Game Advertising The companies reported spending more than $5 million on youth-directed product placements. Some companies explained that product placement expenses encompassed the cost of the product only; other companies reported expenditures for hiring agencies to negotiate opportunities for product placements. Only carbonated beverage companies spent a significant amount on product placements – just over $4.5 million for teen-directed placements, which comprised 67% of what the carbonated beverage companies spent in total on product placements for the reported brands. The companies spent $8.4 million on youth-directed advertising preceding or appearing in video games or preceding movies. The prepared foods category accounted for the greatest expenditures on movie theater, video, and video game advertising to reach children ($2.4 million), representing 95% of all expenditures by the reporting companies on such advertising for prepared foods. Candy/frozen dessert makers reported the largest expenditures on movie theater, video, and video game advertising to reach the teen market ($3 million),47 representing 84% of all such expenditures in the candy/frozen dessert category for the reported brands. b. Character or Cross-Promotional License Fees Youth-directed expenditures for character or cross-promotional licensing fees were reported in all food categories, for a total of $46 million. Although these fees comprised only 3% of all youth-directed marketing expenditures, several companies reported that many to most of their cross-promotional arrangements did not require them to pay fees. Breakfast cereal companies reported the largest amount of child-directed licensing fees ($12.4 million), followed by the QSRs ($11.5 million) and snack food producers ($8.7 million). 21 Marketing Food to Children and Adolescents The Special Order required the companies not only to report license fees, but also to identify the costs reported in other promotional activity categories associated with implementing the license, such as the cost of television ads or product packaging featuring a licensed character. The youth-directed license fees represented 22% of the breakfast cereal companies’ total youthdirected expenditures associated with using character and cross-promotional licenses. Such fees accounted for 15.7% of all youth-directed implementation costs in the restaurant food category and 34% in the snack food category. By contrast, 38% of the fruit and vegetable producers’ youth-directed expenditures associated with character and cross-promotional licensing arrangements were attributable to license fees. For an analysis of the overall costs associated with implementation of licensed cross-promotions, see Section II.C.7, below. c. Athletic Sponsorships and Celebrity Endorsement Fees Nearly all of the food and beverage categories used athletic sponsorships48 and celebrity endorsements49 as promotional techniques, and these were primarily directed to teens. The Special Order asked the companies to report the fees paid to celebrities to serve as endorsers, which are discussed here. In addition, companies were required to identify expenditures already reported in other promotional categories that represented the use of a celebrity endorsement, such as the costs associated with television ads or an event featuring a celebrity endorser. See Section II.C.7, below, for a discussion of the total costs associated with use of celebrity endorsements. Youth-directed expenditures on athletic sponsorships and celebrity endorsement fees for the reported brands totaled $37.6 million. Carbonated and non-carbonated beverage companies spent more than $27 million on teen-directed expenditures in these categories (including $3.7 million in celebrity endorsement fees), representing about 14% of the total amount they spent on these promotional activities for the reported brands. The QSRs reported nearly $4.6 million for teen-directed athletic sponsorships and celebrity endorsement fees, and $1.2 million for similar, child-directed activities. These teen-directed expenditures comprised only 6% – and the childdirected expenditures only 1.6% – of the QSRs’ total expenditures in these two promotional activity categories. d. Events Marketing Companies in all food categories reported expenditures for event marketing across the youth spectrum.50 The largest amounts reported for child-directed event marketing came from QSRs ($7.5 million), juice and non-carbonated beverage companies ($6 million), and baked goods producers ($4.8 million). The largest amounts reported for teen-directed event marketing came from the carbonated beverages (nearly $65 million), juice and non-carbonated beverages ($7.8 million), dairy ($4.1 million) and candy/frozen desserts ($3.9 million) companies. As a 22 Expenditures