It's getting harder to sell a kid a soda.
American Dairy Queen Corp. said Thursday it would remove
carbonated soft drinks from its children's menu in September,
becoming the latest fast-food chain to make such a move amid
obesity and health concerns.
In a twist, Dairy Queen is owned by Warren Buffett's Berkshire
Hathaway Inc. Mr. Buffett is an avid Cherry Coke drinker and a
loyal former Coca-Cola Co. board member. Berkshire Hathaway is the
biggest shareholder in Coke, which derives about 70% of its sales
from soda and is the leading beverage supplier to U.S.
restaurants.
Dairy Queen confirmed that Coke is its biggest supplier. PepsiCo
Inc. and Dr Pepper Snapple Group Inc. also supply Dairy Queen.
Children's meals represent the newest no-go zone for the soda
industry, whose U.S. volumes have fallen 10 straight years as
health-conscious consumers switch to water and other drinks. Coke,
PepsiCo and Dr Pepper Snapple agreed to remove soda from schools in
2006 and say they don't market sugary drinks to children.
Restaurants have been feeling heat from consumer and
public-health groups like the Center for Science in the Public
Interest, the Alliance for a Healthier Generation and
MomsRising.org to make children's menus healthier. First Lady
Michelle Obama's "Drink Up" campaign also encourages Americans to
drink more water.
McDonald's Corp. removed soda from its children's Happy Meals
last July and promotes water, milk and juice as beverage choices.
Wendy's Co. dropped soda last autumn and Burger King, owned by
Restaurant Brands International Inc., made the move in February.
The Subway, KFC and Olive Garden chains also don't promote soda
with kid meals.
Explaining its move Thursday, Minneapolis-based Dairy Queen
cited "concern regarding children's nutrition" and said it is
working to offer "healthier options" on its menu. Dairy Queen
already offers other beverage choices including milk and water for
kid meals, and has been adding new food options including turkey
wraps and bananas.
A Dairy Queen spokesman said the company, which has 4,800 U.S.
outlets, didn't consult with Mr. Buffett or Berkshire Hathaway
about the decision. Mr. Buffett's office didn't respond to a
request for comment. Coke said it doesn't comment "on our
customer's business."
Mr. Buffett told attendees at Coke's annual shareholder meeting
last month that a quarter of the calories he has consumed over the
past 30 years are from the company's namesake cola. "I've got to
tell you, I feel healthy," added the billionaire investor, whose
holding company owns 9% of the beverage giant.
But soda will have a tougher time winning over the next
generation if it can't reach it easily, with some data suggesting
U.S. consumption is falling faster among youth than adults.
Some 63.7% of Americans younger than 18 had a carbonated soft
drink at least once in two weeks in early 2014, down from 77.3% a
decade earlier, according to market researcher NPD Group. Over the
same period consumption dropped to 74.3% from 81.7% among adult men
and to 70.2% from 78.6% among adult women.
Outside the home, annual per capita soda servings for children
between six and 12 years dropped to 33.5 in 2014 from 44.8 in 2009.
For children younger than six, servings fell to 19.9 from 27.7 over
the same period, according to NPD. It estimates children consume
about 40% of their soda away from home.
Children, or their parents, can still make a special request for
soda to accompany a kids' meals at Dairy Queen and other chains
such as McDonald's and Burger King. But it will no longer appear on
menu boards for children's meals or be promoted to accompany the
meals.
School is already largely off limits. Shipments of full-calorie
soda to U.S. schools fell by 97% between 2004 and 2010, according
to the American Beverage Association. Children also viewed 39%
fewer television advertisements for sugary drinks in 2013 than in
2010, according to the Rudd Center for Food Policy and Obesity.
Coke said in 2010 it wouldn't advertise its soda in media in
which more than 35% of the audience is younger than 12, compared
with an earlier 50% threshold. Last year, Coke, PepsiCo and Dr
Pepper said they would work to cut beverage calories in the
American diet by 20% by 2025 through promoting bottled water,
low-calorie drinks and smaller portions.
Fountain sales at restaurants, sports stadiums and other public
venues represented about 25% of U.S. soda volume last year,
according to industry tracker Beverage Digest. It estimated Coke
held a 70% fountain market share, followed by PepsiCo with 19% and
Dr Pepper with 11%. Coke is the main soda supplier to several big
fast-food chains including McDonald's, Burger King, Wendy's and
Dairy Queen.
The Center for Science in the Public Interest, a longtime
soda-industry critic, praised Dairy Queen for joining other
restaurants in removing soda from kids' menus. But it said such
chains still need to expand healthier food offerings such as whole
grain rolls and more fruit and vegetables.
In a 2013 report, the group said 97% of children's menu items
flunked its nutrition test, with fried chicken fingers, burgers and
french fries among the most typical offerings.
Write to Mike Esterl at mike.esterl@wsj.com
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