Challenges Emerge as Grocery Industry Restructures

NEW YORK — The same forces inspiring a new wave of supermarket consolidation are likely to spark a concurrent groundswell of retail bankruptcies and restructurings.

The latter phenomenon will present opportunities and challenges to lenders, lawyers, strategic investors and others who do business with distressed companies, according to speakers at a panel discussion here Thursday. And understanding the unique challenges facing distressed supermarkets is key to successful restructuring, they said.

“For traditional supermarkets … the market is competitive, it’s saturated, and its been tough for a number of years,” said panelist Richard Pedone, a partner with the law firm Nixon Peabody. “And it’s bringing us to a flashpoint where you’re going to see a lot more distress.

“It’s a mature industry where people are killing each other. And where that happens, there’s bound to be opportunity,” he added.

Much of the stress on traditional supermarkets has come as a result of non-traditional competitors including clubs, mass merchants and specialty stores that have absorbed nearly all of the sales growth in the industry since 2008, said another panelist, Craig Boucher, a director at Deloitte’s corporate restructuring group. Boucher briefly served as Winn-Dixie’s chief financial officer while that chain went through a Chapter 11 bankruptcy.

According to Boucher, pressure from non-traditional competitors is forcing some smaller supermarket retailers to seek additional strength and buying power through strategic mergers. Although there has been more than $22 billion in supermarket mergers in 2013 — the hottest pace of consolidation since 1999 — there is still more capacity not likely to be part of a merger, he said.

“There are 38,000 grocers in the U.S. — not stores — grocers,” he said. This group accounts for more than 58% of the supermarket industry with no single player accounting from more than 1.2% of the total share.
Restructuring a grocery chain presents challenges that tend not to exist when dealing with non-supermarket retailers, particularly on the legal front, said Lee Harrington, a partner in Nixon Peabody’s financial restructuring and bankruptcy practice. These challenges include so-called PACA claims arising under the Perishable Agricultural Commodities Act, which creates a trust for the benefit of suppliers to collect payment on perishable items.

Harrington, who worked on A&P’s bankruptcy, said that case helped to establish a mechanism to deal with such claims, which totaled $3.4 million.

Read More: http://supermarketnews.com/retail-amp-financial/industry-faces-restructuring-challenges-panel#ixzz2f4fmgSYn

Written by Jon Springer on Spet. 13th, 2013

Buffett's Berkshire Hathaway Pulls Out on Kraft, Mondelez Stakes

Warren Buffett's Berkshire Hathaway (BRK-A) sharply reduced its holdings of Kraft Foods (KRFT) and Mondelez (MDLZ) during the second quarter.
The company's quarterly filing with the SEC shows Berkshire held just 192,666 shares of Kraft Foods as of June 30. That's a drop of 88 percent from its reported holdings as of March 31.
Mondelez was cut by 91.8 percent to 578,000 shares.
The two companies were created by a split up of Kraft Foods Inc. in October, 2012.
(Read more: Berkshire's Heinz squeezes out 600 employees )
Berkshire increased its General Motors holdings by 60 percent to 40 million shares. That stake is worth $1.4 billion now.
Berkshire is reporting a new stake in Dish Network (DISH) of 547,312 shares. That's worth about $24 million at the stock's Wednesday close.
The small size of that stake indicates it was bought by one of Berkshire's portfolio managers, not by Buffett himself.
Buffett has said that the portfolio managers, Todd Combs and Ted Weschler, don't need or get his approval before buying or selling shares.
(Read more: Berkshire Hathaway's 15 Biggest Stock Holdings )
Contrary to other media reports, Berkshire made no changes in its holdings of Wells Fargo (WFC), American Express (AXP), and Coca-Cola (KO).
(Read more: Warren Buffett sees 'betrayal' as hospital drains big endowment )
In the first quarter of this year, Berkshire eliminated its holdings of two stocks: Archer Daniels Midland (ADM) and General Dynamics (GD),
Berkshire also added a 6.5 million share stake in Chicago Bridge & Iron.

Report: Specialized supermarkets take lead in industry - HEB, Wegman and more

There’s no denying that to many Americans, supermarkets are a bland and boring necessity. Sure, they’re convenient. But the way they’ve been bleeding market share for so long to other channels -- including drug, dollar, convenience, club, limited-assortment, discount and specialty stores, not to mention online retailers -- shows they just don’t generate loyalty.

A beefy new report from Hartman Strategy, a division of the Bellevue, Wash.-based Hartman Group, delves into how some supermarkets are becoming super again, while most are becoming increasingly irrelevant.

The best strategy, James F. Richardson, SVP of Hartman Strategy, which focuses solely on the food and beverage sector, tells Marketing Daily, is that supermarkets need to “focus on delivering great fresh food, which is driving the majority of shopping trips.”

Too many chains, he explains, act as if consumers are driven by the same pantry-stocking behaviors they were a decade ago. Hartman reports only 31% of dinners typically involve cooking from scratch. Instead, shoppers come to supermarkets to fuel their “what’s for dinner tonight?’ needs: Almost 31% of immediate-consumption eating occasions involved an item purchased at a grocery store.

