March 7th, 2014
This article says that General Mills has decided not to follow the example of some other food manufacturers and look for formulate products that avoid genitically-modified organisms (GMO).
The reason: consumer indifference in the checkout line.
Although there was much discussion when the company removed GMO ingredients from its iconic Cheerios brand, the change has resulted in no boost in sales. The cereal maker switched from beet sugar to cane sugar and to corn starch made from non-bio-engineered corn. Post Foods followed General Mills’s lead with its Grape Nuts brand, saying it, too, would be GMO-free.
March 6th, 2014
In the three months since McDonald’s introduced its new value menu “Dollar Menu and More,” the results have been underwhelming.
The chain reported on February 10, 2014 that same-store sales were off 3.3% in January, only slightly better than the 3.8% drop in December. November’s 0.8% slip was positively sunny in comparison.
The new Dollar Menu actually runs from $1 up to $5, and was intended to act as a “value ladder” that would leverage sales up, increase traffic, and allow the individual stores some pricing flexibility (thereby improving profit margins). While CEO Don Thompson insists this was all as the company expected and that guest numbers are up, those in the trenches complain that the new menu has cannibalized sales of higher-priced (and higher-margin) items as customers took advantage of Dollar Menu and More burgers. The trend right now seems to be against the Golden Arches are Americans look at alternatives to traditional fast food.
March 5th, 2014
Kellogg’s thinks old-fashioned marketing can save the breakfast cereal business.
A lot hangs in the balance.
While Americans often pay lip service to healthier eating, one area where they seem to mean it is breakfast: the cereal aisle with its sugary puffs and honeyed pops has seen sales flat. While 35% of the world’s population eat breakfast cereals, the market is confined mostly to the US and the EU. Universally these days CPG companies are looking to the developing world to grow their businesses, rather than in “mature” markets like the States and Europe. Even good news like a 1% growth in the breakfast cereal market in the UK and 3% in France was offset by 0.6% falls in Germany.
What’s more, Kellogg’s isn’t the only game in town: Hain-Celestial has been on a buying spree, especially across the Pond with acquisitions of the Ella’s Kitchen baby food and Tilda rice brands. The company can be expected to give Battle Creek a run for its money, though we should point out H-C has had some issues absorbing these buys.
March 4th, 2014
According to this article in Drug Store News, Kroger has announced the acquisition of digital coupon & promotions company You Technology Brand Services.
You Tech (a clever play on YouTube) will allow Kroger to have a stronger footprint in the digital couponing space. The Silicon Valley-based company has more than 10,000 retail stores in its existing network. Those stores have a total retail sales of over $100bn, and reach 100MM households.
Digital coupons have nearly wiped out conventional Free Standing Inserts (FSIs) long inserted in newspapers and other publications, as well as in-store “Catalinas” (coupons dispensed at the register based on a customer’s purchases). Kroger’s use of digital coupons over the four years since it started offering them hit 500MM downloads by the end of 2012. According to the store, customers have downloaded more than 400MM more digital coupons in just the last 12 months.
March 3rd, 2014
After a two year absence, Broad Street Licensing Group‘s SVP of Business Development Bill Cross will be moderating another panel on the food biz at this year’s National Restaurant Show May 18th at Chicago’s McCormick Place.
Entitled “The Grocerants Are Eating Your Lunch: How Grocery Stores, C-Stores, Drug Stores and Home Delivery Are Taking Away Market Share,” the educational session is intended according to Cross to “scare the pants of restaurant chains and get them to wake up to the threat non-traditional food marketers pose to their business model.”
Panelists include retail food expert Jim Matorin, and Mike Sherlock, VP Food & Beverage for the Wawa chain.
February 28th, 2014
There’s no question about it: Suntory‘s overpaying $13.6bn for Jim Beam & Maker’s Mark shows that booze is booming.
But then, maybe they didn’t overpay.
