NATURAL CEREALS

SITUATION II

The Meeting

Fortunately, Sally and Joe were able to schedule a meeting with Tom for that afternoon. As they walk into Tom’s office, Sally feels a little uneasy. She remembers Tom’s comments over lunch last week. He had made it very clear he feels marketing and advertising must be truthful as well as persuasive. Sally wonders whether Tom will be concerned by the objections to the competitor’s campaign she had read during her analysis. “Well, this was quick work!” Tom says, “I’m glad to see you’ve come up with some ideas already. You got my note, I assume. This is going to be one tough campaign—we have to make it count.”

“Yeah,” says Joe, “Sally has worked around the clock on this. I think you will be pleased with what we’ve done.” Joe smiles and turns to Sally. Tentatively, Sally begins. “I’ve read a lot about bran cereals, and it looks like our major competitor has been quite successful. We can build on the health claims they’ve started. We really wouldn’t be providing a new message, but it seems clear health claims will sell.” Tom leans back in his chair, closes his eyes and pauses. After what seems like an eternity to Sally, he says, “I don’t know. That’s an interesting approach, but it isn’t the only one. I’m pretty hesitant about all this new emphasis on health claims. I’m not sure our competitors are presenting the whole picture.” Joe jumps in. “I agree, Tom. I spent a lot of time pondering this issue. But Sally convinced me. I think a carefully developed health campaign is the way to go. “Well, Sally,” says Tom, “I’m not saying no. You’ve obviously done your homework. But I want to make sure you consider the implications. You know the FDA has been looking into this matter and has issued a directive.” Tom rummages through his file drawer, hands Sally a folder and continues, “Take it and read it. Then come back next Monday with several campaign options. You’ve put a lot of effort into this so far. Now let’s just take some time to consider the alternatives.”

Campaign Options

Sally goes to work immediately. From the information Tom gave her, she finds that in November 1987, the FDA proposed regulations allowing manufacturers to print messages on food labels about the health benefits of their products. Specifically, the FDA listed four criteria for evaluating health related claims and information on food labeling:

1. Information on the labeling must be truthful and not misleading to the consumer.

2. Information should be based on and be consistent with valid, reliable scientific evidence that is publicly available.

3. Available information regarding the relationship between nutrition and health shows that

good nutrition is a function of total diet over time, not of specific foods.4. The use of health-related information constitutes a nutritional claim that triggers the requirements of FDA’s regulations regarding nutrition labeling. The next morning, Sally makes a copy of the criteria and heads for Joe’s office to get his thoughts. After reading over them Joe is silent. He shakes his head slightly and says, “I’m not sure these criteria will have any impact on our plans.” “Well,” says Sally, “I think we might want to tone down our approach a little, don’t you?” “Not really.” Joe smiles. “I did a little research myself last night and I learned the Federal Trade Commission, which regulates advertising, is pretty sympathetic to our competitors’ ads. They believe the claim that some people might actually avoid cancer of the colon or rectum by eating their cereals is generally accurate. I think the FTC would allow advertising claims based on this labeling information.” “I don’t know how seriously we should take the FDA’s position, Joe. But, I do know we should stick with the health orientation. Let me think of some specific options and I’ll get back to you.” “Okay, it’s your show.” “But,” says Joe, “keep in mind we can’t blow this campaign. It’s got to have an impact.” Sally feels uneasy as she leaves Joe’s office. She knows Joe is right. Her career is at stake. This is a highly visible campaign. Yet, she knows Tom is right too. She starts to think of ideas for her marketing campaign. The FDA proposal would allow her to coordinate packaging and advertising, and that would give consumers a consistent message.

Advertising and Packaging Options

To determine the best approach, Sally plans to develop several advertising and packaging

alternatives for the natural product line. She will take the alternatives to Joe to see what he thinks.

She just received from the research department the cereal’s side panel containing nutritional and

ingredient information (See Appendix 1). Now she has to work on the marketing options.

