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Bitter Fight Over Sugar

Despite the scoffing of most experts, several large CPG companies have warned the Obama administration they will raise prices drastically and lay off workers if the government doesn’t relax restrictions on tariff-free imports of sugar.

Kraft Foods Inc., General Mills Inc., Hershey Co., Mars Inc. and Krispy Kreme insist their profits are in jeopardy— oops, I meant to say they see shortages unless regulations are relaxed that aid the domestic sugar industry. Sugar beet farmers in the Northern Plains and cane-sugar farmers in the South have used lobbying and political muscle to prop up U.S. prices to more than 2x the world level.

Adding to the problem: sugar prices, both in the U.S. and globally, have soared in the past year and show no signs of declining.

Price increases have the most direct impact on candy and other sweets, but sugar is ubiquitous in the processed foods industry. Gonnella Frozen Foods, for example, has raised prices for its rolls, hamburgers and hot dogs because of sugar used in the dough. Sugar makes up 1%, 6% and 8%, respectively of costs for ConAgra Foods Inc., Kraft, and Hershey.

Major sugar exporters like Brazil and India are barred from selling their sugar in the U.S. without high import tariffs. One big factor in the rise in prices is the diversion by Brazil (the world’s largest sugar producer) of large amounts of its crop to making ethanol, much as ethanol production has driven corn prices up here. Getting congressional buy-in for raising the amount of tariff-free sugar (50% demanded by the food industry) will run square into Rep. Collin Peterson (Dem., Minnesota), chairman of the House Agriculture Committee, and whose district is a major beet-sugar producer. The American Sugar Alliance, the trade group for cane and sugar-beet farmers, is “absolutely opposed” to relaxing sugar-import quotas, since it would lower prices paid to growers here.

The association claims each one-cent drop in sugar prices costs U.S. farmers $160MM in revenue. The lobbying group also points out allowing more foreign sugar into the U.S. will likely not show up as price reductions for consumers. So far, the large soda manufacturers Coke and Pepsi (who mostly use high-fructose corn syrup) have shied away from this fight.

Most recently, the American Bakers Association has come out in favor of lifting the quota numbers. The trade association cited the historic high prices of sugar reached this past February as evidence of how the quotas hurt consumers. Recent domestic raw sugar futures stood at 31.1 cents/lb, down 25% from the peak of 42 cents this past Winter, but still more than 50% above the 2000-07 average of just under 21 cents. The current Tariff Rate Quota (TRQ) is 1,139,195 tonnes (1,256,000 short tons).

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Fresh & Easy Going Healthier

Supermarket News reports that Fresh & Easy will attempt to correct their retailing missteps with a line of healthier prepared foods.

Launched under the EatWell umbrella, it's a line of 17 ready-to-eat prepared meals and sides, including salads, soups, noodles, and various entrees. The price range is pegged to $3.99. All of the items are supposed to contain fewer than 500 calories, and less than 25% of the U.S.D.A. recommended daily allowance for fat and sodium (based on a 2,000 calorie diet). Such numbers have proven elusive for consumers with regular testing of supermarket products showing a wide variation in actual calories, fat, sodium and other markers.

Fresh & Easy has struggled since opening its smaller footprint stores in the CA, AZ and Nevada markets. Initially the company had too few SKUs and the wrong product mix, as if they had never really studied the American consumer (Fresh & Easy is owned by UK giant Tesco). Then the lousy economy hit those areas especially hard.

But given the goal of making Fresh & Easy a rival for convenience stores (who are pushing for more foods, including healthy options), this new line holds out some hope of turning the chain's fortunes around. The only question is: will 7-Eleven sit still long enough for Fresh & Easy to figure this all out?

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Online Ads Apparently DO Work

After years of ad companies and their clients wondering whether online ads work, a new study by comScore and marketing consultancy dunnhumbyUSA over a three month period shows they do.

A large sampling of 200K panelists selected from supermarket loyalty programs (including measured retail-buying behavior) was tracked through point-of-sale UPC scanners at checkout. Those exposed to online CPG advertising were 9% more likely to buy than the control group. Ad campaigns included both static banners and rich media ads for a range of products including tea, pizza, snack bars, deodorant and toothpaste.

In addition, the study found that 80% of the campaigns resulted in a statistically significant sales increases for the advertised brand. The results were on a par with TV-based ads. CPG companies have lagged behind sectors like financial services and automotive in utilizing online advertising, accounting for only 6% ($1.5bn) of the $23.4bn spent on online buys in 2008 (up from 4%, or $925MM in 2007).

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

More Trouble at Brinker

One begins to wonder how much longer Brinker International can survive.

Norman Brinker, the founder, was a god in the restaurant world. He's reputed to have invented the salad bar, but he's best known for helming a variety of chains when he was in charge of Pillsbury's restaurant division in the 70s and 80s, including Burger King, Bennigan's and Steak & Ale. When he passed away last June, the era of the entrepreneurial restaurant magnate seemed to come to an end.

Brinker built his empire from Chili's, a small burger joint he purchased in the 80s, adding other brands along they way, including On the Border Mexican Grill and Cantina, Maggiano's Little Italy, and Romano's Macaroni Grill. They were once the second largest casual dining chain in the world (based on locations) behind Darden Restaurants. With more than 1,900 restaurant locations in 25 countries, they were a force in the industry.

After a serious polo injury in 1993, Norman Brinker became more of a figurehead than a functioning executive, and the chain evolved in other directions. The trend has been unfortunate in many respects. The first casualty for Brinker was the loss of Romano's Macaroni Grill, sold to Golden Gate Capital in 2008. Now comes word that the Mexican concept chain On the Border is going to be sold to Golden Gate as well. Like a homeowner behind on his mortgage payments, the company has been selling off its assets to keep afloat.

But do they look at food brand licensing? You can probably guess the answer.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

World Food News & Trends

• The French organic market is the second-largest in Europe after the UK and stands at $2.3bn. Chief US exports to that market include dried fruits, almonds, aromatic plants and grapefruits, with organic baby food, food components and essential oils offering strong growth prospects. More organic outlets in France will quicken overall sales according to a report (a full report was attached to the subscription version of this entry).