According to this article in Business Insider, exports of US bourbon & Tennessee whiskey topped $1bn in 2013. Among the astonishing numbers is the growth in some markets since 2000:
- China: 1,110%
- Korea: 381%
- Chile: 793%
- India: 900%
- Hong Kong: 533%
Since tariffs on US booze were abolished in 1994, exports to the EU have trebled to nearly $700MM. And while whiskey once looked as though it would be eclipsed by non-whiskey spirits like vodka and tequila, it has come back, rising 6.2% in 2013 (almost double the increase in case sales in 2013). Explanations include the return of the “cocktail culture,” (thanks, some think, to retro shows like “Boardwalk Empire” and “Mad Men“). While bourbon is leading the growth (10.2% to $2.4bn), flavored whiskeys account for nearly half (43%) of the category’s growth.
February 27th, 2014
Despite successfully spinning off its WhiteWave Foods and Morningstar Foods divisions, Dean Foods has said it will take a financial hit this year.
This article in Food Business News says that rising milk prices represent a “headwind” for Dean’s profitability. The growth of the export market for US milk (in the form of powdered milk) has resulted in pressure on milk producers and marketers like Dean. Through November, 2013, exports totaled 1.1bn pounds, a 24% increase over the previous year, which was a record.
The numbers tell the tale: net income for the 2013 fiscal year reached $813.1MM, significantly up from 2012′s $158.6MM (due to the sale of WhiteWave & Morningstar). Sales were down somewhat to $2.3bn (vs. $2.5bn in 2102).
February 26th, 2014
Nearly two years after Kellogg’s 11th hour bid to purchase Pringles from Proctor & Gamble, the Battle Creek, MI food giant is thrilled with the results.
According to this article in Food Business News, the snacks segment saw a 6% decline in operating profit in 2013 to $447MM on sales of $3.53bn (a 4% increase). However, for Kellogg’s, net income was $1.8bn, a whopping 88% increase over 2012′s $961MM. The spurt was on net sales increasing from $14.2bn to $14.8bn. While Kellogg’s did not release numbers for Pringles, estimates put annual sales in the $1.5bn range (see this summary by Kellogg’s of their 2013 financial results).
Kellogg’s almost wasn’t the successful suitor: all indications were that Diamond Foods fell through due to the discovery of financial impropriety by an internal probe of payments to its walnut suppliers.
Central to the Pringles blueprint for success is expanded capacity in Malaysia and a new effort in China.
February 25th, 2014
With spiced rum one of the stronger growth areas in spirits, it may surprise some to see Diageo taking a run at Barcardi with Captain Morgan white rum.
White rum is the least-dynamic segment of the rum category, with an annual growth rate 0.4% from 2006-2011 and an even lower 0.3% in the past two years (according to just-drinks.com). The CAGR in 2010 and 2011 was even lower, at 0.3%.so why would Captain Morgan want to get into a bar fight with the category leader in a declining market? After all, Captain Morgan, with its famously irreverent commercials, is the spiced-rum market leader.
It appears as though old-fashioned pique is at the root of this: Bacardi’s overall market share is slipping, so it launched Oakheart, a spiced rum SKU in 2011. Is this Diageo’s way of getting back at them?
February 24th, 2014
There’s no doubt that something’s up in the American eating psyche.
The recent article in the NY Times Sunday magazine about Hawaii’s anti-GMO hysteria is now joined by Chipotle Mexican Grill‘s announcement about its upcoming web series “Farmed & Dangerous” that uses laughs to attack America’s industrial agri-business practices.
The chain has 1,500 outlets, but has always pitched itself to consumers as different from other fast-food chains, one that cares about sustainability and quality (their slogan is “Food with Integrity”). The series of four 30-minute episodes cost $250,000 each, and will be aired on the streaming service Hulu. And in a departure from most marketing, mentions Chipotle only once: when the villain gloats about spreading a rumor that Chipotle is still owned by McDonald’s (the Golden Arches sold its stake in Chipotle in 2006).
Instead of the hard sell, the series uses humor to raise questions about the way America sources its food. Apparently the chain believes quality will get its message out, and has hired Hollywood talents like actor Ray Wise and screenwriter Jeremy Pikser. Chipotle beleives consumers will want to eat in its restaurants if they support the idea of sustainable agriculture and reject industrial farming practices like using antibiotics in food animals.
Thanks to Steve Johnson at “The Grocerant” blog for alerting us to this development.