Tag / Food

by Frank Maduri

Food Industry Trends: The Market For Alternative Meat

The introduction of new alternative meat products into the grocery aisle, the fast food drive-in, and the trend towards healthier eating patterns are all factors in the reports issued on Wednesday that Barclays, JP Morgan, and other analysts predict regarding plant-based alternative meat products.

Those major analysts predict that the market for plant-based products will grow to $140 billion in 10 years. The major players in the industry segment, Impossible Foods and Beyond Meat, are banking on getting their share of that revenue influx. The combined effect of consumers being more health-conscious along with dietary restrictions (gluten allergy, soy allergy, vegan) as well as supply issues with traditional beef have led to this trend toward alternative meat products.

The secondary impact of the supply issues with beef and chicken are rising costs for those commodities, which has a direct effect on the profitability of a restaurant, diner, or fast food outlet. The mainstream launch into the alternative meat market has been spearheaded by Burger King with a partnership with Impossible Foods which has produced the “Impossible Whopper” sandwich.

The alternative meat version of a classic American hamburger sold so robustly in the test market phase that it has been rolled out nationally by Burger King. This news has been met with speculation that their rival, McDonald’s , will introduce a plant-based alternative meat burger option in the near future. It is speculated that they will work with Beyond Meat as a partner in that project.

The alternative meat option for products such as The Whopper, will provide an option to vegetarians and others who do not eat meat to become fast food consumers, and it opens options for hardcore fast food customers who struggle with having red meat 5 times or more per week. Those customers can now eat the alternative product, which all reviews say tastes like the “real meat” Whopper version, that they can visit Burger King every day, or nearly every day and use the plant-based option two or three times per week.

The gains from the fast food offerings and the additions to the grocery aisle will provide significant growth in sales for both companies as well as the rest of the industry segment. It should be noted that none of the players in the alternative meat space have developed an alternative to chicken.

Chicken, as a commodity, is still priced competitively and comparatively cost effectively when compared to the other traditional proteins and the plant-based protein alternatives. It remains to be seen whether that will play a role in a further shift by the restaurant, fast casual, and fast food outlets toward even more menu items that feature chicken.

The medical community has produced data for years around the dangers of eating too much red meat. The alternative meat trend is a response both in the grocery store aisle and the fast food counter to offset the trend towards eating less red meat. It is also a way to maintain profitability as the alternative meat protein sources are less expensive than beef to produce.

The demographics of the U.S. have changed as well, with Baby Boomers retiring and becoming more health-conscious with the time to dine out more frequently. The other end of the spectrum is the Millennials who trend toward being healthier in their eating patterns than prior generations were at that age, and they are armed with endless dietary information that they use to make food choices. This younger generation is staring to come into its own and have more disposable income to dine out or spend more money on a product such as an alternative meat entrée.

The Beyond Meat product sells for about $12 per pound in comparison to ground beef which sells for $5 to $6 per pound depending on the supplier or your geographic area. That premium is something that certain consumers are willing to pay, or if their dietary needs dictate it, they will pay for the alternative meat compared to the standard ground beef option.

The Beyond Beef alternative product is also appealing to those who are looking to go GMO-free, if they have a soy allergy, or if they are gluten free due to celiac disease or another autoimmune disease that necessitates them to observe a gluten free diet.

The alternative meat trend is also gaining popularity because of the environmentally friendly benefits of producing plant-based meat products. A study by the University of Michigan found that the Beyond Beef burger used 99% less water to produce than beef, 93% less land, and 46% less energy than a beef burger.

In a time of increased environmental awareness and conservation of resources, the alternative meat products provide a “green” friendly option to consumers. All of these factors drive the formula which Barclays, JP Morgan, and other analysts used to determine the explosive growth of the plant-based alternative meat market in the next 10 years. It stands to reason that they may be correct, and in a time where health, dietary considerations, and environmental conservation are “hot button” topics this industry could be at the right place at the right time.

by Frank Maduri

Kellogg Sells Cookie Brands To Ferrero

The news on Tuesday that Kellogg has an agreement to sell several brands to confection maker Ferrero, came as no surprise to many in the food industry. The iconic cereal maker had been working for months to sell the cookie brands of their business to a willing buyer. The total amount of the transaction is reported in several sources as $1.3 billion.