for Marketing Food to Children and Adolescents percentage of total expenditures on event marketing for the reported brands, the baked goods and breakfast cereal companies spent the most to reach children; approximately 100% of event marketing expenditures for these reported brands were child directed, compared to 30% for the QSRs. For teen-directed event marketing, the ratios were 81% (carbonated beverages), 52% (juice and non-carbonated beverages), 45% (candy/frozen desserts), and 41% (dairy products). e. Philanthropic Seven food and beverage categories engaged in child- or teen-directed advertising or other product branding activities in conjunction with their philanthropic endeavors. The Special Order required the companies to report the costs associated with both monetary and in-kind donations that were conditioned upon or made in combination with the display of trade names, logos, or other branded materials, but not the amount of the donation itself. QSRs spent the most on child-directed philanthropic marketing – $10.2 million, which was 89% of their overall expenditures on marketing associated with philanthropy for the reported brands. Carbonated beverage companies spent $3.7 million to reach a youth audience, amounting to 51% of their total philanthropy-associated marketing expenditures for the reported brands. The noncarbonated beverage companies spent $2.7 million, or 85% of their philanthropy-associated marketing expenditures for the reported brands, to reach a youth audience. Fruit and vegetable producers spent $1.8 million to reach youths, or 93% of their philanthropy-associated marketing expenditures for the reported brands. 6. In-School Marketing The companies spent nearly $186 million in youth-directed in-school marketing expenditures for the reported brands, which accounted for 11.5% of overall youth-directed marketing expenditures, and 67% of the total expended on in-school marketing for the reported brands (including marketing at colleges and universities). As shown in Figure II.16, more Figure II.16: In-School Top 3 for Youth 140 120 Dollars (in millions) than 90% of the youth-directed inschool expenditures was reported in the carbonated beverages and juice and noncarbonated beverages categories ($169 million combined). The QSRs reported $9.3 million in child-directed in-school marketing, and the dairy promoters reported nearly $4.8 million in teendirected in-school marketing. 100 80 60 116 40 53 20 0 23 Carbonated Beverages Juice & Noncarbonated Bevs. 9 7 Restaurant Foods All Other Marketing Food to Children and Adolescents Under the Special Order, in-school marketing included advertising or promotional activities in or around a pre-school, elementary school, middle or junior high school, and high school, including cafeterias, vending machines, school events, athletic events or fields, school buses, and Channel One or other closed circuit television channels. The 44 companies also had to report payments to schools or school systems pursuant to food and beverage contracts, as well as philanthropic donations to schools or particular school clubs, teams, events, or programs. The majority of in-school marketing expenses consisted of payments made or items provided to schools under “competitive” food and beverage contracts, for products sold outside the school meal program. The Commission recognizes that some of the expenditures captured by the inschool marketing category are not traditional marketing techniques aimed at children or teens. Nevertheless, the payments and items provided to the schools allow access to the youth and are crucial to the food sales directed to youth in the schools. The Commission obtained expenditure data for in-school marketing from the four largest bottlers of carbonated and non-carbonated beverages, as well as the beverage producers.51 The QSRs provided the Commission with some data on expenditures associated with the sale of their foods in schools. These data are likely under-reported, however, because in-school sales of QSR foods tend to be conducted by QSR franchisees at the local or regional level, from whom the Commission did not seek data.52 Likewise, the snack foods, prepared foods and meals, baked goods, and candy/frozen desserts categories accounted for few in-school expenditures because the vending contracts for these products are often coordinated by local and regional wholesale food distributors from whom the Commission did not seek expenditure data. 7. Use of Cross-Promotions and Celebrity Endorsements a. Licensed Cross-Promotions The companies provided expenditure data on both licensing fees paid for and expenditures associated with implementing marketing campaigns incorporating a licensed character or other cross-promotion. A typical cross-promotion featuring a licensed movie or