Most people don't consider chocolate popsicles, sugary cereal and bagels filled with cream cheese as healthy foods. But it's no surprise that a new labeling program underwritten by 14 major food companies--including Kellogg, Kraft and Unilever--says otherwise.  Between 2008 and 2009, the 14 corporations paid a combined $1.47 million to fund the development of Smart Choices, a labeling initiative that stamps a green seal of approval on the front of food packaging to indicate healthier fare to consumers. Unilever's Fudgsicles, Kellogg's ( K - news - people ) vitamin-enriched Froot Loops and Kraft's Bagel-fuls all now bear the Smart Choices label. (A 60-calorie Fudgsicle may be low in fat, but has almost no nutritional value and contains three different types of sugar.)  At the heart of the Smart Choices initiative is the Keystone Center, a Keystone, Colo.-based nonprofit group that mediates public-policy disputes. In 2008, Keystone convened a group of 40 food executives, academics, health advocates and government officials to develop the program's nutrition guidelines. Keystone received more than $680,000 from food companies to organize the talks; the remaining funds were spent on consumer testing.  Since it was introduced in August, the labeling program has been criticized by nutrition experts and health advocates for selecting unlikely products as healthy alternatives. It also has been portrayed as in the corner of industry; food companies that participate fund the program annually based on a sliding scale ranging from $5,000 to $100,000. They cannot add their own, additional health-themed logo on the products' packaging.  "The food companies paid because they had the ability to," said Mike Hughes, vice president and director of the Center for Science and Public Policy at Keystone. "You're not going to get [money] from the little nonprofits, so we said, 'Let's go get some,' and we passed the hat."  Hughes declined to disclose how much each company spent, citing a previous agreement that those figures would not be shared with other participants. The organization's most recent annual report shows that ConAgra ( CAG - news - people ), Nestle ( NSRGY.PK - news - people ), Kraft, Kellogg, Coca-Cola ( KO - news - people ), Unilever and Wrigley ( WWY - news - people ) each contributed $50,000 or more. The American Diabetes Association and the American Heart Association, the only two non-industry organizations to help subsidize the cost of the panel, contributed a total of $40,000. (Keystone has listed all of these contributions as donations, but they were in fact fees for Smart Choices-related services, Hughes confirmed.)  Once convened, the group identified qualifying criteria for products in 19 food and beverage categories, with the goal of promoting items low in trans and saturated fats, cholesterol, added sugars and sodium. The criteria, which were based primarily on dietary guidelines developed by the USDA and Department of Health and Human Services, also encourage the consumption of fruits, vegetables, whole grains and select nutrients. (See the criteria here.)  Smart Choices, which is now administered by the American Society for Nutrition and NSF International (a nonprofit public health organization), has approved approximately 800 products, including Kid Cuisine's Magical Cheese Stuffed Crust Pizza, Healthy Choice's Philly Cheese Steak Panini and Slim Fast's Rich Chocolate Royale Shake. (The pizza meal contains 23% of one's recommended daily saturated fat intake, not to mention dozens of ingredients.)  New product applications are reviewed by the ASN and NSF and the program is governed by a board of nine directors: Four seats belong to independent experts, four are held by food industry executives and the ninth is for someone with "no skin in the game," according to Hughes. He holds that seat and will for the next year.  Hughes denied that industry funding swayed the group's judgment when developing the nutrition guidelines for the program. "If a company makes a [contribution] because they value our neutrality, it does not upend that neutrality," he said.  Keystone argues that it is bringing food companies and health advocates together to help address America's obesity epidemic. "How all of this money comes together is really uninteresting," Hughes said. "It's all a way of helping these folks get a conflict resolved."  Despite Hughes' hope for resolution, the program has become controversial in many quarters. In addition to criticism from nutritionists, Smart Choices also garnered a letter from the Food and Drug Administration, expressing its concerns over potentially misleading claims.  "We do have some concerns," said Barbara Schneeman, Ph.D., the FDA's director of the Office of Nutrition, Labeling and Dietary Supplements. "It's hard for us to know what products are going to bear the logo until they show up in the marketplace."  Schneeman observed some of the roundtable discussions and was aware that the process was being paid for by industry groups.  In a response to a request for comment about its involvement with Smart Choices, Battle Creek, Mich.-based Kellogg said its financial support of the panel was an outgrowth of their consumer education efforts.  "Kellogg joined many others in the industry in investing in the development of the Smart Choices program to help consumers make informed food choices," said spokeswoman Kris Charles.  Susan Davison, a spokeswoman for Northfield, Ill.-based food giant Kraft, said there was no conflict of interest in the company's funding of the panel, referring to the fact that the nutrition criteria were developed by a coalition of food executives, academics, health advocates and government officials  Richard Kahn, Ph.D, a panel participant and now an independent consultant serving on the board of trustees, said the guidelines were designed to help people who are currently making "terrible, terrible choices" with their diets.  Kahn, who was formerly the chief scientific and medical officer for the American Diabetic Association, said it seemed unrealistic to point consumers toward less-processed foods like fruits and vegetables because the intended audience of the Smart Choices program comprises those who might be choosing between a sugary cereal and a doughnut.  "If you get someone who has diabetes and they're eating doughnuts for breakfast," he said, "anything down the ladder is a better choice."  Kahn was surprised to learn that all 14 food companies had paid for the development of Smart Choices, but said he sees no conflict of interest.  "I personally like multiple companies sponsoring," he said. "If it's just one company, people think that company gets a bias."  In this case, it appears, Fudgsicles, Froot Loops and Bagel-fuls were all treated equally.
Processed-foods giants spent more than $1 million to create nutritional guidelines for a labeling system that favors their own products.