• The British government is wrangling over whether their dairy industry is or is not working towards greater sustainability, especially regarding the usage of recycled high-density polyethylene (rHDPE) content (an industry white paper has targeted 50% as the goal by 2020). Depending on the source, dairy manufacturers are doing well (meeting the target of 10% recycled rHDPE by 2010) or poorly.

• Robert Watson, 59, of White Plains, N.Y., pleaded guilty in January 2009 to defrauding Kraft Foods, his former company, by accepting bribes Randall Rahal, a sales broker for SK Foods of Lemoore, CA, to purchase processed tomatoes. While that might sound puny, Kraft apparently bought over 230MM pounds of tomatoes and other products at inflated prices. Prosecutors have characterized SK Foods as a “racketeering enterprise” (no charges have been filed as yet). Rahal is awaiting sentencing, and will face justice with former purchasing managers from Frito-Lay and B&G Foods, along with two former SK Foods employees who pleaded guilty to other charges.

• In other police blotter news, British conman Kenneth Goldsmith has been sentenced to 3½ years in jail for conning investors with a scheme that claimed Goldsmith was friends of celeb chef Jamie Oliver. The money (£120K) was used for lavish holidays, Aston Martins and “helicopter rides.”

• Stating the stores had grown “too old,” Publix has announced it will be closing 5 Florida outlets. Last year, the chain purchased 17 of the old Albertsons stores in Florida to convert them to Publix.

• The Golden Arches announced McDonald’s Corporation’s global comparable sales rose 4.3% in July 2009, while U.S. sales were up 2.6%.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Marketing Trends

• Supermarket chain Meijer has extended its marketing partnership with Kraft Foods in a campaign entitled “Dining in Makes $ense” first introduced in Winter 2008 offering discounts on future Meijer shopping trips with purchase of multiple Kraft products. Kraft has been aggressively marketing its products with retailer tie-ins. A recent inducement is a $2-off with purchase of three boxes of Kraft Deluxe Macaroni & Cheese or Velveeta Shells & Cheese. Kraft promotes the discount with floor clings showing meals made from Kraft items, along with sending consumers to their website for “deep-dish pizza casserole” and other recipes too yummy to contemplate. The program is also being flogged on the retailer’s website.

• McNeil Nutritionals has launched a Benecol smoothie in the UK and Ireland hoping to reach a younger market with a product offering plant-derived cholesterol-lowering benefits along with a fruit flavor. Retailing for €4/bottle, it will be slightly higher than the market leader innocent (aimed at the 45-55 year-old consumer).

• The #1 marketing tag for confections last year was “upscale” with new products bearing the tag rising for 9% in 2005 to 13.8%. It is no surprise chocolate is the largest confectionery category with a 50.9% share of the U.S. market ($18.4bn). Cereal bars are the fastest growing category in Europe with growth forecast at 31.7% to 2012. Overall in Europe, the most frequent claims made on new products were those claiming “no additives/preservatives,” “organic,” “vegetarian” and “microwaveable.”

• Not only is the grocery business regional, but costs vary depending on where you are in the U.S. Grocery store prices in Chicago are cheapest overall in the store-brand, national brand and organic food categories ($115.73 per cart ), though with the highest organic prices ($142.95 per cart). Overall Los Angeles was the most-expensive ($124.43 per cart), followed by New York City ($122.66). LA had the least-expensive organic costs ($137.52 per cart).

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Wal-Mart says "Si!"

With Hispanics the largest-growing segment in the US population, it’s no wonder that grocery retailers continue to chase the Latin consumer.

The latest is Wal-Mart: its Más Club targets recent immigrants who until now have found their familiar foods in local bodegas. A Sam's Club spinoff, the concept is part of the company’s efforts to secure the Hispanic shopper’s food dollars. With Sam’s Club’s share of the parent company’s $401bn sales having slipped from 13.3% in 2005 to 11.7%, the goal is to bring the division more in-line with the domestic market.

Internationally, Sam’s revenue has increased from 18.7% to 24.6% during the same period. Given the amount of small businesses who shop at Sam’s Club, the Bentonville Behemoth has also launched Supermercado de Walmart. While local markets offer personal service, Wal-Mart execs believe they can compete on price, but are moving beyond the Sam’s model of frozens and pre-packaged foods to include a tortilla bakery, 20 varieties of fresh-made Mexican pastries, and a butcher shop selling custom cuts and ethnic delicacies like cow tongue.

Yet despite the firm’s muscle, pitching to Hispanics means entering a crowded marketplace with some established competition not limited to the corner bodega . Additionally the road to Hispanic marketing heaven has been littered with some glitzy failures, including Safeway’s Tianguis. Other retailers have chosen to slant existing stores to Hispanic tastes, rather than open stand-alone stores aimed at the Latin shopper, including both Winn-Dixie and Publix.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

More Problems with Organics

Organic food sales will slip 1.1% to $5.07bn according to a forecast from Chicago-based research firm Mintel.

No, that's not an "Arpril Fool's Day" joke.

Fuel prices especially have cut into profits on organic soybeans, whose price has jumped to $28/bushel; conventional soybeans sell for $12 per bushel according to the U.S.D.A. Dean Foods calls the “natural” designation “a large, growing industry.” Critics say the totally-unregulated (and meaningless) “natural” category (including empty buzz words like “eco-friendly,” “fair trade” and “sustainable”) have gutted the organic category.

Unlike the strict rules for organic certification (and their attendant cost), the “all natural” rubric has no requirement for testing, evaluation or regulation. A recent survey of consumers found that an overwhelming majority believed “natural” is better than “organic.” WhiteWave (a Dean brand), for example, claims it works with Conservation International to ensure its soybeans are grown without genetic engineering, and are sourced in a “sustainable, socially responsible and ethical manner.” The Food & Drug Administration has expressed its reservations to the industry about using the ambiguous term “natural,” but no regulations have discouraged companies from using the term despite its ambiguity.

Meanwhile, Private Label organic products have grown from 13.6% of the total organic products sold in 2007 to 22.7% in 2008. Part of the growth can be seen in Safeway’s effort to peddle its organic products to other retailers, and SUPERVALU has extended its Wild Harvest organic brand to from 150 to over 300 items. Overall, private-label organic food sales increased 34% to $1.1bn; in comparison, only three years earlier (2005), organic private-label sales were only $166MM. The meteoric growth of organic foods has slowed during the recession, with shoppers trading down to conventional products in the face of 100%+ price differences. In years passed, the organic category saw 20% annual increases, while the previous 52 weeks have seen this taper off to 4.6% ($18.3bn).

