Salt Sugar Fat (32 page)

In the audience that day were 86 research and development officials from General Foods and another 125 from Kraft, who represented all the major brands, from boxed cereals to frozen desserts. But none of them would benefit more from all the talk about divining the consumer’s mind and chasing trends than the people from Oscar Mayer, who at that moment were poised to take their own product, the Lunchables, to new heights.

F
or a brief moment, when production costs were outstripping revenue, it looked like Philip Morris had made a bad bet on the Lunchables. Right after Hamish Maxwell signed off on giving the trays more development money, which kept the Kraft bankers from shutting the whole venture down, sales dropped, and Bob Drane’s team scrambled to slash production costs. Drane even gave up his most treasured part of the tray, the yellow napkin,
“which I fought like crazy to hang on to. It was like one and a half cents, but every element was examined in detail to figure out how to reduce the costs without screwing up the quality.” Oscar Mayer also gradually learned how to accomplish high-tech assembly, in which workers were replaced by machinery that accelerated and automated the factory lines, further reducing costs. Projected to lose $6 million in 1991, the trays instead broke even; and the next year, they earned $8 million.

Having extinguished this fire, the Lunchables team could focus its attention, once again, on boosting sales. And it did this by turning to one of the cardinal rules in processed food: When in doubt, add sugar.
“Lunchables with Dessert is a logical extension,” an Oscar Mayer official reported
to Philip Morris executives in early 1991. To accomplish this, they would have to spend $1.2 million to retool the production lines yet again. But the “target” remained the same as it was for regular Lunchables—“busy mothers” and “working women” aged twenty-five to forty-nine, he said—and adding cookies and puddings would bring several advantages. The “enhanced taste” would attract shoppers who had grown bored with the current trays; the added sweets would let the company charge thirty cents more per unit; and the dessert line would keep Oscar Mayer a step ahead of competitors who were reacting to the Lunchables success by putting out their own versions of cold, ready-to-eat lunch.

A year later, with the trays increasingly being eaten by kids, the dessert Lunchable morphed into the Fun Pack, which came with a Snickers bar, a package of M&Ms, or a Reese’s Peanut Butter Cup as well as a sugary drink. The Lunchables team started by using Kool-Aid and Cola but switched to Capri Sun in 2000 when Philip Morris added that drink to its stable of brands.

By 1995, six years after their launch, the Lunchables were giving the tobacco executives some of the only good cheer in the financial reports from Oscar Mayer. In appearing before the Corporate Products Committee that fall, Bob Eckert, president of the Oscar Mayer unit, went through all the bad news in red meat: Bologna sales were down; bacon was down; even hot dogs had sunk 4 percent.
“Our processed meat categories get more than their fair share of negative stories about fat, leukemia, nitrates and the like,” Eckert lamented. In response, Oscar Mayer had begun making a new line of fat-free meats—hot dogs, bologna, sliced ham—that were projected to reach $100 million in sales.

The Lunchables, however, used the regular products and were already a superstar in the Oscar Mayer lineup. It had gone from being a money loser—or, as Eckert put it, “a bleeder”—to being “a growth engine,” a foundation of the company’s profits. “We’re leading the hottest segment of the supermarket’s refrigerated case,” he said. That year, the Lunchables hit a string of milestones: 100 million pounds in trays sold, half a billion dollars in revenue earned, and $36 million in profits. Lunchables had come so far,
so fast that Oscar Mayer was scrambling to find more places to make the trays. “We must expand manufacturing capacity,” Eckert told the tobacco executives.

Sugar wasn’t the only catalyst being used to advance the Lunchables sales. All three components—salt, sugar, and fat—would get hefty boosts. A line of the trays, appropriately called Maxed Out, was released that scoffed at the federal government’s guidance on nutrition. These and other permutations had as many as 9 grams of saturated fat, or nearly an entire day’s recommended maximum for kids, with two-thirds of the max for sodium salt, and 13 teaspoons of sugar.

When I asked Geoffrey Bible, former CEO of Philip Morris, about this shift toward more salt, sugar, and fat in meals for kids, he did not dismiss the nutritional concerns that this raised. Indeed, he said, even in their earliest incarnation, Lunchables were held up for criticism. “One article said something like, ‘If you take Lunchables apart, the most healthy item in it is the napkin.’ ”

Well, they did have a good bit of fat, I offered.