Besides the ad linking high fiber cereals with cancer risk reduction she reviewed earlier, she

found a recent ad for another product noting it was high in Vitamin B and provided an energy

boost. As the first option, she thought of a possible hard-hitting strategy using the statement

“Vitamin Enriched” on packaging and in advertising.

The report she recently received from BFI’s research department indicated that Natural brands

contained 13 essential vitamins and minerals. She would feel comfortable putting this on the

package and in advertising. In closely investigating the side panel listing nutritional information,

she finds that Natural Bran Cereal, by itself, contains no fat. She knows a large part of the market

is conscious of the levels of fat in foods. This could be another good claim to make.

But there are problems. Sally knows that the vitamin content is similar in all bran cereals. She

also knows from internal company documents that most Americans are not deficient in B

vitamins, nor does the amount of B vitamins contained in the cereal give one instant energy.

The second option she thinks of focuses exclusively on the appeal of bran and fiber as possible

preventatives to cancer. She learns from company records that the amount of bran in Natural

Cereals has increased by 40 percent in the last two years. One label alternative is: “With 40 Percent More Bran.” Sally also knows this amount is equal to the most bran in any cereal.

Therefore, another label or ad option is: “Containing the Highest Level of Fiber-Help prevent

cancer by eating high fiber foods.” She could place these statements in large boldface print on the

package label and use them in advertising. This would reiterate the competition’s strategy of

linking cancer reduction with bran.

Another label she considers as part of this second option uses “natural” in the title for Bran

Breakfast Flakes or Bran Bits. The slogan “Fiber for Health” is also a possible package label and

advertising tag line. Although these two options would probably be most effective, the FDA

criteria keep running through her mind. As a result, she develops a third option downplaying

health claims.

Option Three would point out that her product is a high-fiber, low-fat natural food. The label and

the ads would feature energetic, healthy, young people eating her breakfast cereals before an early

morning tennis match. However, other traditional selling devices would be used, and the link to

cancer reduction would not appear. From a marketing standpoint, she believes coupons on the

back of the package might appeal to a broader market. She could also promote BFI’s new

“Resealable Pack,” which allows the inside bag to be resealed for freshness. Other possibilities

included discounts on a t-shirt and a cookbook featuring recipes using Natural’s cereals. All of

this would add up to a broad-based marketing appeal without relying totally on fiber and health

claims. She thinks Tom might like this approach.

Sally knows these ideas are somewhat sketchy, but she wants Joe’s input. She schedules a

meeting for the following morning. She grabs a quick sandwich at the cafeteria and goes back to

her desk to review her notes and reasoning for the meeting.

Evaluating the Options

Joe listens quietly to Sally’s options. As she describes each, he jots down a few notes.

When she finishes, he simply says, “Combine Options One and Two.”

“But I’m not sure that’s the best way,” Sally begins “They are persuasive, but I think we should

consider the implications.”

Joe shakes his head. “The implication is that you need to increase market share and increase it

quickly. Option Three won’t do it. Options One and Two will. Everything we put on the package

and the ads will be the truth. We could simply say Vitamin Enriched and Contains Vitamin B. We

don’t need to say anything about Vitamin B and an energy boost. Plus, we know the FTC won’t

object to cancer reduction claims.

There is nothing wrong with this approach. Besides, as you said yourself, we’re doing people a

favor. It isn’t our responsibility to make people health experts. That’s not our job, but selling

cereal is.”

Sally frowns, “What do you think Tom will say?”

“Look,” Joe responds, “I talked with Tom about this over dinner. He said, basically, what I decide

goes. Even if he doesn’t agree totally, he won’t overrule me. Tom is an excellent manager but

doesn’t have to concern himself with the details. The bottom line is that if we don’t go with a hard-hitting campaign, we’re going to lose our shirts. I’ve made my reputation around here, Sally.

Now it’s your turn. I want you to develop a full campaign combining Options One and Two.”