Ferrero will obtain Keebler, Famous Amos, Murray’s, and some other smaller brands from Kellogg. This will allow Kellogg to focus more specifically on their core business focus of breakfast cereal and snacks. They want to create a niche in both of those industry segments, that quite frankly, they could not achieve in the cookie segment of the business.

The cookie business is very competitive with Nabisco leading the pack with some top selling brands. Kellogg executives determined that the cookie brands were not a good fit for their overall business model. I have food industry background, and personally I did not understand why Kellogg purchased Keebler, Famous Amos, Murray’s, and other brands to get into that business. In my view, it never made sense that they would enter such a competitive landscape and it seemed to distract their marketing focus away from cereals and salty snacks. Those two areas have been segments of the business where the company has done very well.

Kellogg, according to a report by CNN, reportedly had $900 million in sales from their cookie brands in 2018 but that yielded just $75 million in operating profit. That demonstrates the challenges of being in that industry segment and the overhead costs involved from packaging, production, and marketing costs.

Conversely, Kellogg has had success since it acquired the Pringles snack brand from P&G. The iconic potato chip brand was a lower-performing brand that was a bit of an afterthought at P&G. The attention that Kellogg provided has turned into a powerhouse brand that has helped drive profits.

The Pringles brand along with Cheez-It, Pop Tarts, and Rice Krispie Treats are called the “power brands” by the CEO of Kellogg. This is where they will bring some very specific marketing and advertising techniques into greater intensity now that the cookie business is not siphoning off dollars.

Ferrero completed this deal so that they can gain a better foothold into the North American market. The foreign confectioner specializes in Tic Tac, Nutella, and Ferrero Rocher among other smaller brands. They took an opportunity to obtain some nostalgic brands that truly represent a slice of Americana with Keebler and the Keebler elves baking up “magic” in the oven in the iconic tree.

Famous Amos has been highly visible in parts of America for decades for their signature chocolate chip cookies. The move to Ferrero could potentially increase their entry into the convenience store chains along with Tic Tac and some other confectionary products. Ferrero most certainly has some strategic plans for the brand to make it more visible in different channels.

Ferrero will also gain the agreement to manufacture the ubiquitous Girl Scout Cookies, which are currently made by a subsidiary bakery within the Keebler business structure. That piece of business could be significant for Ferrero in an increasingly competitive cookie market.

Kellogg will shift their focus back to another core business area: breakfast cereal. The sales of cereal have been sluggish overall, but the company maintains that by exiting the cookie business they can bring some new emphasis and innovations to the cereal aisle.

Some people might have a problem with a foreign based company holding the rights to some quintessentially American brands such as Keebler, Famous Amos, and the Girl Scout Cookie that we all love to partake in. However, times are changing, and Kellogg is trying to distinguish itself within a highly competitive industry.

In fairness, Ferrero is attempting to do the same thing, they need to grow and diversify their brand holdings at the risk of being consolidated by a larger fish in the food industry pond. This transaction will help Ferrero increase their visibility and their sales volume in North America, where the cookie business is projected to grow after some years of flat results.

The consumer wins in this deal because Kellogg is going to focus on even further improving their core businesses of snacks and breakfast cereal brands. Ferrero will have a fresh perspective and will bring some new innovations and energy to the Keebler and other cookie brands that Americans have grown up with over decades. It is certainly one of the larger deals in the food industry in 2019 and could shape the directions of both companies for years into the future.

(some background info and stats courtesy of CNN and PR Newswire)

by Frank Maduri

Hain Looking To Sell Protein Business Unit

In a report by CNBC regarding potential mergers, Hain Celestial is looking to sell their protein business unit. This decision is widely regarded as a precursor to the company looking to merge the rest of their business with another entity.

My experience in the food industry is what drew me to this headline coupled with my experience in writing about mergers and acquisitions over the past few years. The consolidation of Hain Foods and Celestial Seasonings (yes the “tea people”) back in the early 2000s was never a very good fit.

The business strategy, or some may argue the lack thereof, by Hain in gobbling up smaller regional organic food product labels only exacerbated the issues stemming from the Celestial merger. The company is now a hodge podge of different brands that all do not co-exist in any sort of cohesive manner.

