Shop Talk
Retailers, consumers and prices
As downturn takes toll, food bank volunteers become clients
The longest recession since the Great Depression has taken an exacting toll on Americans and their ability to put food on the table. Families who once considered themselves solidly middle class are now signing up for food stamps or turning to food banks to feed themselves in the face of lost jobs or cut wages.
“These are our neighbors, our friends, the people we go to church with,” said Margaret McKenna, president of the Walmart Foundation, of the number of Americans who are going hungry. “This is not like this is the other, people we don’t know. These are people we do know.”
Food stamp enrollment has reached record numbers, while a survey by Feeding America, the nation’s largest domestic hunger relief organization, found that 99 percent of participating food banks reported a surge in demand for emergency food assistance in the past year. Ninety-eight percent of food banks said that demand is being driven by first time users.
Jean Osborn, 61, who lives in Bluffton, Indiana with her 76-year-old husband, knows what it means to lose her footing in this economy. Osborn can no longer work due to health issues and her husband supports them with a factory job that pays $33,000 a year — an income level that means the couple does not qualify for many government benefits.
So Osborn, who used to volunteer at food banks to help the needy, now relies on them to feed herself and her husband. She tries to extend the hand-outs of bread, peanut butter or meat as long as possible.
“If you’re creative, you can make chili and live on it for three days,” she said.
But between paying a $540 mortgage, medical bills and living expenses, Osborn said she can still barely make ends meet.
Food sellers: I’m no Twit!
Just when it seems like everyone is using Twitter, we learn that is not really the case.
A panel discussion on Thursday at the CIES World Food Business Summit in New York featured four prominent industry leaders: Sara Lee CEO Brenda Barnes, Cargill CEO Greg Page, Kraft CEO Irene Rosenfeld and Jeff Noddle, executive chairman of grocery chain Supervalu. The conversation turned to how the panelists’ companies would stay relevant with the next generation of consumers.
Understanding Generation Y, whose oldest members are already in the work force, will be key to success in the future, said Noddle.
Very broadly defined, Generation Y includes more than 70 million Americans born from 1977 to 2002.
“They will measure their purchases on different criteria than those who came before them,” Noddle said, noting that younger consumers were more concerned with issues of sustainability and health. “We’re trying to understand that and trying to project how do you respond to that. Even though they may not have the dollar power today, they will. And I think that’s a critical element.”
Sara Lee’s Barnes agreed, noting that today’s younger consumers “grew up on the Internet” and that they “have every bit of information at their fingertips in a nanosecond.”
Moderator Bill Rancic, the first winner on Donald Trump’s “The Apprentice” reality television show, asked who on the panel was “tweeting” (and therefore a “twit”).
Check Out Line: Tale of two trends for General Mills
Check Out quarterly results at General Mills.
The maker of Progresso soups, Hamburger Helper and Green Giant frozen vegetables posted a disappointing profit for its fiscal third quarter. Even its slightly higher full-year outlook is below Wall Street’s expectations.
But here’s an interesting twist — the company saw strong sales of cereals, soups, frozen vegetables and refrigerated dough during the quarter, in a continuing trend whereby consumers are eating more meals at home to save some money in the recession. But while that helped sales in the U.S. retail segment, the bakery and food service segment languished, as consumer thrift led to fewer trips to restaurants and cafeterias.
Still, the company is working to capitalize on consumers’ new habits. Later this year, General Mills will unveil new items across categories as it tries to entice shoppers to buy its brands, CEO Ken Powell said in an interview.
* Today’s speakers at the Reuters Food and Agriculture Summit 2009 include Panera Bread Co-Chief Operating Officer William Moreton, Constellation Brands CEO Robert Sands, and Monsanto executives Brett Begemann and David Stark.
Also in the basket:
Check Out Line: There’s a lot to digest …
Check Out the lineup at Reuters Food and Agriculture Summit 2009.
Executives from various food firms are slated to speak at the Reuters Summit in Chicago beginning today, with the first handful of executives from companies such as Wal-Mart Stores, Campbell Soup and Hormel.
With the economy front and center, executives are expected to discuss the tug of war to keep food prices at current levels, even as they fight hard to entice shoppers to buy their products on a tight household budget.
Also worrying for food manufacturers is Wal-Mart’s own push with its own private-label products. The world’s No. 1 retailer, which is also the largest grocery seller in the United States, is relaunching its Great Value brand this month, adding pressure to the tough food market.
Let the price wars begin.
Monday’s participants at the summit feature: Douglas Conant, CEO of Campbell Soup; Andrea Thomas, Senior Vice President, head of private brands at Wal-Mart Stores; Hormel Foods’ CEO Jeffrey Ettinger; economist Greg Doud from the National Cattleman’s Beef Association; Rob De Groot, executive vice president, North America and Australia, at Reckitt Benckiser; GLG Life Tech’s president Brian Palmieri and President of Unilever Americas, Michael Polk.