television character tie-in involved expenditures for a license fee, television advertising, packaging and in-store marketing, premiums, and company websites. See Section III for further discussion of crosspromotions. As shown in Appendix Table C.4, the companies spent $208 million on youth-directed marketing campaigns that used cross-promotions, representing 13% of all youth-directed spending. As shown in Table II.3, cross-promotional expenditures were a substantially larger portion of some food and beverage companies’ child-directed marketing expenditures. For example, the fruit and vegetable producers spent 47% of their child-directed expenditures on 24 Expenditures for Marketing Food to Children and Adolescents promotions that used crosspromotions. For QSRs, the cost of promotional activities that used cross-promotions comprised 46% of their childdirected marketing expenditures. In total, more than 78% of all cross-promotion expenditures for the reported brands were youth directed. In terms of dollars expended, Table II.3 shows that QSRs reported $74.4 million in child-directed cross-promotions, followed by producers of breakfast cereals ($56.2 million), snack foods ($17.1 million), prepared foods ($8.6 million), dairy products ($8.5 million), and baked goods ($5.6 million). The QSR figure would exceed $430 million if self-liquidating premiums were considered a reportable expense under the Special Order.53 These sums dwarf the $4 million spent by the fruit and vegetable producers to implement child-directed cross-promotions, as shown in Figure II.17. Table II.3: Reported Child and Teen Marketing That Uses Cross-Promotions, Ranked by Percentage Child 2-11 Food Category Total Reported Child 2-11 Marketing ($1000) Reported Marketing That Uses Cross-Promotions Value ($1000) Percentage Fruits & Vegetables 8,410 3,977 47.3 Restaurant Foods 161,479 74,404 46.1 Dairy Products 29,572 8,474 28.7 Breakfast Cereal 228,983 56,247 24.6 Snack Foods 112,607 17,123 15.2 Prepared Foods & Meals 59,821 8,584 14.3 Baked Goods 61,147 5,648 9.2 Candy/Froz. Desserts 60,708 4,224 7.0 Juice & Non-carbonated Bevs. 70,432 3,343 4.7 Carbonated Beverages 77,171 225 0.3 TOTAL 870,329 182,249 20.9 Teen 12-17 Food Category Total Reported Teen 12-17 Marketing ($1000) Reported Marketing That Uses Cross-Promotions Value ($1000) Percentage Breakfast Cereal 71,266 32,495 45.6 Snack Foods 51,354 12,660 24.7 Fruits & Vegetables 6,236 958 15.4 Dairy Products 38,307 5,315 13.9 Baked Goods 39,649 3,292 8.3 Prepared Foods & Meals 17,931 1,220 6.8 Candy/Froz. Desserts 98,998 3,169 3.2 Carbonated Beverages 474,192 8,909 1.9 Restaurant Foods 145,008 1,420 1.0 Juice & Non-carbonated Bevs. 108,606 658 0.6 1,051,546 70,096 6.7 TOTAL Companies in several food and beverage categories reported teen-directed expenditures for cross-promotions that were not substantially duplicative of expenses reported as child directed. These categories included snack foods ($12.7 million), candy/frozen desserts ($3.2 million), and carbonated beverages ($8.9 million). 25 Marketing Food to Children and Adolescents Figure II.17: Reported Child Marketing Expenditures and Portion Using Cross-Promotions 250 Uses Cross-Promotions Dollars (in millions) 200 No Cross-Promotions 150 100 50 0 Carbonated Beverages Restaurant Foods Breakfast Cereal Juice & Noncarbonated Bevs. Snack Foods Candy/Froz. Desserts Prepared Foods & Meals Baked Goods Dairy Products Fruits & Vegetables b. Celebrity Endorsements The companies were asked to provide both the fees paid to celebrities to serve as endorsers, as well as the expenditures for marketing campaigns that involved the use of a celebrity endorsement in other promotional categories, such as in television advertising.54 As shown in Appendix Table C.4, the companies spent a total of $26.8 million on youth-directed promotions featuring celebrity endorsers, representing 1.7% of all youth-directed spending. Thus, implementation of celebrity endorsements represented a much smaller part of youth-directed marketing than did the implementation of character licenses and other cross-promotions. The dairy promoters reported the largest expenditures on teen-directed campaigns featuring celebrity endorsements, which totaled $13.9 million (including $275,000 in endorsement fees), and represented 44% of all celebrity endorsement costs for the reported dairy products. Companies marketing candy and frozen desserts reported more than $5 million for use of teendirected celebrity endorsements (including $1.3 million in fees), accounting for nearly 97% of all marketing that used celebrity endorsements for the reported candy/frozen dessert brands. Additionally, QSRs reported $1.9 million for youth-directed celebrity endorsements (including $402,000 in endorsement fees), accounting for 56% of all use of celebrity endorsements for the reporting QSRs. Appendix Table C.4 contains detailed data on expenditures for each age category for marketing using celebrity endorsers. 