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.
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.
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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