Is Soda the New Tobacco?

Cigarettes, asbestos, and unprotected sex. It's hard to remember a time when we thought these were safe. Yet each was the subject of major culture wars before today's standard narrative gained traction. Surely there's something we use widely today that, in the fullness of time, will suffer similar dismissal as obviously dangerous. I submit that it's sodas. Good money should steer clear.

Semantic fatigue
Socially responsible investment. Conscious capitalism. Ethical investment. Triple bottom-line investment. Slow money. There are enough terms out there to make your head spin, and enough pundits arguing over nomenclature to put you off your lunch. Let's pull back to basics.

If you're like me, you want to secure your retirement, but not at the expense of others. You want to make money by investing in things that provide some benefit in the world. You're interested in owning companies that meet the needs of their stakeholders, not just their shareholders. These are all strategies for growth, and they don't need to cost you basis points.

If a company makes a product that literally kills its customers, this cannot be a sustainable business model. If the same company does everything it can to discredit the evidence of its products' dangers, conscious investors should balk.

Big Soda = Big Tobacco
The PLoS Medicine journal from the Public Library of Science just published a series on Big Food in which it specifically compared the "corporate social responsibility" campaigns of today's soda producers with yesterday's tobacco producers. The two are unnervingly similar, the more so because Big Soda has taken its tactics to a whole new level of sophistication.

Let's have some context. From 1977 to 2004, American children more than doubled their caloric intake from sodas, and by 2004 these kids derived fully 13% of their calories from sodas. Between 1977 and 2007, sodas accounted for about one-fifth of Americans' weight gain. You've heard of the obesity crisis, right?

Worse still, sodas don't offer any kind of benefit. Consider other controversial industries. At least Big Oil powers economies, and Big Pharma treats serious illness. What on earth does Big Soda do? Make a fun mixer for Pop Rocks?

Given that Big Soda's products are inherently bad for you, it's no surprise that its "corporate responsibility" strategies give with one hand and take with the other. Effectively, these companies pursue slick "healthy lifestyle" campaigns to mitigate the pernicious effects of their products, thereby allowing you to consume more. Brilliant!

Smoke 'em if you got 'em
Let's take a brief stroll down memory lane to recall how Philip Morris (NYSE: PM  ) navigated the troubled waters of pesky health claims. The company launched the industry's most aggressive "corporate social responsibility" campaign -- in truth, it was a public-relations campaign -- in 1999. The strategy was to distract people from Philip Morris' core business of selling cancer sticks by focusing on its charitable giving efforts, and to seduce interest groups that might otherwise have pushed back against the tobacco industry's agenda.

This story probably sounds familiar to you. We all know now that smoking kills and the industry tried to hide the fact. Just remember that this wasn't always clear, and there was a time when my last sentence was considered deeply controversial. Lest you doubt, check out this ad the industry published widely in 1954.

Empty calories
Now we see the soda producers borrowing heavily from the Big Tobacco playbook, and even throwing in a few new tricks. PepsiCo's (NYSE: PEP  ) flagship "Refresh Project" was a $20 million social-media campaign to identify and support philanthropic ventures. This campaign succeeded in doing something Big Tobacco could only dream of: It directly and explicitly targeted youth. The idea was to associate the Pepsi brand with the warm, fuzzy feeling of doing good in the world, thereby appropriating corporate responsibility efforts for marketing purposes.

PepsiCo also collaborated with the U.K. government on its anti-obesity campaign, promoting healthful eating and exercise. These are good things, of course, but such messages subtly shift responsibility from the company to the consumer. This type of campaign says: "We know our products are terrible for you, but they're delicious. If you're getting fat, it's your fault for not exercising more." I do believe in individual responsibility, but that should not allow companies to abdicate theirs.

PepsiCo is currently backing away from its Refresh Project, probably because it failed. The company lost market share to Coca-Cola (NYSE: KO  ) in 2011, and is refocusing on its brand.

