Thursday, 18 September 2008

HFCS, the Little Man and Big Business Part 2 - Making a Difference

HFCS, the Little Man and Big Business (Part 1)
HFCS, the Little Man and Big Business Part 2 - Making a Difference
High Fructose, Low Budget: The Alternative Advertisement

In part one we looked at companies that manufacture and sell products like tobacco, sugar and HFCS. I suggested that for the most part, the people who own them (shareholders) and the people who work for them are just trying to make an honest dollar/pound like everyone else and have constructed for themselves a view of the world that allows them to get on with life without worrying about the rights and wrongs of what their company does. I also suggested that whilst companies are totally amoral and according to one view behave in the manner of a sociopath, they are, nevertheless, neither inherently good nor evil. Ironically, this complete lack of morals is the good news – or at least the best news we can hope to get under the circumstances.

The amorality of companies presents as much of an opportunity as it does a threat. They are, for the most part, interested in just a couple of things – self-preservation and profit.

Companies usually come into being when someone decides they can make money from selling something. It’s unlikely any of the companies that began refining sugar in the 18th and 19th centuries in England had any idea their product would become the scourge of the western diet. If they had seen similar opportunities in the penicillin market no doubt they would have been equally inclined to make that (although of course it would not be discovered until the 20th century.)
Companies Follow the Dollar
If the bigwigs at British American tobacco discovered that that tobacco, when treated in a certain way produced the most alluring, harmless aromatic scent that consumers were just crazy about and would pay twice as much for….you can bet they’d have their business realigned accordingly within months. In the context of a burgeoning market for potpourri, you can also bet their cigarette manufacturing arm, with its attendant legal and regulatory burdens, would quietly dwindle to nothing within a decade. Companies follow the dollar, pure and simple.

McDonalds, that arch-villain of the food world, bought Pret a Manger in 2001. Now I’m not saying Pret a Manger sells healthy food – a recent UK TV program about sandwiches disabused me of any such notion – but next to McDonald’s own food, Pret’s is a shining beacon of nutritional excellence. The point being, McDonalds is getting a whiff of the coffee and investing strategically. They sense a shift towards the healthy option and are getting ready to move with the times. They are not passionate about selling burgers – they sell them because right now that’s where the money’s at.

Have you ever watched a game of soccer being played by young kids? They scuttle around the pitch in a group, following the ball wherever it goes. For grown-up aficionados of the game this is an amusing spectacle, but for the kids, who at this age have largely their own self-interest in mind (they just want to kick the ball), it makes perfect sense. Companies follow the dollar like these kids follow the soccer ball; and since it’s our dollars they are chasing, that makes us - the consumers - the ball.

In such games, the referee’s job is to make sure the players behave themselves during the scramble for the ball; but since young children have not yet grasped the concepts of fair play and rules, this is not an easy task. If the teacher is one of those well-intentioned but bumbling types, easily manipulated by the kids’ pleas, then the game can degenerate somewhat, with the rules being followed only in the loosest sense. The regulators and lawmakers, particularly those responsible for nutritional regulation, are this kind of referee.
Balance of Power in Our Favour
So let’s examine the balance of power between big business and the little man. There are three key ways that companies are able to exert influence:
  1. Marketing. As we have seen from the HFCS adverts, companies can employ slick techniques to convince consumers they should buy products.
  2. PR. Companies routinely use the media to their advantage by releasing stories to show their products in a positive light.
  3. Lobbying. Vast sums of money are spent on legal and professional services with which companies put pressure on the regulators to make decisions favourable to their interests.
On the other hand, there are four key groups who can influence companies:
  1. Consumers. If we don’t buy the product, companies will not make money out of it and will look for other things to sell.
  2. Shareholders. Each year, they take part in a meeting at which they can table motions that affect company policy and lobby other shareholders to vote on them.
  3. The Media. It has the power to publicly bring companies to account for misdeeds and educate the public about products.
  4. The Regulators. I include in this category the lawmakers and government. They can remove products entirely from circulation or make life difficult for companies to continue to make money from them, for example through taxation or stringent regulations.
On the face of it, companies are at a disadvantage – they are being influenced from all directions and have comparatively fewer ways to exert their own influence. More importantly, if you examine the ways they can be influenced, the consumer has the power to act either directly or indirectly in all cases.


In the diagram, red lines indicate where the consumer’s influence can be felt by the company, either directly or indirectly. The black lines are where companies can exert their own influence. Of course, this takes no account of the relative power of each channel of influence – but whereas the black channels are being utilised to their maximum by companies, the red channels are under-used.

Companies throw billions at the black lines of influence - lobbying, marketing and PR. They would regard these activities as pivotal to their success. If as much effort was devoted to the red mechanisms of influence, the balance of power would begin to shift to the little man. In this battle, effort equates to money and although the companies have a lot of money which buys a lot of effort, even the vast coffers of entire industries could not buy enough effort if every consumer exerted their potential influence in the same direction.
Buying Power
If consumers buy less of a product, companies make less money out of it and focus their attention elsewhere. Many of us make compromises for the sake of convenience or cost so we all have an opportunity to influence in a small way. It may not feel like it makes any difference if we stop buying that once-a-week trail-mix bar because it has some kind of corn syrup in - but it does. The company manufacturing those bars will be watching sales like a hawk. If sales drop even a little, they run focus groups. In those groups, someone like you will tell them why they stopped buying the bars.
We are the Media
There was a time when the little man would sit at his desk writing letters to newspapers complaining about the world. They would rarely be published or used as the basis for a story.