And those so-called center-aisle products, the shelf-stable items that still account for 70% of sales, are less important. Sales are shrinking, not growing, and those slow-to-turn-over bottles of Worcester sauce, jars of pickles, and boxes of confectioners sugar cut into profits.

These consumer changes present plenty of risks for branded products as well. “The reality is that shifting volume out of grocery into discount channels presents a real long-term danger for established CPG suppliers,” the report says, “especially when discount channels are innovating in private-label emulations (and don’t require brand promotional spending to grab share).”

It’s also time for stores to abandon the pretense that they are all things for all people, he says. The fastest-growing leaders are those that are either offering specialization in a purely upmarket option, such as Whole Foods; one that is entirely downscale, like Winco; or an approach that varies its up-or-down strategy on a store-by-store play, a strategy used by HEB. 

Also critical: Making sure each store reflects local food culture. Tesco’s failure with Fresh & Easy provides a cautionary tale. 

“They ultimately designed an upmarket private label-heavy format that competes directly with Trader Joe’s,” the report notes, but then “placed 40% of its stores in zip codes skewing low income and/or low education, and 30% of its stores in Hispanic-heavy neighborhoods. The low-income, low-education consumer audience was not interested in their offering.”

By contrast, it points out how well Wegman localizes its stores, providing a high-end and differentiated experience to a broader audience.

Overall, the report says, it's time for stores to ditch the middle class. “The middle class consumer is more trained than ever to trade up or to trade down where appropriate in a multichannel food shopping context. They prefer to do this, however, at specialist retailers, whose commitment to editing the store against either of the market extremes is obvious, thorough, and well regarded in their social networks. Each supermarket ultimately needs to position itself at either extreme to outflank the local competition.”

Innovation becomes key as grocery competition intensifies

Supermarkets are undergoing some of their greatest changes since they came to the fore in the 1940s and 1950s, according to a new report from market researchers Packaged Facts. Indeed, while “The Future of Food Retailing: Shopper Insights and Market Opportunities,” report reiterates a great many of the same observations we make on a daily basis on both our website and print editions, it also provides additional color to enhance its findings.

“Economic, demographic, lifestyle and technological changes have created not only a fertile environment but the absolute necessity for new concepts to engage shoppers, capture share of stomach, and re-invent food and beverage retailing,” says David Sprinkle, research director for the Rockville, Md.-based market research firm. While the greatest competition to supermarkets and grocery stores comes from supersized, one-stop shopping venues like supercenters and warehouse clubs, the threat has spread out across myriad retail channels, including drugstores, dollar stores, limited assortment chains, and (the elephant in the room) online grocery shopping.

However, while supermarkets remain the majority force in food shopping, Sprinkle says, “They are no longer calling the shots” for the roles now shared with Whole Foods and Trader Joe’s on the natural/specialty side, Walmart, club stores and dollar stores on the value front, and farmers markets and food trucks in trend-setting.

At the same time, 2012 and 2013 have been big years for mergers and acquisitions in the retail food industry, as strategic buyers and private investors seek a way to expand their businesses to additional markets. Further, while the economy has shown positive signs of recovery in the past year, many consumers remain buffeted – if not traumatized – by higher gas prices, rising food prices, mounting healthcare costs and increased payroll taxes. Accordingly, most folks continue to feel economically squeezed and spending-shy, a fact that most grocery execs are acutely aware of – and how.

Other noteworthy insights from the report that caught my eye:

- Although many grocery shoppers are operating within a short time horizon, for most people grocery shopping is an activity that involves preparation. A substantial majority of grocery shoppers (85 percent) report that they do some kind of planning beforehand, according to Packaged Facts Food Shopper Insights survey data. Only 37 percent of grocery shoppers say they often stop by the grocery store on the spur of the moment.

- That’s in large part because saving money remains a key consideration. Two out of three grocery shoppers agree with the statement: “I buy a lot of groceries that are on sale or promotion.” Moreover, almost half (47 percent) used coupons or coupon codes during their most recent grocery shopping trip, 42 percent checked store circulars, 31 percent used store savings clubs/loyalty cards, and 11 percent used coupon matching services (such as double coupons).

- Even if the vast majority (83 percent) of shoppers say they are satisfied with the store(s) where they usually shop for groceries, only slightly more than half (56 percent) enjoy grocery shopping, and 18 percent actively dislike grocery shopping.

- The slippage suggests that retailers can do much more to make the task of grocery shopping easier, less burdensome, and maybe even pleasurable for a significant proportion of their customers.

For more information, visit www.MarketResearch.com.


Hosted by Progressive Grocer’s team of seasoned supermarket industry scribes, Aisle Chatter blends the latest industry information with insider viewpoints as a natural complement to PG’s reliable industry news platform. With three content sections - Trending Topics, On Our Minds and In The Aisles - Aisle Chatter is a new destination for visitors to learn, track and participate in the latest supermarket industry buzz.

