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FOOD BUSINESS NEWS:

Discussions about the food industry, restaurants, and licensed food brand extensions

A World Leader

A World Leader
One of the World's Top 20 Licensing Agents

Wednesday, September 30, 2009

Food Technology Updates

Pioneer Hi-Bred’s genetically engineered soybean may make an oil that has no trans fats. The high-oleic oil may last 3x-5x longer in commercial fryers than most zero-trans-fat oils.

Frito-Lay’s Sun Chips will be in compostable packages by next year that use layers of plant-based film instead of conventional packaging.

• In the race to “who’s is bigger,” sustainability is now a major buzz word. New CPG (consumer package goods) launches for 2009 to date claiming to be “sustainable,” “environmentally friendly” or “eco-friendly” topped 450, a pace that will triple those carrying these vague and most-useless monikers from last year’s total which was double the number in 2007. Does this mean a Department of Sustainability will be formed by the Obama administration to promulgate rules on what exactly “sustainable” and “eco-friendly” mean?

• While semanticists struggle with marketing-speak, Whole Foods is putting its money where it’s PR is by adding solar power to 20 stores. Wags and skeptics will point out this is less than 10% of the company’s 275 locations, but plans are in place to offset all of the company’s non-renewable electricity with wind power, along with retro-fitting existing stores with more efficient lighting and equipment to reduce overall energy consumption.

• In other “green” news, Mars, Incorporated is directing its 5 divisions (Chocolate, Pet Care, Wrigley, Food, and Drinks) to work with the recycling company TerraCycle to convert waste into products. Of course, “upcycling” sounds better than “recycling,” and the new buzz word for upcycled waste is “repurposed.” Plans are to convert package waste into cell phone covers, laptop sleeves and messenger bags, among other product ideas. The partnership is part of Mars’ efforts to reduce landfill shipments by 3%. Skeptics will point out that recycling centers are choked with unsalable materials already that are looking for “re-purposing.”

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Tuesday, September 29, 2009

World News


Aeon Co., Japan’s largest supermarket chain, is opening a 500-chain of convenience stores in Tokyo’s megalopolis. Plans are for the stores to be open by 2012. The move would make Aeon the first retailer to make such a switch in the Japanese retail market, rivaling Tesco’s opening of its c-store-like Fresh & Easy footprint in the US last year. The new model will take up 130-200 sq. meters and will be open from 6AM to midnight. Aeon already is using the smaller format with its 3,000 “Ministop” stores. The company has 5,100 stores worldwide, both owned and franchised.

PepsiCo, Inc. has acquired Karinto S.A.C. who makes “Los Cuates,” Peru’s best-selling corn chips, as well as the company’s manufacturing arm, Bocaditos Nacionales S.A. Other brands included in the purchase are Fripapas and Papi Frits potato chips, as well as edible seeds, raisins, mixed nuts and the #1 peanut brand. PepsiCo is looking both at health snacking as well as niche and macro-snack opportunities. PepsiCo purchased Brazil’s Comercio de Doces Lucky Ltda. less than 2 years previously as part of its goal of defending Frito-Lay’s image as “the evil empire.”

• The price of palm oil, an important frying tool, is expected to rise as Malaysian farmers have been unable to upgrade their extraction facilities.

• In Food & Wine’s annual selection of top cities for cutting-edge cuisine and vibrant food scenes, Tokyo beat our Barcelona (without Vicky & Christina), Copenhagen, London and New York. Among the restaurants highlighted was Tofuya Ukai, a century-old converted sake brewery serving multiple varieties of soy.

McDonald’s continues to be bullish on China, announcing plans to add more than 10,000 new hires, 80% of which will be college graduates as part of efforts to improve service and efficiency. As part of that strategy, salaries will be increased 6.3% across the board and additional training will be started. In 2008, McDonald’s grew 8.9% to hit 2,012 Chinese locations, a growth rate exceeding the U.S. and the EU. Plans for 175 new outlets in 2009 will continue the company’s emphasis on this market.

Ice cream brands are also targeting the Middle Kingdom: Dairy Queen, Baskin Robbins and Haagen-Dazs are planning to expand stores despite the slack state of the Chinese economy. Dairy Queen will open 100 new outlets in 12 Chinese cities, and Movenpick is shifting from marketing the Haagen-Dazs brand only in expensive hotels to “second-tier” cities according to China Daily.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Monday, September 28, 2009

Kosher Big Business Even for Non-Jews


While kosher foods are essential to Jewish consumers, their appeal as a compromise between ordinary products and natural/organic foods has meant an appeal far beyond the small percentage of American Jews (2% and declining).

Sales of certified kosher foods have grown from $150bn six years ago to over $200bn last year, a growth rate more than 2x that of the overall food marketplace. The increase is primarily due to the growing numbers of certified products, but also to consumers seeking out kosher products as "better" or "safer" than non-kosher foods. Kosher (and also Halal foods) require stricter standards of production, including forbidding things like human hair and feathers-- which are allowed by government regulations. Analysts predict the total kosher market will soon reach $260bn. While Muslim Americans make up less than 1% of the population, one in five persons on earth follow the faith, giving Halal immense importance for global food marketing.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Friday, September 25, 2009


A new "census" by COLLOQUY (an association of publishing, education and research resources devoted to the global loyalty-marketing industry) reports membership in U.S. loyalty rewards programs reached 1.808bn.

