How many ounces in a pint?

Not to get off-topic, but one reason I'd like to see the US switch to metrics is that I can never remember how many of this there are in that. But Ben & Jerry's is out to remind us that there are sixteen ounces in a pint.

This is not an instance of corporate high-mindedness -- taking on a civic responsibility of educating the masses. The reason for B&J undertaking this campaign is that their principal rival, Haagen-Dazs, has begun marketing fourteen ounce "pints" of ice cream.

"One of our competitors (think funny-sounding European name) recently announced they will be downsizing their pints from 16 to 14 ounces to cover increased ingredient and manufacturing costs and help improve their bottom line," the statement said. "We understand that in today's hard economic times businesses are feeling the pinch. We also understand that many of you are also feeling the same, and think now more than ever you deserve your full pint of ice cream."

I can see Ben & Jerry's having some fun with this, but I guess Haagen-Dazs has found itself caught between rising commodity costs and retailers who won't accept price increases. Cutting down sizes has been a traditional method of avoiding price increases, but it's one thing to shrink a candy bar or fill a cereal box a bit less full, and quite another to redefine accepted units of measure.

More on the food-price battle

In the comments to my previous post on pricing tensions between suppliers and food retailers, Mark Ahrens pointed us to the Unilever-Delhaize dispute in Europe, where Delhaize tossed hundreds of Unilever products out of their stores.

Unilever spokeswoman Aurelie Gerth said Delhaize, which had already removed 70 other Unilever goods before October, refused to buy all the brands the company offered and wouldn’t guarantee new products would get shelf space. Though talks continue, there’ll “probably not be a solution this week,” she said.

“We didn’t agree to their terms, so they refused to grant us discounts,” said Delhaize spokeswoman Liesbeth Rogiers. “That would really boost our purchasing prices and we can’t and won’t pass those on to our customers.”

Throwing out one of the world's leading CPG companies seems like a pretty bold step, and one suspects Unilever won't be out for long. But I was struck by this step that Delhaize has taken:

Delhaize plans to sell the remaining Unilever products it has in stock, and has put up signs in its stores directing shoppers to alternative brands and private labels, Rogiers said.

In regard to food prices in general, a bit of perspective might be in order. This item from WomensDay has, among other things, comparative prices (adjusted for inflation) for food products -- in the 1950s, a dozen eggs cost the equivalent of $5.29, and in the '70s a pound of round steak was $9.33. The next time I gripe about prices, I'll try to keep those in mind.

Watching a local go national

Shamrock Farms, long the dairy leader in the Phoenix and Tucson markets, has recently been making efforts to become a national brand.

Based in Arizona, Shamrock Farms is one of the largest family-owned and-operated dairies in the country, according to the company. One of the first dairies to become a nationally-known brand, Shamrock Farms single serve milk has been gaining notoriety as the official milk of Subway Restaurants, as well becoming a staple in vending machines and a must-have for school lunches across the Southwest.

Kroger and Marsh will be selling Shamrock products in Indianapolis and in several mid-Atlantic markets. The marketing plan includes print and broadcast as well as in-store (of course), plus sampling at "high-traffic locations."

Smithfield beef division sold to JBS

Smithfield Foods has sold its beef business to Brazil's JBS.

The deal, worth $565 million in cash, received clearance by regulators on Monday when they said they wouldn't challenge the merger, which pairs Smithfield Beef Group Inc., the nation's fifth-largest beef producer, with JBS, the nation's third-largest beef producer.

The Justice Department, though, is blocking another acquisition by JBS, the #4 beef company, National Beef Packing.

Federal regulators and attorneys general from 13 states said that deal, worth $560 million in cash and stock, could push up costs for consumers and drive down prices paid to ranchers and feedlots.

Smithfield remains the largest pork producer in the country.

Do food brands mean anything?

According to this study, only one-third of Americans (and even smaller numbers in Europe) think brand name is important in buying food.

Taste, quality and price are the dominant factors in choosing food in all of the countries except China, where foods' health benefits are most influential, according to the study, "Food 2020: The Consumer as CEO." On average across the countries, 74% cited taste, 73% quality and 70% price.

There were certainly some variations by country. For instance, price was cited by nearly as many American and U.K. consumers as taste and quality, and price had a slight edge over these other two factors among Germans.