Stores are retaining organic customers with private label products that have slashed prices from boutique and big brands alike. Deflation, however, is a real worry with organics, however, with a ½ gallon of reduced fat 2% organic milk retailing for $3.78(vs. $2.96 for a gallon of conventional milk). As a result, organic farmers are scaling back expansion plans. And Whole Foods Market Inc., has reported consecutive quarters of declining same-store sales. Its $8bn in annual sales makes up over 1/3 of the organic industry.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Watch Out for-- Pallets??

While not normally a topic that gets the blood racing, a real fight has broken out between the wood and plastic pallet industries on which method of shipping food is safer.

In a nutshell, a plastic pallet manufacturer is asking the US Food and Drug Administration (FDA) to launch a probe into allegations wood pallets pose a risk to the food supply. The National Wooden Pallet and Container Association (NWPCA) claims to welcome the probe, saying it has studies done in Europe that exonerate wooden pallets from such charges. Over 1bn wood pallets are currently in use in the U.S. Among charges against the wooden variety are that:

1.) they allow the breeding and spread of diseases such as Listeria, E. coli and salmonella, and
2.) formaldehyde (used to prevent pest infestations like the tree-killing Asian longhorn beetle) is a known carcinogen that could leak onto any food coming in contact with the wood, or
3.) that said formaldehyde might be released in gaseous form during storage in areas where food is also present.

NWPCA has countered saying plastic pallets are composed of a honeycomb-like structure that can act as a breeding ground for diseases, and that the deca-bromine chemical fire retardant used in plastic pallets should be studied. Several U.S. states have had passed laws banning deca in household products as a potential health hazard. Industry analysts say the plastic pallet company is caught between its dependence on deca-bromine and its risk factors with consumers.

Aren't you glad you're a regular reader?

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Dean Foods Under Attack (Again)

Regular readers of our subscription newsletter know that organics producer Dean Foods has been under attack for profiteering in the milk sector.

It has now earned the wrath of The Organic Consumers Association which is calling for a boycott on Dean and its Horizon, Silk and WhiteWave-Morningstar brands following the company’s decision to convert most of its organic soy bean operations to conventional. Dean insists it’s a straightforward business decision instigated by consumers choosing “natural” over “organic,” but The Cornucopia Institute, an organic advocate who claims to seek “economic justice for the family-scale farming community,” calls the move “declaring war on the organic industry.”

Dean has already announced “natural” Horizon milk. While the organic lobby insists consumers are still demanding their products, the plain fact is shoppers are trading down to conventional, putting pressure on companies like Dean with large investments in organic production facilities.



This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

It's Not What You Make, It's What You Can Sell

Restaurant execs often make a classic mistake when contemplating leveraging their brand to retail.

They assume the need to find a company who can make Product X (fill in the name of your favorite restaurant menu item or items).

The reality is that many food marketers don't make the products they sell. They contract with a firm who already has the plant equipment, experience and ability to make the product for them. It's called "co-packing."

Some of these firms have zero experience or ability selling the product. That's because most retailers have pre-existing sales networks they rely on for bringing products onto their shelves. Not to mention the cost of getting conventional retailers to carry a new product. They expert bribes-- er, slotting fees-- to carry that product.

So what's a poor restaurant executive to do?

Market-research firm Hartman Group has released a study claiming it’s service that sells, not products or brands. The use Apple as their prime example, while singling out Cincinnati-based Procter & Gamble for buying up chains in the car wash and men's grooming-products categories. Other companies that “get it” (in their opinion) include Beecher’s Handmade cheese, where consumers can see their fromage being made right before their eyes— and presumably will remember the brand when they see it at retail.

The problem with Hartman’s paradigm is that Apple often seems to be the exception that proves the rule. Its quirky products defy the logic of the electronics business, even though they are often inferior in quality and features to its competition (anyone who’s had their iPod battery die on them knows what I mean). And while 16 locations for the Mr. Clean Car Wash might sound like a lot, it’s nothing in comparison to P&G’s core business. Numerous non-retailing companies, including Disney and NASCAR, have been lured into the “company store” morass. Most of them quietly shutter the experiments long after the hoopla has died down.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Taking Social Media to the Max?

Burger King is known for controversial marketing. They don't mind getting "in your face."

When told by a reporter "the King is creepy," former BK CMO Russ Klein replied, "I'll take creepy."

After all, bad pub is better than no pub at all.

The BK formula is to be "edgy," with the brand pitched as the "cool uncle" (the one who presumably tells you where to download the best porn and how to fool your parents when you're high?). So their ad agency, Crispin-Porter, is allowed to do things that make even some BK executives (and franchisees) uncomfortable. The idea is that it attracts the "super fan" who likes edgy and even creepy.

So now comes a campaign CP developed in Brazil that allows customers to have a wrapper with their likeness on it.

OK.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Food Retailing in the Next Decade

Supermarket News has published a long, fascinating article about where the retail industry might go in the next decade.

Predicting the future isn't one of the smarter, safer things you can do. Events have a nasty way of turning out very differently than we planned. So let's look at some of the predictions and see where there might be some meat to all this:

1.) Digital Marketing: Just like its kin, Social Networking, digital marketing is now the hot button topic. I suspect that's partly because we don't really understand it! But Social Networking has proved to be a bust in many cases (especially Twitter). Downloading coupons to your loyalty card, sending coupons to cell phones, or even sending text messages about price reductions to shoppers passing a product they've purchased in the past all sound like science fiction, and you know how sexy Sci-Fi can be. It's easy to plan trips to other worlds because we don't have to pay for or actually take the trips. Since few of us understand the technology of digital marketing, we either embrace it blindly or shut up for fear of being classed as a troglodyte.

2.) More Information: There's some thought the push by consumers and the government for more nutritional and sustainability information will dovetail nicely with digital marketing, but again, this is more faith than either science or even "boots on the groud" marketing. Consumers appear to want more information, but delivering it remains the challenge, with information overload a likely outcome.