26 Food Marketing Activities Directed to Children and Adolescents III. Food Marketing Activities Directed to Children and Adolescents A. Introduction In response to the Special Order, the Commission received thousands of samples and descriptions of advertising and promotional activities from the 44 target companies. These samples covered the entire spectrum of advertising and promotional categories covered by the Special Order: television, radio, and print advertising; company-sponsored websites, ads on third-party Internet sites, and other digital advertising, such as email and text messaging; packaging, labeling, point-of-purchase displays and other in-store marketing tools; advertising and product placement in movies, videos, and video games; premium distribution, contests, and sweepstakes; cross-promotions and celebrity endorsements; marketing activities in schools; viral and word-of-mouth marketing; sponsorship of events, sports teams, and athletes; and philanthropic activity tied to branding opportunities. The companies provided samples for those activities for which they had reportable expenditures, as discussed in Section II, as well as for activities that met the Commission’s criteria for marketing directed to children and adolescents but for which there were no reportable expenditures. In some cases, particularly for new media such as the Internet, promotional activities may have required little or no financial investment in order to reach the intended audience. Broadly speaking, nearly every food product category engaged the full spectrum of advertising and promotional activity formats. One exception was the fruits and vegetables product category, which tended not to use the traditional media of television, radio, and print. Fruit and vegetable companies did, however, use licensed characters and marketed them in much the same way as other food and beverage companies: via company websites, in-store displays, and product packaging. Third-party licensed characters and company proprietary “spokescharacters” – animated versions of animals, people, or even the food itself – were used heavily in marketing to children, but also were used to reach teens. Celebrity endorsers, on the other hand, were almost exclusively employed in advertising directed to teens and “tweens” (those between the ages of 8 or 9 and 13 or 14). For the most part, other promotional activities reported were used to reach both children and teens.55 The responses to the Special Order show that product marketing campaigns directed to youth typically are fully integrated: a child might first see an ad on television for a food product; 27 Marketing Food to Children and Adolescents the child would then encounter related promotional displays or product packaging in a retail setting or restaurant; the child might receive a related toy or other premium immediately upon purchase of the product or might be directed to the product website to enter a package UPC or other code to participate in sweepstakes or to receive “points” redeemable for prizes or digital content, such as ringtones; once on the website, the child might interact with the brand through online games or by sending “e-cards” (electronic greeting cards) or “send-to-a-friend” viral marketing messages to others. Part B of this Section of the Report focuses on marketing activities such as crosspromotions, new media, unmeasured traditional promotional activities, and in-school marketing that previously have not been systematically analyzed across the youth spectrum for broad categories of food products. Thus, use of traditional measured media, such as television, is described only in the context of cross-promotions. In addition, Part C of this Section provides an overview of market research reported by companies on the success and impact of various promotional techniques directed to youth. Finally, in Part D of this Section, the Commission reports on information provided by the companies relating to advertising campaigns and techniques that focused on particular gender, racial, or ethnic segments of the population. Companies provided much of this information on a general audience basis, with a small amount examining a target audience of children and adolescents. B. Specific Promotional Activities 1. Cross-Promotions and Third-Party Licensed Characters One of the most consistent themes in advertising directed to children and adolescents – appearing in nearly all promotional formats and for nearly all product categories – was the use of cross-promotions and third-party licensed characters to promote foods, beverages, and restaurants. Companies used cross-promotions