The figure is 24% more than the tally in 2007. The categories surveyed were Car Rentals, Cruise Lines and Mass Merchandisers. The average U.S. household belongs to 14.1 loyalty programs but is active in only 6.2. In 2007, those figures stood at 12 and 4.7 respectively. This translates to 792.8MM active memberships in U.S.-based loyalty programs. What constitutes an “active” membership varies across companies, but typically includes some participatory involvement in the past 12 months, including earning points on a purchase or redeeming them for a reward.

While the number of loyalty programs per household rose, active membership remained essentially flat at 43.8% ( compared with 39.5% in 2007). A billion inactive memberships means that many company databases are essentially useless. The report suggests the emphasis switch from sheer numbers to adding value. One of the editors writs “Conditions are ripe for marketers to use loyalty data across the enterprise, enhance value propositions and adopt innovative loyalty models such as coalitions, as they seek to revive lapsed members and turn engaged members into profitable, loyal customers.”

Other industries covered in the 2009 census include Airlines, Drug Stores, Department Stores, Financial Services, Fuel Convenience, Gaming, Grocery, Hotel, Restaurant, Specialty Retail and the always-popular “Other.” Membership rankings by industry (in millions):

• Financial Services 422.0
• Airline 277.4
• Specialty Retail 191.3
• Hotel 161.8
• Grocery 153.3
• Mass Merchants 124.8
• Gaming 106.0
• Dept. Stores 92.8
• Drug Stores 73.9
• Fuel Convenience 51.2
• Restaurant 13.7
• Car Rental and Cruises 10.7
• Other 127.9

The entire census was provided to subscribers of this service.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Thursday, September 24, 2009

Brands Fight Back

As Private Label products soar, the national brands are fighting back.

Brands are switching their ad spend from gourmet and luxury items to staples like Kool-Aid and Hamburger Helper as shoppers cut back even at home. Land O’Lakes unveiled the first ad promoting its core butter in 10 years, passing over other products like cheese and eggs, while Hormel’s SPAM and Dinty Moore stew have seen double-digit sales growth following new ads targeting the frugal consumer.

During the last significant downturn in the 1980s, companies simply slashed ad budgets. But with private label products stealing market share, brands are fighting back this time. To drive home that point, Nielson Co. reports sales of store brands overall rose 9.1% to $84.8bn in the 52 weeks ending March 21, while branded products rose a mere 1.7% ($421bn). Kraft has been pushing Kool-Aid year-round now, instead of just during the Summer in an effort to capture dollars from consumers cutting out soft drinks. Not all marketers are ignoring the high end, though: Unilever is pushing its cheap Suave shampoo, but also boosting its spending on Bertolli frozen meals, along with announcing a line of licensed PF Chang's frozen Asia entrees. Hamburger Helper, introduced during a recession in the early 1970s, is seeing a doubling of ads from parent company General Mills as sales of dry meals have risen 9%. The company believes converts in hard times will carry over once the economy recovers because consumers continue to demand convenient meal solutions.

Even companies doing well in the private label wars are arming themselves for things to come: PepsiCo’s Frito-Lay reported sales volumes were strong in the quarter ending March 31 even with higher prices. To combat the incursion of the store brands into its market share the company has stopped “short weighting” product (putting less in while charging the same), adding upwards of 20% more for retail grocery SKUs (as opposed to vending). In addition it has launched value lines Munchos and Santitos at $2 per bag. Groupe Danone is combatting the erosion of its Dannon yogurt brands with a combined response of cutting prices, promoting some products, advertising more and introducing new products. Focus remains on its high-margin Activia line vs. more commoditized yogurt.

If you were a subscriber, you'd have received this news faster, as it was excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Wednesday, September 23, 2009

Crowdsourcing


Why invent something yourself when your customers can do it for you?

This is the "big idea" behind a popular wave of Internet-based sites companies are starting up to help them develop products and services their customers want— because they tell them so. General Mills has given one of its execs time off to study ways the company can induce customers to interact with the company and bring the “viral” marketing concept inside. They’re not alone— Starbucks has already profited from www.mystarbucksidea.com where customers post their ideas about how Starbucks can be improved. They can also vote on other people's ideas and communicate with one another, as well as with a team of Starbucks employees. Those employees review the posted ideas, select some that appear promising, and present to decision makers at the Seattle coffee retailer for possible implementation.

Devious and brilliant.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Tuesday, September 22, 2009

Hidden Dangers in Private Equity Brand Ownership


One of the more remarkable developments has been the rise of private equity ownership of brands. By pooling investor monies into unregulated and semi-regulated networks, PE companies have turned out to be important players in most areas of the economy. This is true for brand ownership, especially with CPG (Consumer Package Goods) houses shedding brands that don't "fit" with their portfolio, or grabbing up companies in receivership. Increasingly, licensing agents find themselves working on brands that are owned by companies heavily-leveraged or owned outright by PE money guys.

There's an old saw in baseball that eventually, the manager of any team will get fired. This is equally true for licensing agents, who often are pushed out by companies who decide they can manage their licensing programs themselves, or who simply decide that licensing is no longer a viable or strategic component for them. So up until recently, "post-term compensation" was the hot-button topic for agents. The concept concerns how long an agent will continue to receive all or part of their fees after their contract with the licensor or brand has ended. Some contracts go into perpetuity, but most companies insist on a "sunset" provision. Agents and brands continue to arm wrestle over the length of post-term compensation.

More troubling is the problem of private equity ownership of companies and/or brands. Oh, I have nothing against the PE money guys, they're all very smart and have saved or resurrected dead brands. They have cash to spend, and few hide-bound reservations about "degrading" the brands or companies they've acquired. Because PE funds need to show growth and profits quickly, PE managers want results, and understand often better than restaurant execs or brand managers how licensing can help generate both fast traction and raise the overall value of the brand or company.