Article written for Progressive Grocer's by:
Meg Major

Chief Content Editor

mmajor@stagnitomedia.com

http://www.progressivegrocer.com/top-stories/headlines/trending-topics/id39675/a-remix-in-grocery-retailing/ 

Best Overall Brands: Crest, Gillette, and Dove; and Kellogg, Heinz, and Kraft



The best overall brands in health and beauty, and food and beverage categories are Crest, Gillette, and Dove; and Kellogg, Heinz, and Kraft, respectively, according to a pair of new Forrester rankings based on online surveys this year of 4,500 adults. The Boston-based market research firm argues that brand health comes from the extent to which it is trusted, remarkable, unmistakable, and essential. If you turn that into an acronym, you get Forrester's TRUE formula for brand equity.


In the survey, from which the rankings are derived, consumers said Dove provides "a consistent experience every time I use the brand," and has "products/services that consistently deliver on their promises." Thanks in part to its campaign about authentic, versus manufactured, beauty the company has gone from a $200 million soap brand in the 1990s to a $4 billion mega-brand today, notes Forrester.

The research firm suggests brands shouldn't expect miracles based on spikes in consideration from a new product, or sudden interest from a new ad campaign. Dove's slow and steady pace is exhibit A: trust over buzz wins, says the consultancy. The firm says P&G's Crest and Gillette also lead in their categories because of this, with the latter leading among men between 25 and 34. The firm says that by contrast, younger, more niche brands like Axe haven't yet built trust, and haven't become "essential" to consumers. The brand, per Forrester, does resonate with consumers 18 to 34.

Dove, meanwhile, does best with women 40 to 49, with consumers overall preferring Dove over all other brands based on the levels of trust consumers have for it. The survey found, for example, that the brand provides "a consistent experience every time I use the brand," and scores well for "having products and services that consistently deliver on their promises."

Thanks to a refocus on athletes, Gatorade did well in the food and beverage survey in terms of consumers' sentiment that the brand helps athletes "to always perform at their peak." Forrester said the PepsiCo unit's marketing strategy around affiliating the brand with athletic performance, plus touting scientific research to back its claims, puts it above Coke on the brand ranking with its core target audience of 20-something men. The firm also says Gatorade's efforts have helped return it to a dominant -- 46% share -- position in the global sports drink sector.
Generally speaking, the study finds that familiar food brands have the highest TRUE ranking and "old-guard" brands are more trusted by upstarts. And -- not surprising -- as trust drops, so does preference. For example, Vitaminwater, whose preference level is under 20%, has the lowest trust score of any brand in the competitive set. Above Vitaminwater is Snapple, which is bested, in terms of preference, by Pepsi, Lipton, Gatorade, Kellogg, Nestle, Kraft, Coke and Heinz.

Article Written by Karl Greenberg, Yesterday, 2:34 PM for Marketing Daily - original post can be found here.http://www.mediapost.com/publications/article/204498/forrester-healthy-brands-are-true.html#axzz2ZFVaGIQj

Kroger to Buy Harris Teeter for $2.4 Billion

A Kroger-operated market in Del Mar, Calif. Kroger will acquire 212 Harris Teeter stores.
The Kroger Company, seeking to expand in the Southeast and mid-Atlantic regions, said on Tuesday that it would acquire Harris Teeter Supermarkets for $2.4 billion.
Kroger agreed to pay $49.38 a share in cash, about 2 percent above Harris Teeter’s closing price on Monday and 34 percent above the price on Jan. 18, when media reports emerged that Harris Teeter was exploring strategic alternatives.
Harris Teeter has 212 stores in North Carolina, Virginia, South Carolina, Maryland, Tennessee, Delaware, Florida, Georgia and the District of Columbia. The company also operates distribution centers for grocery, frozen and perishable foods in North Carolina. Harris Teeter posted $4.5 billion in revenue for the 2012 fiscal year.   Kroger said it would finance the transaction with debt and assume Harris Teeter’s outstanding debt of about $100 million. Harris Teeter will continue to operate its stores as a subsidiary of Kroger and will continue to be led by Harris Teeter’s senior management team. There are no plans to close stores.
Kroger expects the deal to result in savings of $40 million to $50 million over the next three to four years.
“This is a financially and strategically compelling transaction and a unique opportunity for our shareholders and associates,” David B. Dillon, Kroger’s chairman and chief executive, said in a statement. “Harris Teeter is an exceptional company with a great brand, friendly and talented associates, and attractive store formats in vibrant markets run by a first-class management team.”

Thomas W. Dickson, the chairman and chief executive of Harris Teeter, said, “Harris Teeter has a long track record of creating shareholder value, and this merger is the culmination of those efforts over many years.”

Bank of America Merrill Lynch advised Kroger and Arnold & Porter served as legal adviser. J.P. Morgan Securities advised Harris Teeter, and McGuireWoods was its legal adviser.

Original Article authored by Dealbook for the NYTIMES and can be located here)http://dealbook.nytimes.com/2013/07/09/kroger-to-buy-harris-teeter-for-2-4-billion/?ref=business

Kroger, Macy's Among Nation's Top 20 Retailers - Check Out The List

The top 20 retailers ranked by 2012 U.S. sales were Wal-Mart, Kroger, Target, Walgreen, Costco, The Home Depot, CVS Caremark, Lowe's, Best Buy, Safeway, McDonald's, Sears Holdings, SUPERVALU, Publix, Amazon.com, Macy's, Rite Aid, Ahold USA/Royal Ahold, Delhaize America, and Kohl's.