to advertise nearly every type of food product, including QSR children’s meals, breakfast cereals, candy, snacks, and beverages, as well as fruits and vegetables and dairy products, and the campaigns generally were integrated across promotional formats. The focus of a cross-promotional campaign was typically a child- or teenoriented movie or television program, but cross-promotional arrangements were also developed for toys,56 websites,57 theme parks and other children’s entertainment venues,58 video games and consoles,59 and youth and professional athletic leagues.60 Media companies often entered into cross-promotional arrangements with multiple food companies to promote an individual film or television program. Thus, characters from 28 Food Marketing Activities Directed to Children and Adolescents Nickelodeon’s Nick and nickjr programming were used to promote QSR children’s meals, canned pastas and soups, snack crackers, snack chips, cookies, clementines, baby carrots, bagged spinach, yogurt, macaroni and cheese, lunch kits, children’s frozen meals, fruit snacks, and breakfast cereals. Animated characters from Cartoon Network programming appeared on labels and packaging for QSR children’s meals, fruit snacks, snack crackers, yogurt, macaroni and cheese, breakfast cereals, frozen desserts, and fruits and vegetables. Sesame Street licensed its characters only to fruit and vegetable companies as part of its Healthy Habits for Life program. Disney characters appeared on packages and store displays for fruit snacks, breakfast cereals, candy, yogurt, frozen waffles, toaster pastries, macaroni and cheese, and fruits and vegetables. Multi-brand food companies often included several individual food products, spanning multiple food categories, in their cross-promotions. For example, one packaged food company utilized cross-promotions with the films Cars, Over the Hedge, Ice Age 2, and Open Season to market multiple products, including its children’s frozen meal, pudding, canned pasta, and popcorn products. Below is a comprehensive list of the media properties that the target companies reported using in cross-promotions to children and adolescents in 2006: •• The Adventures of Jimmy Neutron: Boy Genius (canned pastas and soups, snack chips) •• American Idol (candy, cookies, toaster pastries) •• The Ant Bully (QSR children’s meals, non-carbonated beverages) •• Avatar (QSR children’s meals, fruit snacks) •• The Backyardigans (fruit snacks, fruit) •• Barbie: Fairytopia (breakfast cereals, toaster pastries) •• Batman (canned pastas and soups, fruit snacks) •• Blue’s Clues (breakfast cereals, fruit snacks, fruit, yogurt) •• Care Bears (fruit snacks) •• Cars (QSR children’s meals, fruit snacks, snack bars, breakfast cereals, toaster pastries, frozen waffles, canned pasta, pudding, cookies, snack crackers, popcorn, yogurt, non-carbonated beverages) •• Charlie and the Chocolate Factory (candy) •• Charlotte’s Web (QSR children’s meals) •• The Cheetah Girls (macaroni and cheese) •• Chicken Little (fruit snacks) 29 Marketing Food to Children and Adolescents •• The Chronicles of Narnia (QSR children’s meals, breakfast cereals, cereal bars, snack chips, fruit snacks, toaster pastries, packaged salads) •• Clifford the Big Red Dog (QSR children’s meals, fruit juice, snack crackers, breakfast cereal) •• Curious George (QSR children’s meals, breakfast cereals, snack cakes, fruit juice, bananas) •• Danny Phantom (canned pastas and soups, children’s frozen meals, frozen desserts) •• Disney Princesses (breakfast cereals, fruit snacks, yogurt, frozen waffles, toaster pastries) •• Doogal (QSR children’s meals) •• Dora the Explorer (breakfast cereals, canned pastas and soups, snack crackers, fruit snacks, cookies, fruit, yogurt) •• Dragon Booster (QSR children’s meals) •• El Chavo animated series (cookies) •• Elmo and other Sesame Street characters (fruits and vegetables) •• The Fairly OddParents (snack chips, macaroni and cheese, fruit snacks, frozen desserts) •• Finding Nemo (fruit snacks) •• Flushed Away (QSR children’s meals, breakfast cereals, snack bars, snack crackers) •• Foster’s Home for Imaginary Friends (QSR children’s meals) •• Go, Diego, Go! (fruit snacks, yogurt) •• Goosebumps (QSR children’s meals) •• Happy Feet (QSR children’s meals, snack crackers, breakfast cereals, yogurt, fruit snacks, baked goods, carbonated and non-carbonated beverages) •• Hello Kitty (fruit snacks) •• Holly Hobbie and Friends (QSR children’s meals) •• I Spy (QSR children’s meals, fruit juice) •• Ice Age 2 (QSR children’s meals, yogurt, fruit snacks, cereal bars, breakfast cereals, toaster pastries, frozen waffles, children’s frozen meals, canned pasta, pudding, cookies, snack crackers, popcorn, carbonated and non-carbonated beverages) •• King Kong (fruit snacks, snack cakes, cookies, carbonated