This is a rush transcript from "The O'Reilly Factor," February 11, 2009. This copy may not be in its final form and may be updated.
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BILL O'REILLY, HOST: In the "Personal Story" segment tonight: Olympic swimming star Michael Phelps is paying for misbehaving. Media all over the world are displaying this picture of Mr. Phelps smoking dope in South Carolina. To his credit, he's taken responsibility and his punishments like a man.
Now one of those punishments, being fired by Kellogg's, the cereal company. And the pot people, organizations that want to legalize marijuana, are angry.
Joining us now from Pittsburgh, Peter Shankman, a marketing expert, and here in our New York Studio, Diane Brady, senior writer for Business Week magazine.
Now, did Kellogg's help or hurt its brand by sacking Michael Phelps?
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DIANE BRADY, SENIOR WRITER, BUSINESS WEEK: They did absolutely the right thing. If you had to choose between 10,000 parents e-mailing you or 10,000 pot smokers, I think I'd alienate the pot smokers. So I think they did the right thing.
O'REILLY: I'm not sure because they tell me after you smoke pot, you want to eat a lot of stuff.
BRADY: But you're not terribly discriminative about what you eat, so I think…
O'REILLY: So — but if Kellogg's sugar Frosted Flakes is there, I think they would nibble on it. All right, so you say that the pot lobby is not as affluent, is not as powerful as middle — what is it?
BRADY: It is, but Kellogg's is a family brand.
O'REILLY: Family brand.
BRADY: Yes, Frosted Flakes is oriented to 6-year-old children for the most part and their parents.
O'REILLY: It's good to give them all of those kids all the sugar they can get, isn't it?
BRADY: Still has Visa. Omega. Most people have not dropped him.
O'REILLY: OK.
BRADY: Kellogg…
O'REILLY: So you say Kellogg's made the right choice.
BRADY: Yes.
O'REILLY: And I love Kellogg's Frosted Flakes, by the way. I'm just, you know. All right, Mr. Shankman.
BRADY: Smoke pot?
O'REILLY: No, I never smoked pot in my life.
BRADY: Good.
O'REILLY: Nobody believes that, because the way I behave. Now Mr. Shankman, what do you think? Good or dumb decision?
PETER SHANKMAN, MARKETING EXPERT: Well, I'm glad you know your cereal choice. You know, this is a stupid decision on Kellogg's part. The fact of the matter is the only reason it's still a story is because Kellogg's kept it alive by dropping him. It was going to be over in two months. Look, he was off season. This is not — it wasn't a performing enhanced, performance-enhancing drug. This wasn't A-Rod. I don't remember the last time someone smoked pot to, you know, to hit a long ball even longer.
O'REILLY: No, but it's an illegal activity.
SHANKMAN: It is an illegal activity, but it's not — it's the most benign of the illegal. I'm not denying that what he did was wrong. He apologized for it. Look, the kid's 21 years old, OK. He's realizing for the first time in his life, "Hey, I'm a superstar." There's going to be a camera everywhere he goes. Guaranteed he won't make…
O'REILLY: All right. No, we're not excoriating Phelps for making a mistake because…
SHANKMAN: Yeah, Kellogg's made the mistake.
O'REILLY: OK, but that's what I want to know. Business-wise…
SHANKMAN: Yeah, they overreacted.
O'REILLY: All right. Ms. Brady…
SHANKMAN: Kellogg's overreacting.
O'REILLY: Ms. Brady says, Mr. Shankman, that middle America is really the target audience for these cereals, and they don't want somebody who's publicly been outted as a drug user on the package. Now that seems logical to me. Look, we're looking at this — a little elf there. If a little elf had a syringe full of heroin, I don't think he's going to be on the cereal package.
SHANKMAN: If the little elf had a syringe full of heroin, it would be a lot harder for him to come out and apologize and just simply quit. The fact of the matter is that Kellogg's made it a much, much bigger production that it would have been. I'd rather see the parents say, hey, you know what? Michael screwed up, but he admitted his mistake and we learned from it. I think that Kellogg's banning him is going to come back to haunt him because in four years, he's going to win another 50 gold medals. And then where's he going to be?
O'REILLY: All right. Now if the public perceives this as being mean to Phelps, because he is 21 years old…
BRADY: Very likable guy.
O'REILLY: We all make mistakes throughout all of our lives, OK? Hero, this and that. And Mr. Shankman says overreaction. You're over-punishing him. Then the public might say, well, you know, Kellogg's, they're mean guys.
BRADY: Them's the breaks. You go to Washington, you have to pay your taxes. You want to be an endorsement, you know, you want to endorse a family brand, you just have to…
O'REILLY: Do you think that most folks are going to be OK with this? They're not going to resent Kellogg's for doing it?
BRADY: I don't think they're going to boycott Frosted Flakes because Michael Phelps is not on the pack. Now…
SHANKMAN: They're not going to boycott them.
BRADY: Do they think they're overreacting? This has been a huge story…
O'REILLY: It is a huge story.
BRADY: …regardless of what Kellogg's has done.
O'REILLY: Right.
BRADY: So I think that they are perfectly within their rights. You know, Sharon Stone says bad karma for the Chinese, Christian Dior drops her. So this is what happens. This is, you know, Kobe Bryant, some endorsements…
O'REILLY: He lost a lot of endorsements after that.
BRADY: He lost, but some of them he kept.
O'REILLY: OK, I got it. I got it. Now…
BRADY: Prediction?
O'REILLY: Go ahead, Mr. Shankman.
SHANKMAN: Prediction. The next time he competes, and he's been banned for what, like two months, or something from swimming. Next time he competes, he's going to win whatever medal he wins.
O'REILLY: Right.
SHANKMAN: Some other cereal company or some other company like that is going to pick him up for a bigger endorsement. Kellogg's is going to be very, very upset.
O'REILLY: All right.
SHANKMAN: They're going to have missed out. They're going to have missed out.
O'REILLY: I appreciate you guys coming in. It was a very interesting discussion.
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