FTC Issues Report on Marketing Food to Children and Adolescents

Date: Aug 04, 2008

On July 29, 2008, the Federal Trade Commission ("FTC" or "Commission") issued its anticipated report, Marketing Food to Children and Adolescents: A Review of Industry Expenditures, Activities, and Self Regulation ("Report"). The data and findings presented in the Report are based on information provided by 44 food and beverage companies who were ordered by the FTC to provide 2006 expenditure data covering 20 categories for marketing directed to kids, teens, and all audiences. A copy of the Report is available on the FTC's website at http://www.ftc.gov/os/2008/07/P064504foodmktingreport.pdf.

Based on the detailed information submitted, companies spent approximately $1.6 billion in 2006 to promote food and beverages to both kids under 12 and teens. This is well below previous estimates that food companies spent $10 billion to advertise food and beverage products to children under 12 used by groups such as the Institute of Medicine and others. Companies spent approximately $870 million on kids, $1 billion on teens, with approximately $300 million estimated for advertising intended to reach both demographic categories. Of those companies that advertised to kids and teens, the overall expenditures for promotional activities directed to all audiences exceeded $9.6 billion. Thus, expenditures for advertising to kids and teens represented 17% of the total 2006 budget for those companies.

The Commission's estimate of 2006 youth-directed advertising expenditures for each media category is as follows (expressed as a percentage of all youth-directed expenditures):

Television

46%

Radio and Print

7%

New Media (company websites, Internet, digital, word-of-mouth, viral)

5%

In-store Marketing and Packaging

12%

Premiums, Toys, and Prizes

4%

Product Placement; Movie, Video, and Video Game Advertising; Cross-promotion License Fees; Athletic and Event Sponsorship; Celebrity Endorsement Fees

15%

In-school Marketing

11%

Internet advertising expenditures in particular were low, somewhat in contrast to assertions by advocacy groups that expenditures were being reallocated to the Internet. The FTC commented, however, that focusing on expenditure data "may underestimate the degree to which food and beverage marketers used the Internet to reach children and teens."

The FTC made several recommendations pertaining to companies' marketing practices, the Council of Better Business Bureaus ("CBBB") Children's Food and Beverage Advertising Initiative (CFBAI), and school foods based on the information provided.

The FTC praised the CFBAI, a program under which the now 14 participating companies pledge to adhere to certain self-regulatory guidelines in advertising foods and beverages to children under 12. It recommended that all food and beverage companies join the CBBB.

With regard to company marketing, the FTC suggested, among other things, that companies broadly construe "marketing" to include all techniques (including packaging) and address "line" advertising to assure that all products advertised to children meet nutrition standards.

While praising the CFBAI, the FTC made several recommendations about the pledge program. It recommends that the CBBB closely monitor participating companies' compliance with the pledge program; expand the scope of the program to cover all techniques, including product packaging and in-store marketing; require that 100% of advertising to children meet nutrition standards; address product line issues; standardize nutrition category by product category; standardize definitions of advertising directed to children under 12; address product placements; and ensure that franchisees are bound by pledge commitments. In fact, the CBBB issued its first compliance report on the CFBAI the day the FTC's report was issued, finding that the level of compliance was excellent.

The FTC also made numerous recommendations about school foods, including improving the nutrition profile of foods in schools and ceasing all in-school promotion of products that do not meet meaningful nutrition standards. It urged companies to join the Alliance for a Healthier Generation ("AHG") initiative and incorporate AHG commitments into distributor contracts, and urged schools to adopt nutrition standards for competitive foods.

The Report is largely positive for the food industry and complimentary of the CBBB pledge program. It also confirmed what the food industry has said for some time: kid-directed food and beverage advertising expenditures are much lower than many advocates have estimated. The FTC indicated that it viewed this report on 2006 expenditures as a benchmark; food industry members can expect that the FTC will again require the submission of expenditure data in the next year or two in connection with a second report.

For more information on the FTC's report on food and beverage advertising or on youth advertising or privacy, contact Sheila A. Millar at 202 434-4143 or via e-mail at millar@khlaw.com, or Tracy P. Marshall at 202 434-4234 or via e-mail at marshall@khlaw.com.

Contact: , Ph 202.434.4143