beverages) •• Klutz (QSR children’s meals) •• Lady and the Tramp (carbonated beverages, snack cakes) 30 Food Marketing Activities Directed to Children and Adolescents •• Leroy & Stitch (fruits and vegetables) •• The Lion King (fruit snacks) •• Little Einsteins (breakfast cereals) •• The Little Mermaid (QSR children’s meals, breakfast cereals, candy) •• The Littlest Pet Shop (QSR children’s meals) •• Looney Tunes (QSR children’s meals, fruit snacks, fruits and vegetables) •• Madagascar (fruit snacks) •• Mickey Mouse Clubhouse (breakfast cereals) •• Monster House (frozen pizza) •• Monsters, Inc. (fruit snacks) •• My Little Pony (fruit snacks) •• ¡Mucha Lucha! (fruit snacks, frozen desserts) •• Nanny McPhee (food service pizza and burritos served in schools) •• Nintendo characters such as Mario and Donkey Kong (QSR children’s meals) •• One Tree Hill (carbonated beverages) •• Open Season (QSR children’s meals, breakfast cereals, children’s frozen meals, popcorn) •• Over the Hedge (QSR children’s meals, yogurt, snack chips, snack cakes, popcorn, carbonated and non-carbonated beverages) •• Paz the Penguin (fruits and vegetables) •• Peanuts (QSR children’s meals) •• Pirates of the Caribbean (QSR children’s meals, candy, frozen waffles, fruit snacks, breakfast cereals, lunch kits, popcorn, non-carbonated beverages, fruits and vegetables) •• Polar Express (popcorn) •• Robots the Movie (fruit snacks) •• Rudolph the Red-Nosed Reindeer (breakfast cereals, snack cakes) •• Rugrats (fruit snacks) •• Scooby-Doo (breakfast cereals, snack crackers, macaroni and cheese, fruit snacks, yogurt) •• Shrek (breakfast cereals, macaroni and cheese, yogurt, fruit snacks, snack crackers, cookies) 31 Marketing Food to Children and Adolescents •• Sony PlayStation characters Spyro the Dragon and Crash Bandicoot (popcorn) •• Spider-Man (QSR children’s meals, breakfast cereals, cereal bars, cookies, pancakes, fruit snacks, snack crackers, snack chips, sliced cheese, macaroni and cheese, frozen desserts, non-carbonated beverages) •• SpongeBob SquarePants (QSR children’s meals, breakfast cereals, snack crackers, macaroni and cheese, lunch kits, fruit snacks, cookies, yogurt, fruits and vegetables) •• Star Wars Episode III (fruit snacks) •• Strawberry Shortcake (QSR children’s meals) •• Stuart Little 3 (QSR children’s meals) •• Superman Returns (QSR children’s meals, breakfast cereals, milk, cereal bars, snack chips, snack crackers, fruit snacks, packaged pasta, carbonated and non-carbonated beverages) •• Surf’s Up (popcorn snack) •• Teenage Mutant Ninja Turtles (fruit snacks, fruit juice) •• Trollz (QSR children’s meals) •• The Wiggles (fruit juice) •• The Wild (QSR children’s meals) •• Winnie the Pooh (fruit snacks) •• Winx (fruit snacks, fruit juice) •• Xiaolin Showdown (breakfast cereals) •• Yu-Gi-Oh! (QSR children’s meals) •• Zoom (QSR children’s meals) a. Anchoring Cross-Promotions with Traditional Measured Media Food and beverage companies and restaurants frequently anchored their cross-promotions in traditional measured media, particularly in television advertising. Companies reported using television ads as part of their cross-promotions for a wide variety of food products, including QSR children’s meals, breakfast cereals, children’s frozen meals, frozen waffles, toaster pastries, cookies, candy, snack chips, macaroni and cheese, fruit snacks, yogurt, and spinach. Print advertising of cross-promotions was used for snack cakes, milk, carbonated beverages, and canned soup. Occasionally, products were embedded in the television program or film to enhance the cross-promotion. For example, one carbonated beverage was cross-promoted, via packaging, in-store advertising, and the Internet, with the teen television drama One Tree Hill. 32 Food Marketing Activities Directed to Children and Adolescents Products were shown within the program, in addition to being advertised in standard television ads appearing during or adjacent to the show. b. Reliance on Packaging and In-Store Displays Companies frequently relied on packaging and in-store displays as mechanisms for advertising their cross-promotions. Typically, media companies permitted use of their copyrighted images from films and television programs directly on product packaging and displays. These images usually were featured prominently on the front of the package, with additional, related content, such as games, trivia, and sweepstakes or contest information, provided on the back. Packaging also advertised the availability of promotion-related premiums inside the package or through the product website. In other cases, the packaging itself served as the premium, such as a popcorn carton that had a cut-out picture [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Aftc%3Aaa5fa98470f3e0b6. Public record. Not legal advice.