But because of that relentless pressure to make money, PE guys are thinking about selling a brand or company the moment they buy it. The question isn't IF they will sell, but WHEN. The current economy has slowed this process quite a bit, but money guys typically are looking to recover their investment within a few years.

Now how would that affect a licensing agent?

Simple: you work for company A licensing their brand. You put in place a nice deal or two that raise the overall value of the brand or company. The property is sold, sometimes to another manufacturer, or perhaps a different PE group. The deals you've put in place may or may not survive the transfer. Suppose a competitor is buying the company and plans to quietly allow its brand(s) to die? Or the new company isn't interested in having you continue as the brand's agent?

PE guys like their transactions to be "clean." This means no encumbrances on the transfer that could hold up the deal or cost them points. But if you don't get protected, your chances of being screwed rise dramatically. The answer? A transfer fee that brings you something for the effort you've put into building up the brand.

Naturally, licensors and PE funds HATE any kind of transfer fee, and you'll have to argue hard to get one into your representation agreements. But if more licensing agents become aware of this issue, the chances of getting transfer fees into most contracts will help us all.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Friday, September 18, 2009

China Again



China, once seen as offering unlimited growth potential for US fast food brands, is experiencing one of its few challenges in the current economy. Elsewhere in the world, same store sales have stayed strong as consumers trade down from casual dining to QSR for price reasons. But Western fast-food meals are increasingly seen by the Chinese as too expensive and unhealthful. KFC in particular met with early success in China in part because consumers viewed it as cleaner and offering more-hygienic foods. Recent ads and promotional materials there have stressed good value, high quality and healthful lifestyles.

Overall, health issues are not yet as prominent among Chinese consumers (though 2 years of melamine catastrophes have pushed awareness along at the speed of light). It's the high relative cost of Western QSR dining that has run smack into the current economic downturn. In a recent survey by the marketing research firm Millward Brown found that 78% of Chinese consumers were feeling some effect from the global financial crisis. About half said they were likely to cut down on eating at Western fast-food restaurants. Yum Brands Inc., China's largest restaurant chain with nearly 2,500 KFCs and 416 Pizza Huts, said same-store sales in the country were up just 1% in the fourth quarter of 2008, compared with year-earlier growth of 17%.

In the U.S., Yum’s same-store sales rose 2% in the latest quarter. McDonald’s doesn't report figures for China, where it has about 1,050 stores, but the head of their operations admitted things were “soft” at the end of last year. Joining other US retailers in China, including Wal-Mart, McDonald’s has cut prices on its “value meals” to $2.42, a saving of up to 1/3 on a double cheeseburger, medium-size fries (or cup of corn) and a Coke. Despite the softening, McDonald’s plans on opening 175 stores in the Chinese market, more than anywhere else. Other food and beverage retailers, including Burger King, Dunkin’ Donuts, Starbucks and Cold Stone Creamery, are planning expansion in China.

Eating out has been growing by double digits there in recent years. The China Cuisine Association estimates sales surged 24% last year to $225bn at the nation's 4 million eating and drinking establishments. KFC, which opened its first store in China in 1987 and has spread into the rural parts of China, and its restaurants there are usually full. Few other foreign retailers in China have yet to enter such smaller markets inland, tending to focus instead on young consumers and the middle class in China's urban centers. Such a strategy is being challenged by the alarming drop-off in overall growth in the coastal cities like Guangzhou and Shenzhen as the country’s export juggernaut slows dramatically.

And the Chinese have been adept students of Western fast food success. Real Kungfu, a chain of 309 restaurants adorned with an image of Bruce Lee in its logo, has its own line “extra value meals” that includes rice, meat and vegetables, steamed egg, soybean milk and green-bean soup for about $2.58.

How long before Real Kungfu opens in the US?

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Thursday, September 17, 2009

Carrefour


Carrefour’s lackluster attempts to compete with rivals Wal-Mart and Tesco have led the new CEO, Lars Olofsson (a NestlĂ© veteran) to revive the French retailing giant’s "hypermarket" concept that will stress low prices and restore Carrefour’s image for value among shoppers. Merchandizing is getting more emphasis, with bolder graphics and discount signs (ala Wal-Mart) trumpeting low prices over the previous slogan “Quality for All.” While still the world’s #2 retailer, the company is expected to be surpassed by the UK’s Tesco.

Additionally, its past focus on selling almost anything has left it vulnerable during the Great Recession to retailers with more flexibility, especially those who have stressed groceries over hard goods. Specialist chains like Zara (owned by clothing giant Inditex SA) Darty (owned by electronics manufacturer Kesa Electricals PLC) have eaten into Carrefour’s market share in non-foods. Net profits are down sharply, leading to the ouster of Olofsson’s predecessor late last year. With little time in the new post, he hasn’t been able to right the ship yet; April saw Carrefour’s first decline in quarterly sales in the past 6 years.

The company has branches in 33 countries with €86.97bn ($120.36bn) in net sales in 2007, but its problems in the home country (where 44% of its sales occur) are indicative of the issues it faces worldwide. Food discounters like Germany’s Aldi are taking away market share, hence the move to revive the hypermarket strategy, where shoppers can load up on groceries and specials. The company claims over 1MM customers per day in its existing hypermarkets, which will give it a leg up for changing perceptions and jumpstarting sales.