3.) Niche Stores & Small Footprint Retailers: Oh, yeah, for sure. The idea is that smaller is better for shoppers, that the age of the "crash buy" when mom took home a semi's worth of groceries is over. Then why have all the "small footprint" stores like Tesco's Fresh & Easy, Giant Eagle's Express, Safeway's The Market and Jewel's Urban Fresh all performed middling at best? The problem with the small retail footprint is it limits choices, and that clashes with the biggest development coming out of the retailing channel: Price and the Recession. Consumers want choice, not necessarily 1,000 SKUs of peanut butter, but choice on price, size and mostly, convenience. It's no wonder the most-successful retailer of the past decade has been Walmart. Don't expect that to change anytime soon. It is true that America is running out of space for unlimited store and mall expansion, so optimizing the existing store locations will be a major focus of retail chains. But they will also face continuing competition from club stores, convenience stores, dollar stores and other non-tradtional retailers like Walgreens, who have shifted over to selling more foods, including an expanded line of fresh & frozen products.

4.) The World is Coming: Several of those interviewed in the article think more and more world retailers like France's Carrefour or Germany's Metro-AG will join Tesco here. Don't bet on it. Tesco has taken a bath on its Fresh & Easy stores, combining bad luck with poor management decisions. They opened the majority of their locations in California and Arizona, two of the states hit hardest by the Recession, and limited choices to a small number of SKUs, guessing Americans wanted to eat like Britons by taking home expensive prepared foods. Guess again! A trend that is more likely would be for the larger foreign chains who have a favorable exchange rate helping them to acquire some American firms (the Dutch company Royal Ahold, for example, owns Stop & Shop, Giant, Martin's and Peapod).

5.) Value: Everyone seems to think the Frugal Shopper is here to stay, even once the Recession is over later this year. So they're looking for cash & carry outfits like Aldi, Save-A-Lot and PriceRite to excell. But Americans are notoriously fickle about their buying habits, and I'm unconvinced that indulgence won't come back once times get better. We all know we should eat better, yet how many of us keep our New Year's resolutions?

6.) The Rise of the Ethnic: Here I think the article is dead-on. Americans are more and more interested in ethnic foods, and with the growing population of Hispanics and Asians especially, expect to see more grocers catering to these groups.

7.) Private Label: One of the experts profiled in the article predicts store brands will top 35% of dollar sales, soaring to perhaps 50% of unit sales (two times the current rates). He also says "retailers will become leaders in innovation rather than fast followers." Yeah? Well, one problem is that private label products continue to be co-packed (manufactured) by companies not owned or controlled by the stores. In many cases, the national brands are making the private label versions for stores to soak up excess production capacity. The notion that grocery retailers will lead in product innovation is, I think, mostly wishful thinking. The retailers know retailing, including managing inventory and cash receivables, not developing products.

The article is filled with other observations about the details of the grocery business and its micro-concerns, so I recommend it highly (though disagree with many of its conclusions).

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

In Your Face Marketing

OK, this is certainly "in your face" marketing.

There is always that fine line between "bad press is better than no press" and "bad taste is just that-- bad."

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Why Marketing Foods to Children is Wrong

According to a study in Health Affairs, U.S. children snack almost three times a day and get about 27% of their daily calories from snacks.

Not surprisingly, desserts and sweetened drinks are the most-popular between meals snacks.

Surprisingly, though, 98% of children reported snacking in the last survey about it in 2006, compared with only 74% in 1977. The long-term implications for eating, obesity and health in general from this information should be apparent even to the most closed-minded business apologist.

Part of the problem is the way the food industry has gotten around its own promises to limit marketing unhealthy foods to kids. But the government may have no choice except to look into mandatory restrictions on marketing to kids similar to the ones in the U.K. following the publication of a Yale University study about the advertising of unhealthy foods to children. Researchers found that cross-promotions targeting kids increased 78% from 2006-2008.

Yet during this time, the Council of Better Business Bureaus (CBBB) had promised an effort by the food industry at self-regulation would decrease advertising of unhealthy foods. Food marketers, both CPG houses and restaurants, formed the high-sounding Children’s Food and Beverage Advertising Initiative promising to limit advertising and marketing of unhealthy foods.

Yet the Yale researchers assessed nearly 400 products marketed to kids, and found only 18% met accepted nutrition standards as based on "Nutrition Standards for Foods in Schools." The study found the use of third-party licensed characters and other marketing cross-promotions has soared, including tie-ins with TV shows and movies, athletes, sports teams & events, theme parks, toys and games, and charities. Worse, 65% of the offending products were from members of the Children’s Food and Beverage Advertising Initiative.

I feel like Claude Rains in "Casablanca" who announces while standing in his favorite nightclub casino how he's shocked to find gambling going in in Casablanca (while picking up his winnings from the craps table).

The study’s authors fairly beg for government regulations similar to those in the UK, where the Office of Communications (Ofcom) has banned commercials to children under 16 that tout high fat, salt and sugar (HFSS) foods and drinks, broadcast at any time of day or night on any network. As an incentive for manufacturers to reformulate their products, foods that fall below the "bad" thresholds set by the Food Standards Agency (FSA) can be advertised without restriction.

Despite the fanatical belief of capitalists that free markets will regulate themselves, it's clear that CPG houses and fast food restaurants simply can't give up the teat of selling to kids. I have no "appetite" for government regulations limiting what adults or children CAN eat. But I think any effort to combat the negative, harmful, unhealthful messages being spoon-fed children by the food industry is simply an unfair fight.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

The Food Chain is Broken

It's time someone stood up to the food industry.

Everyone knows the system for safeguarding our food supply is broken. But the food manufacturers, farmers, processors and retailers seem to lack any vision for change or are actively opposing reform.

The beef we eat is tainted with e-coli O157:H7.

What's worse, the beef processing industry knows how to rig the game. In 2001, Beef Products, Inc., a leading supplier to fast food chains and school lunch programs, got an exemption from USDA requirements to test beef by injecting it with ammonia, a process that however unappetizing, supposedly kills pathogens.

Only the process doesn't work. And Beef Products, Inc. apparently cut the ammonia used, probably to save money.

The chicken we eat is bathed in fecal matter that spreads pathogens from the gut of sick birds to the meat of healthy ones.

The fish we eat raised in farms breed parasites that spread to the wild population.

The vegetables we eat are contaminated with pesticides, in danger of being compromised by GM (genetically modified) crops, and are themselves contaminated with pathogens, either at the source or during processing.