Sally walks out of Joe’s office. The project she wanted so badly isn’t turning out the way she

expected. She knows that technically Joe is supposed to just advise her, but could she realistically

ignore his request? Besides, maybe he is right. What he said makes sense. Options One and Two

are literally true. And is it her responsibility to make people health experts?

She sits down at her desk and begins to clear her mail. An envelope there from Tom contains a

note and list of questions:

Sally /Joe:

Here are a list of questions I use to evaluate the legal and ethical impact of advertising I have done.

Please look them over. We do not want any legal or pressure-group problems!

- Are your claims accurate?

- Do you have competent and reliable evidence to support your claims? It should be evidence that

the scientific or medical community is willing to support.

- Have you disclosed important limitations or qualifications to the claims you have made about

your product?

- Have you misrepresented or cited out of context the contents of a report or scientific study?

Have you suggested there is a consensus of medical opinion on an issue when there is not?

- Have you suggested that a report is government sponsored when it is not?

- Is your advertising inconsistent with information on the label?

- Has FDA found the food ingredient in your product to be ineffective for your advertising

purpose?4

Sally quickly scans the list. Exasperated, she phones Joe and blurts out. “Have you read the note

from Tom?”

“Yes Sally, I did,” sighs Joe. “I read it this morning, and my position is the same. We can answer

yes to each question. Sally slowly replaces the receiver and thinks aloud, “Now what”?

Dianne L. Taylor, “Health Related Food Advertising: ‘The Time is Ripe for Change’.” Food Engineering,

December 1984, p. 21.

Appendix 1

Situation II

Each serving contains 10 grams of dietary

fiber.

-------------------------------------------------------------------------------

Nutrition Information Per Serving

-------------------------------------------------------------------------------

Serving Size: 1 OZ. (About 2/3 Cup) (28.35 g)

Servings Per Package: 20

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With 1/2 Cup

(118 ml)

1 OZ Vitamin D

(28.35g) Fortified

Cereal Whole Milk

------ ------------------------------------------------------------------------

Calories 90 160

Protein 3 g 7 g

Carbohydrate 28 g 34 g

Fat 0 4 g 0 4 g

Sodium 230 mg 290 mg

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Percentages of U.S. Recommended Dally Allowances

(U.S. RDA)

Protein 4% 10%

Vitamin A 25% 30%

Vitamin C ** **

Thiamine 25% 30%

Riboflavin 25% 35%

Niacin 25% 25%

Calcium ** 15%

Iron 45% 45%

Vitamin D 10% 25%

Vitamin B6 25% 30%

Folic Acid 25% 25%

Vitamin B12 25% 30%

Phosphorus 15% 25%

Magnesium 15% 20%

Zinc 10% 15%

Copper 10% 10%

** Contains less than 2% of the U.S. RDA of these nutrients

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Ingredients: Whole Wheat, Wheat Bran, Sugar, Natural

Flavoring, Salt and Corn Syrup.

Vitamins and Minerals: Iron, Vitamin A Palmitate,

Niacinamide, Zinc Oxide (Source of Zinc), Vitamin B6,

Riboflavin (Vitamin 82), Thiamine Mononitrate (Vitamin 81),

Vitamin B12, Folic Acid and Vitamin D.

-------------------------------------------------------------------------------

Carbohydrate Information

1 oz With 1/2 Cup

Cereal Whole Milk

-------------------------------------------------------------------------------

Starch and Related Carbohydrates 13 g 13 g

Sucrose And Other Sugars 5 g 11 g

Dietary Fiber 10 g 10 g

Total Carbohydrate 28 g 34 g

NATURAL CEREALS CASE

Situation III

After two weeks of steady hard work, Sally developed a marketing strategy that included the best

elements of options two and three. She limited the health message to the high fiber content in

Natural’s bran cereals. She did not imply that Natural’s bran cereals had more bran than other

competing bran cereals. She did indicate in a fairly cautious way that foods high in fiber had been

linked in some studies to lower rates of some kinds of cancer. She also featured the new “Zip

Pack” and included a coupon worth 35 cents toward the next purchase of a natural cereal product.

