'Food' Archive
Top Chew
Cadbury, maker of everyone’s favorite crème-filled chocolate eggs, is the venerable UK candy company that would dearly love to be, and in fact claims to be, the #1 confectionery group in the world, although the company doesn’t specify just what #1 refers to — is it sales, number of brands, area of distribution, number of customers, or some other metric in which it is top dog? But, #1-ness aside, the company is big. And determined too.
After much wailing and gnashing of teeth, it finally shed its carbonated beverage business this year (leaving it to the folks in Plano, Texas, to supply the world with Dr Pepper, Snapple, and Canada Dry). Thus soda-less, Cadbury has turned, full bore, to concocting irresistible confectioneries and placing its flag on the candy mountaintop. And what has it come up with? A gum. A chewing gum. A chocolate-flavored chewing gum.
But then, this is all the fault of us Yanks. Just as Cadbury was set to attain the ultimate spot in the confectionery world (or so it hoped), over here in the cheeky US, Mars (which also likes to claim some kind of #1 spot) and chewing-gum champ, Wrigley, decided to merge.
Dueling Quotes
What’s a newly stand-alone confectionery company to do when faced with the Mars/Wrigley combo which Bill Wrigley now says is “the world’s leading confectionery company?” Another quote, this time from Cadbury chairman, Roger Carr: “We will take whatever measures are necessary.”
Off to the Lab
So the Bunsen Honeydews at Cadbury, charged with taking whatever necessary measures, came up with Sweet Kicks — a mint-flavored gum with a chocolate-flavored liquid center. And, wow, it’s sugar-free and low-calorie. Bunsen and his buddies (probably in marketing) targeted women seeking “a moment of pleasure.” To which I say, “Blech.” Speaking as a woman, I want my chocolate with sugar and calories and most definitely not in the form that loses its flavor on the bedpost overnight.
A Small Wad of Advice
One last thought. What’s a company wantin’ to be #1 to do then? In Cadbury’s case, I would suggest getting out the old checkbook and writing the big one, payable to the shareholders of Hershey.
There’s an old saying that goes something like this: Be careful what you wish for, lest it come true. Take heed John Mackey!
Let me explain. In a previous post (read here) I mentioned that the Whole Foods Market founder and CEO was quoted as saying that if he could go back in time “we wouldn’t have done the Wild Oats acquisition.” Now a US appeals court ruling reversing the decision that allowed the $565 million purchase to proceed, has put the deal on hold, at least temporarily. The court has remanded the case for reconsideration to US District Judge Paul Friedman, saying that he erred when he dismissed the Federal Trade Commission’s claim that the deal violated antitrust law. The FTC opposes the combination saying it could stifle competition and lead to higher grocery prices.
From the point of view of WFM, the deal is a fait accompli as the company has already closed some Wild Oats stores, sold others, and is well down the road toward integration of the two chains. However the ruling, which states that “only in a rare case would we agree a transaction is truly irreversible,” leaves the door open for redress if the acquisition of Wild Oats is found to be unlawful. Of course, that has yet to be determined. (Read the appeal court’s opinion here.)
But even the prospect of reversal begs the question: How do you undo a (largely) done deal?
Potential consequences include a freeze on any further integration of the two chains, including ordering WFM not to close or rename any more Wild Oats stores. And if the FTC ultimately prevails it could order WFM to divest the Wild Oats stores it acquired to be run independently.
In a statement, WFM said that it was disappointed with the court’s ruling and was considering its legal options. Until then, the continuing integration of the Wild Oats business is in limbo while Whole Foods awaits the District Court’s response.
I wonder what Mackey is wishing now?
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.