The new strategy has already worked in the UK for the William Morrison Supermarkets PLC chain, and Carrefour is watching the success of US retailer Kroger in tailoring its stores to the tastes of local clientele by mining data from customer loyalty cards. If Bigger is Better, Carrefour isn’t above borrowing the “small footprint” model used successfully by Britain’s Tesco and J Sainsbury PLC, too. The new CEO admits the company has had an inconsistent pricing policy that oscillated from high prices and strong margins to low prices sustained by volume, confusing shoppers who have been hammered by the price-cutting message of Wal-Mart and others for the past few decades. So far, Olofsson’s efforts are starting to show in changes to the product mix: more luxury brands such as gourmet boutique’s Fauchon, exotic ready-to-cook fruits & vegetables, and 40% fewer non-food SKUs (though 100% more HBA & perfume products). Promotional flyers show fewer products per page and stress discounts (“three-for-two” or 50% off for loyalty-card holders). A new ad blitz is stressing “Carrefour Discount.” So far, industry observers think the ideas sound, but point out Carrefour has failed to implement similar measures in the past.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Wednesday, September 16, 2009

Better Homes & Gardens Surveys the Female Consumer


In an online survey of 2,151 readers conducted July 30-August 1, 2008 among its readers, Better Homes & Gardens found:

 The vast majority (95%) of women are “very/somewhat concerned” about the cost of food today.

 As a result of the increase in food prices, 71% of women are stocking up on bargains; 66% are eating out less often; and 63% are comparing food prices at the same store more carefully.

 When selecting a brand of food to buy, 79% of women indicated “value for the money” as an important factor, followed by past experience/familiarity with the brand (62%) and consistent quality (51%).

 Roughly 8 in 10 women (83%) try to save money by preparing meals regularly and say that the cost of food is affecting the meals they cook (77%).

 Approximately 3 out of 4 women are eating at home primarily to cut back on spending (76%) and restaurant expenses (73%).

 6 in 10 women (60%) are still shopping each week at their regular supermarket, followed by superstores/supercenters (20%) and discount supermarkets (10%).

 In deciding where to shop, product choice/selection and physical store attributes (79%) have a great deal of influence. For 68% of women, store services/programs are also important.

 To economize, most women (54%) freeze foods and cook in batches (21%). They are also cutting back on certain foods including baked goods and desserts (52%), convenience foods (48%), wine/alcohol (37%) and gourmet oils (36%).

 In addition, more than half (56%) of all women are buying more store-brand/private label brand foods for their cost/value (94%), improved quality (48%), greater trust in the quality (32%) and wider variety (30%).

 1 out of 3 (33%) women report buying a new food because they have a coupon for it. 28% had a store sample and 25% wanted to experiment/taste.

 Other motivators were that the items were budget-friendly (23%) or recommended by a friend/relative (20%). 64% of women are more concerned about wasting food than they were two years ago.

 On average, women spend $105/week on groceries - $34 more than they did two years ago. As a result, 84% have changed their buying habits, 83% have cut back/limited food purchases, and 70% have switched stores.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Tuesday, September 15, 2009

Why Aren't Consumers Eating Healthier?


A question by Mary Boltz Chapman, Editor-in-Chief of Chain Leader, got me to thinking. Mary asks:

Technomic research shows consumers are choosing less-expensive food over healthy food. Is the industry not doing a good job of marketing that the two are not mutually exclusive?

1.) The failure of the organics movement: many consumers are either confused or suspicious of the high prices of most organic products. Recent surveys show the TOTALLY unregulated "all natural" category resonates more with shoppers than organic. Without boring you with the details, many manufacturers and retailers are hedging their bets and switching from organic to natural, including Hood, the largest organic dairy supplier.

2.) The Great Recession: Consumers have less money to spend, so they're falling back on cheaper alternatives. Most of them are processed foods that are made with too much salt, sugar, fats and other bad-for-you ingredients. That's not a marketing issue: minimally-processed foods are better for you. Some CPG houses like Campbell's have been reformulating their products to include more veggies, less salt and MSG, and lower fat.

3.) I'm going to tell you one thing and do another: Consumers will often tell a survey one thing, then do something different. We all know we SHOULD eat better, but when standing in the supermarket aisle, that 30K calorie frozen cheesy sandwich looks good, and we buy it. Comfort foods that taste really good and which are often bad for us (Mac & Cheese, for example, is loaded with simple carbs, fat, salt and sugar) are usually cheaper than healthy foods. And frankly, we're probably in denial about our health. Don't take my jaded word for it: a new survey from Mintel says 70% of us think we're in good or excellent health, while the Deloitte Center for Health Solutions’ Connected Care estimates 100MM Americans have heart disease, diabetes or hypertension. Weight? Only 25% of those surveyed admitted to being overweight, while the Centers for Disease Control and Prevention puts the percentage at 67%. Those surveyed did concede more exercise would be good for them (70%), but less than 37% actually do so regularly (50% work out 2x a week or less). Nearly two thirds insisted they try to eat healthy foods, but 59% conceded they eat whatever they like "regardless of the calories."

4.) Retailer greed: I know I will annoy some retailers by saying this, but with all the demand last year for organics and "better-for-you" products, prices were high, profit margins were enjoyable, and that's what Capitalism is all about. But the consumer associates "good for you" with $$$$.

What's the solution? Some retailers like Safeway are trying to push healthier products and protecting their margins by stressing Private Label products. It's one area where PL can excel and be more than just "the cheaper alternative."