“You bet,” he said. “Plus cookies.”

But speaking in general about the nutritional aspects of the products that Philip Morris sold through its food division, Bible said the company was in a tough spot. The prevailing attitude among the company’s food managers—through the 1990s, at least, before obesity became a more pressing concern—was one of supply and demand.
“People could point to these things and say, ‘They’ve got too much sugar, they’ve got too much salt,’ ” he said. “Well, that’s what the consumer wants, and we’re not putting a gun to their head to eat it. That’s what they
want
. If we give them less, they’ll buy less, and the competitor will get our market. So you’re sort of trapped.”

Bible said the nutritional aspects of the company’s products were typically left in the hands of brand managers, who faced an uphill battle whenever they sought to introduce a new product. But given the consumer’s fickleness, the risks of failure were even greater if they tried to pull back on the keystones of their formulations, the salt, sugar, and fat. Bible said the
most vivid example of this that he could recall involved Robert McVicker, a Kraft vice president for technology who died in 2001, and Michael Miles, the company’s former CEO.
“Bob was very keen to get a low-fat peanut butter,” Bible said. “Peanut butter wasn’t a big business for us, but it was big in the country, so if you find one it could pay. But it was going to cost a lot of money. So Mike had a rule, which I thought was a pretty sensible rule. He said to Bob, ‘If you can find a brand manager who’s prepared to absorb the R&D cost, go for it.’ Now, if I’m the brand manager, and they say, ‘Geoff, this is probably going to cost you $5 million and if you want to put it in a test market, another $10 million, and then if we roll it out to a bigger test market, this thing will cost you $30, $40 million.’ And I say, well, ‘No thanks.’ You see your bonus disappearing. So it doesn’t work, unless you can find somebody who’s prepared to say, ‘Okay, I’ll take the punt. If it doesn’t work, I’ll eat the money, and I may lose my job, because that’s what I’m paid to do, pick winners not losers.’ A lot of these initiatives didn’t really get out of the box because it’s hard to find the funding, the champion who will get behind them. I think everybody did their best, but again, it’s what the consumer wants that we tend to make.”

When it came to Lunchables, they did try to add healthier ingredients. Back at the start, Drane had
experimented with fresh carrots and sliced apples but quickly gave up on that; these fresh components didn’t work within the constraints of the processed food system, which typically required weeks or months of transport and storage before the food arrived at the grocery store. The carrots and apple slices wilted or turned brown within days. Later, a low-fat version of the trays was developed, using meats and cheese and crackers that were formulated with less fat, but, like the low-nicotine cigarette, it tasted inferior, sold poorly, and was quickly scrapped.

When I met with Kraft officials in 2011 to discuss their products and policies on nutrition, they said that they were trying to improve the nutritional profile of Lunchables through smaller, incremental changes that were less noticeable to consumers. Across the Lunchables line, they said they had reduced the salt, sugar, and fat by about 10 percent, and new versions,
featuring mandarin orange and pineapple slices, were in development. These would be promoted as healthier versions, with “fresh fruit,” but their list of ingredients—containing upwards of seventy items, with sucrose, corn syrup, high-fructose corn syrup, fructose, and fruit concentrate all in the same tray—have compelled some reviewers to attack. “Snack Girl makes frequent visits to her local supermarket to check up on the latest,” Lisa Cain, a biologist and mother of two, wrote in November 2011, on the website she calls Snack Girl. “Guess what I found in the shampoo aisle? Peanut Butter and Jelly Sandwich Lunchables! Right there next to shaving cream, toothpaste, and assorted hair products was Oscar Mayer’s kid friendly MRE (meal ready to eat) for our children. Now, if we were in a hurricane situation—I would say, ‘Stock up on those bad boys. They will last forever!’ ”

She added five “reasons to avoid” the new Lunchable: The sugar, at 37 grams, nearly matched that in a 12-ounce can of Coke; the $3 price tag far exceeded the cost of her homemade PB&J and fresh fruit; the packaging was not reusable; the bread was not 100 percent whole-grain; and the ingredients included “artificial colors, flavors and something called ‘carnauba wax’—I use wax on my floors and car—not for food for my children.”