Even the bees that we count on to pollinate our crops are dying by the billions.

But no one has the nerve to say out loud what we all know: that without government intervention, our food chain is just a time bomb waiting to go off. Salmonella recalls are now routine (the latest involves flavor additives that run the gamut of the processed food sector from Herrs potato chips, Pringles potato chips, and Quaker snack mix).

People are already dying from tainted food. How many have to die before we stand up and demand clean, healthy, safe food?

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Fast Food Nation

Everyone knows intuitively that fast food can be harmful.

But we can't agree usually on what constitutes fast food, and what to do about it.

Government action is probably coming in Europe, where regulation is more pervasive (and accepted) than in the U.S.

But it may come to that. The evidence is certainly mounting.

This article shows how fast food restaurant distribution and obesity are connected, as well as the consumption of no-nos like sweetended sodas.

Nowhere in the equation is there any discussion of personal responsability. If I'm fat, it's because I'm "big-boned" or "the fast food restaurants made me do it." I recently lost 25 pounds on the "push away diet." What is the "push away" diet all about?

Pushing away from the table.

The article shows as well that those parts of the country that eat more healthy things and exercise more are less-obese.

Duh.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Food Allergies

Despite concerns about food allergies, health professionals are worried foods are being targeted for ailments they did not cause, and frequently blamed for crimes they did not commit.

One-quarter to one-third of Americans believe they or their children have a food allergy, though diagnosed rates are one-fifth that total. Studies show 6%-8% of children under 3 are allergic to at least one food, but that once they grow up, that number falls to 3%-4%. Approximately 12MM people in the U.S. have such allergies, with the U.K. the leader in Europe.

The usual suspects— milk, eggs, peanuts, wheat, soy, fish, shellfish and tree nuts— make up 90% of food allergies. The most-common non-food allergies are from pollen, penicillin, and bee stings, but whether food or non-food, the reaction is the same because of the antibody IgE (Immunoglobulin E) which is supposed to fight foreign substances entering the body. IgE causes histamines to be released, which (along with other chemicals intended to protect us) can cause symptoms ranging from itchy eyes and mouth all the way to hives, wheezing, a swollen tongue, rashes, nausea and diarrhea. In the worst instances, anaphylaxis sets in, shutting off the airway and leading to a calamitous drop in blood pressure.

Even with physicians questioning the extent of real food allergies, the reactions blamed on them have been increasing. Informal estimates show peanut allergies have doubled in the last decade, and celiac disease (an allergy to wheat gluten) is now 4x more prevalent than 50 years ago. Fortunately, a blood test and an intestinal biopsy can settle the matter. One problem for diagnosing food allergies is the tests are inaccurate. The best test is also the most-dangerous: called a “food challenge,” it has the patient ingest controlled amounts of the suspected offending food in greater and greater amounts.

The fall-back method is blood testing, often leading to misdiagnosis: one recent study showed up to 90% of the suspected allergies in a group of 125 4 year-olds were negative when food challenges and not blood tests were used. An older 1987 study following 500 kids up to their 3rd birthday found only 8% had real allergies, despite 28% of parents thinking their kids did. Some who think they have an allergy may simply be sensitive to certain foods. Lactose intolerance, caused by too little of the enzyme the body employs to digest milk proteins, affects 50MM Americans. Simply avoiding dairy or eating dairy products with the enzyme lactase solve the problem.

Even wheat gluten is a challenge for most stomachs, so the occasional upset may trigger the belief one has celiac disease. Avoiding gluten, food dyes or MSG isn’t harmful; giving up whole food groups over a self-diagnosis spawned by feelings of discomfort can be, especially when it leads to parents blocking certain foods from their children. And even avoiding gluten is challenging, since it’s in processed meats, medications, and even used to dust frozen vegetables to prevent freezer burn.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

The "Take" in the Restaurant Biz

Who says restaurants are struggling?

NY Magazine has estimated the “take” for some of the more-lucrative menu items at NYC’s top restaurants.

1. The Spotted Pig, Cheeseburger: $17
Description: Char-grilled eight-ounce burger with Roquefort cheese and shoestring potatoes
Daily Volume: Approx. 200 orders
Food Cost: 19 percent or $3.25 (La Frieda ground beef at $3.99 per pound, or $2 for eight ounces; brioche bun, $0.50; Roquefort cheese, $10 per pound, or $0.50; fries and garnish, $0.25)
Yearly Gross: $1,241,000

2. Balthazar, Steak Frites $30.50
Description: Classic steak frites with maître d’ butter or béarnaise sauce
Daily Volume: 85 orders
Food Cost: 24 percent or 7.24 (La Frieda petit tender steak, $5.99; frites,
$1; butter or sauce, $0.15, garnish, $0.10)
Yearly Gross: $951,600

3. Nobu, Black Cod with Miso $26
Description: Two four-ounce sablefish fillets, marinated
Daily Volume (est.): Approx. 100 orders
Food Cost: 13.5 percent or $3.50 (eight-ounce sablefish, $3; miso glaze and garnish, $0.50)
Yearly Gross: $949,000

4. Momofuku Ssäm Bar, Pork Bun $9 for two
Description: Two steamed buns filled with marinated pork belly, hoisin sauce, and a few cucumber slices
Daily Volume (est.): Approx. 200 orders
Est. Food Cost: 20.5 percent or $1.85 (two steamed buns, $0.50; one-to-two-ounces prime pork belly at $3 per pound, $1; hoisin, cucumber, scallion, garnish, $0.35)
Yearly Gross: $657,000

5. Waverly Inn, Macaroni and Cheese $55 (that’s not a mis-print)
Description: Macaroni with cheese and shaved white truffle (the magazine believes the restaurant is using canned truffles)
Daily Volume: Approx. 20 orders
Food Cost: 9 percent or $5.10 (elbow pasta, four ounces, $0.50; cheese blend (Cheddar, Parmigiano Reggiano), $0.50; garnish; $0.10 cents; shaved truffles,* $4)
Yearly Gross: $501,875

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Carbohydrates & Breast Cancer

Researchers in Sweden analyzing data on 61,433 women who completed “food frequency” questionnaires in the late 1980s have found a link between the amount and kind of carbohydrates women eat and breast cancer.