Two Cincinnati-based companies – The Kroger Co. and Macy’s Inc. – remain entrenched on a list of the nation’s largest retailers for U.S. sales.

The National Retail Federation’s STORES magazine lists Kroger as the nation’s No. 2 retailer reporting more than $92 billion in sales last year and Macy’s was the No. 14 retailer with $26.3 billion in sales.

London-based Kantar Retail compiled the data.

Kroger remained No. 2 on the list from a year ago while Macy’s jumped two spots on the list.

Sales for Kroger rose 6.6 percent and its store count dipped 1 percent to 3,538 from 2011.

Sales for Macy’s rose 4.9 percent from 2011 while it gained one store to stand at 841.

Based on 2013 projections, Kroger is expected to maintain its position as the nation’s No. 2 retailer and Macy’s is expected to rise to No. 13 in the country.

Kroger could rise to be the world’s fifth largest retailer based on sales projections for the 2013 calendar year, based on data provided by Kantar Retail.

Walmart remains the nation’s and the world’s largest retailer as it generated $467.9 billion of sales worldwide. An estimated 70.3 percent of company’s sales were in the United States.

(Original article written by Bowdeya Tweh for cincinnati.com and can be located here)

The Manufacturing Powerhouse States You Never Thought of

"In fact, the manufacturing of durable goods -- things that last longer than three years, such as cars, appliances or software -- grew by more than 9% nationwide in 2012, according the BEA. It was the leading contributor to growth in 22 states, the bureau said." ~ By Steve Hargreaves @hargreavesCNN

On the Left: Intel Microships out of Oregon.

On the Right: Ball Mason Jars from Jarden Home Brands in Indiana. 

Guess which state had a manufacturing boom last year? It's not in the Rust Belt, nor the South, and autos have nothing to do with it.

Oregon comes out on top. With Indiana following in 2nd place.
Manufacturing made up 39% of Oregon's GDP last year -- more than any other state:

Oregon's gross domestic product grew 3.9% last year, making it the third fastest-growing state economy after North Dakota and Texas, according to Commerce Department data released last week. Unlike those states, which benefited from an energy boom, Oregon drew about two-thirds of its growth from durable goods manufacturing.
Digging deeper into the data reveals a meteoric rise at a time when manufacturing activity was stagnant, or even declining, in more traditional manufacturing states.

About 15 years ago, manufacturing only accounted for about $9 billion, or 9%, of Oregon's economy. By 2012, it had risen to $74 billion, or a whopping 39% of Oregon's entire economic output -- the highest proportion of any state.

Oregon isn't large. By GDP, it ranks 25th in size among the 50 states. But its manufacturing sector has risen so rapidly that Oregon now ranks sixth in manufacturing output, surpassing even states like Indiana, Michigan and Pennsylvania.

Original Article writter by By Annalyn Kurtz June 10, 2013 for CNN: Money and can be found HERE.


Oscar Meyer crafts the fanciest velvet bacon box ever for Father's Day

Oscar Meyer crafts the fanciest bacon box ever for Father's Day 

The folks at Oscar Mayer are allowing consumers to ‘say it with bacon’ as they can purchase velvet boxes full of bacon. The gifts are apparently available for just four weeks beginning June 4, 2013.

According to the WSJ:
"Delicately bundled in a luxurious velvet jewelers box, the Oscar Mayer Original Collection includes 18-20 slices of delicious Oscar Mayer Original bacon, and is available in three personalized gift sets: The Commander, which comes with a stainless steel money-clip engraved with the words “Bringin’ it Home” and an image of a bacon strip; The Matador, which features two handsome bacon strip cufflinks; and The Woodsman, which includes a rugged 12 function multitool with a bacon strip image carved into the handle."

You can purchase the boxes for around $22-28 each, only at www.SayItWithBacon.com from June 4 to July 1, 2013. Also, the video is hilarious…

Sprouts Seeks Fuel for Growth in IPO in Plan for 1000 Store Expansion

Sprouts Seeks Fuel for Growth in IPO

(Article written by Jon Springer for Supermarketnews.com and can be found here)

PHOENIX — Sprouts Farmers Markets is touting rapid sales growth and the potential to add more than 1,000 new stores in a prospectus detailing plans for an initial public offering of stock.

The retailer here, which operated 157 stores as of May 1, said it plans to grow its store count by at least 12% annually over the next five years, with the potential to operate as many as 1,200 nationwide. Sprouts posted comparable sales growth of 9.7% in 2012, according to the filing, and has marked positive comps for 23 consecutive quarters.

Sales for 2012, including Sunflower assets added during the year, totaled $2 billion. The company posted $20 million in net earnings for the year.

Spouts, which is controlled by the private investor Apollo Capital Management, did not indicate how much it intended to raise in the IPO, but said it intended to use proceeds to service debt from its recent refinancing and for general corporate purposes.

Sprouts in the filing said its combination of natural and organic foods and low prices in produce gives it broader appeal than "high end" natural and organic retailers. Its strategy is to use low prices in produce to attract and then transition conventional grocery shoppers into more loyal "lifestyle" shoppers.