I'm not so sure that the results really support the article's headline (Brands Lose Relevance in Food-Buying Decisions). Putting aside price for the moment, if the major factors are taste and quality, then doesn't that pretty much equate to brand? I might, for example, tell the pollster that taste and quality are how I decide on my food purchases, but when I'm shopping in the canned vegetable aisle and reaching for a can of creamed corn, my decision will be determined by which brand has in the past delivered the best taste and quality.

And then, of course, price enters the equation, and I might ask myself whether Del Monte creamed corn tastes enough better than Jewel's store brand to justify the price difference.

So I think the survey, while probably accurate, is misleading. Of course we buy food based on taste, quality, and price. But the brand names are shortcuts in that process.

EU fines Dole and Del Monte for banana price-fixing

The European Union fined Dole over $60 million for engaging in price-fixing on bananas. A German company, Weichert, was fined $20mil, but Del Monte will have to pay the fine because they owned Weichert at the time of the violations. Chiquita escaped fines by blowing the whistle:

Chiquita also participated in this activity, but the EU’s competition commission said it could not have opened the investigation without that company’s initial cooperation.

Chiquita escaped a fine of $113 million (83.2 million euros) by bringing the activity forward and applying for leniency, EU officials said in a press release.

Government investigating price-fixing in food

USAToday reports that the Justice Department is investigating allegations of price-fixing in two more categories of the US food market -- tomatoes and eggs (they have been investigating citrus for the past year).

These investigations are into price-fixing not by manufacturers, but by producers -- farmers and cooperatives.

Although federal law bars competitors from collaborating when setting their prices, Congress has created antitrust exemptions intended to help small farm groups and cooperatives bargain with large food processors.

Inquiries into whether food producers overstepped those limits are being run by federal prosecutors in Sacramento, and an antitrust division of the Justice Department based in Philadelphia.

A separate report, a few days previous, in the Wall Street Journal, said that the Commodity Futures Trading Commission (CFTC) is investigating the dairy industry, specifically Dairy Farmers of America, a cooperative that processes one-third of the nation's milk.

According to the Journal report, the CFTC is investigating whether DFA drove up the prices of milk and cheese futures through strategic trading of cheese contracts on the Chicago Mercantile Exchange. Because DFA purchases milk from farmers based in part on the prices of dairy futures, this would amount to an illegal maneuver to increase the price of milk.

Smuckers plans more purchases

J. M. Smucker's purchase of Folger's, the #1 coffee brand, from P&G is apparently just going to be one of many.

Family-run Smucker cultivates a folksy image while pursuing acquisitions with an aim to dominate its markets, ranging from biscuits to evaporated milk.

After the purchase, which Smucker will pay for with 63 million shares once P&G splits or spins off the unit to shareholders, the foodmaker will have enough cash to keep buying, executives said on a conference call with analysts and investors.

"We expect acquisitions to still contribute roughly half of our growth," said Chief Financial Officer Mark Belgya.

Chairman Timothy Smucker and President Richard Smucker, great-grandsons of founder Jerome Smucker, have built what started as an Ohio cider mill into what would be a foodmaker with annual sales of $4.7 billion.

This will be Smucker's biggest purchase ever, and will roughly double the size of the company.

The purchase is seen as a good one for Smucker's, which has a reputation as a brand-builder. Folger's is the top supermarket coffee brand, but supermarket coffee has been being drubbed by coffeehouse brands recently. Smucker's may do a better job than P&G of restoring some luster to a solid name.

Analyst reaction was positive. Stephens Inc. said it viewed the deal positively in view of the Smucker practice of buying up strong brands "and revitalizing them with management attention and advertising support."

Gravity works for Campbell's

Campbell's is having success with its "gravity-feed" shelf units, first introduced in 2002. The units are now in 23,000 stores, and are now to be rolled out (if that's the term) in Wal-Mart. The company reports sales increases in stores installing the units:

Joe Ruiz, director-merchandising strategies at Campbell, Camden, N.J., said when the company installed the systems in 2002 it saw an initial sales lift of 5% and a 3% sustainable lift. "It's driven by where we put the system and what the customer base is," said Ruiz. "We've seen lifts [as high as] 5-8% [but as low as] 1-3%."

When I first saw the gravity-feed system in a store, it appeared to me to take more space per SKU, but that just shows how little I know, it seems. McCormicks also has gravity-feed systems for spices, according to the article, although I must admit I don't recall ever seeing one.

Supplies down, prices up, sales down

Recent hurricanes and other problems have drastically cut orange juice production in Florida, which has led to rising prices in grocery stores, which has led to declining sales. None of this should be a surprise, but this AP story seems to treat it as such.