Sally thought the marketing approach she suggested, and BFI adopted, combined an effective

competitive strategy with a high level of business ethics. Package labels and advertisements were

designed to avoid deception.

After three months BFI’s market share increased three points. However, recent public criticism

has prompted Tom to schedule a meeting with Sally and Joe to discuss Natural’s campaign.

Before walking to Tom’s office, Sally rereads the most recent magazine article about the Natural

campaign. It says:

. . . Breakfast Foods, Inc. is the latest entry in the health claim craze. Advertisements for their bran

cereal line exemplify how companies are jumping on the bandwagon to make often misleading or

incomplete health claims. Even if a health claim is true, there are many details that can’t be included

in ads or on product labels due to space or time constraints. For example, nowhere on the Bran

Breakfast Flakes label or in its ads does it say how much fiber people should eat nor what

percentage of the recommended amount they would receive from eating a bowl of the cereal.

Also, advertisers forget to mention that general health, or susceptibility to a disease, is seldom a

function of one foodstuff. A person’s health is a function of one’s total diet. Simply ingesting large

amounts of one healthy food is not sufficient. An individual needs a completely well-balanced diet.

If someone eats a high fiber cereal, but does everything else wrong nutritionally, that person may

have a higher risk of cancer than someone who doesn’t eat a high fiber cereal at all.

In the past year, health claims for foods have increased at a tremendous rate. Competitive pressures

are forcing even reluctant advertisers to jump on the bandwagon. For example, a soup company ran

the following ad:

Introducing fiber from the heartland. GRANDMA’s has been making the finest bean soup in the county

for years. Now GRANDMA’s three-bean rich and savory soup is available to you and your family.

Experts say GRANDMA’s soup is high in fiber. The National Cancer Institute says that a diet high in

fiber and low in fat may help reduce the risk of some forms of cancer. The folks around here never

knew that GRANDMA’s soup was so good for them, they just knew it was good...

The problem is that soup contains a high level of salt. Foods high in salt present a danger of their

own. As a result, the National Cancer Institute asked the soup company to remove all references to

the NCI from its advertisements. The institute objected to the ads because they contend the amount

of sodium in the bean soup is excessive.

As a result of the vast increase in health claims, the FDA is receiving public comment on a set of

regulations to govern health claims. The FDA has even suggested they may prepare a series of

approved statements food manufacturers could use. These messages would avoid referring to

specific product brands and would emphasize the important effects that a total dietary plan has on

good health.

As Sally enters Tom’s office, she notes the grim looks on his and Joe’s faces. She sits in the chair

beside Joe and waits for Tom to begin.

“Well, I guess I don’t have to say this situation is disturbing. I thought our campaign was a good

one. Looks like the press thinks otherwise,” states Tom as he paces across his office.

“The campaign is a good one,” Joe replies, “We’ve risen three percentage points so far. The press

isn’t being fair. None of the government or private nutrition experts can say how much fiber

people should eat. How are we supposed to answer it?”

“I guess that’s the point!” notes Tom.

“There are a few things we can do,” Sally says. “One of our competitors is putting health tips for

reducing the risk of some types of cancer on their package labels. They’ve also been including

recommendations for what kind of food to eat, like eat fresh fruit. Maybe we should change our

package information and put Natural Cereal within the context of a balanced diet.”

“That’s fine for the packages;” interjects Joe, “but you can’t waste a 30-second commercial on

health tips. We’re not doing public service announcements.” “Right,” responds Sally. “But there

are other things we could do. Since high fiber cereal is only one part of a good diet, we could use

the labels on the box to make other recommendations for a healthy diet—things that have nothing

directly to do with high fiber cereal. For example, we could urge people to add fresh fruit to the

cereal. Or encourage the use of skim milk, since whole milk contains high levels of fat linked to

heart disease. We could go even further and list other sources of fiber-fruits, vegetables,

peanuts—and urge people to eat those foods, too.”