"The foundation of our value proposition is fresh, high-quality produce which we offer at prices we believe are significantly below those of conventional food retailers and even further below high-end natural and organic food retailers," the company said. "We believe that by combining our scale in and self-distribution of produce, we ensure that our produce meets our high quality standards and can be delivered to customers at market leading prices. In addition, our scale, operating structure and deep industry relationships position us to consistently deliver ‘Healthy Living for Less.’ We believe we attract a broad customer base, including conventional supermarket customers, and appeal to a much wider demographic than other specialty retailers of natural and organic food."

The IPO would follow those of other growth-oriented speciality food chains that have tapped the public markets recently, including Natural Grocers by Vitamin Cottage, The Fresh Market, and Fairway Holdings.

$4.2B gluten-free food market only expected to keep growing

$4.2B gluten-free

food market only expected to keep growing

(Article written by Roger Riddell for Fooddive.com, original article can be found here)

Dive Summary:

• Packaged Facts reports that gluten-free food sales reached $4.2 billion last year, with the market forecast to top $6.6 billion in 2017.
• Gluten-free foods have become popular due to some consumers' belief that they can't tolerate the protein, which is found in foods processed with grains, and parents who say gluten is harmful to children with autism, though NPD Group senior analyst Harry Balzer expects interest in the category to fade eventually.
• Food giants like Mondelez International, General Mills and Kellogg's all offer gluten-free foods, and restaurants like Domino's Pizza are also beginning to cash in on the latest health interest.

From the article:
... A recent survey released by NPD Group found that 29% of U.S. adults say they want to either cut back or eliminate gluten from their diets, an increase from 24% in 2009. However, NPD senior analyst Harry Balzer tells MSN Money he expects interest in the category to fade, though he isn't sure when.
"This is the health issue of the day," he said, adding that his research doesn't delve into why people want to buy gluten-free goods. ...

READ THE FULL ARTICLE FROM MSN.COM HERE

Where Did Food and Grocery Companies Land on this Year's Fortune 500?

Where Did Food and Grocery Companies Land on this Year's Fortune 500?

(Written on May 6, 2013 by Davide Savenije for Fooddive.com)

The Fortune 500 for 2013, the annual list of U.S. companies with the most revenue, has been announced by Fortune magazine and a whole slew of food companies were on it. Check out who made the list:

1. KROGER
Rank: 23
Revenue: $96.8 billion
Profits: $1.5 billion

2. ARCHER DANIELS MIDLAND
Rank: 27
Revenue: $89 billion
Profits: $1.22 billion

3. WALGREEN
Rank: 37
Revenue: $71.6 billion
Profits: $2.13 billion

4. PEPSICO
Rank: 43
Revenue: $65.5 billion
Profits: $6.18 billion

5. COCA-COLA
Rank: 57
Revenue: $48 billion
Profits: $9.02 billion

6. SAFEWAY
Rank: 62
Revenue: $44.2 billion
Profits: $597 million

7. SUPERVALU
Rank: 86
Revenue: $36.1 billion
Profits: -1.04 billion

8. MONDELEZ INTERNATIONAL
Rank: 88
Revenue: $35 billion
Profits: $3.03 billion

9. TYSON FOODS
Rank: 93
Revenue: $33.3 billion
Profits: $583 million

10. PUBLIX SUPER MARKETS
Rank: 108
Revenue: $27.7 billion
Profits: $1.55 billion

11. KRAFT FOODS GROUP
Rank: 151
Revenue: $18.3 billion
Profits: $1.64 billion

12. GENERAL MILLS
Rank: 169
Revenue: $16.7 billion
Profits: $1.57 billion

13. KELLOGG
Rank: 192
Revenue: $14.2 billion
Profits: $961 million

14. LAND O'LAKES
Rank: 194
Revenue: $14.1 billion
Profits: $240 million

15. CONAGRA FOODS
Rank: 209
Revenue: $13.3 billion
Profits: $468 million

16. SMITHFIELD FOODS
Rank: 213
Revenue: $13.1 billion
Profit: $361 million

17. DEAN FOODS
Rank: 217
Revenue: $12.9 billion
Profits: $159 million

18. WHOLE FOODS MARKET
Rank: 232
Revenue: $11.7 billion
Profits: $467 million

19. H.J. HEINZ
Rank: 234
Revenue: $11.6 billion
Profits: $923 million

20. HILLSHIRE BRANDS
Rank: 288
Revenue: $9.3 billion
Profits: $845 million

21. LEUCADIA NATIONAL
Rank: 299
Revenue: $9.3 billion
Profits: $855 million

22. HORMEL FOODS
Rank: 319
Revenue: $8.2 billion
Profits: $500 million

23. CAMPBELL SOUP
Rank: 338
Revenue: $7.7 billion
Profits: $774 million

24. COCA-COLA ENTERPRISES
Rank: 339
Revenue: $7.6 billion
Profits: $677 million

25. DOLE FOOD
Rank: 372
Revenue: $6.8 billion
Profits: -$146 million

26. HERSHEY
Rank: 384
Revenue: $6.6 billion
Profits: $661 million

27. INGREDION
Rank: 386
Revenue: $6.5 billion
Profits: $428 million

28. SEABOARD
Rank: 411
Revenue: $6.2 billion
Profits: $282 million

29. DR PEPPER SNAPPLE GROUP
Rank: 427
Revenue: $6 billion
Profits: $629 million

30. J.M. SMUCKER
Rank: 452
Revenue: $5.5 billion
Profits: $460 million

New Twinkie Maker Cold-Shoulders Union Labor

New Twinkie Maker Cold-Shoulders Union Labor

(Written by author By RACHEL FEINTZEIG for the Wall Street Journial. Original article can be located here.)