Different carbs produce a different “glycemic load” with correspondingly varying effects on blood sugar. For example, both white bread and potatoes have a high glycemic index, causing a rapid surge in blood sugar when digested. High-fiber cereals or beans create a more gradual change and are considered to have a low glycemic index. High glycemic loads were linked to an elevated risk for estrogen receptor (ER)-positive/progesterone receptor (PR)-negative breast cancers, with those subjects having the highest “glycemic index diet” seeing a 44% increased risk compared to women with the lowest glycemic index diet. Women with the highest “glycemic load” in their systems had an 81% increased risk. Researchers speculate high-glycemic load diets cause a surge of insulin and sex hormones in the body, contributing to the development and spread of breast cancer cells.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Tasty Tidbits

• Only one of the 27 largest food companies reported a decrease in sales in 2008, with 16 reporting increases in net income. Five companies recorded net losses, the most in the last six years.

• Sales of microwaveable packaging in the U.S. will reach $1.7bn by 2013, a 16% growth rate since 2003. For those who want to know more, a complete report can be purchased for $4,500.

• When it comes to ice cream, Californians like Mint Chocolate Chip, Neapolitan and Rocky Road, and prefer eating it at Baskin-Robbins over trendier places like Cold Stone Creamery (see “World Food” above).

• In another tasty ice cream story, and a sign that marketers are under pressure, Unilever’s North American ice cream unit has announced how 6 varieties of Klondike bars, the chocolate-covered ice cream squares, will now have 25% more chocolate coating. Unilever’s Breyers ice cream brand was among the first companies to sell their bulk ice cream in less than ½ gallon containers while keeping the price of the old ½ gallon packaging.

• And finally, comfort food seems to vary by generation (duh!). Boomers prefer “classic” foods such as braised meats, casseroles and ice cream, along with foods from childhood, including peanut butter, popcorn, canned tuna, chicken noodle soup and oatmeal. Gen Xers prefer commercial fast food burgers or burritos, and want their brands in things like cookies, ice cream, candies and snacks. Gen Yers aren’t picky and range from burritos to ramen noodles, though usually with a healthy angle (sushi and fruits) and with no particular loyalty to brands.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

World Food News

• The most-promising region globally for beer sales is Asia, which had 8% annual growth from 2003-2008. Not surprisingly, China is not only the world’s largest population but the biggest beer market. India is second, with $12bn in sales and 12-15% annual growth. Both countries have brewing traditions going back to colonial introductions (the Germans in China and the British in India), but now even in smaller markets in Southeast Asia like Singapore, Thailand and Vietnam, beer consumption is growing among the young thanks to rising incomes.

• Supermarket sales in Brazil continue to surge, up 4.8% compared to last year. Forecasts for this year are currently for a 4.5% growth rate, an increase over the previous 2.5% prognostication. Although the first 6 months of this year have seen sales rise 5.27% over the first half of ’08, June sales were off 5.59% from May, the second consecutive monthly decline. Despite the economic slowdown in Latin America’s largest economy due in part to lower exports, rising salaries and falling interest rates have bolstered Brazil’s retail sector. Additionally, consumers access to credit has also expanded thanks to the central bank’s intervention. Inflation is expected to remain below the government’s official target of 4.5% for the year. Brazil’s major grocers are Companhia Brasiliera de Distribuicao (CBD), France’s Carrefour SA, and U.S. retail behemoth Wal-Mart Stores Inc. French retailer Casino Guichard Perrachon SA owns a 34.3% stake in CBD.

• Cold Stone Creamery (owned by franchising packager Kahala) is following the co-branding of its stores strategy begun in the US as it attempts to expand in Europe. Thirteen stores sharing its brand with Sv. Michelsen Chokolade, Denmark’s leading chocolate manufacturer & retailer, will be opening in Copenhagen and other parts of the country. Previously Cold Stone had co-branded its stores with the Tim Horton’s chain.

• In the UK, The Competition Commission (CC) has proposed the creation of a food ombudsman to settle disputes between supermarkets and suppliers after retailers failed to come up with a voluntary mechanism. Long-time readers of this newsletter know that food manufacturers in particular have complained about how retail chains are not only pressuring them on margins, but are directly competing with Private Label brands and offering services like banking, travel agencies, etc. The CC has gone slowly on implementing change thanks in part to the competition between Britain’s top four chains having kept prices down. The chains insist an ombudsman will become a mouthpiece for the suppliers and lead to higher prices, while the manufacturers insist pricing pressure by the retailers is forcing them to seek low-wage workforces in developing countries, holding down the standard of living there. The UK grocery supply market is estimated at ₤70bn.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Online Couponing & Other Marketing Trends

Marketers have found the world of online couponing and digital marketing harder to navigate than they thought.

In May, talk show host Oprah Winfrey mentioned a coupon for a free Kentucky Grilled Chicken meal, and within a few hours, the link went “viral” on Twitter, Facebook, blogs and various social networks. More than 10MM coupons were downloaded, with some of them photocopied (despite instructions not to). KFC ended up giving away 4.5MM in a two-day span, then pulled the plug. It issued rain checks but the fallout left the chain looking stupid.

Now Marsh’s Supermarkets in Ohio and Indiana have stepped into the same gooey, sticky mess by offering $10 coupons to the 3,100 loyal customers signed up on Facebook. Within only a few days, 3K coupons morphed into so many as fans shared them with their social networks that the company had to cancel the promotion, issuing a statement saying “we at Marsh recently stuck our toe in the water to try this whole social media thing. Unfortunately, we ended up stubbing it. Our recent $10 coupon offer on Facebook has instead left us red in the face and many of our loyal customers angry. Rightfully so. For that we are truly sorry. Needless to say, we’re learning.” Companies are learning to include expiry dates and bar codes on their digital coupons, as well as requiring customers to enter some kind of information so as to tip off the issuer to the number of likely participants.

In other marketing news,

• The bad news for restaurants just keeps on coming: traffic declined 2.6% in the quarter ending May 2009, the biggest decline since 1981. Specifically customer counts were off 2% at QSRs, down for the seventh out of the last nine months. Casual dining was down 4% and midscale 6%. Bucking the trend are restaurants in NYC, where traffic this Summer is above the usual levels.

• Pizza Hut was the first national pizza chain to offer an ordering App for the iPhone and iPod touch, and the result was over 100K downloads from the App Store in 2 weeks. The App lets consumers order Pizza Hut food directly from their Apple mobile devices.