The sale of the protein business component of the Hain Celestial portfolio will certainly aid the eventual consolidation of the company with a “bigger fish” in the consumer-packaged goods area of the food industry.

The unit for sale is the organic poultry division of the company, which according to statements in the release from the company this area is not congruent with their future strategy. The company was ahead of the trends for organic foods at one point, and after missing the earnings per share estimates set by Wall Street, they are looking to refocus their strategic objectives.

The issue, from my perspective, that Hain is running up against is the demand for pesticide free, GMO free, locally grown/sourced food products. The offerings from Hain are not locally grown, for the most part, and are not fresh either they are generally frozen or shelf stable packaged. It is a more mass produced organic offering and they have to recalibrate their business model to meet shifting consumer demand.

The two big names associated with a potential merger of Hain Celestial are Nestle and Unilever. The implications on the food industry in either case is a scenario of the “big getting bigger” and that might alter the corporate culture at Hain Celestial and prove to have a negative overall effect on their objectives. It would make sense for either of the “big fish” linked to them to consolidate Hain Celestial because it would expand the reach of either Nestle or Unilever further into the organic foods area.

The deal would also provide the larger entity with the access to technologies that Hain Celestial uses to develop future product lines within their respective core business areas. This could provide a potential competitive advantage to a company such as Nestle in their scramble for increased market share in a variety of segments within the consumer-packaged food industry.

The suitors for Hain for their poultry division could be potentially Tyson Foods who could leverage the purchase of the protein division of Hain to bolster their presence in the organic poultry area.

The other part of this situation is that Hain could be in a position where they have to sell off other divisions of the company to be folded into a suitor like Nestle or Unilever in a more seamless manner. The sale of Hain will certainly shift the landscape in the organic food segment of the industry.

by Frank Maduri

Squashed: Hunt’s GMO Claim Buries New Ad Campaign

Hunt’s is an iconic American brand, perhaps known best as the number two brand of ketchup next to Heinz, released a new advertising campaign this past Monday. The after-Christmas marketing and advertising direction poised to take them into 2017 and it features a field of tomatoes with the voice-over: “No GMOs in sight”.

The campaign, on the surface, might seem rather benign to the average consumer. However, the campaign and the inference that Hunt’s products used non-GMO tomatoes was met with swift resistance by those in a variety of areas of expertise.

The issue being: that there are no GMOs in tomatoes that are sold to consumers in any form in the United States. The claim by Hunt’s (parent company ConAgra Foods) is now being viewed as the company trying to essentially trick the American consumer into thinking that the competition uses or contains GMO ingredients.

Furthermore, the campaign by Hunt’s is being seen as a way to capitalize on the American consumer and their inherent aversion to GMO containing food products. In the essence of the situation here, the bottom line is that it looks dishonest by the company that they are making a claim about GMOs when all tomatoes are free of the ingredients that would met a standard definition of being genetically altered or modified.

The consumer, farming, and scientific communities have all taken to social media and squashed Hunt’s for the implication that their ingredients are free of GMOs, when it would be true for the entire market. The other issue at play here is that if they planned on changing their label to reflect a “non-GMO” status, that type of change to the packaging and label deck costs money, and it is usually passed along to the consumer in the form of a price increase.

The campaign has smacked so much of utilizing public fears over GMOs that some social media comments have consumers saying that they will be buying the competition’s products because of what Hunt’s tried to insinuate in this campaign.

It would be ridiculous if Heinz had to issue a campaign or a statement regarding the GMO status of their tomato based product lines. This is a case study for a marketing and advertising campaign that has gone totally sideways from the original intent because it was not thought all the way through. It was ill-advised by Hunt’s and it is definitely misleading to the consumer, but it was not in a malicious way.

The topic of GMOs is a hot button for many, myself included, and I have written my share of pieces on all sorts of topics relative to GMOs in the past. The article I did on Campbell’s Soup and their decision to disclose genetically modified ingredients on their individual product labels has certainly sparked a backlash against their products. I have witnessed it in the soup aisle and with the reaction of those people I know regarding their soup products.