The company that bought the Twinkie, HoHo and Ding Dong brands out of bankruptcy is gearing up to reopen plants and hire workers, but it won't be using union labor.

 

Hostess Brands LLC—Metropoulos & Co. and Apollo Global Management LLC's new incarnation of the baking company that liquidated in Chapter 11—is reopening four bakeries in the next eight to 10 weeks, aiming to get Twinkie-deprived consumers the classic snack cake starting in July.

 

Chief Executive C. Dean Metropoulos said the company will pump $60 million in capital investments into the plants between now and September and aims to hire at least 1,500 workers. But they won't be represented by unions, including the one whose nationwide strike sparked the 86-year-old company's decision to shut down in November.

"We do not expect to be involved in the union going forward," Mr. Metropoulos said in an interview Wednesday.

Hostess Brands Inc., the company that filed for bankruptcy protection in January 2012 and eventually sold off its brands and plants to several buyers, was once powered by 19,000 workers, 15,000 of whom were represented by unions. The company's largest union, the Teamsters, had agreed to a new labor contract following a contentious bankruptcy trial. But the second-largest union, the Bakery, Confectionery, Tobacco Workers & Grain Millers International Union, launched a work stoppage after the company imposed new labor terms on the union's members. Hostess said the strike crippled its operations, forcing it to shut down.
A Teamsters spokeswoman declined to comment. A spokeswoman for the bakers union couldn't be reached for comment Wednesday.

In February, before the $410 million sale to Metropoulos and Apollo was finalized, the president of the bakers union expressed confidence that his thousands of out-of-work members would find opportunity at the Hostess facilities once they were reopened by their new owners. President David Durkee said the strike had left the union in "a position of strength," and he expressed confidence its workers would get a better deal from the new owners than Hostess offered during the bankruptcy case, its second in recent years.
He added that the only way for the brands to have a "seamless restart" would be to hire back unionized bakers. "Only our members know how to get that equipment running," Mr. Durkee said. "A work force off the street will not be able to accomplish that."

But Mr. Metropoulos and his son, Daren, the co-CEO of Pabst Brewing Co. who is also heading up the reborn Hostess's marketing strategy, expressed confidence they would be able to find skilled, nonunion workers near the four plants, which are in areas with high unemployment.

"We're trying to find the most qualified people in these local markets to come work for the company," Daren Metropoulos said.

The new Hostess is firing up plants in Columbus, Ga.; Emporia, Kan.; Schiller Park, Ill.; and Indianapolis, Ind. It's also considering whether to reopen a fifth plant it purchased, in Los Angeles. Previously, the Hostess products that Metropoulos and Apollo bought were made at 11 plants, but the elder Mr. Metropoulos said those plants were running at less than 50% capacity under the old model. The new Hostess plants will run at 85% to 90% capacity, making the business "as efficient as possible," he said. The new company expects total capacity to be back to where it was before Hostess's shutdown by September.
The elder Mr. Metropoulos said he wasn't sure how many employees it used to take to produce the classic Hostess snack cakes now under the control of Metropoulos and Apollo. The new Hostess plans to use third-party drivers and an outside sales organization. It will also switch distribution models, delivering Hostess Twinkies and Cup Cakes directly to supermarket warehouses instead of individual locations.
"Ultimately, the consumer will be getting fresher products sooner through this model," Daren Metropoulos said.

The company also aims to increase distribution to locations that Hostess couldn't reach before, including smaller convenience stores and dollar stores.

The snack-cake company will begin considering new products, including healthier options like 100-calorie packs and whole-wheat or organic varieties, in the fall. But for now, it is focusing on getting the classic treats back on the market. In some cases, that may require the company to compete with similar products that rivals Grupo Bimbo SAB and Flowers Foods Inc. launched to fill the void during Hostess's hiatus, according to the Metropouloses.

A Bimbo spokesman declined to comment and a Flowers spokesman wasn't immediately available for comment Wednesday.

"We feel very, very confident that the originality of this brand is going to win out and the copycats will fade out," the elder Mr. Metropoulos said.

Write to Rachel Feintzeig at rachel.feintzeig@dowjones.com

A version of this article appeared April 25, 2013, on page B3 in the U.S. edition of The Wall Street Journal, with the headline: Twinkie's New Owners Will Shun Union Labor.

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Involving all aspects of supply chain in S and OP can lower inventory carrying costs

The "S" in S and OP Can Stand for Supply Chain, Too

Involving all aspects of supply chain in S and OP can lower inventory carrying costs.