• Technomic has been tracking the sale by restaurant chains of corporate units to franchisees. The aim in many cases is to reduce debt and raise cash, but it also means franchisors must sweeten the deal, and can help franchisees who otherwise might be cut off from credit markets by acting as the lender or facilitating a loan. Within the Top 400 chains, Pizza Hut was the largest franchise company in the world with 3,627 units, followed by Burger King (2,758 units), and Taco Bell (2,391 units).

• The single biggest challenge for brands in the current economic environment has been retaining customers as private label and down-trading become more extensive. The Chief Marketing Officer (CMO) Council has prepared a study of customer retention in the communications industry (see attached executive summary). The entire report is available from Broad Street Licensing Group for $300.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

In-Store Sampling

A new study by conducted by research firm Knowledge Networks-PDI and commissioned by PromoWorks which followed consumer behavior on product sampling days and thereafter shows the impact on sales from offering in-store product samples (an executive summary was attached for subscribers to our newsletter). Among the knowledge gained from the study, in-store sampling:

• Drives additional repeat purchase: The average cumulative first repeat purchase for sampled products was +11% and +6% over a 20 week period.

• Drives sales for existing products and line extensions: The sales lift for the existing product sampled was +177% for day of event and +57% after a 20 week period. The sales lift for line extension products sampled was +919% for day of event and +107% after a 20 week period.

• Drives trial sales: Showed a significant impact for the parent brand of the sampled products with +107% average sales lift on the day of event and +21% average sales lift after a 20 week period.

• Delivers new buyers: The average cumulative new buyers for sample products was +85% and +23% for the core brand franchise over a 20 week period.

• Increases average household shopping basket size: The sampling event increased consumers’ overall shopping basket expenditure by 10% (compared to the average frequent shopper basket at the participating retailer, suggesting sampling contributes to incremental growth and does not cannibalize other items within the brands’ own franchise.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Tasty Tidbits

• The Inventure Group, a licensee of our client Burger King, is doing well: net earnings for the 2nd quarter ending June 27th rose 44% to $1.038MM, equal to 6¢ per share on the common stock, up from $722,540, or 4¢ per share a year ago. Industry-wide, salty snacks are growing with sales for the first half 2009 up 3.5% in the c-store sector, and potato chips up 10%. Only packaged ready-to-eat popcorn did better (13%) while alternative snacks were up 2%.

• A team of researchers from the University of Minnesota’s BioTechnology Institute (BTI) have uncovered an enzyme that will make detecting melamine in milk, ice-cream and chocolate drinks easier and less-expensive. The group plans to adapt the test to find melamine in seafood and meat. Melamine contamination in milk products and baby formula proved fatal in China, and was blamed for pet fatalities in foods imported into the U.S.

• It’s a sue-happy world, and Denny’s isn’t alone in court dates: (see above): Applebee’s and Weight Watchers have been hauled into a Cincinnati court over the fat and diet “points” on the Cajun Lime Tilapia by an Ohio woman who claims fraud, negligence, and a conspiracy to conceal the accurate nutritional information from consumers. Applebee’s Weight Watchers’ menus list calories, fat and the number of “points” for each meal to assist those on the Weight Watchers diet system. Other current legal claims against restaurants are one alleging McDonald’s allowed workers infected with Hepatitis A to infect a patron, one that says a patron bit into a condom in the cheese topping of a bowl of French onion soup at a Claim Jumper restaurant in Mission Viejo, CA, and a suit (also filed in New Jersey— is this a trend?) by a nonprofit vegan advocacy group, The Cancer Project, that demands hot dog makers warn consumers with new labels about its claim that the American Institute for Cancer Research links eating 50 g. of processed meat (the amount of a single hot dog) a day to a 21% increased colorectal cancer risk. The American Meat Institute has asked the court to dismiss the suit as frivolous.

• And in a final, sad note (though one tinged with lawyerly elements in keeping with the item above), another beloved celebrity has passed on: Gidget, the Chihuahua who played Nacho in the famous series of Taco Bell commercials has died at 15. Having made famous the phrase "¡Yo quiero Taco Bell!" she eventually became the focus of a multi-million dollar lawsuit between Taco Bell, their ad agency, and the owners of the Psycho Chihuahua character. The latter successfully established in court that the chain and its agency had stolen their IP by creating a series of ads uncannily like their edgy, talking dog. BSLG president Carole Francesca testified as an expert witness for the plaintiffs, and was later credited by their legal team with destroying Taco Bell’s case. The suit is still under appeal.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Retailing & Marketing Trends

• Canadian supermarket chain Loblaw is purchasing T&T Supermarkets, a Canadian chain of 17 stores catering to the country’s Asian minority. The move is seen as part of Loblaw’s efforts to diversify its holdings and satisfy the growing interest in ethnic foods.

• Restaurants aren’t the only sector of the food business feeling the pinch: over the first half of this year, nearly 700 c-stores have gone away, a reflection of the blue-collar focus of the channel where job losses have been more apparent. But all the news in the channel isn’t bad: 7-Eleven plans to open hundreds of stores in California to take advantage of the real estate slump by hammering hard rental bargains with landlords.

• Dutch retail giant Ahold is the owner of the U.S. chain Stop & Shop, and has reported 2nd quarter sales up 16% to $5.393bn (€3.808bn) . The company’s worldwide sales were $9.107bn (€6.43bn) up 12%. from €5,769 million in the same period a year ago.

• Digital couponing continues to spread: Scanbuy is partnering with Du Pont and Printpack to put 2-D barcodes on snacks that would allow consumers to retrieve product information AND get new offers (surprise!). An app gets downloaded to the user’s cell phone, who then uses the phone’s camera to scan the barcode.

• Recently-opened Fresh & Easy Neighborhood Markets in Southern California bring the U.S. total to 124. U.K. giant retailer Tesco had targeted 200 stores by last February, but has struggled to find the right balance of products and marketing.

• President Obama used a visit to a Kroger store in Bristol, VA to host a town hall discussion on health care reform.