In fairness to Campbell’s, as I noted in my prior article, the staple crops in making some of their soups: corn, soy, and sugar beet are sourced from the supplier as GMO containing ingredients. This is due to the supply chain of our staple crops containing GMOs or being grown with GMO seed. The amount of organic crops of those staple items is far too limited to sustain a mass production supply level and would also be very cost inefficient at this point.

The case of Campbell’s differs from Hunt’s because the ingredients involved in making soup do have non-GMO alternative sources, in the case of Hunt’s the product is already GMO free and they were trying to pass it off as it was a decision that they had consciously made about their products.

In the end analysis, honesty is always the best policy. Hunt’s would have been better served by focusing on the facts such as: “the tomato, GMO free and always will be” or “ketchup the naturally GMO free way to give flavor to your favorite food”. The tact they took has left them in a tough spot, they have to course correct this marketing campaign or else they will be left trying to figure out what to do with all those unsold bottles of ketchup which was GMO free in the first place.

by Frank Maduri

Follow Up: Lower Food Costs and the Impact on the Restaurant Industry

In a follow up to my most recent piece on the lower cost of food commodities and the impact on the retail grocery channel; the Chicago Tribune published an interesting article on the relationship to those lower costs and the impact on the restaurant industry.

The article describes the fact that the falling food prices for staple items such as beef, eggs, and other commodity products has not translated into lower prices at restaurants. In fact, dining out is more expensive than it has been when compared to eating at home, that ratio is at the highest difference in three decades in the United States.

I was thinking about this connection myself last week when I was working on the piece on food commodities. It came about at a couple of different points last week: I had picked up some mail and the menus for some restaurants in my area were included in the ads and coupons. The prices on some of the menu items really jumped out at me for being expensive. Then, I stopped one day last week in a time crunch to pick up lunch and it was pretty expensive compared to the servings of what I had ordered.

I kept thinking about people that eat lunch out every day and how that cost will definitely add up over time. In keeping along that line, just take an example of ten dollars a day for lunch during the work week. That ends up being fifty bucks per week and two hundred dollars per month for lunch which will end up being close to two thousand four hundred dollars per year, give or take. That is for one person, for lunch, and an average cost of ten dollars. That is a lot of money for the average family.

The lower cost of food has had the reverse effect on restaurants because the cost of running and maintaining the business has not decreased. The restaurant has to be staffed and it has significant overhead costs with insurance, energy, and other costs associated with running that business.

In order to maintain profitability amid an increasingly competitive market, most restaurants have had to increase their menu prices. The other pressure point for restaurants, especially the traditional sit down places and the fast casual chains, is that the grocery store channel has become increasingly more relevant in the prepared foods area.

The local grocery store in your neighborhood and mine now has expanded upon the offerings for prepared meals to go which suit our active lives and are at a lower price point than going out to eat. I think we all can attest to a recent shopping trip where we have grabbed a cooked rotisserie chicken for dinner or put together a meal on the go from a huge selection of choices at a Whole Foods or a Shop Rite.

The numerous alternatives at the grocery store and the emergence of fast casual dining options such as Chipotle, Salad Works, and a few others have impacted the margins of the traditional restaurant channel as well. The Tribune article cites the troubles of Chili’s and a few other regional Midwestern chain restaurants in surviving this trend. The article as well as other industry resources mentions the higher minimum wage in certain states as another mitigating factor in the demise of certain restaurants in this climate.

The fast casual or traditional fast food options have lower overhead because the employees are members of a “crew” where each person is cross-trained and can complete a variety of job functions. This approach has helped them sustain profitability more than a traditional sit down restaurant but even the fast casual and fast food operators are encountering issues with falling food prices and an uncertain economy.

Many consumers are opting to save money in their budget and eliminate eating out and they are staying home. The more health conscious consumer prefers to make their own food at home with ingredients which they select, which is becoming a larger trend resulting in eroding profits in the restaurant sector.

The fast food channel has displayed several indications that they are at an oversaturation point. The industry is focused on rolling out new product offerings or seasonal products to attract new customers. The major players in the industry are putting together special promotions and full meal deals such as “4 for $4” or a “McPick Two”, to drive the value to the customer.

