Food advertising and promotion programmes financed by assessments on US farmers, importers and processors are at risk of collapse under the weight of several lawsuits working through the US courts. At stake is as much as US$1bn a year for marketing milk, beef, pork, soybeans, potatoes, watermelons, orange juice, grapes and other fruits and vegetables. James C. Webster, former assistant secretary for governmental and public affairs at the USDA, investigates.
Authorised by laws passed by the US Congress and many individual states’ legislatures over the past half century, the mostly generic advertising programmes attempt to increase sales – and thus the price to producers – of each of their commodities.
The most visible are the “Got Milk?” campaigns financed by a dairy farmer-financed board and the “Pork: The Other White Meat” and “Beef: It’s What’s for Dinner” slogans popularised by producers of those meats. Each of the three has ranked near the top in surveys of consumer brand recognition. But even such mundane crops as maize and wheat are promoted with funds raised, under varying state-level laws, by the “checkoff” of a few pennies on each bushel a farmer sells.
The mandatory national promotion assessments overseen by the US Department of Agriculture raise almost US$700m a year. Other state-supervised programmes – notably grains in the Midwest and fruits and vegetables in California and Florida – may raise half as much again.
Courts swinging against schemes
Some growers oppose these automatic deductions and are challenging them in state and federal courts. Some claim they don’t help farmers; others say they benefit mostly imported foods or large food processing companies. Just during the past year, courts have ruled that national advertising schemes for dairy products, beef, pork, orange juice and grapes are illegal.
The controversy is heading toward ultimate resolution by the Supreme Court of the US. The handwriting seems to be emerging more clearly with each subsequent decision – that these schemes violate the protections afforded under the US Constitution for “freedom of speech” because they compel people to finance a specific message even though they may disagree with it.
Three different appeals courts have ruled during the past year that the three major programmes – dairy, beef and pork – are contrary to the constitution. The most recent decision against the 20-year-old law that finances the National Dairy Promotion and Research Board is typical of all three. Government can’t compel individuals to finance advertising solely to increase demand for one product, it held, saying the checkoffs “seem to really be special interest legislation on behalf of the industry’s interest more so than the government’s.” The ruling does not affect a separate fluid milk promotion that finances the popular “milk moustache” campaigns from assessments on milk processors.
USDA and producer groups which support the programmes have asked the Supreme Court to hear their appeals and rule that they comply with the constitution. If the high court declines to hear the appeals this spring – or if it agrees to consider them next year and upholds them – farmer financing would end for generic dairy, beef and pork advertising. Either outcome would also invite challenges to cotton, soybean and other similar programmes.
Florida ‘box tax’ banned
State-level marketing efforts are also falling to court decisions on the same constitutional grounds. A federal judge in Louisiana outlawed a state assessment that finances marketing of alligator products, a federal court ruled against California state assessments on grape producers and a Florida state court outlawed the oldest checkoff of all, the US$70m annual “box tax” that has been collected to promote orange juice since 1935.
Elimination of producer-funded schemes would have differing impacts on US food advertising.
Those who advocate the dairy promotion effort – which collects US$0.15 for every 100 pounds of milk farmers sell – say they would lack a systematic way to challenge the hundreds of millions of dollars spent to advertise soft drinks, branded fruit juice and bottled water.
Supporters contend that the loss of beef and pork promotion would be a competitive advantage for poultry, which are produced by large integrated companies such as Tyson Foods and Perdue Farms that invest millions of dollars in advertising their own brands. Opponents say the demise of generic pork advertising, for example, would increase the incentive for integrated companies such as Smithfield Foods to spend more to advertise its branded pork products.
Backers of all the programmes point to numerous studies that have estimated the benefits to producers from their investment in advertising, promotion and the small part of each fund devoted to research.
“Checkoff hiked beef demand”
A University of Florida study concluded that the beef promotion checkoff created a statistically significant increase in retail beef sales and attracted new consumers to the beef market. Changes in demand beef due to health concerns, demographics, eating behaviour and attitudes cannot be prevented, the analysis found, “yet the checkoff does provide the beef industry with a marketing tool to respond to these observed changes.” Without the farmer-supported checkoff, beef demand would be 5% less than it is, says Evan Vermeer, a cattle consultant for the Land O’Lakes co-operative.
Texas A&M University claimed that pork producers realised more than US$100 from every US$1 of National Pork Board spending on marketing chains, new products and quality and safety. Marketing investment in foodservice, merchandising and pork information returned US$15-20, it said, and investment in pork export market development had a 12-1 return.
Export development offices under threat
Some of the biggest losers would be the ubiquitous US agricultural export development organisations that maintain offices and marketing campaigns in most major importing countries. They get much of their funds from the checkoff schemes under challenge. For example, half of the US$24m annual budget of the US Meat Export Federation and nearly 60% of the US$10.5m spent by the US Dairy Export Council comes from checkoff funds. Most of the rest is from USDA export development grants.
Any ultimate decision to end the kind of checkoffs outlawed by the appeals courts thus far would not do away with all generic advertising. Some voluntary farmer financing would continue. Courts have upheld some fruit and vegetable promotion that is part of comprehensive market regulation. Supporters are also poised to ask Congress to amend the laws to satisfy constitutional questions.
Annual revenue from producer assessments for USDA-sponsored marketing programmes
Source: USDA Agricultural Marketing Service
By James C. Webster