SNACK ATTACK

The focus on childhood obesity has put snack foods under a microscope of lawsuits, new tax proposals, changes at food and restaurant companies, and food restrictions in schools. But so far, the scrutiny hasn't adversely affected sales, according to retailers polled by SN."Our salty snack sales are doing well," said Lynn Tingle, grocery buyer, Mars Super Markets, Baltimore.Mars is not getting "worked

The focus on childhood obesity has put snack foods under a microscope of lawsuits, new tax proposals, changes at food and restaurant companies, and food restrictions in schools. But so far, the scrutiny hasn't adversely affected sales, according to retailers polled by SN.

"Our salty snack sales are doing well," said Lynn Tingle, grocery buyer, Mars Super Markets, Baltimore.

Mars is not getting "worked up" about the issues surrounding snack foods yet, although it is monitoring the news to find out the latest events taking place, Tingle said.

Statistics show nearly 60% of U.S. adults and 15% of children ages 6 to 19 are overweight. Childhood obesity is being blamed for such maladies as diabetes, asthma, and heart and liver disease.

A growing number of consumers say fast-food restaurants and certain packaged goods have contributed to the epidemic, and some have filed lawsuits to press their claims. But retailers believe otherwise.

Tingle said it's unfair to blame manufacturers for the growing girth of today's kids, saying it's more likely the result of less physical activity.

"Kids are getting fat because they're sitting in front of the television and computer, not because they're eating Doritos," she said.

That hasn't stopped politicians from getting involved. California, Washington, Vermont and several other states have introduced proposals to tax soft drinks or snack foods. Most recently, a New York assemblyman proposed a 1% state tax on junk food and soft drinks. Under the proposal, the revenues would go into a fund to prevent obesity in children. The proposal would also tax video game rentals and companies that run TV ads promoting junk foods.

The Snack Food Association, Alexandria, Va., has emerged as one of the lead trade associations fighting such curbs. Its position is that most of these tax proposals are aimed more at curing budget woes than obesity.

"Snack taxes are arbitrary, regressive and confusing," said David Dexter, SFA's senior vice president of government and public affairs.

The SFA helped defeat snack tax laws in Nebraska, North Dakota and other states this year.

"No state has a snack tax on the books or in the pipeline that we see as any real threat, at least this year," he said.

Even if such proposals go through, their effect on snack food sales would be minimal, retailers polled by SN concurred.

"It depends on how much it is, but, in general, snacks are relatively inexpensive, so I don't think it would hurt sales," said John Mahar, director of operations, Green Hills Farms, Syracuse, N.Y.

"A 1% tax most likely wouldn't prevent someone from buying their favorite chips," Tingle agreed.

Tingle is more concerned about individual and class-action lawsuits involving snacks and quick-service foods. She cited the recent case against McDonald's, in which parents of two children who became obese after regularly eating hamburgers and french fries at McDonald's, sued the fast-food giant for their health problems.

That case was dismissed, but if others are allowed to go through the court system -- and prevail -- it could lead to higher prices of snack foods, and could become the next "tobacco," Tingle said.

"If lawsuits are won, there could be a trickle down effect in terms of prices and cost of goods sold," she said.

Figures from ACNielsen, Schaumburg, Ill., show that the snack category could be performing better. Food store cracker sales were $2.8 billion, a 0.2% decrease for the 52 weeks that ended June 14, 2003. The category in total generated $8.8 billion, a drop of 0.4%.

While consumers may not have abandoned their favorite snack foods, there has been a movement toward more healthy options, like Snyder of Hanover's EatSmart line of better-for-you snacks, which are performing well at Mars, according to Tingle.

Indeed, heightened public awareness of obesity translated into strong sales increases in other "light, lean and less-of" product categories in 2002, according to a report by the Grocery Manufacturers of America, Washington, and Information Resources Inc., Chicago. Along with snacks, these included reduced-calorie versions of ready-to-eat meals, desserts, carbonated beverages and beer.

"As the obesity issue has emerged over the past few years, the food and beverage industry has developed new products oriented toward more healthful eating including lower-fat, no-fat and reduced-sodium meals, snacks and drinks," Gene Grabowski, GMA's vice president, communications and marketing, said in a statement.