However, even with all of those efforts in marketing, the channel is hitting a point where it cannot grow profits. Therefore, they all made a push for breakfast and that is the final frontier, so to speak, for the fast food industry to grow profits. It is the last untapped revenue stream available to them where they can maximize the lower commodity prices for eggs and other staple items to put together a profitable set of menu offerings. The demand for a fast breakfast is also very robust for the American consumer that is seemingly always rushing around in the morning to start a very hectic day.

The traditional restaurants are going to struggle in this scenario because it is hard to compete on cost with other establishments and the fast casual/fast food/grocery prepared foods channels while maintaining their profits. It is a situation to bear in mind as the commodity pricing on food overall, and certain products such as beef and eggs in particular, will remain at a point where the restaurants and the grocery stores will feel the squeeze for the foreseeable future.

by Frank Maduri

Dannon Launches GMO- Free Yogurt

Dannon announced today that the company has launched yogurt products which are free of GMOs in the United States. The changes have been made to the Dannon main brand product line and to the Oikos Greek yogurt brand product line. The company, according to industry and financial media reports, also plans on launching GMO free product versions of the Dannimals product line geared toward children.

The products that cannot be made with GMO free ingredients or GMO free milk will be labeled very distinctly that they contain genetically modified ingredients. The products that are now GMO-free have a new packaging and a distinct label indicating GMO-free.

I discovered this while shopping in my local grocery store today and picking up some Greek yogurt I noticed that the Oikos products had a new package that was clear plastic so that I could see the product. I picked it up to see what the new package indicated and noticed the GMO free label right away. I have advocated for GMO labeling on food products for a long time now, so I was very happy to see this change today.

Dannon is making an effort to source all of their milk from non-GMO sources by either late 2017 or 2018 depending on what reports you may see on this topic. I think that latitude in the time frame is also predicated on demand for the products potentially increasing and the need for more adequate supply to catch up and flatten out that curve.

Dannon is certainly going to gain customers from this change, even if it is incremental, because not all the products in the brand lines I mentioned above have hit the shelves with their GMO free versions yet. However, those that have certainly will get the attention of the consumer in a positive way.

The groups that advocate for GMO labeling and for a change to non-GMO sourcing in food products have been hammering Chobani and General Mills (Yoplait) for a long time now to make this change. The fact that Dannon was the first to market with this concept in this food product category that has exploded with the trend toward healthier eating in the U.S. bodes well for their brand image and reputation. That is all going to translate into increased sales and revenues for Dannon.

The decision to label the products that cannot be made GMO-free (at least at this point in time) is another constructive step that will push their competition to consider similar measures. The American consumer tends to look favorably upon transparency and this willingness by Dannon to comply by telling the consumer what is and what is not GMO free is a step in the right direction for proponents of stricter food labeling measures.

In the case of Dannon, my earlier article on their acquisition of White Wave Foods will only serve to enhance their capabilities in offering further GMO free product options across all their brand lines in the future, should that transaction be approved.

It is going to be interesting to see how the rest of the yogurt market responds to this move by Dannon today. It certainly sets the playing field on a bold new path. I know the consumer is going to find it favorable. In time we will know how the rest of the industry tries to respond to an ever growing trend of GMO free product demand.

by Frank Maduri

Doubling Up: Danone Purchases White Wave

The latest in the seemingly continuous cycle of food industry mergers and consolidations was finalized today with international dairy giant, Danone acquiring a leading American organic food maker, White Wave Foods, in an all cash deal. The details of the transaction put a valuation on White Wave of $56.25 per share which equates to about a 24% premium over their average share price in their 30 day outlook. The deal has a total value of $12.5 billion according to several mainstream media outlets covering the financial transactions of the day.

My perspective on this situation comes from my time working for a food ingredient supplier that was partnered with Danone on numerous product lines. I have had direct involvement with Danone in the US which is more commonly known as Dannon. The statements released today announcing this transaction reflect the emphasis on values which are very important to Danone, in my experience. The focus on healthy food options for the consumer being a core value.

The transaction today essentially doubles the size of Danone’s North American business market share once the deal is finalized. The two companies have some great synergies with a common shared strategic specialty in the dairy segment of the industry. The proposed transaction will provide two major boosts to Danone with regard to their long term business strategy by obtaining White Wave: it provides a robust boost to their overall sales growth (Danone has had some issues with barriers to growth in emerging markets) and it will give them an entry point into the American organic foods segment which is poised for huge growth potential.

