About Barbara Murray

Native North Americans believed in the Corn Mother (the first woman to bear offspring, a kind of Eve).  After the white man took over and tamed North America, corn became the Midwest’s gift to the country and the world – year after year of bounteous corn crops grown on rich farmland fed us and almost everyone else.

Now corn is a high-priced double whammy.  At least it appears that way to the average American consumer progressing through an average weekend.

First, on the average American’s to-do list for the weekend: gas up the car.  We all know the story on that. Suffice it to say the price of gas is out of sight. (Hummers, and even your run-of-the-mill SUVs are the dinosaurs of the auto industry — big galoots doomed to extinction but that’s another blog.)

Then on to filling the fridge for the week.  A fryer from the supermarket, a gallon of milk from the convenience store – it doesn’t matter where you go. It’s costing more.  And if our average American decides to see a movie  – alas, even the popcorn at the theatre, never a bargain in the best of times, costs more.

What does corn have to do with all this? Lots. You see, in December 2007 the federal government passed an energy bill mandating that ever larger amounts of ethanol be used to run our vehicles. The bill was passed with seemingly good intentions (if not outcome). It was meant to reduce the US’s dependence on foreign oil and to help curb global warming.

But our lawmakers forgot to take into account that the product of choice for making ethanol in the US is corn, as in an ingredient that food manufacturers large and small turn into Aunt Jemima Syrup, Froot Loops, Fritos and hundreds, if not thousands, of other products. (There are other options for ethanol production. Brazil, for instance, makes it from sugar cane, probably no better a choice, as it is a food crop as well. But   ethanol can be made from agricultural byproducts such as corncobs, straw and sawdust. Kraft and General Mills don’t use much of those in their plants, at least I hope not.)

Corn farmers supported the bill of course, but hey, here was a chance to make some extra income. The law awarded farmers money for every bushel of corn that was used for ethanol production. Ethanol manufacturers (everyone from agricultural giant, Archer Daniels Midland – the #1 ethanol producer in the world — to small newly formed companies created to take advantage of the government’s largesse) became preferred corn farmers’ customers, at the expense of long-time corn users/customers such as dairy and poultry farmers, beef ranchers who use corn for animal feed, and food and food-ingredient manufacturers who use corn for people feed.

(Big oil companies like Exxon are trying to fight back the ethanol scourge, no matter what it’s made from,  but they seem to have lost their influence in this debate.)

The double whammy (a whammy we’ve smacked our own selves over the head with) is this:  We use corn to make foods we eat, we use corn to fill the fuel tanks of our cars and trucks.  Food vs. fuel. 

It’s not nice to try to fool Mother Corn. She’s known for millennia what corn is for. It’s for sustenance.  It’s for eating. It is her gift to us, a gift of food — for human, not transportation, systems.

Delighted dolphins, giddy gators, happy herons. What is all this wildlife wonderment about? It seems these and the many other species of fauna and flora that inhabit the Florida Everglades may have been given a pass from extinction. And for once, mankind is not the villain in this tale. In fact, one man, Florida governor Charlie Crist, might be its hero.

Seems the guv had a meeting sometime back with the nabobs at U.S. Sugar Corporation, the largest cane-sugar producer in the country. They, like all good Big Sugar companies are wont to do, went to call on Gov. Crist to complain about Florida enacting some laws that forbade the company from pumping its polluted water back into the Everglades.

Expecting due deference from the guv and a “pat on the back” solution allowing the sugar maker to skirt the new laws — they, again, like all good Big Sugar companies, being large contributors to political campaigns, mostly to pro-business Republican candidates — U.S. Sugar got instead an unexpected, nay, shocking offer. The governor suggested that Florida buy U.S. Sugar. No need to find a way around ever-increasing environmental regulations, just go out of business — and with a pretty penny in its pocket too — $1.75 billion.

It’s a nice bit of money for U.S. Sugar, which has suffered bottom-line woes due to increasing sugar imports from countries such as Brazil and Thailand, which have lower labor costs. (Not to mention having to do continual battle with both the state and the feds over water and land pollution and the rising costs of the clean-ups it is forced to make by these authorities.) The company is also involved in a nasty lawsuit brought by former employees, charging that the company bilked them out of their retirement funds. The deal offered by Crist amounted to some $350 a share, far above other offers it has received over the years. So U.S. Sugar, which has operated on its land since 1931, said, yes, it would sell itself to the state.

And what does Florida get for its pot of gold? It gets, among other assets, 187,000 acres (or about 300 square miles) of land north of Everglades National Park, which the state would turn over to its South Florida Water Management District for use as part of a plan to help restore the Everglades’ pre-development ecosystem. (Cue the dancing endangered animals.)

The land would connect (or reconnect, actually) Florida’s Lake Okeechobee with the so-called River of Grass, the swampy natural waterway that carries overflow from the lake to its natural runoff into the ocean. The waterway, which is made up of marshes and forests rich in reptile and bird life, has been unable to drain itself adequately for years due to development, including sugar farming, and that has led to the stagnation of Lake Okeechobee’s waters.