Manufacturers are doing more than product reformulation. Just weeks ago, Frito-Lay, Plano, Texas, announced it has added a new on-pack Smart Snack ribbon label to some of its better-for-you snacks, including its Baked! brands. And last month, Kraft Foods, Northfield, Ill., announced a number of moves aimed at combating obesity, including capping on the portion size of single-serve packages; eliminating all in-school marketing; and revamping its vending machine criteria.

"By providing people with products and information they can use to improve their eating and activity behaviors, we can do our part to help arrest the rise in obesity," Roger K. Deromedi, co-chief executive officer, Kraft Foods, said in a statement.

Retailers said Kraft's position is likely to lead to changes at other companies. Price Chopper Supermarkets, Schenectady, N.Y., has had meetings with its category managers to discuss possible changes its private-label suppliers, which include the Bake-Line Group, will make to snack foods in response to Kraft's announcement, said Regina Tator, the chain's private-label category manager.

"We're trying to get information filtered down from category managers as to what approach we'll take with cookies," Tator said.

Tator said it's likely that suppliers will watch how the changes at Kraft play out before making any changes to their lines.

"Typically, the private-label suppliers sit back and wait to see what the brands will do," she said.

Eventually, though, Tator said it's likely that health concerns will lead to changes in some private-label snacks. She noted that she attended a seminar sponsored by the Private Label Manufacturers Association, New York, about health issues.

"We're paying a lot of attention to health issues with our private-label products," she said, noting how the chain just introduced an organic private-label line, marketed under the Price Chopper brand.

If consumer demand dictates, Price Chopper will offer other health-oriented products as well.

"We'll look and see if there's a way to increase the health benefit of our foods without detracting from sales," she said.

Price Chopper doesn't want to make any rash decisions, Tator stressed. She cited the fat-free movement several years ago as an example. While manufacturers flooded the market with fat-free offerings, consumers eventually turned away from many of them because they didn't care for them.

"For a while, everything went fat-free, but since people didn't like the taste, it affected sales," she said.

Salty snack sales are doing well at Green Hills Farms, according to Mahar, who attributes this to the fact that while many people are eating healthier foods, they don't want to give up snack foods.

He expects consumers will, however, seek out additional healthier options, like those that are free of trans fats and those with reduced fat.

Under a recent directive from the U.S. Food and Drug Administration, food manufacturers will be required to disclose the number of grams of trans fatty acids on their products' nutrition labels, effective Jan. 1, 2006. Under such a scenario, products that taste good and are healthier to eat are likely to gain more consumer credibility, said Mahar. He cited Frito-Lay's Baked Lay's as a personal example.

"I ate Baked Lay's potato chips today for lunch," said Mahar. "I like them just as much as any other potato chip. It's not like eating a piece of cardboard."

Mahar said consumers have to accept some responsibility for the foods they eat.

"Just like I can't believe smokers didn't think cigarettes were bad for them, I have a hard time believing that anyone eating Doritos doesn't believe it's clogging their arteries," he said. To be sure, the number of class-action lawsuits seeking damages from manufacturers of snack foods, fast food and related items are in danger of increasing as consumers seek to vent their frustrations on those parties that sold them the food. Industry observers point out that the first liability test, against McDonald's, was thrown out y the judge, but it doesn't mean such cases will go away forever.

The Food and Drug Administration's effort to monitor and control labeling may also have an impact down the road. Depending on public pressure, manufacturers eventually may be compelled to begin putting warnings or advisories on labels, just as they did with saccharin, after a Canadian study released in 1977 concluded the artificial sweetener caused an increase in bladder cancer in lab rats. The advisory was rescinded in 2000.

Fighting Back

Members of the food industry have banded together to spread the message that obesity can be prevented through the right balance of food and exercise.

Consumer goods companies formed the American Council for Fitness and Nutrition to combat the obesity epidemic facing America, particularly its youth. Comprised of food, beverage and consumer products companies, ACFN's mission is to improve health and wellness through science- and behavior-based solutions.

The industry is also working diligently to convey the message that consumers need to take responsibility for their own health. The Grocery Manufacturers of America, for instance, released a survey revealing that more than eight in 10 Americans (83%) say that some personally controlled factor, either individual choice, a lack of exercise or watching television, is responsible for obesity. Meanwhile, 5% blame fast food, and 4% finger manufacturers.

In addition, 78% agreed either "strongly" or "somewhat" with the statement: "Overweight and obese Americans have no one to blame but themselves for making unhealthy food choices."