(Written Apr. 18, 2013 by Becky Partida, research specialist, supply chain management, APQC on and for Industry Week. Original article can be found here.) 

Sales and operations planning (S&OP) has the potential to promote visibility within the enterprise and foster collaboration among business functions. However, the functions involved in the S&OP effort can vary from organization to organization. APQC asks organizations participating in its Open Standards Benchmarking in supply chain planning to indicate the business functions they involve in S&OP (Figure 1). Not surprisingly, sales and marketing is involved more often than not, with more than two-thirds of responding organizations indicating that they involve this function. Less frequently involved are supply chain functions, with 65% of responding organizations indicating that they include the purchasing and manufacturing functions and less than half reporting that they include the logistics function.

Given that S&OP can affect demand forecasts, inventory levels, raw material purchase projections, production plans and forecasted labor utilization, it is worth considering whether the involvement of all supply chain-related functions in S&OP could have a positive effect on supply chain performance. APQC compared the cost of supply and demand planning and the inventory carrying cost of organizations that involve each of these groups in S&OP to the costs of organizations that do not involve the groups.

Demand and Supply Planning Costs

Table 1 presents the median performance of organizations with regard to demand and supply planning costs per $1,000 in revenue. Organizations that involve the logistics function and the manufacturing function in the S&OP process spend slightly less at the median on demand and supply planning per $1,000 in revenue than organizations that do not involve each of these functions. However, organizations that involve the purchasing function in S&OP spend $0.72 more per $1,000 in revenue on demand and supply planning than organizations that do not. For an organization with $5 billion in annual revenue, this would result in $3.6 million in additional demand and supply planning costs associated with involving the purchasing function in the S&OP process.



Table 2 presents organizations’ median inventory carrying cost as a percentage of average inventory value. Organizations that involve each of the supply chain functions spend much less to store and maintain inventory than organizations that do not involve each of these functions. The difference is largest when considering the involvement of the logistics function: the median inventory carrying cost for organizations that involve the logistics function in the S&OP process is almost half as much as that of organizations that do not involve this function. Organizations that involve the purchasing function have a 1% lower inventory carrying cost than organizations that do not involve this function. Although this difference may not seem large, for an organization with $1 billion in average inventory value, a 1% difference would translate into $10 million in additional inventory carrying cost.

The difference in performance illustrated in Table 2 indicates that involving the supply chain functions in S&OP can have a significant effect on the ability of an organization to plan for demand and thus to maintain an optimum amount of inventory. Keeping these functions involved in discussions regarding demand and production plans can enable the organization to optimize planning, purchasing and manufacturing to reduce the amount of inventory that must be stored.

Weigh the Effects

APQC’s data show that involving the supply chain functions (purchasing, logistics and manufacturing) in the S&OP process is associated with a lower inventory carrying cost and lower cost to conduct demand and supply planning. The exception to this is with organizations that involve the purchasing function, which incur higher costs for demand and supply planning than organizations that do not involve this function. However, the lower inventory carrying cost obtained by this group of organizations may help offset any additional costs generated in the demand and supply planning process.

Because S&OP affects the entire supply chain, organizations should give serious thought to involving representatives from the supply chain functions in this process. Organizations should consider whether any additional costs incurred in the planning process would be offset by increased efficiency or costs savings generated within the procurement, manufacturing, or logistics functions. It may be that involving the supply chain in S&OP is worth the investment.

Becky Partida is a research specialist, supply chain management, with APQC, a member-based nonprofit and one of the leading proponents of benchmarking and best practice business research.

How Procter & Gamble achieved zero waste to landfill in 45 factories

How Procter and Gamble achieved zero waste to landfill in 45 factories

(Original Article Posted via http://www.guardian.co.uk and can be viewed here)

(Gillette's World Shaving Headquarters in Boston is one of the factories to have achieved zero waste status. 82% of employees have opted in to the zero waste space programme. Photograph: Dave Walsh. Today Procter and Gamble (P&G) are announcing that 45 of their facilities across the world have now reached zero manufacturing waste to landfill status.)

Globally P&G has already ensured that 99% of all materials entering their plants leave as either finished product or end up being reused, recycled or converted to energy. But in the 45 plants that have achieved zero waste status, through innovative technologies and creative reuses, the company has managed to find ways to divert that remaining 1% from landfills. Better still for the company's bottom-line, they have found ways to convert this waste stream into a new revenue stream.

Much of the success in tackling that 1% of landfill waste is attributed to the company's Global Asset Recovery Purchases (GARP) team which was formed in 2007. The GARP team, which is headed up by Forbes McDougall, do not look at "waste as waste," but as something "that can always be reused for another purpose." So, for example, when they found that after recycling scraps of paper from their Charmin plant in Latin America, they were still left with unusable fibres, they found a way to convert those fibres into low cost roof tiles. Similarly, waste that is left from making shampoo is turned into industrial fertilizer and scraps from feminine care products are turned into pellets that are used to make plastic soles for low cost shoes. The genius behind GARP, says McDougall, is that his team specialise in purchasing and are not an environmental team per se.

