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Sun, Jul 27, 2003 - Page 12 News List

The skinny on Kraft's fight against obesity

As waistlines continue to increase in girth throughout North America and Europe, Kraft goes on the offensive

By David Barboza  /  NY TIMES NEWS SERVICE , CHICAGO

Front and center

Some observers believe the company is building a defense against those who would criticize Kraft if it did nothing. So while many big food companies continue to blame a lack of exercise for the nation's obesity problems, Kraft is putting itself front and center in the obesity debate.

"I guess they figured if the industry is going to have to change, why not be perceived as the one to lead the change," said Kelly Brownell, a Yale professor who heads the university's Center for Eating and Weight Disorders.

Kraft's bold announcement comes at a difficult time for the company.

Two high-level executives left the company a few weeks ago, worrying investors. Then the company forecast weaker profits for the second half of this year because of slumping sales of cheese, cold cuts and other products. Some stock analysts have responded by downgrading the stock, which has dropped 17 percent since the July 1 announcement.

With obesity rates climbing and health care costs soaring, food makers are worried that regulators, legislators and class-action lawyers could force major changes on the industry, or cost it dearly in the courtroom. Some research analysts see parallels to the tobacco litigation, parallels which Kraft's parent company, Altria (formerly Philip Morris), knows all too well.

Future litigation

In two remarkably bold reports, analysts at JP Morgan and Credit Suisse First Boston warned investors last fall that the big food companies were facing major financial risks.

Referring to the tobacco litigation, Arnaud Langlois, author of the JP Morgan report, said in a recent telephone interview, "We think a number of well-capitalized law firms are now going to look at the food industry as the next target."

According to Kraft, a food-industry database search found 25 news articles about obesity in the first quarter of 1999; in the most recent quarter, a similar search turned turned up 1,400.

"Little by little the importance became apparent to us," said Mudd, the Kraft spokesman.

Among the other changes under way at Kraft is the elimination of all in-school marketing. No more Kraft book covers. No more Oreo cookie lunch boxes. And no more advertising on Channel One, the in-school television network. The company said that it had spent a couple million dollars a year on in-school marketing.

Health experts applauded the in-school marketing ban, but they still chide Kraft for being among the most aggressive marketers to children and young adults.

"Their marketing aimed at kids is terrible," said Margo Wootan, a nutritionist at the Center for Science in the Public Interest. "There are all these cartoon characters on their packages of low-nutrition foods, on everything: crackers, cookies, a whole range of products."

Kraft also seems to be reaching out to its critics. The company is forming a global advisory council to help Kraft develop new policies, standards and measures in its effort to combat obesity.

"The only way to react to that is with action," Mudd said. "All I can say is stay tuned."

But Kraft's efforts have also come under fire from some of its peers. Executives at several big food companies said Kraft has conceded too much ground to those who like to blame big food makers for the obesity epidemic.

"It's good intentions, but where do good intentions get you?" said one food company executive who asked not to be named. "It's kind of like Gary Hart saying, `Follow me around.'"

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