Kraft has been deftly defusing criticism like this since the earliest days of the Lunchables, of course. One of the company’s counterarguments was that kids don’t eat the Lunchables every day, so even the versions with the heaviest loads of salt, sugar, and fat were just part of their overall diet that parents could supplement with healthier foods. They also pointed out that there was nothing automatically healthy about the brown-bag lunch, if parents loaded them up with their own brownies and cookies and soft drinks. As for the kids, the company pointed out that they were unreliable—even when their parents packed fresh carrots, apples, and water, they couldn’t be trusted to
eat
it. Once in school, they often trashed the healthy stuff in their brown bags to get right to the sweets.

Kraft’s use of this notion that kids are in control of their eating dates back to the earliest days of the Lunchables. In 1994, when a pediatric cardiologist called the trays a “nutritional disaster,” a Kraft spokeswoman,
Jean Cowden, shot back,
“This is not some big corporate plot to fatten up kids. This is what kids want. There are very few kids out there who will eat rice cakes and tofu.”

This idea would become a key concept in the evolving marketing campaigns for the trays. In what would prove to be their greatest achievement of all, the Lunchables team would delve into adolescent psychology to discover that it wasn’t the food in the trays that excited the kids; it was the fun, the cool, and most of all, the feeling of power it brought to their lives.

“I
f you had lunch with Michael Jordan tomorrow, what would you eat?”

That was the question Bob Drane put to kids in the mid-1990s, as his team began searching for tricks to keep the Lunchables sales growing. “And guess what came back?” Drane told me. “Pizza.”

It made sense. Pizza, back then, was booming. Throughout the country, sixty thousand pizza restaurants were turning out $26 billion worth of the stuff each year. Pizza had become the hottest convenience food in the country, which, in turn, only helped fuel the entire fast food market. The big chains—from Pizza Hut to Domino’s to Jack-in-the-Box—which had generated $6 billion in sales in 1970, were pulling in nearly $93 billion by 1995, or roughly a third of all restaurant sales nationwide.

But what did this pizza insight possibly have to offer them, the Lunchables team wondered. All those pizzas and burgers sold by restaurants and craved by kids had something the Lunchables could never replicate: They came out of an oven. They were hot. Lunchables came off the shelf of the cooler section of the grocery store and then went into kids’ lunches from the fridge at home. Pizza would never be a possibility for them, right?

Wrong.

“We went through the Montessori School process again, asking, ‘What could a pizza be like that would fit into the Lunchables world?’ ” Drane said. “We started to make them, and they had this characteristic of being
cold. They could have been heated but not as a carried lunch. It was impractical, so we created little crusts and little sauces and toppings and stuff and stuck them in a package and showed them to moms.” Not surprisingly, he said, “the moms told us, ‘This is an awful idea, a really awful idea.’ It was a disaster in the making, who would ever eat cold raw pizza, on and on. I think, in our testing, the concept got the worst score in our history.”

And yet, Drane wouldn’t let go of the idea. The potential windfall was just too huge. Not only were Americans buying $26 billion worth of pizzas from restaurants, they were spending another $1.7 billion on frozen pizzas they heated up at home. It was these frozen pizzas that gave Drane hope. Even when cooked, the crust on many of these was pale and soggy and tasted like cardboard. Surely, they could do better. So Drane and his team persevered, and a few months later, they encountered some good news. Moms may have been revolted by the idea of serving their kids a cold, raw pizza, but kids were a different story. The team whipped up a prototype; according to Drane, when “we showed it to kids, they said, ‘Wow, that’s really cool. I love it!’ ”

This disconnect between moms hating the idea of cold raw pizza and the kids loving it had to do with their distinct approaches to eating in general. Adults use their mouths when they eat, tasting whatever it is they are eating. By contrast, kids tend to use their eyes, judging the food—initially, at least—by how it looks. In a Lunchables with cold raw pizza, they saw nothing but fun. And to amp up the fun quotient, Drane’s team didn’t lay out the pizza in slices, as if it had been cut from a pie. They put it into the trays unassembled, in order to maximize the fun. The crust went into one compartment, the cheese, pepperoni, and sauce into others. That way, the kids got to make their own pizza right at school, while their schoolmates looked on with envy.