Information Failures: Coca Cola & the Get Fat Diet

Ed Harley is annoyed about claims made by Coca Cola that their low sugar-colas offer a quick and easy route to a healthier diet. In a follow up to this I note that Coca Cola in the United States faces a legal action over misleading claims for its Vitamin Water brand. More here

Ed writes: Coca-Cola is one of the most recognisable and widespread brand names in the world, managing to reach even the most far-flung corners of the world. It is currently the third most valuable brand name, being worth $34.8bn. Underneath the flagship red-labelled coke ‘original’, there are its two main daughter labels: Diet Coke and Coke Zero. They both market themselves on containing no sugar at all, and it follows that this would mean it reduces weight-gain. However, this is not the case.

Contrary to popular belief, the process of breaking down the artificial sweetener aspartame (which is, coincidentally, significantly cheaper than sugar) into its toxic components burns a lot of every in liver cells, leaving less available for burning fat and this eventually leads to you gaining more weight than if you had consumed a ‘full-fat’ coke instead.

This is a good example of an information failure in the market. However, it is slightly unusual compared, for example, to the market for used cars, as all the information is present for the consumer to see: the extensive list of ingredients, mainly comprising of chemicals, can be seen in small white writing on the side of every can or bottle. It would take very little to find out exactly what you were ingesting into your body every time you lifted the iconic can to your lips.

The Coca-Cola brand is known for innovative marketing schemes, with Coca-Cola spending $2.5bn on advertising in 2005 , and often brings a host of star names to promote their product; this is what has led it to becoming one of the most valuable brand names in the world. When people are told about the negative consequences of the artificial sweeteners found in Diet Coke and Coke Zero, their first instinct is to deny it: ‘That’s not what Coke say, they say it’s good for you!’

Well, not exactly. Coke Zero is marketed with the slogan ‘Same Coke taste, zero sugar’. Its first advert followed a man and his friends discussing how perfect life would be without any negative by-products (‘Like bras, without the fumbling’ one of his mates suggests). He decides that Coke would be better off without the sugar and, unsurprisingly, his gang all unanimously agree with him - cut to a silhouetted shot of him taking a swig from a Coke Zero can. To the unobservant consumer, he seems to be right - Coke without the health effects, what’s not to like? However, not once does the advert say that it will benefit your weight.

This selective release of information has been exploited by marketers to torment consumers since the day advertising was created. It is still employed today, allowing advertisers to gloss over the drawbacks of their product. The way Coke lay out their ingredients - small writing, with all the various languages jumbled together one after the other - makes it almost unintelligible, and even if they wanted to, the effort required to decipher it is too much. It isn’t that people choose to drink a more fattening drink, they simply are oblivious to it. The UK is the first market where sales of Coke Zero and Diet Coke are set to overtake original Coca-Cola, so the Coca-Cola Company will be unwilling to drop it for fear of reducing their $6.82bn profit margin.

The problem with a case like this is that almost all that can be done has been done: ingredients must be on each bottle and can, and there are the usual advertising regulations that prevent misleading marketing campaigns. Even the term ‘diet’ used to describe these low-sugar drinks cannot be forbidden as it technically is a diet drink as you are reducing the amount of calories consumed; the problem is that in this case it is not the calories but the chemicals that make you gain weight