Speaking of Coke, the story looks similar there. The company's "Balanced Living" and "Exercise Is Medicine" campaigns effectively create the impression that obesity is the result of consumers' poor choices, ignoring any hand Coke has in fattening us up. Indeed, Coke (and others) trumpets the health benefits of its "fitness" products, such as Powerade. A recent Oxford University study found that not a single such claim was scientifically valid. The senior researcher said:

The drink companies have created a market [...] by creating a disease called "dehydration" which needs to be treated or prevented with these expensive drinks -- expensive not just in cost but in sugar and calorie intake.

Not at my table, not in my portfolio
Ultimately, this choice is simple. Health-conscious parents don't serve sodas to their children. Responsible investors shouldn't have soda producers in their portfolios. Invest in companies that meet the world's needs, rather than manufacturing them.

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Fool contributor Sara E. Wright owns none of the stocks mentioned in the story above and can't remember the last time she drank a soda. The Motley Fool owns shares of Coca-Cola and PepsiCo. Motley Fool newsletter services have recommended buying shares of Coca-Cola and PepsiCo and creating a diagonal call position in PepsiCo. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (17) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 03, 2012, at 11:41 PM, EquityBull wrote:

    Well the argument could be made that sugar infested cerials for kids play a role. Cheese is high in fat and kids eat lots of that. If you eat ANY food or drink that is not "healthy" it falls under the same exact qualification as a soft drink IMHO. It isn't fair to single out soda.

    It is up to american citizens to have the right to eat or drink whatever they want. These products clearly label their calories and ingredients. You know what you are getting going in. If you don't consume in moderation sure there will be weight gain. If I eat one whole pizza too a day I will gain weight.

    This country has to be careful not to ruin what is great about it and become a nanny state. Our government is worried about soft drinks and meanwhile they cannot even pass a budget or get anything done that actually means something for our country. It is very sad.

    So if soda or other non healthy foods are a problem (KFC, McDonald's, etc) do we ban all of those? How about this. I think if you are a smoker and want health insurance they, hang on...., charge you MORE! Yes a higher premium. So when it comes to health insurance if you are obese and have no medical condition that actually caused this other than over eating behavior than how about this novel concept. Charge a HIGHER premium! This way if people choose to eat until they are obese than society does not have to bear the health burden. They can pay their correct actuarial portion of the risk they put on the health system. So basically rate the insured based on risks that they CAN control like smoking and weight. How hard is that?

  • Report this Comment On August 04, 2012, at 12:21 AM, wolfhounds wrote:

    My 3 biggest investments over the last 20 years - MCD, PEP, MO & PM. And I don't buy any of these products. But I do have a nice retirement portfolio thanks to everyone who chooses to be fat. Yes, it is a choice.

  • Report this Comment On August 06, 2012, at 9:44 AM, Primbs2 wrote:

    Your main argument to paint the soda makers as the bad guy is that the soda makes people gain weight. Would we next be banning french fries and bacon? What about candy makers? Should Mars not be able to advertise to it's target market without scrutiny such as yours? At some point you need to place responsibility on the consumer for their own health. I own restaurants and advertise food such as our french fries to our customers all the time. I know they are not healthy so am I killing my customers? Your article stinks.

  • Report this Comment On August 06, 2012, at 11:07 AM, actuary99 wrote:

    ^ All of the above comments could have been used for tobacco a few decades ago.

  • Report this Comment On August 06, 2012, at 11:53 AM, DrGoldin wrote:

    Wow, a lot of rabid overreactions here. The article didn't say anything about banning soda or creating a nanny state. It said that soda makers are using the same deceptive strategies that tobacco makers used in the past. It's not "We need to ban this stuff"; it's more like "This isn't good for society and invest at your own peril, because sooner or later attitudes are going to change."

  • Report this Comment On August 06, 2012, at 1:09 PM, DrDeVito wrote:

    I think the point of his article was to show the similarities between soda and cigarette companies. No where in the article does he say the consumer is not at fault. But when soda companies come out and say that their products are "healthy,"it makes the decision to be healthy much harder for the consumer as they don't even know what damage is being done to themselves by drinking soda.

    The solution is simple: Force the soda companies to explain the detrimental health effects their products have, just like Phillip Morris has to. That way 100% of the blame is on the consumer, who will probly still drink the stuff anyway because everyone in this country is fat and dumb.