So the Everglades’ ghost orchids and royal palms can perhaps sway in joy; their death knell has been silenced. Maybe. You see, despite the efforts of the Caped Crusader of the Everglades, Gov. Crist, and the, ahem, pragmatic decision by the elders of U.S. Sugar to sell, the deal might not go through. It seems that U.S. Sugar is owned by its 1,700 employees through an employee-ownership plan. And while the buyout deal allows U.S. Sugar to operate for another six years in order to fulfill its long-term commitments, after that, its employees are facing certain unemployment. Saying it will be regulated out of business anyway, the company has offered its wage earners one year’s pay as severance, with salaried workers being offered two years. The state has offered retraining. The deal is supposed to be finalized by November.

Put yourself in the place of a third-generation sugar worker, living in the small Florida town of Clewiston, being forced to weigh the relative merits of the survival of, oh, say, a rare panther and putting food on his or her family’s table. It’s a tough call.

With apologies to 3M and any fans thereof reading this missive, it has nothing to do with the maker of those ubiquitous, pale yellow squarettes we stick to every possible surface in our cubicles. This is about breakfast, the most important meal … er, deal of the day. It’s about Post cereals.

A bit of background. It’s been a little over a year since Kraft Foods broke free from the death-rattle ownership of Altria.  The smoke is beginning to clear. CEO Irene Rosenfeld took over the show at Kraft two years ago and, recognizing that its sales and stock were going nowhere, instituted a three-year makeover (corporate restructuring in bizspeak) for the biggest food company in the US (and the second biggest in the world, after Nestlé). She’s introducing new products — some 80 new ones this year alone, including microwaveable pizzas and health drinks with probiotic and prebiotic dietary supplements.

Rosenfeld is also spending lots o’ money on marketing for Kraft’s venerable brands, and she’s peeling off operations that don’t fit in with the company’s (more bizspeak, sorry) core products, these being cheese (Philadelphia Cream Cheese), meats (Oscar Mayer), snacks (Nabisco cookies and crackers, Oreos), and beverages (Maxwell House, Kool-Aid).

Post cereals (the #3 breakfast-cereal seller in the US, after #1 Kellogg and #2 General Mills) are next on the old chopping block. Although the Post brands, which include Shredded Wheat, Grape Nuts, Honey Bunches of Oats, and Pebbles, are reliable sellers, they don’t fit in with the core four sectors that Rosenfeld is aiming for. In addition, raw material costs, which are soaring for all food companies, are somewhat less for dairy ingredients than for the grain-based ingredients for breakfast cereals (e.g., commodities such as wheat and corn — ethanol anyone?) So it makes sense to let them go.

Ergo, Post is out the door in a deal said to be valued at $2.6 billion. (Not bad, Ms. Rosenfeld.)  The buyer is Ralcorp, a St. Louis-based manufacturer of private-label packaged food products, including frozen bakery items, cereals, crackers, cookies, dressings, syrups, jellies, sauces, snack nuts, and candy. With a line-up like that, it sounds as if Ralcorp is more than capable of taking over the Post cereal operations and the some 1,250 Post employees who are expected to join Ralcorp once the deal is final.

Now, if the Sage of Omaha, Mr. Berkshire Hathaway himself, Warren Buffet, has his way (he owns 10% of Kraft but he’s busy at the moment, trying to get Anheuser-Busch to sell to InBev), Kraft will unload even more brands. Then there’s Nelson Peltz, that lovable old corporate raider, owner of about 2% of Kraft. Surely he has plans, but in 2007, in order to get two Peltz-approved directors on the Kraft board, he had to agree to not publicly advocate for change at the company for two years. He did, however, make it known before the agreement that he thought the Post and Maxwell House businesses should go.

Stay tuned. Now that Post is Toast(ies) at Kraft, more brands are sure to follow.

RWA? That’s “raised without antibiotics” for all of us city-slickers. Seems chicken-champ Tyson Foods got in trouble with some of its birds. Sort of. Depends on who’s story you’re gonna believe.

Except for people living under rocks, everyone, including Tyson, knows that the American public wants to eat more healthful food. So Tyson hatches a plan to raise, market, and sell some of their brood produced using no antibiotics. And of course it wants the public to know about this healthier chicken alternative. Like all good companies — read, companies that have to comply with the US Department of Agriculture rules and regulations with regard to food manufacturing, lest consumers conk out on E. coli or some other nasty disaster (See the latest fresh tomato debacle) — Tyson applies to the USDA for permission to use the label “raised without antibiotics” for these uber-healthy chickens. And, the USDA says yes. Cue the sound of joy and jubilation emanating from Tyson’s marketing department as well as perhaps a less vociferous reaction from its executive suites. Maybe a tasteful humming of “We’re in the Money.” This labeling permission was granted last May.

So Tyson began rolling out their thusly labeled chicken products across the nation. It didn’t take long for a couple of Tyson’s dastardly competitors to notice. Perdue and Sanderson Farms filed a lawsuit, charging false and misleading advertising since the feed that Tyson gave the chickens used for these products contained ionophores, an additive used to prevent nasty gastrointestinal problems in poultry. Injunctions, opposing rulings, denials, and further filings from both sides, like, well, chicken feathers, flew.