Danone has several well-known brands such as Oikos Greek Yogurt, Activia (yogurt), and Evian bottled water. This move to fold in White Wave will enhance their ability to compete with Nestle and General Mills, among other competitors.

White Wave has such notable brands as Horizon Organic and Silk. They possess some very valuable strategies and technologies with regard to the coveted organic/healthy food trend that is sweeping North America at this point. Their combination with Danone will result in an expansion of those brands and product lines as well as new business growth areas based on their shared expertise.

Both companies are committed to healthy lifestyles and sustainable product supply chains with shared focus on providing the consumer with healthy choices at cost effective price points. It will be interesting to see how the White Wave portfolio will be grown with Danone steering the ship.

In my view I know that Danone will seek to work with their select ingredient suppliers to eliminate redundancy in the supply chain for both companies wherever possible because that will directly enhance cost controls and maximize profitability.

It should not be lost that this move will also give Danone a position to compete with their yogurt lines against Chobani and Fage through the utilization of White Wave’s brand portfolio and organic milk production capabilities.

In the end, it is a smart move by Danone and it looks like a very fair valuation of the White Wave business at this point. In the event it gets finalized the consumer will reap the benefits of their collaborative strengths in the production of healthy and organic food offerings.

by Frank Maduri

Rebuffed: Hershey – Mondelez Merger Proposal Rejected

The proposed merger between Hershey and Mondelez at the end of last week was quickly rebuffed by The Hershey Trust which represents 81% of the voting power in the company. The trading of Hershey stock continued to climb due to an increased perception that, although the Mondelez deal was rejected, the chocolate giant would be acquired by another entity.

In my initial piece on this proposed deal last week, I was skeptical of the Mondelez offer for Hershey because it was being initiated because Mondelez had no room to grow, needed a branding makeover, and needed to grow market share in North America in their confectionary division. These three rationales are usually indicators which portend a poorly conceived merger of two organizations which generally ends badly.

Mondelez is now left to search for another potential partner so that they can attempt to gain a more stable foothold into the North American confection and snack marketplace. The former division of Kraft Foods has the cash to spend to make this acquisition eventually take place with the right suitor.

The merger proposal rebuffed by Hershey had some definite hurdles via the Pennsylvania state level regulatory bodies and through federal anti-trust regulations. Hershey remains an attractive target for another food company to pursue, and those suitors could line up in the weeks and months to come before the close of the calendar year.

However, that being stated, The Hershey Trust and the Pennsylvania Attorney General’s Office both have the ability to block the potential sale of Hershey and have done so in the past. The successful acquisition of Hershey would have to be a well-structured deal that accounts for all of the political and business implications involved; therefore that type of bid would have to be navigated by investment banks and M&A executives who have been involved in similar scenarios.

The way forward for Mondelez at this point is unclear, the executives and others there most probably felt that they put together an impressive offer to obtain Hershey. It now appears that the deal will never materialize.

In my view, the potential for a Mondelez bid for a company such as Mars Candy is not too far a stretch. That potential acquisition would provide the expanded market share in North America in strategic markets, it would provide a branding image makeover for Mondelez, and it would allow for the consolidation of resources to aggressively deal with rising commodity prices for cocoa as well as other staple ingredients in the confectionary industry.

In the case of Hershey, my opinion is that they could be merged with a larger food conglomerate such as ConAgra, which made news earlier this year with the announcement that they were moving their corporate headquarters from Omaha to downtown Chicago in order to be a more desirable employment destination for younger generations who desire to live and work in cities. They have an eye towards growth and Hershey could be a bold move into new territory for them.

In the end, the Mondelez – Hershey deal was a non-starter because Hershey did not want to sell to them and be merged with a company that has some other rather daunting issues. The right deal will come along for both companies to chart their respective future strategic growth and that is going to be interesting to see unfold in the months ahead.

by Frank Maduri

Mega Makeover: Mondelez / Hershey Merger Proposal

The news this morning that sent the stock market surging was a proposed merger between the top two candy and snack manufacturing companies in the United States: Mondelez and Hershey. The news sent shares of Hershey dramatically upward, and shocked others in the food and beverage industry space.

