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Big food is in danger of becoming as vilified as Big Tobacco.

Kraft Foods' pledge last week to stop advertising snacks such as Kool-Aid and Oreos to kids 6 to 11 infuriated competitors in the growth-challenged food industry. Rivals are grumbling that the move plays right into the hands of government regulators and consumer health advocates pushing to end the marketing and even the sale of unhealthy foods, especially to kids. They see Kraft's move as a tacit acknowledgment of guilt in fueling the country's obesity epidemic-and one that damns them by implication.

The $500 billion packaged-food industry's marketing over the last year has already been severely constrained by growing obesity concerns. Kraft, Kellogg Co., PepsiCo, General Mills and others, including fast feeders, have all been clamoring to appease consumers and advocacy groups and meet just-released Food & Drug Administration Food Pyramid guidelines with health-driven products, promotional initiatives and advertising (see chart, right). But Kraft's latest step ( QwikFIND aaq23y), which many see as a lawyer-inspired public relations effort driven by its parent, Altria Group, also the owner of tobacco giant Philip Morris, is seen as pushing too far.

Rivals are, for now, holding their ground.

A Kellogg spokeswoman said that the company "has a long-standing commitment to advertising to children in a responsible manner." A PepsiCo spokeswoman mirrored that sentiment, pointing to the increasing shift of PepsiCo's marketing toward its healthier lineup newly designated with a Smart Spot label. General Mills declined to comment. But all the major food marketers are expected to face increased pressure to follow Kraft's lead.

Consumer activists see Kraft's voluntary restrictions on advertising to kids as not nearly enough, but a great first step. "This shows that companies like Kraft are beginning to recognize the harmful impact of marketing unhealthy products to kids," said child and family psychologist Allen Kanner, a member of The Campaign for a Commercial-Free Childhood, whose goal is banning all marketing to kids under 8. That's just the kind of reaction Kraft competitors fear.

Credit Suisse First Boston analyst Dave Nelson said Kraft's announcement surely shows that "the industry is going to have to further restrict itself in terms of marketing to avoid criticism and, potentially, regulation." After all, he said, "we have obesity [because] these companies have been extremely successful in getting us to eat their products."

That success, already severely limited of late for top players including Kraft, is further jeopardized as food marketers shift marketing priorities from a focus on sales and profitability (requiring marketing dollars behind the successful and growing product lines) to self-protection by touting restraint, especially to kids.

apple polishing

Already over the last year, food marketers have "all been on high alert to make sure their message is about a well-balanced diet and doesn't push their product too heavily," said Leigh Thornberry, executive producer for kids' Web site and advergames developer Circle 1 Network. For its clients, including Kellogg's Keebler brand and the National Cattlemen's Beef Association, that has meant messages, she said, that are less "`Eat our cookies, eat our cookies, eat our cookies"' and more "'have two cookies with your apple and sandwich."'

But packaged-goods marketers don't make money selling apples.

One executive close to Kraft said, in fact, that despite impressive growth in small better-for-you categories and "a lot of noise from a vocal minority" regarding health issues, the consumers "who make up the bulk of [food companies'] volume are still buying what they've been buying for years and years." Most of it not the healthy stuff.

Kellogg's one-third less sugar varieties of Frosted Flakes and Froot Loops have not been setting the world on fire, according to one Midwest retail executive. And General Mills' own 75%-less-sugar items have only skyrocketed since being added to the USDA's supplemental nutrition program for women, children and infants, or WIC, he said.

fun fuel

According to Information Resources Inc. data, sales for Kraft's less-than-nutritious Lunchables franchise totaled $519 million, while the 2003 launch of the brand's better-for-you offshoot, Lunchables Fun Fuel, amounted to only $31 million in sales for the 52 weeks ended Dec. 26. But Kraft's Senior VP-Global Health and Wellness Lance Friedmann said in fact that a new lower-calorie, lower-fat Chicken Dunks variety (that will be the type of product bearing Kraft's new Sensible Solution label and advertised to kids 6 to 11) is in fact its "fastest-moving Lunchables variety."

Neuberger Berman analyst Bill Leach said Kraft's decision to focus on the healthiest items in its portfolio is not sales-driven but rather driven by the overwhelming pressure from the lawyers, consumers groups and government agencies looking at the obesity issue. In fact, the news of Kraft's shifts in ad tactics for kids broke first in the Washington Post-the Beltway bible for regulators and legislators.

What's clear, however, is that nutrition-focused food marketing efforts are irrevocably the wave of the future. "All of our companies have nutrition in their minds when developing marketing and new products now," said Stephanie Childs, a spokeswoman for industry association Grocery Manufacturers of America.

The products Kraft claims it will no longer advertise to kids make up 10% of its total product portfolio, or roughly $3 billion in sales. Kraft said that while the type of products being advertised in kids' media will change to focus on better-for-you products, its total spending on the demographic-$80 million, according to Advertising Age estimates-remains the same.

Wary media companies aren't taking any chances. Viacom's Nickelodeon issued a statement following Kraft's announcement that the kids' network "has offered promotional incentives to companies who advertise healthy food products on our network, and we look forward to adding additional healthy lifestyle messaging from companies interested in partnering with us."

Nickelodeon will also roll out new "Nicktrition" labels for its licensed foods, the first among them Kraft's Macaroni & Cheese, to include more detailed nutritional information and active lifestyle tips.

Battle of the bulge

A sampling of marketers' top obesity-battling initiatives

* General Mills: Converts cereals to whole grain; starts weight- loss program Brand New You

* Kellogg: Launches one-third fewer sugar versions of Special K and whole-grain Tiger Power

* PepsiCo: Commits to making 50% of new products healthier; Labels 100 products Smart Spot.

* Kraft: Labels healthier lines as "Sensible Solution"; pulls kids' ads for un-"Sensible" products.

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