Tom stops pacing and says, “So we could avoid the charge that we’ve got a conflict of interest

trying to increase market share while selling better health. We could promote products we don’t

sell.”

“Wait a minute,” states Joe. “Let’s think about this. Is this a proper role for a corporation? Are we

supposed to educate the public? Couldn’t we be digging ourselves in deeper? Next thing you

know the press will be after us for not offering a complete course on nutrition.”

“I don’t know, Joe,” says Tom. “That is a point, but we need to take some action.”

Joe responds, “I’m not sure we need to. Sally’s ads were smart, and it’s not fair to compare them

to competitors’ ads. Those ads don’t show the same ethical sensitivity as ours. Besides, market

share is up!”

“Fair or not;” says Sally, “It happened. We need to counter the publicity somehow. Besides, what

about the FDA’s proposal to regulate health ads? Maybe we could come out in favor of the

regulations and offer to assist them. We could use your reasoning, Joe. We don’t feel our

competitors are showing the necessary ethical sensitivity.”

“Come on, Sally. Didn’t you learn anything in MBA.school? The last thing we want to deal with

are the inefficiencies of a government agency. We’d lose control over health claim ads. How can

you even think of supporting government regulation?”

Tom stands up quickly. “Look, this is obviously not something we’re going to solve today. Why

don’t you both spend a few days thinking individually about this. Then get back to me and

present separate proposals.”

Sally returns to her office to consider Tom’s request.

Steps for Resolving an Ethical Issue

What are the relevant facts?

What has occurred that requires a decision?

What are the ethical issues? What legal, ethical or moral standard may have been violated in this instance?

Who are the primary stakeholders? Who will be affected by the decision you make?

What are the possible alternatives?

What solutions are there to the issue at hand? Include all alternatives,

even those which are legally or ethically incorrect.

What are the ethics of the alternatives? What legal or ethical issues are there?

What are the practical constraints? She could lose her job.

What might happen to you as a result of your decision?

What action(s) should be taken?

Breakfast Foods, Inc. (BFI) is a national manufacturer of food products with three dry cereal divisions children's, family, and natural. BFI also sells frozen breakfast entrees such as waffles and pancakes. BFI's marketing department has just hired three assistant branch managers. One of these, Sally Thompson, received her MBA from a major Midwestern university. Before joining BFI, Sally spent two years with the marketing group of a large food manufacturer. Although her experience at the former firm was educational, Sally often felt frustrated by the lack of responsibility. Moving to BFI was good for Sally. BFI is a decentralized, progressive company, and management believes in giving people significant responsibility as soon as possible. Sally learned early that BFI management is quick to reward success but does not tolerate those who do not accept responsibility and its ramifications. The Assignment Sally's first major project is to improve market share in the adult cereal market through advertising and labeling strategies. Her charge is to suggest a new or modified marketing campaign for the Natural Cereals Division. Natural Cereals' brands are Fiber Rich, Bran Breakfast Flakes, Natural Bran and Bran Bits. Sally is excited. This project allows her to work with two of the marketing department's best professionals, Tom Miller and Joe Bradley. Tom Miller, a group product manager for the Natural Cereals Division, is a twenty-year veteran of BFI and has greatly influenced company policy. Tom is well known throughout BFI as a fair, yet demanding, manager with a high degree of integrity. He transferred from the Family Cereals Division five years ago, having made his reputation as the product manager for Winkies, the number two brand in the company. Since Tom's time is limited, he assigned Joe Bradley to informally supervise Sally on this project. Joe, recently promoted to product manager, has been with BFI for four and one-half years, most of which were spent in the Family Cereals Division. His best-known campaign was for Sparkles, a children's cereal. Joe joined forces with a well-known toy manufacturer to give away a miniature character toy with each box of Sparkles. The box also contained an order form so parents could purchase the remaining set of characters directly from the manufacturer. This campaign increased market share of Sparkles by 10 percent. Sally knows she can learn a lot from Joe. She also knows he is Tom's friend and protege. Sally suspects Joe will one day take Tom's position.