With the advent of the Internet, particularly what has been dubbed ‘web 2.0’, this has profoundly changed. Now you can contact the media and companies much more easily and free of charge. Just find the website, write an email and boom, you’ve scored a point for the little man. Many news websites allow you to comment on stories now – so there is even a guarantee that your views will be published.

And that’s the point - now we are the media. The fact that you are reading this blog proves the point; and you don’t have to be a blogger to make your views known – the participatory web has generated a wealth of opportunity for the little man to seize control from companies. Don’t like the corn industry’s adverts? Create a spoof and post it on YouTube. If you make it funny enough it might even get more views that the originals.

Companies are scared of the pace at which technology and the socialisation of media is changing. They have accepted that they will, for the foreseeable future, be one step behind the consumer in this medium – it’s up to us to take advantage of that.
Contact the Regulators
Just as it has become easy to contact companies and the media thanks to the Internet, likewise the regulators are suddenly within easy reach. Formerly these bodies were remote and almost mythical, mentioned in the news but never seen anywhere else. Now they have websites and can be found in search engines or linked to on blogs and other sites. In many cases, regulators welcome comments and complaints from the public and will act on the consumer’s behalf in disputes.

Even politely acknowledged emails sent to governments make an impact – someone has to read these emails and someone else takes note of the numbers of emails about a certain topic. Someone else then looks at these numbers and decides what issues matter to the public so they can advise politicians on what to talk about in speeches or propose as legislation.

Although it’s not shown on the diagram, clearly the regulators and lawmakers read and are affected by the media, so the little man’s influence can come from more than one direction for the regulators.
Become a Shareholder...or Don’t
In part 1, we had shareholders pegged as the opposition – but whilst the public ownership of companies may be at the root of company psychopathy, it nevertheless represents an opportunity for the little man to influence company behaviour in more ways than one.

First, by ethical investment. Share value is important to companies and influences their power. If investors go out of their way to avoid funds, banks and other financial instruments or bodies that are known to invest in companies they disapprove of, they make a difference. There are a growing number of ethical funds and financial institutions out there and although there may not yet be any who avoid investing in the corn industry, they are certainly addressing issues like tobacco and fair trade.

Alternatively, become a shareholder activist. In May 2008 UK TV Chef Hugh Fearnley-Whittingstall bought a stake in UK supermarket behemoth, Tesco and tabled a motion for the June meeting of shareholders, calling for changes to animal welfare. He persuaded the holders of £3m worth of shares to vote in his favour, but unfortunately lost. Nevertheless, this shows what can be done with shareholder power and of course even though he lost, he scored a big win via the media coverage. The full story is here.
Corporate Social Responsibility
The existence of corporate social responsibility (CSR) bears witness to the influence we can have over companies. If companies are interested in the dollar and self-preservation then CSR proves that companies realise that our opinion has the ability to make or break them. Now companies are falling over themselves to prove how ethical they are. If you Google CSR plus the name of a major company you will invariably find well-crafted policies, open forums or other web sites designed to show that the company cares. Even British American Tobacco has found a way to contrive a veneer of caring.

Psychopaths will often feign emotions they are not capable of having in order to achieve their objectives; but from the little man’s perspective it matters not how genuine the sentiment is when companies flash us their best smile - what matters is that they are doing it.

I’ll end with a quote from Adam Smith, Scottish moral philosopher and a pioneer of political economy:

“Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.”

See Also:
HFCS, the Little Man and Big Business (Part 1)
High Fructose, Low Budget: The Alternative Advertisement
Good discussion of the arguments for and against CSR

7 comments:

Anna said...

Nice post.

I tend to view the red line of regulation as an particularly less powerful than the black lobbying line, many regulatory agencies are like the fox guardign the henhouse, with the revolving staff doors, intensive lobbying, deep pockets for legal teams, etc.

At the same time, the govt has gotten so many health initiatives spectacularly wrong, that I am wary of the well-intentioned regulations they do manage to come up with. For instance, bans on "high fat" foods during children's television programming. That gives sugary low fat cereals a pass, but restricts ads for cheese.

Methuselah said...

There is definately a need for a better classification of foods that target children. I continue to be amazed that things like Coco Pops can be marketed to children in the way they are.

Methuselah said...

Plus, in the UK we seem to have a problem defining when children are being targeted...

Junk food ad rules 'not working'

Sheila said...

Wonderful, wonderful post! I study nutrition and public health and used to get frustrated to the point of tears that food industry created products that were ultimately unhealthy for us. It's important to understand WHY companies act the way they do...and that in fact, we give them the power to do so (being consumers and shareholders). I'm happy to see you point out that we DO have the ability to change things, even as a "little man."

Methuselah said...

Thanks Sheila - I appreciate the feedback.

Paul said...

I'm loving this analysis, Mr. M. In the U.S. from what I know, lobbying especially by agribusiness like Archers Daniels Midland led to corn subsidies. As the uses for corn syrup was discovered, they went a further step forward and promoted higher tariffs on sugar imports to really create wiggle room for high fructose corn syrup as a sweetener. If my interpretation is misinformed, please correct me.

As I posted in part 1, there's a internet campaign to get cola companies to switch to beet or cane sugars instead of HCFS at http://www.thepoint.com/campaigns/dear-high-fructose-corn-syrup-please-get-out-of-us-colas-thanks-america/discussion/topics/743 If you know of other efforts, please do share. Thanks.

Methuselah said...

Paul - that sounds about right, although I am not familiar enough with the history to be sure. As I mentioned on the other post, I've signed up for the campaign and really like the idea of that site. Now that I am a member I may consider using it myself. As you may have guessed, there are one or two issues about which I might want to set up campaigns for myself...

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