The Wall Street Journal reports that the proposed deal is for $23 billion and the financial markets have responded with shares of Hershey at a 52 week high. The proposal, if approved by regulators, would create one company under the Hershey brand umbrella.

Mondelez split from Kraft Foods about four years ago and has largely struggled to gain brand recognition. The name, Mondelez, has been problematic for the company because the American consumer believes that the products are made in Mexico and other countries and shipped in to the U.S. marketplace (which is true in some cases and not true in others). This merger represents a potential makeover for Mondelez to set a whole new branding message around one of the quintessential American brands: Hershey. The fact that they are willing to pay megabucks for this acquisition represents the desperation they have in reinventing themselves.

I believe that what fascinates me and so many others who have worked in the food industry space and also have knowledge of the financial markets is that this deal is indicative of the nationalistic agenda that has been sweeping the world. The markets have been struggling due to the “Brexit” decision that many see as nationalism gaining a victory with Great Britain separating from the E.U. last week.

This proposed merger is all about nationalism as much as it is about consolidation of two large corporations to cut costs and maximize profit margins. The guys at Mondelez have an opportunity to market their brands with a whole new strategic shift under the Hershey name. They can tout that the company headquarters is now in Hershey, PA which is an iconic American destination, especially now in the height of the summer vacation season.

Mondelez International is headquartered in Deerfield, IL and employs over 100,000 people. They hold the brand rights to Oreo, Nabisco, Cadbury, Chips Ahoy, and Triscuit just to name a few of their billion dollar brand lines. The company generates tens of billions of dollars a year in revenue and this merger would make the combined entity a significant competitor to Nestle in the marketplace.

The branding and P.R. aspects of this merger are just one component of the scenario. Mondelez had grown essentially to their capacity and so M&A activity is the only other pathway to getting larger. The synergies between both companies are evident, as the combined entity would conceivable grow the confectionary brand lines through shared intellectual property and manufacturing technology techniques.

The new combined entity would have significant power in the negotiations for retail shelf space and most likely see cost savings from streamlined distribution operations as well. The combined company will most likely look to grow their market share in the cookie and cracker industry segment.

The cascading effect will be for the other food companies in the next tier beneath Nestle and the newly proposed Hershey, companies like ConAgra, Kellogg, and Campbell Soup. Those companies will be key players for the purchase of brands that both Mondelez and Hershey will potentially have to divest in order to satisfy regulatory boards for anti-trust reasons.

The proposed combination of Mondelez and Hershey would also have more sway over suppliers of food ingredients and could command a whole new system for doing business which would have a direct impact on the food ingredients market place in the way of cost cutting and potential consolidation of product submissions.

In the end analysis, the hurdles remain for this combined company to become a reality, but if it does gain approval it will be yet another example of American corporate largesse. It also represents the lengths a company will go in order to makeover their image in the court of public opinion. The impact on consumer perception is hard to tell until it occurs, but perception is reality and that concept is at the center of this latest merger in the American food industry landscape.

by Frank Maduri

Tainted: Academies of Science GMO Report

The report issued today from the Academies of Science which essentially stated that GMOs in our food supply are safe for humans to consume came under fire by several consumer advocacy groups. The media coverage of the report can easily be found, and in fact, USA Today did fair and balanced overviews of both sides of this argument.

The focus of this commentary on my own blog here is to not delve into the specifics of the report from this organization, but rather to focus on the facts and implications that still remain in the “great GMO debate” in America. Most of you know as readers of my prior work on the topic of GMOs that I am very strongly anti-GMO. That stance has been honed by researching tons of scientific studies and empirical data from trusted sources and reading accounts of the effects of herbicides such as Roundup and their impact on the soil and crops in our country over a period of roughly 20 years.

Despite what this report released today states, GMOs are not safe for humans to consume, products such as herbicides and pesticides have caused all sorts of illnesses in children and adults. The use of genetically engineered seeds and other products in our agricultural production processes has a direct correlation to increased incidences of gastrointestinal, autoimmune, cancers, and other diseases.