Meanwhile, back at the ranch, er, the government (kinda the same thing for the next six or seven months, but who’s counting?), it seems the USDA goofed. Its very own Food Safety and Inspection Service unit classifies ionophores as antibiotics. So it took back its permission last fall. Tyson, having spent lots of money on advertising, publicity, and marketing, not to mention packaging and the labels themselves (about $20 million according to the company), was a bit miffed but offered to change its claim to read “Chicken Raised Without Antibiotics That Impact Antibiotics Resistance in Humans.” Uncrossed your eyes yet?

To confuse matters even more, the Food and Drug Administration, while it has no oversight in this instance, does not consider those accursed ionophores antibiotics. To Tyson’s credit, it has asked the Agriculture Department to consider starting a public process for more clarity and consistency in labeling and advertising rules for food product claims.

However, back at that OK Corral better known as the federal appeals courts, those evil, suit-filing competitors said Tyson’s revised claim only served to confuse the consumer and, more importantly, bottom-line-lovers that companies tend to be, caused them to lose money as a result. (Perdue claimed $10 million in losses; Sanderson claimed $4 million.) The appeals courts weren’t buying it and tossed out the suit, saying the companies had failed to prove their claims.

And here it gets kinda hairy (feathery?). Tyson, good corporate citizen that it claims it is, says it has now voluntarily pulled its no-antibiotic advertising and labeling. But the gumint says it sent Tyson a letter requiring them to do so. Guess it boils down when Tyson got the USDA’s letter. And who really knows? Tyson says it was late on the very day it decided to take its voluntary action. Perhaps we need to seek out the mail clerk at Tyson.

All I know is, when it comes to food labeling, it’s time for everyone, Tyson and all of its cohorts in poultry production, along with the various and sundry federal agencies involved, to get their ducks in a row.

Do you suppose August Busch IV will be pulling up a stool with the other CEOs/chairpersons/heirs-to-the-family-fortune at an imaginary get-together in a dusty old corner tavern to drink to their multi-billion-dollar deals? Will he join these other recent sellers of giant companies and drink to the money they’ve made? Will Busch IV and the others also drink to the demise of the American family business dynasty? They probably should, at least to the former.

Here’s a short round-up of recent dynasty-related acquisitions: Wrigley sold its iconic gum company to candy company Mars; the Bancrofts sold Dow Jones (and with it, The Wall Street Journal) to Rupert Murdoch; and Carlsberg and Heineken have just taken over, dismantled, and divvied up the UK’s oldest brewer, Scottish & Newcastle. The beer arena has examples of other takeovers of family-owned and -run companies as well: South Africa’s SABMiller snagged Milwaukee’s finest, Miller Brewing, and Canada’s Molson bought out that mellow Denver brew, Coors (creating the not very creatively named Molson Coors Brewing Company). There are others but you get the drift — consolidation is all, especially in the beer market.

To this end, it sure looks like little Auggie Busch will be joining our group of seller (sell-outs?) for a drink. Rumors, reports, and Reuters are rife with talk about the sale of Anheuser-Bush to InBev. InBev? What’s that? Not a household name in this country (yet), InBev is a large Belgium brewer with operations in some 30 countries. It produces and markets some 200 beers throughout the world and makes some pretty well known quaffs you’ve probably quaffed — Beck’s, Stella Artois, Brahma, and Labatt, to name a few.

[Reader note: Instead of using past perfect, pluperfect, and other awkward tenses, let us assume this is a done deal, thus freeing us to use and read less convoluted verbal constructs: So, instead of, "August Busch IV is said to have rejected," let us say instead, "August Busch IV has so far rejected ..."]

As of this writing Busch IV has rejected InBev’s $46 billion offer to buy out his family’s legacy. Ever mindful of his father (Busch III) and all the Bs before him, not to mention his hometown of St. Louis, and perhaps even his company as an edifying example of the American Dream, Bush IV and A-B itself remain silent on any deal. InBev officially remains silent as well.

But $46 billion. It is a sum not to be sneezed at. Just what would Anheuser get for this tidy sum? Well, considering the flat sales in the mature US beer market, A-B would leverage InBev’s global and emerging market platforms, as well as its manufacturing, cost-saving, and scalability synergies. In short, A-B would probably see an increase in its bottom line.

And InBev — again, given the sluggish US beer market — what would it get? Given that some of its most successful operations are in Canada and South and Central America (through its Brazil-headquartered AmBev subsidiary), the company badly wants into the US market. What better way than to acquire Anheuser-Bush’s well established distribution system? InBev could market its more upscale beers in the US and do the same with Budweiser in its emerging (and already-emerged) markets.

It sounds like a pretty good deal all around. But the thought arises — will the Clydesdales now be draped in the black, red, and gold of the Belgian flag? I don’t even want to contemplate the Super Bowl ads.