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Monday, September 14, 2009

Cott Beverages: A Case Study in Private Label


A few months ago Cott Corp. looked to be dead in the water.

It’s own brand of soda was nowhere and Walmart had just dropped them as their exclusive beverage supplier.

Now investors have bid up its stock by 215% in a scary bear market. And in spite of challenges to its international business (especially Mexico), analysts are talking up the price even further. The key to the turnaround has been private label sales. The company (based in Toronto’s grimy industrial suburb of Mississauga) makes bottled water, juices, energy drinks and bottled teas, but the sales to grocery chains led to first quarter profits of Cn$20.8MM, despite revenues dropping 5.8% to Cn$367MM on the strength of the U.S. dollar. Lower commodity costs are helping, along with the usual cost-cutting (shedding jobs and bottling lines reduced costs Cn$22MM), some one-time tax benefits and deferred spending.

The Walmart impact hasn’t been felt yet, likely on the surge in demand for private label products as consumers “trade down” from brands. Walmart claims the phase-out will take 3 years, so Cott may be far from out of the woods. The company is looking to rebuild its relationship with the Bentonville Behemoth, who has recently announced a new PL initiative that may help bring Cott back into the fold. But with private label surging around the globe, Cott may find out it doesn’t need Walmart as much as everyone thought.

A bigger question is whether Coke and Pepsi can revive their sales once the recession ends, or if consumers will stick with the move to private label. Sales of colas and other soft drinks have been flat for years, with both brands pushing their non-soft drink products like water, functional waters, and energy drinks.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Friday, September 11, 2009

Meijer: Part 2



Meijer's strategy in its struggles with Wal-Mart and the changing food business has been to promote its private label brands, and impress shoppers with the quality of its perishables, which experts say equal or even exceed Kroger’s (the darling of the grocery channel). Critics say Meijer has further to go with its non-food products, which compare unfavorably with those from non-grocery retailers like Kohl’s or Target. Indeed Meijer’s perishables are credited with saving the chain when Wal-Mart moved into its Michigan home turf in the 1990s. Wal-Mart had an insurmountable edge in distribution, which Meijer could only counter by slashing expenses. Wal-Mart on the other hand couldn’t deliver perishables through its enormous distribution system that competed with the local company.

Despite lacking the capital or the ability to expand with new stores, the company has actually grown stronger from the competition, at least according to observers. The Wal-Mart business model is driven primarily by its non-foods model, allowing the two stores to compete in the same world. Another reason cited for Meijer’s success has been its relationship with its vendors. While many retailers dictate terms to their suppliers, Meijer gets high marks for working cooperatively with them, ensuring their financial goals and needs are met. The company says this results not only in better performance for its vendors, but in increased resources to suppliers and better product selection and options.

Meijer is controlled and run by a third generation of the founding family members: Hendrik “Hank” Meijer is co-chairman and CEO, while brother Doug Meijer is co-chair; and Mark Meijer serves on the board. Talks about selling the company are just rumors insiders say, with the family showing no signs of giving up control or cashing in their investment. In a striking change from many family-owned empires, Meijer has been run from the past three decades by outsiders in the role of president. The current president is Mark Murray (since 2006) who did not come out of the retail grocery business, but instead was a former budget director for Michigan’s government, state treasurer, VP for finance and administration at Michigan State University, and then president of Grand Valley State University outside Grand Rapids. The Meijer family picked Murray after conversations with people they respected and not because of his business resume. Instead of seeking retail experience, the family wanted someone to help them focus on core values and executing their strategic vision. Speculation around the state has Murray on a short list of candidates with the right stuff for being Michigan’s next governor.

To read Part One, click here

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Thursday, September 10, 2009

Meijer: Part 1

Unless you’re from the Midwest, you might never have heard of Meijer (pronounced “MY-ER”). But in the Rust Belt, the store has thrived while other businesses have gone elsewhere, so much so it’s now considered a “major” player in the grocery retailing channel and a strong competitor against the Beast of Bentonville. Meijer operates 188 stores across a five-state area: 98 in Michigan, 40 in Ohio, 27 in Indiana, 15 in Illinois and 8 in Kentucky, opening around 10 stores each year. The privately-held company does not release data, but sales are estimated at $14bn. While that's barely a rounding error for Wal-Mart, the largest food retailer, Meijer is showing others how to compete with chain discounters. And at a time when many are looking to reduce their footprint and cut back expansion, the company continues to pin its strategy on 200,000-square-foot behemoths that it pioneered with the Thrifty Access format in 1962, almost 25 years before WM did its first Super Center.

The company is celebrating its 75th anniversary this year, and industry analysts say it is well-positioned to ride out the recession, though the large-footprint stores make securing expansion locations tougher, except in rural areas. Price has been the key driver for Meijer’s success, with theirs running 8-10% lower than competitors. Promotions are the other key to driving sales.
One advantage for the Grand Rapids, MI-based firm is that it’s privately-held and doesn’t answer to Wall Street or private equity investors demanding quick results or fat margins. While small stores have a lower break-even point, larger ones generate higher profits due to economies of scale. And since Meijer doesn’t compete in most urban markets, it’s insulated from the problems of finding the right store property.