Several other consumer advocacy groups and others involved in the food industry agree with my view on this report and on this situation. The reason: the Academies of Science report is tainted, it is skewed because the scientists and other members of the organization are linked with the large biotech companies and the agricultural production giants such as Monsanto. This effectively caused one group, Food & Water Watch (which is a respected consumer advocacy group) to call the results “watered down”.

This is not the first time, nor will it be the last, that the biotech and big agricultural giants like Dow Chemical and Monsanto got involved to directly or indirectly influence a report or a legislative measure when it comes to GMOs. I have written numerous articles over the past few years on this same subject with political donations being linked to high powered politicians who then change the course of a particular bill so that it is favorable to the big business interests involved.

This should come as no surprise to anyone in the audience because the genetic engineering of food has always at the core been inherently about pure greed. The ability to grow more product or make the food last longer so that stores had less perishable or expired inventory has been the catalyst behind a “make it GMO or bust” mentality.

The evidence of that is clear in the U.S. according to reports published in USA Today, Yahoo! News, and other trusted sources the following numbers for 2015 are staggering with regard to the prevalent nature of genetically engineered produce in our food supply. I have listed below the percentage of each crop that is genetically engineered:
Sugar beets = 99%
Soybeans = 94%
Cotton = 94%
Feed corn = 92%

I have written previously about the pervasive and persistent nature of the GMO problem in the U.S. based on these numbers above. It has created conditions where now the staple products are genetically modified and the soil has been degraded to a point where it is not capable of growing non-GMO produce. The other issue which is just as troubling is that the seed used in so many crops are genetically modified and two main companies – Dow and Monsanto control a huge market share in the seed business for our food supply.

The amount of feed corn that is genetically modified is also a tremendous problem because it has a direct impact on so many areas of agriculture which impacts the food that is provided to many of our sources of animal protein. In turn that creates a scenario where it is very difficult to avoid GMO containing products in your given daily food intake.

In any case, despite your view on the situation, God created all that we have been given here on Earth, every living thing, the soil, the seeds, the water, and the Sun. Then mankind came along and decided that they knew better than God and they decided to alter what God created in the name of enhanced profit margins. There are many other people and groups out there that also agree with this component of my argument against GMOs.

The incidences of increased levels of autoimmune diseases such as celiac, Parkinson’s disease, dementia, certain types of cancers, and other gastrointestinal diseases all jumped up in the past 20 years since man decided that they would alter the crops and the seeds and the soil with chemical ingredients and herbicides.

I cannot emphasize enough that the ties to the Academies of Science and the biotech and agricultural products suppliers casts a huge cloud of suspicion over the validity of the report issued today. It certainly was a far cry from an independent analysis on this issue.

National Geographic put together a really informative and well done piece on the effect of Roundup brand herbicide on the crops and the soil in the American farming system. The results, and the amount that we do not know about such a widely used chemical are alarming.

The final subtopic I will touch on with regard to this issue is the labeling of GMO product which is a debate that I have covered vigorously over the past few years as well. The consumer groups today stated that the majority of Americans still believe strongly that they have the right to know if the food they are consuming is GMO containing. That fight over labeling standards and a national protocol for labeling food products is not going away with this announcement today.

The basic premise being that even if a group states that GMOs are safe, the majority of people, whether they believe those ingredients are bad or unhealthy or not, still maintain that they should know whether the product they are going to purchase contains genetically engineered components.

The fact that so many of the staple food crops that I referenced earlier in this piece are genetically engineered creates a potentially very negative situation for certain large food producing companies such as Nestle and ConAgra just to name two. The consumer will most definitely think twice about buying a can of soup with genetically modified soy in the ingredients.

The federal government has to get involved with a standard protocol because each individual state cannot have their own separate ways of declaring GMOs on labeling for grocery products, it will become a complete nightmare for interstate commerce.

In the end, the report today did nothing to quell the debate over GMOs in the food we eat, instead it stoked the fire. This debate will continue because there is a mountain of evidence to refute what this report claimed today. The trend toward healthy and fresh/ organic eating habits in the American consumer will not change because of this report today. The distrust of the government, the disdain for lobbyists, and the general skepticism towards large corporations will continue in America, and in fact was emboldened by this report today. I urge you to educate yourself on this topic because it can have a dramatic impact on your health and that of the rest of your family. This report cannot change that fact.