    Although I don't think its socially irresponsibly to invest in a company like PM today, as everyone has now been made aware of the dangers of their products. The people who smoke do so because they enjoy it, and that means that PM is infact meeting one of the world's needs.

  • Report this Comment On August 06, 2012, at 2:17 PM, TMFHelloNewman wrote:

    Dangit Sara! Why would you write such a well-thought analogy!

    I guess that I'll start drinking tonic water instead...

  • Report this Comment On August 06, 2012, at 4:52 PM, Borbality wrote:

    Interesting, but tobacco continues to be a great investment. Of course, it might not always be.

  • Report this Comment On August 06, 2012, at 5:33 PM, Kloeybubs wrote:

    There is no similarity between soda and tobacco and noone is overreacting. The article is idiotic. I have never seen a soda company claim that there products were healthy (except maybe 100yrs ago when Pharmacist thought they were). As far as sports drinks go, I have had doctors recommend the use of gatorade to fight dehydration. The ingrediants are there for all to see and so are the calories. By the way, soda companies also make diet drinks that are zero calorie. Tobacco kils - soda does not. Sugared Soda is a treat - just like Ice Cream, cookies, and other not good for you products. If you eat a 1/2 gallon of ice cream a day you will be fat!!!

    When people try to impose restrictions on consumption and pick winners and losers - everyone loses.

    All companies have PR campaigns and allocate money to give back - soda companies motives are no better or worse than other organizations. Pepsi and Coke are two great american companies. They have developed technologies that have changed the world (from water treatment to distribution). They have partnered with 3rd world countries to help them expand distribution of food and medicine to rural areas and to assist in delivering clean and safe water.

    You Soda Haters need to back off and see the soda cup half full.

  • Report this Comment On August 06, 2012, at 5:36 PM, Kloeybubs wrote:

    Forgot one point - they are pretty good investments also.

  • Report this Comment On August 08, 2012, at 3:47 PM, rnorich wrote:

    "Responsible investors shouldn't have soda producers in their portfolios". Cars kill people, so don't invest in car manufacturing or any company that makes products that go in cars. You could make that case for any product out there. I am a responsible investor and I know when someone invests they should do everything to maximize their return. an article on investing should focus on the viability of future returns, not whether a product is socially acceptable. Sounds like the writer ispart of the health police.

  • Report this Comment On August 08, 2012, at 4:54 PM, DocOtt wrote:

    These counter-points miss the mark with their focus on killing. Yes, cars kill people. Drugs kill people. Everything kills people.

    It's a matter of cost and benefit. While cars unfortunately do kill some people, they are the linchpin of transportation in our economy. And the list goes on, with the aforementioned Pharma and Oil and the benefits that they provide.

    What benefits do carbonated sugar drinks provide? If a possible slight boost in worker productivity (due to caffeine) is the best you can think of . . .

  • Report this Comment On August 08, 2012, at 5:18 PM, sheldonross wrote:

    @DocOtt

    Quality of Life? I can't stand hand-wringing worry-warts. If these type of people have their way, we'll all be living in padded rooms wearing helmets to ensure we don't harm ourselves.

    I enjoy soda, and I *gasp* oh no *gasp* enjoy Copenhagen.

    Life, no one gets out alive. Live it while you can.

  • Report this Comment On August 08, 2012, at 6:17 PM, gskinner75006 wrote:

    I would be interested to see some examples of what the authors idea of companies that "meet" the worlds needs rather than "manufactures" them are.

  • Report this Comment On August 10, 2012, at 11:23 AM, DocOtt wrote:

    @sheldonross

    Remind me again how an increase in diabetes contributes to quality of life?

    Everybody that I know who has diabetes would prefer to not have it.

  • Report this Comment On August 10, 2012, at 2:25 PM, sheldonross wrote:

    Yes, because people drink soda with the intent of developing diabetes. Not because it tastes good or anything like that.

    Besides that obvious point, sugar does not cause diabetes, only exacerbates a predisposition towards it.

    http://www.diabetes.org/diabetes-basics/diabetes-myths/

  • Report this Comment On August 11, 2012, at 9:12 AM, DocOtt wrote:

    Just like people start smoking with the intent of developing lung cancer. Not because of peer pressure, the nicotine buzz, or suave marketing.

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