Currently Meijer is growing most rapidly in the suburbs of Chicago, Cleveland, Detroit, Cincinnati and Louisville. Targeted areas include Wisconsin and Missouri. Staying close to the Great Lakes region has allowed Meijer to build its brand with consumers. Expansion in the prime Chicago market, for example, has been by slashing prices and stressing selection in produce and meats in competition with established chains like Jewel and Dominick's, and hasn’t been shy about going head-to-head in commercials touting Meijer’s as "a better store than the other guys." Wal-Mart has not been a factor in the Chicago food retailing marketplace, so Meijer has the low-price white spaces to itself currently. Given their reliance on large stores, this may change over time, as options closer-in to Chicago will likely prove too expensive. The rapid expansion of the suburban housing market fit nicely with Meijer’s growth plans, but the downturn in the economy may keep more shoppers in the city and out-of-reach.

To read Part Two, click here

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Wednesday, September 9, 2009

BROAD STREET LICENSING GROUP BROKERS DEAL FOR NEW BURGER KING-BRANDED CRISPY MICROWAVEABLE FRENCH FRIES FROM CONAGRA

This just in....

Miami, FL,: Montclair, NJ-based BROAD STREET LICENSING GROUP brokered an exclusive deal between Burger King Corp. and Con Agra Foods Lamb Weston for a retail line of crispy microwaveable Burger King-branded French fries. The line will hit shelves of select retailers including Wal-Mart this fall. King Krinkz, seasoned crinkle-cut fries, will be the first to market in early September, soon followed by King Kolossalz, extra-large fries, and King Wedgez, seasoned potato wedges.

Once out of the microwave and with a quick rip of the top, the box becomes an easily transportable container reminiscent of Burger King Corp.’s signature FRYPOD® container. The perfect size for snacking or sharing, the products offer the convenience of microwave cooking while maintaining the delicious taste and texture of crispy fries.

“Burger King Corp.’s tremendous brand strength and reputation for great-tasting French fries give this new line of King retail fries a head start in the marketplace,” said Sharon Miller, vice president of retail sales for ConAgra Foods Lamb Weston. “Now consumers can enjoy King-fries at home in an easy-to-prepare, microwaveable format that’s perfect for today’s busy families.”

"This licensing deal, brokered by Broad Street Licensing Group, gives Burger King Corp. the ability to take our HAVE IT YOUR WAY® brand promise beyond our restaurants and engage customers in a new way,” said John Schaufelberger, senior vice president, global product marketing and innovation, Burger King Corp. “The innovative and portable design of the packaging makes these fries perfect for an on-the-go snack.”

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Tuesday, September 8, 2009

The REAL Cost of Food



Working in the food business sometimes feels I'm part of the MOD Squad.

As in "Merchants of Death"?

As in smoking, drinking and firearms?

The MOD Squad was satirized in the movie "Thank You For Smoking." It took some laughs from the way that cigarette companies, distillers and the NRA work the Washington lobbyists and Congress to avoid regulation, water-down bills that might hurt business, and the cynicism that has all sides putting money ahead of the public good.

Some critics of the food and restaurant industry are starting to make the connection in the public's mind between cigarettes, obesity and cheap food. Of course, mechanized farming has resulted in a paradox: an unprecedented abundance at cheap prices, as well as an epidemic of obesity and the pollution of the land. This article in Time magazine is a very succinct summary of the conundrum of the modern food channel, as well as an occasionally simplistic look at solutions to the problems it identifies.

The article is quite hard-hitting, even for the post-Bush wimpy mainstream media that always looks to balance every article with contrary views. It starts by showing the reader just how cheap food is, adjusted for inflation:

According to the USDA, Americans spend less than 10% of their incomes on food, down from 18% in 1966. Those savings begin with the remarkable success of one crop: corn. Corn is king on the American farm, with production passing 12 billion bu. annually, up from 4 billion bu. as recently as 1970. When we eat a cheeseburger, a Chicken McNugget, or drink soda, we're eating the corn that grows on vast, monocrop fields in Midwestern states like Iowa.

We eat corn, use corn oil margarine as a substitute for butter, corn oil for cooking, corn syrup to sweeten our prepared beverages (to the point that Snapple and Pepsi recently made a splash by offering limited time versions sweetened with cane sugar). Yes in order to produce that corn (which is also diverted to making cheap gas with ethanol), we use enormous quantities of chemical fertilizer (ironically made from the same imported oil the ethanol is supposed to replace). That means a very large and troubling carbon footprint.

Because it's a monocrop, corn is particularly susceptible to pests. In conventional agriculture, farmers plant crops in rotation and often as barriers to insects so they don't have to use as much pesticide. Marigolds, for example, deter many plant-eating bugs, and a ring of them can drive off some invaders. But not with vast fields on an industrial scale. The traditional farmer accepts that some corn worms will be in his freshly-picked ears; the modern grocery shopper will likely refuse to buy any ear of corn with a bug on it.

Single crop plantings are also more subject to pathogens (anyone of Irish descent understands how catastrophic a blight or other disease can be). And don't think the Potato Famine is as relevant to today as the Black Death in the Middle Ages: the same fungus that wiped out Ireland's monocrop (potatoes) in the late 19th Century is ruining the tomato crop this year. So corn must be treated with a variety of pesticides and fungicides. There is quite a bit of disagreement whether these measures leave dangerous residues.

I stopped buying anything but organic potatoes when I read how most farmers grow a separate crop for their families that isn't treated with chemicals.

The corn crop is changing, too. Large conglomerates like Monsanto are pushing for the adoption of genetically-modified corn (GMO) and wheat that will be pest- and pathogen-resistant. Unfortunately, we don't know how changing the corn genome will affect non-GMO plants. Several European countries are banning or limiting GMO agricultural products. Snack chips made with GMO corn, for example, can't be imported.