• Do you know where your pizza is? Apparently a lot of consumers want to know, so the packaging tracking made commonplace by FedEx and UPS is coming to a Domino’s near you. UPS had a paltry 100K online tracking requests per month in 1995; by last December, the total had reached 27.3MM PER DAY. Both UPS and FedEx now send out constant updates to shippers, and Domino’s Pizza Tracker does just what the name implies. But it doesn’t end there: FlightAware keeps you informed about any domestic airline flight, The Chicago Transit Authority’s “Bus Tracker” online system shows where every bus is, and the New York City Stimulus Tracker keeps you up-to-date on where those funds are being used. I think things have gone too far, though, with the website that tracks your baby’s sleeping, eating and pooping. I couldn’t make this stuff up if I tried.

• While it would seem a no-brainer that consumers would like freebies, it turns out cultural differences disprove conventional wisdom: A study by New York’s Baruch College School of Business found that American-born consumers are happier with unexpected gifts than those in Hong Kong and Taiwan, along with Asians living temporarily in the U.S. Asians overall preferred gifts tied into luck (e.g., a winning ticket), while Westerners like rewards for hard work, loyalty or just coming in at all.

• Already allowed by the government’s rules to say “no trans fats” on the labels of its soft (tub) spreads in the U.S. due to the small amount present, Unilever will eliminate entirely partially-hydrogenated oils by Q2 2010, and will then trumpet this fact with labels saying “0 grams of trans fat per serving.” In a related story, Cargill is the second manufacturer to announce it would halt production of hydrogenated oils at one of its plants.

• In a branding faux pas possibly akin to the New Coke, PepsiCo’s Gatorade’s share of the sports drink market fell 4.5% (to 75%) with volume down 17.5% in the first half of this year. Analysts blamed the re-branding of the product to “G” as contributing to consumers fleeing for other brands. PepsiCo’s CEO Indra Nooyi has all but thrown in the towel, saying she doesn’t see a return to double-digit growth in the U.S. despite sports drinks once being the "next" category.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Heinz Goes to the Garden Department

Heinz-UK, which owns the country’s largest-selling sauce brands (Heinz & HP, which it purchased in 2007), is targeting garden centers for its barbecue sauces and other non-food retailers for other products.

The move is intended to avoid the dominance of supermarkets and the relentless march of their private label products. Heinz has watched its market share in sauces (including tomato ketchup) drop from 79,9% last year to 74.7%, while private label has grown from 15.8% to nearly 19%. Sales of private label products have surged in recent months thanks to retailer promotions. Dave Woodward, president of Heinz’s UK and Ireland business, describes garden centers as “white space opportunities.” The sauces and ketchup are already being sold by Heinz’s foodservice division in garden center cafes, but the company is aiming for retailers like Mothercare, a specialist retailer selling children’s clothing & furniture, as an outlet for its baby foods.

Gas stations and c-stores such as Nisa-Today’s and Spar are also on the radar. Heinz has sold seasonal products in these outlets in the past, but never year-round before. Currently 70% of sales are in traditional supermarket chains like Tesco, Asda, Morrisons and Sainsbury. Unlike many brands, Heinz makes only frozen desserts in a private label format. The move to c-stores will not be a no-brainer, since private label already accounts for 1/3 of all U.K. food sales and is rising in the convenience store channel. Tesco is looking to rent out plots (called “allotments”) to consumers for growing vegetables and raising chickens at its own Dobbies Garden Centres.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

The Knives Come out at Benihana

If this article isn't proof of what's wrong in the restaurant industry, I'm not sure I know what is.

The piece talks about a food fight between the several factions who own the Benihana chain. On one side are the children of Benihana founder Rocki Aoki and Coliseum Capital Management, which owns around 10% of Benihana's stock. Apparently Benihana management is looking to issue between 12.5MM-25MM new shares of common stock following a merger with a subsidiary. Management claims they need to do this in order to raise capital, resist the economic downturn, and deal with some outstanding credit issues. The measure passed on February 23rd despite the opposition; there is no word yet whether the disgruntled parties will resort to legal redress.

The family says the stock issue will dilute their influence on the direction of their father's creation, and undermine the value of their shares. Naturally, the company that controls the chain (BFC Financial Corp., the second-largest stockholder) has no problems with the issue, and why should they? There's a nifty anti-dilution protection written into their agreement that will mean the influence of their share won't be hurt, and will by default increase. Even the company's SEC filing admits other investors will be "adversely affected."

That's what you call a "ginned game."

The widespread ownership of the restaurant industry by private equity groups and other financial entities can be a mixed bag for the business. On the one hand, PE guys tend to be more entrepreneurial than traditional foodservice people. They understand making money and taking risks. But they also know how to work the system, so right now, Benihana is focused on stock manipulation, not on improving its competitive position. Would I consider representing the brand?

Not until this issue gets settled.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

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BK Ups Its Game

Client Burger King struggles against McDonald's even on a good day.

It seems no matter what the Miami-based food giant does, it pales in comparison to the Golden Arches. Much of that is just the economies of scale: McDonald's is so big, even when it belches, the winds of change blow hot. The media has tended to favor the Oakbrook, IL-based behemoth while openly denigrating the efforts and prospects of chains like BK, Wendy's/Arby's and others.

Recently the brand has taken two pages from Mickey D's playbook. As reported here in this blog, Burger King has ditched its loser coffee, BK JOE (considered "sludge" by those in the coffee trade), in favor of Seattle's Best (well, second-best, but better than BK JOE). Now, its its latest move is to go after McDonald's Angus Third Pounder premium burger with the new Steakhouse XT. Boasting 7 ounces of beef, the new burger is 30% larger than an Angus Third Pounder.

The Steakhouse XT will debut at the promotional price of $3.99 alongside a co-branded A.1. Steakhouse XT and a Smoky Cheddar Steakhouse XT at $4.49. Whoppers usually go for $3.19. The Steakhouse XT and A1 Steakhouse XT are joining the core menu, while the Smoky Cheddar is an LTO (limited time offering).

The new line of premium burgers offers a higher margin than Burger King's regular lineup, which has seen controversial price-cutting strategies that prompted a lawsuit from franchisees. The change is only possible because of a new line of batch broilers with multiple cooking tracks that allow it to make both Whoppers and premium Steakhouse XT burgers. The company also says it is testing other broiled products, including Fire-Grilled Ribs, stuffed burgers, breakfast items, snacks and even flame-grilled desserts.

Stay tuned for more in the burger wars.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.