"It's very easy to just press the scrap button. But now we tell people 'don't scrap stuff, call GARP.' Purchasing guys are good at finding viable solutions financially, so we treat (handling waste) as a business opportunity. Once you start delivering revenue for the business, then you are everyone's friend."

Repurposing waste also requires innovative (and often simple) uses of technology. McDougall describes how rejected feminine care pads at one of their plants in Budapest, Hungary ended up being diverted from landfills to be used as fuel to make cement. Initially the pads which contained both paper and plastic were sent to the cement plant whole. But they soon discovered that they burned much better and became a better energy source if they were shredded down. So they developed a new shredder and a vacuum that enabled them to separate the paper from the plastic and vacuum off the material as it went along the line. What was once landfilled became a good source of fuel and a good source of revenue for P&G.

One of the sites that has achieved zero waste status is the Gillette Plant in Boston, better known as the World Shaving Headquarters. The no waste philosophy is immediately evident when you enter their office building. At almost every work station there is a small sign saying this is a "zero waste space" meaning that the employee has volunteered to give up their individual bin in favour of using the centralised waste station where the company has found they tend to recycle more and trash less. At each waste station as well as recycling opportunities, there is a compost bin where employees can dispose of any raw or cooked food. Some stations also have a bin for plastic bags. The sustainability team at the site proudly note that 82% of their 1,320 employees opted in to the zero waste space programme.

The same no waste ethos is also highly visible in the employee cafeteria. There are huge signs everywhere encouraging employees to recycle and compost and even better signs explaining exactly what is compostable. All of the packaging for takeaway items is made from either corn or sugar and so ends up back in the compost bin where it is later taken to a local farm along with any food or beverage waste and converted into industrial fertiliser. The same biodegradable material is also being used in packaging for Gillette and other P&G products. The packaging for the Gilette Fusion ProGlide razor is made from a combination of sugarcane, bamboo & bulrush which the company says has led to a 57% reduction in plastic and a 20% reduction in gross weight.

On the manufacturing floor great care is taken to ensure that nothing that has value or can be repurposed ends up being trashed. Under each machine there is a bin to collect any discarded or rejected items.

These pieces of scrap metal or plastic are then transferred to pristine containers where employees are instructed to take care to keep each resource separate. Mixing metals or plastic can cause contamination and will reduce the reuse value. The Site Solution Provider, who handles all the plant's recycling, will then find the appropriate vendor for each specific material stream. Plastic from dispensers is ground up to make new dispensers. Scrap metal is recycled into new metal for marketplace and scrap wood pellets are turned into particle board or biomass fuel chips.

At the manufacturing level, P&G is well on its way to achieving their zero waste to landfill goals in all their plants. More challenging is their long term goal of achieving zero consumer waste as well. Approximately 4.6 billion people around the world are using P&G products. According to Len Sauers, VP of global sustainability, the company is constantly engaged in research to quantify the impact of its products across their life cycle so they can direct their research and development efforts where the impact is.

An obvious high impact area is the energy and water used with cleaning products, so the company has developed both cold water and reduced rinsing detergents to counteract this. For obvious reasons, no date has been set for when the company may achieve their goal of zero consumer waste. "It's a journey," Sauers says, "and the destination keeps on changing."

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P&G has achieved double whammy of zero waste status and increasing revenues with innovative technology and re-use. You have to admit... that's impressive.

Study: Specialty Food Sales Reach Record Highs @ 14.3%. (Originally Predicted @ 3%)

Study: Specialty Food Sales Reach Record Highs

(Article originally posted on supermarketnews.com and can be viewed here)

(Picture of http://www.leavittandsons.com/ store-front)



NEW YORK — U.S. sales of specialty food and beverages rose 14.3% to $86 billion in 2012 — more than double the 6.8% increase recorded the previous year — according to the Specialty Food Association’s annual State of the Specialty Food Industry report.

Cheese and cheese alternatives is the largest category with $3.6 billion in sales, followed by yogurt and kefir, which leapfrogged over other foods for the number two spot with $2.27 billion in 2012 sales. The next largest categories are chips, pretzels and snacks; coffee, coffee substitutes and cocoa, and meat, poultry and seafood. Energy bars and functional beverages stand out as the fastest growing specialty foods.

Read more: Independents Say Cheese

“Three years of solid growth is clear evidence that consumers are choosing specialty food as part of their everyday lives,” said Ron Tanner, vice president of communications and education for the Specialty Food Association, in a statement. “Not only the foods but the artisans and entrepreneurs behind them are enjoying remarkable attention and interest across the U.S."

The report tracks sales of specialty foods through supermarkets, natural food stores and specialty food retailers, and includes surveys of specialty food manufacturers, importers, distributors, brokers and retailers, and is prepared in conjunction with Mintel International and SPINS. It also found:

• Gluten-free and convenient/easy-to-prepare are characteristics most likely to be included in product development plans this year.
• Alcoholic beverages spiked to 13.3% of product introductions in 2012 as entrepreneurs introduced small batch offerings.
• Importers report that Mediterranean is the fastest-growing cuisine followed by Latin, Italian and Vietnamese.

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