Juice makers like Atlanta-based Coca-Cola Co., which makes Minute Maid orange juice, and PepsiCo Inc. of Purchase, N.Y., the maker of Tropicana orange juice, were forced to raise prices to offset the cost of oranges - a cost that has gone up at the same time crop yields have gone down.

Journalist meets supply-and-demand, is shocked. AP goes on to tell us that "A smaller number of crops typically translate into higher raw material costs for juice makers since the cost of oranges usually rises with a smaller harvest." No kidding.

Enough snark. Apparently yield have dropped from 220 million boxes of oranges per year prior to the 2004-05 hurricanes to an anticipated 132 million boxes this year. Prices are up 20-25% percent, with sales down about 10% or so -- which translates into a bit of a revenue gain:

But Florida Department of Citrus spokesman Andrew Meadows said even though consumption might be down, revenue from orange juice as a category has gone up in March.

According to the AC Nielsen figures, revenue is up 9 percent across all brands, mainly due to the higher prices companies are charging for their products.

One guesses that Coke and Pepsi will take this lesson to heart, and that prices will not drop all the way back when production revives. It appears that the price increases are being accomplished in large part through less promotion -- not surprising, given the supply constriction -- why promote if all it will do is create an out-of-stock?

Van Brugge said PepsiCo and Coca-Cola are raising prices by increasing the list price slightly and cutting back on promotions, like in-store discounts and coupons.

Tropicana spokesman Pete Brace said the company is "making the necessary adjustments to ensure supply and meet consumer demand."

Smithfield buys ConAgra Meats

Smithfield Foods has bought the meats division of ConAgra, including the Butterball, Eckrich, and Armour brands -- they recently bought the European meat operation of Sara Lee.

[Smithfield will] combine the management of the Butterball turkey business, which it valued at $325 million, with Carolina Turkeys, a business it co-owns with Maxwell Farms Inc. Butterball is the No. 2 U.S. turkey producer, with sales of about $600 million annually. Carolina Turkeys is the fourth-largest turkey producer in the United States.

The combination is likely to pressure Hormel Foods Inc. and the turkey products it produces under the Jennie-O Turkey Store brand. Although Jennie-O currently is the largest, the combined sales of Carolina Turkey and Butterball will surpass Jennie-O.

"For Smithfield this is a big deal," said Greggory Warren, a food analyst with Morningstar Inc., a Chicago-based market research company. "This moves them up the value chain. They might actually make [profit] margins of 6 percent or 8 percent, and that's up from 3 percent to 4 percent."

The two deals add $2.9b in sales.

Weekend quick notes

Rona, the biggest home improvement chain in Canada, is planning to reverse the usual pattern and come south to chalenge Home Depot and Lowes. The report is that they may buy a small US chain, and will concentrate initially on the northeast.

McCormick has bought Epicurean International, a Thai food marketer (Thai Kitchen and Simply Asia are their brands). "David Sakamoto, Epicurean International's chief financial officer, said the purchase by McCormick will allow his company's products to be further developed and distributed more widely."

Heinz cutting European trade spending

Heinz has announced it will close fifteen factories in Europe and cut trade spending and distribution costs, with part of the savings intended to increase spending on advertising.

The total cuts amount to about $355 million, with about $50 million to be redirected into advertising.

CPG trade spending is significantly higher in Europe than in the US.

Sara Lee files plans for apparel spinoff

Sara Lee Corporation has filed information with the SEC on the spinoff of its apparel units. The new company, to be called Hanesbrands, will include Hanes, Playtex, Bali, Champion and Wonderbra, and will total $4.7 billion in sales -- making it one of the largest apparel firms.

The spinoff is planned for completion by September.

Sara Lee is seeking to transform itself into an entirely food, beverage, and household products firm.

Weekend quick notes

Whirlpool's takeover of Maytag is apparently likely to get the thumbs-down from the Department of Justice on antitrust grounds, according to rumor. "Lawyers in the department's antitrust division 'have made it clear' to the antitrust chief, Thomas Barnett, that they believe the $1.7 billion deal would hurt competition, said the source, speaking on the condition of anonymity."

L'Oreal is buying the Body Shop retail chain, which will presumably help their distribution, and also help to further blur the line between retail and manufacturer, as we commented on, just a few days ago.