The bad news about cheap food is that it not only isn't really cheap, it's not cheap across the board. Corn farmers enjoy subsidies, and ethanol has made corn more expensive (good for farmers, bad for food companies and consumers). Yet subsidies are applied unequally, largely depending on political clout:

A study in the American Journal of Clinical Nutrition found that a dollar could buy 1,200 calories of potato chips or 875 calories of soda but just 250 calories of vegetables or 170 calories of fresh fruit. With the backing of the government, farmers are producing more calories — some 500 more per person per day since the 1970s — but too many are unhealthy calories. Given that, it's no surprise we're so fat; it simply costs too much to be thin.

Food companies don't like to take any responsibility for the obesity epidemic. They point out that no one is holding a gun to your head when you scarf that Big Mac or down those cookies. But poor people and those less-educated don't have the same choices, which is reflected in the fact that obesity is more of a problem with the poor- and not just because they can't afford Pilates.

The solutions advocated by the article (buy local, buy organic) are good in their own way, but don't address the problems of food costs to the consumer in a time of economic struggle. The drop in same-store sales at Whole Foods shows that consumers are less-likely to pay the prices required for organic food when times are tough. And given the struggles of organics, the near future doesn't look like a time when Americans will face up to the real cost of their cheap food.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Monday, September 7, 2009

Labor Day

Today is Labor Day in the United States and there will be no post. Enjoy some food, beverage and friends, and always remember it was the working man and woman who built this country.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Friday, September 4, 2009

Some Marketing Isn't Rocket Science

And I bet you thought advertising should inform consumers about what benefits a product has.

Apparently just pounding them with the name is better than anything else. Recent research shows that when we are presented with two choices, one known and one unknown, we will pick the known one-- even if we know nothing about it. For companies trying to revive dead or dormant brands, it means they aren’t always swimming upstream. Focus groups pick Ovaltine because they’ve heard of it and figure it must be good. There is even a fancy two-dollar term for this: the recognition heuristic.

A new book entitled Gut Feelings: The Intelligence of the Unconscious follows studies that had people tasting the same, identical peanut butter from three jars and overwhelmingly (75%) choosing the one with the brand name. Children given French fries in McDonald’s packaging insisted those fries (identical to the others) tasted better. The alarming conclusion from all this is that, as a species, we’re not very bright, since even subjects in a marketing experiment who were asked to choose between different airlines invariably picked the one they knew best, even when presented with figures about that airline’s crashes and safety shortcomings.

Apparently we’re hard-wired to choose what we know, since brain scans show choice is a two-step process: the first component of a decision is the subconscious decision whether to rely on the recognition principle, or not. Maybe we buy based on what advertisers are telling us to? You will now do as I say….

(Due to the Labor Day Holiday, there will be no post on Monday, September 7th; regular posts will resume Tuesday, September 8th at 8 AM GMT)

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Thursday, September 3, 2009

RIP Sheila Lukins

In a sad note, Sheila Lukins, co-author of The Silver Palate, has passed away. A hugely-influential figure whose book changed American ideas about food, food preparation and our notion of what to expect from restaurants and recipes at home, died from brain cancer. She was 66.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Social Networking 101 & 102


The lack of clear understanding how to make use of social media sites such as Facebook and Twitter has not stopped the larger CPG (consumer packaged goods) houses from embracing the breakout media phenomenon.

With some stats showing such sites now surpassing email as the preferred form of communication between younger consumers, both Kraft and Proctor & Gamble are putting extensive resources into adapting them to their marketing needs. Kraft launched an iPhone application that charged consumers 99 cents for new recipes on the go, and its Twitter page for the Oscar Mayer Winermobile alerting fans to the vehicle’s schedule now has 800 members. The Twitter handle for its DiGiorno pizza franchise has at last count on 28 members, so social networking isn’t a slam-dunk for brands.

Indeed skeptics insist consumers have little or no interest in being friends with toothpaste, and scoff at Kraft’s assigning brand-specific public relations teams when they need to move millions of units to be profitable. Money isn’t the only factor, though, and some marketers like Unilever and Budweiser have stumbled even after budgeting large sums for their social networking programs. Bud linked up with the NCAA (National Collegiate Athletic Association) to promote the latter’s tournaments on the beer’s Facebook page, yet attracted less than 1,800 fans, barely enough to fill a small high school gym.

In contrast, the Nutella site has over 3MM adherents. Like other top three sites such as Coke and Pringles, Nutella let fans build its Facebook page, dispelling the impression this is something being shoved down consumers’ throats by greedy marketers. P&G built its Pringles site by consolidating all the pre-existing fan sites into one. Yet much like the question about profitability during the dot com bubble, executives get all fuzzy and vague when asked whether social networking can "scale" to the needs of large marketers, saying such discussions are "premature."

I’ll take that to mean they’re still clueless.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Wednesday, September 2, 2009

Today's Shopper & Changing Demographics


For the past two decades, the composition of the “principal shopper” in the United States has shifted dramatically from a predominantly-female demographic. The male principal shopper has become more common, due partly to the many variations in the family structure, including more single-parent homes. Additionally, Americans are postponing marriage according to the U.S. Census Bureau: in 2008, the median age at first marriage was 27.4 for men and 25.6 for women vs. 25.9 for men and 23.6 for women for the 1988 census. Finally, with Americans living longer and large numbers of Baby Boomers retiring, men are shopping more than their fathers or grandfathers. Almost 1/3 of men are now the principal shopper, posing challenges for grocery retailers, manufacturers and brands.

