Disney’s War on Childhood Obesity Trumps Profitability

For the last six years, Disney has engaged in a remarkable and gutsy program to improve the nutritional knowledge and choices for kids. Without question, Disney’s leadership and actions appealed to a growing segment, enhanced their brand and made a difference concerning an important social issue. Yet, the decisions behind the program could not have been easy, as there was significant cost and risk involved. How much weight should a firm place on addressing social issues? How much financial risk and sacrifice should be accepted in order to do the “right” thing?

In 2004, Disney made the dramatic decision to establish nutrition guidelines that they leveraged in a variety of ways. In 2007, they phased out all trans fats in their parks and continued a policy of upgrading the healthiness of their park menus. In 2010, they launched the Disney Magic of Healthy Living consumer campaign, complete with a website that encouraged kids to eat right and exercise. In 2011, we saw the TRYit campaign to encourage kids to try new foods and exercise moves. And in 2012, Disney upgraded the nutritional guidelines, launched the “Mickey Check” logo that is placed on nutritious choices, and announced that by 2015, all food advertising within Disney channels will have to meet the new guidelines. All this time, the healthy food options at the parks were becoming more plentiful and enticing, with something like 60% of the menu items at parks having a nutritious side and beverage option.

An amazing set of programs and commitments has a lot of upside for the Disney brand. Families are increasingly conscious of obesity and diet issues involving kids. Many will be attracted to a place where better food choices are encouraged and unhealthy options are less available. Further, being a leader in this area could only enhance the respect and admiration for Disney as a firm, one that is truly interested in kids and families

Even further, it is the “right” thing to do. By taking a leadership position, Disney is making a material difference with respect to a significant social problem, child obesity. The impact goes way beyond the Disney commercial world because the symbolism of their actions will resonate all over the place. A major brand has gotten involved and taken a leadership role with no legislation from government or pressure from any special interest group.

There are many social and environmental problems that the paralyzed and dysfunctional US government is unable to address. In that context, it is remarkable how the private sector has stepped up to make a real difference. Disney is only one example of a firm showing initiative and having a broader view of their purpose and mission.

These decisions, however, could not have been a no-brainer. The decision to ultimately decline advertising for food that does not meet certain standards will certainly means a loss in advertising revenue. Only a small proportion is likely to be replaced by “healthy” options, because those healthy options will lack the budget to advertise. Shifting menus away from less healthy products will sacrifice margins and may serve to disappoint visitors that look for popular and familiar items and even insist on eating what they are “used to.”

Creating standards is a slippery slope. It can become a nightmare of controversy. Some will say that having 10 grams of sugar in a cereal serving is not acceptable, even though it is much less than most cereals today. Disney can be open to accusations of hypocrisy if they are perceived to fail to live up to the spirit of the standards. Others will complain about the “big brother” aspect: “Who is Disney to say what my kids should consume? I can make those decisions by myself, thank you.”

I believe that this action was the right course for Disney. Assume, however, that it was not the best “business decision” in terms of profit flows, both in the short and long run. Michael Porter has argued that business should not be driven by financials exclusively, as there are other payoffs from being a part of the solution with respect to social issues. So even if there is a short-term and long-term net cost, it still may be the right course. I don’t know the economics of the decisions and they were likely complex, but if Disney accepted some risk and margin decline to develop such a program, good for them.

Posted June 13, 2012 / Permalink / Subscribe (e-mail) / Subscribe (RSS)
Tags: business decisions childhood obesity disney economics financials nutrition parenting profitability strategy

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