ConAgra seems to be going through some tough times, with sales down 46% (!) since 2001. They're responding by cutting dividends and selling a bunch of brands: "ConAgra ... said last month that it will sell its Butterball turkey and Armour meat brands. The company, which has 70 brands, said Thursday that it will sell its Singleton seafood unit, which had $290 million in sales last year, and the Swissrose cheese unit, which had $200 million in sales." On the plus side, the company is planning to bump up advertising by 21%, concentrating on stronger brands.

Thursday quick notes

Del Monte is buying Milk Bone and other pet food brand from Kraft (which is in one of those "dispose of non-core businesses" moods that companies get in from time to time). Del Monte bought Meow Mix just a couple weeks ago, so it looks like pet food is becoming very much core for them.

If you think I'm negative about the newspaper industry, read this guy. "It was just a year ago that I predicted ... that most major newspapers would be dead or dying by the end of this decade. Apparently, I was being conservative."

A lawyer posts on the British supermarket investigation.

The soft drink decline is going to continue, according to this audio report from Ad Age, mentioning a 1% annual drop in sales.

Tuesday quick notes

Federated settled with New York, paying $725,000 to resolve claims of false advertising and sales promotion. "Kaufmann's ... used small print in ads to exclude many items from sales, featured photos of items not eligible for sales, and used misleading in-store signage. It also created false senses of urgency to buy with such promotions as "Biggest Sale of the Year" and "One Day Only Super Sale," only to retain lower prices after the sales were supposed to end..."

Best Buy is reported to be looking to buy a piece of Five Star, a Chinese consumer electronics retailer. Best Buy had said they were entering China this year, and it appears they want to buy into Five Star as a way of creating a strategic alliance.

Hain is rolling out an organic baby formula product as part of its Earth's Best line of infant and children's foods. This is in line with the health trend we commented on here.

Weekend quick notes

Knight-Ridder is expected to announce this week who won the auction to buy the company. McClatchy (Sacramento Bee, Minneapolis Star-Tribune) was reportedly the high bidder, which is a bit of a surprise, since K-R is twice their size. Didn't take long to need an update for this. An hour after the original post, I read that it's a done deal -- the NYT says nice things about McClatchy.

The Ant Farm is fifty years old. They've sold twenty million of them, including one to little Bobby Houk, although my ants (dug up in the back yard) had very short life spans.

Food marketers are supposedly trying to target aging Boomers with, according to the subhead "smaller portions, placement, ads." Hmmm ... how about trying larger fonts on the label directions?

Myers department stores in Australia are being sold by Coles-Myer to a group including the Myers family, but primarily backrolled by Newbridge. Newbridge is owned by Texas Pacific, which owns Neiman-Marcus in the US and Debenhams in the UK.

Healthy eating

There have been several items recently indicating that health-consciousness among consumers is having a significant effect on both retail and manufacturers. Two days ago, we posted about Whole Foods' prediction that they will more than double their sales in the next few years, from $4.7b to $12b. Yesterday we posted that Wal-Mart is planning to double the space they devote to organic products.

Today, two more such items. First, this, a report that US cigarette sales dropped last year to their lowest level in 55 years (and, since US population has almost exactly doubled in that timespan, that means that per capita consumption of cigarettes has dropped to half what it was).

And then, this: Soft drink sales in the US dropped last year for the first time in 20 years.

"The carbonated soft drink business in the U.S. has basic fundamental problems," said John Sicher, editor of Beverage Digest. "This is the first generation of children that are going to grow up not viewing soft drinks as the ultimate treat. They're growing up on things like sports drinks, water and noncarbonated drinks. As these little kids move into late teens and early adulthood, their drinking habits are going to be different than past generations."

Among the five leading brands, Coke/Diet Coke and Pepsi/Diet Pepsi were all down, but Mountain Dew was up. Corporately, Cadbury Schweppes was up slightly, while both Coca-Cola and Pepsico were down.

Quick notes

Wal-Mart is doubling its organic food selection. Coupled with the item posted in yesterday's Quick notes about Whole Foods' aggressive plans, this is confirmation of the tremendous growth of this category.

St. Patrick's Day will generate $2.69 billion in spending this year, according to the National Retail Federation, up substantially from last year's $1.94 billion. When did this become such a big deal? I saw a TV ad (for Guinness) that referred to the "St. Patrick's day season."

Kellogg's Corn Flakes are celebrating their 100th birthday. This article discusses many of the company's marketing and advertising practices through the years.