According to one observer, “men buy, women shop: the sexes have different priorities when walking down the aisles.” Data from several analyses by the A.C. Nielsen Co. show females dominating all shopping channels except convenience/gas stores, but their share of shopping trips has fallen over the past four years especially. Channels where men have shown important increases in influence include convenience/gas outlets, warehouse clubs and grocery stores.

In terms of dollar amount, women continue to dominate, though the difference is not as large as one might expect, and is largely explained by the fact that female shoppers plan their trips while men traditionally are impulse buyers. But men have increased their average dollar basket size across all channels, especially in grocery where they have increased spending by 56% over the past 5 years. In the grocery channel, men’s share of dollars increased from 30% to 38%—a 27% increase versus women’s decline of 11%.

In a study commissioned by ESPN, there has been an upward trend in both the amount of dollars spent by men and their shopping frequency, with males as the primary or primary/secondary shopper rising by 4% and 3%. Total dollars spent has increased by 8% and 7% respectively.

Not surprisingly, a large portion of the purchases by men are in the usual, predictable categories of grooming care and alcoholic beverages: hair coloring (86%); depilatories (84%); gin (83%); scotch (81%); and pre-shave cosmetics (80%). But some surprising results showed:

• Men’s External Breathing Aids (61%)
• Canned Seafood (61%)
• Refrigerated Juices, Drinks (61%)
• Prepared Food-Ready-to Serve Stew (59%)
• Herbal Package Tea (57%)
• Prepared Food-Ready-to Serve Lasagna (55%)
• Health Bars & Sticks (54%)
• Non-Sliced Refrigerated Lunch Meat (53%)
• Refrigerated Yogurt and Shakes (52%)
• Dishwasher Rinsing Aids (52%)

Traditional media ad buys fall into three categories:

1. Programming aimed primarily at females (network soap operas and female-targeted cable networks like Lifetime and Oxygen)

2. Programming aimed at both genders evenly (network prime time, broad-based cable networks like USA Network)

3. Programming that skews males (primarily sports networks)

The new shopper will mean marketers must reassess their ad buys and strategies. A study of media scheduling for a leading cold remedy and how that schedule delivered both male and female buyers found that men made up 48% of the brand’s users and 48% of sales occurred during shopping trips where the male head of the house was the primary/secondary shopper. The brand’s ad buy schedule included a wide mix of broadcast and cable networks, but focused primarily on women. Sports networks accounted for only 2% where only 38% of the brand target impressions fell against men, far below their share of the spend. Despite 20 years of trying to figure out the male shopper, marketers clearly have a ways to go.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Tuesday, September 1, 2009

Is Walmart Coke?



According to this article, Walmart thinks its Great Value brand is on a par with Coke.

Forgive me while I pick myself up off the floor laughing.

Andrea Thomas, senior vice president of private label brands for the Bentonville Behemoth, says:

The Great Value brand is the largest consumer packaged goods brand in the United States, on par or bigger than national mega brands such as Coca-Cola, Tide, Cheerios and Ocean Spray, which each tally more than $200MM in annual sales. We are right there with them, the Wal-Mart private brand is every bit as big, sometimes even bigger.

Thomas is touting the re-launch of Walmart's Private Label business, which frankly has fared poorly in comparison to rivals Safeway, Kroger or (overseas) Tesco. It's one of the few areas in food where the retail giant has stumbled. And some of her hyperbole is part of the erosion of the word "brand" which used to mean something, but now is applied to everything:

The Britney Spears "brand."

But the real problem is that Walmart is equating size with brand status. Yes, consumers buy a lot of PL products, and the new packaging likely will improve sales. Yet it's unclear whether over the long haul consumers are going to remain loyal to private label products to the same degree they are to national brands, and aren't just buying these products based on price. Stats show, for example, that shoppers won't switch when it REALLY matters, such as health & beauty products for themselves or food for their kids. The PL people, of course, insist we're in the midst of a "paradigm shift" in retailing (let's hope for their sakes it's not like the shift to driving slower and buying gas-sipping cars that was predicted when prices at the pump reached $4 a gallon last Summer). They back up their claims with reams of stats and studies (I know, because it's part of my job to wade through the sticky goo). Then, if you listen to the apologists for the organic movement, everything is rosy and organic products are continuing to expand and succeed.

There's no question shoppers like saving money, and they're buying PL products in record numbers. But discussing "private label" is like talking about "public opinion" or other convenient fictions. There are many house brands, and they're not all created equal. What's more, their supporters fail to differentiate between several factors:

1.) Many consumers purchase PL products simply to save money, and often return to their favorite national brands when times get better. So comparing PL products ACROSS THE BOARD doesn't give us a true picture of the strength or weakness of house brands. It's comparing apples to oranges.

2.) House brands vary enormously in quality, not only between retailers, but across product categories. Partly this is a reflection of the supplier process, where retailers commission co-packers to make products for them (almost no retailer that I know of owns their own production facilities, unlike most of the large CPG houses). So in that respect, the Walmart "brand" isn't a brand at all, but an in-store selling cooperative.

3.) National brand push-back: brands are finally waking up to the fact that PL is taking a greater and greater share of their business. Some brands are sitting back, waiting for the Recession to fade and the old rules to return. If brand managers think shoppers will mindlessly go back to their ranks after any recovery, they're smoking crack. Without increasing value and innovation, it's hopelessly naive to think that people will give up those PL prices. Unless, of course, the retailers start raising THEIR prices, which today's NY TIMES says is exactly what's happening, LOL!

The solution for brands is to get creative and innovative. More on that in a future posting.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)