Also in the basket:
Whole Foods selling 13 stores in settlement
Natural and organic food grocer Whole Foods will sell 13 stores as part of a settlement that ends an antitrust battle with U.S. regulators over its acquisition of rival Wild Oats.
Is your store on the list?
- 7133 N. Oracle Rd., Tucson, AZ
- 8688 E. Raintree Dr., Scottsdale, AZ
- 2584 Baseline Rd., Boulder, CO
- 1651 Broadway St., Boulder, CO
- 3180 New Center Pt., Colorado Springs, CO
- 5910 S. University Blvd., Littleton, CO
- 9229 N Sheridan Blvd., Westminster, CO
- 340 N. Main St., West Hartford, CT
- 4301 Main St., Kansas City, MO
- 1090 St. Francis Dr., Santa Fe, NM
- 7250 W. Lake Mead Blvd., Las Vegas, NV
- 19440 N.W. Cornell Rd., Hillsboro, OR
- 6930 S. Highland Dr., Salt Lake City, UT
(Photo\Mike Blake, Reuters)
I would have liked to have seen a greater impact on Whole Foods from this settlement – apparently these were underperforming stores for them – what kind of punishment is that? I do think its unfortunate that the stores will simply close – its not like Wild Oats is going to reopen. So in the end its the consumer that suffers – either to the highly marked up foods at Whole Foods or because they now have one less place to shop for organics. Consumers need to learn their options for organic foods: farmer’s markets, local health food stores, and shopping online (www.shoporganic.com for one) are all good options.
Check Out Line: Too Many Chickens
Check out more grim news on the jobs front, from the food sector.
Pilgrim’s Pride became the latest consumer-related company to cut jobs when it said on Friday that it plans to idle three U.S. plants because of an oversupply of chicken and weak consumer demand. The plants, in Georgia, Louisiana and Arkansas, employ about 3,000 people, or about 7 percent of the company’s U.S. workers.
The chicken producer, which is fighting to emerge from Chapter 11 bankruptcy protection, said the closings were needed to reduce production of low-value meat that is draining its finances.
But it’s not just chicken producers feeling the crunch of the recession.
Reuters reporter Bob Burgdorfer wrote this week that Americans are eating more hamburgers and fewer steaks as the economy wallows in recession — leading to huge losses at U.S. feedyards that fatten the cattle for steaks.
The U.S. Agriculture Department has said that prices for cattle, hogs and turkeys will stay weak for much of this year because of oversupply even as the nation’s meat production declines.
Also in the basket:
Check Out Line: Food vs foreign currency
Check Out Sara Lee and Kraft Foods joining the “stronger dollar” bandwagon.
Both food makers cut their profit forecasts for the current year, citing the pain they expect from the stronger U.S. dollar decreasing the value of sales from international markets.
But currency alone is not to blame for oversease woes.
Sara Lee said it is seeing pressure in certain overseas markets due to worsening economic conditions.
“In our international business we are adjusting our plans and refocusing our resources to help offset significant economic downturns in many of our key markets, most notably Spain, France and the United Kingdom,” sad Brenda Barnes, the company’s chief executive officer.
Meanwhile, Kraft’s CEO said the company is seeing a slowdown in sales growth in the EU and developing markets.
Sara Lee, which makes Jimmy Dean breakfast sausages and its namesake bakery products, and Kraft, which sells Oreo cookies and its namesake cheese, have also faced increased competition from private label manufacturers as shoppers seek to save every dollar they can amid a deepening global recession.
Check Out Line: Sales up at Burger King, profit misses view
Check Out Burger King missing Wall Street views but saying sales grew 12 percent worldwide, with sales at restaurants open at least a year up 3 percent in the United States and Canada.
Lower-cost fast-food chains have benefited in the economic downturn, while higher-priced sit-down restaurant chains like Applebee’s and Chili’s Grill & Bar have been hit particularly hard, as consumers slash discretionary spending to adjust to falling home prices, a credit crunch and higher food and fuel costs.
The home of the Whopper hamburger has been sprucing up aging restaurants, extending hours and adding value menu items to better compete with rivals like McDonald’s, Taco Bell, Pizza Hut and KFC.
Burger King maintained its forecast of opening 350 to 400 new restaurants next year, a sign it is hopeful hungry people in a hurry will continue to order items like the 11,500-store chain’s flame-broiled burgers, Big Fish sandwich and newer offerings like its Angus beef burger.
Also in the basket:
L’Oreal shares fall on sales warning (Reuters)
McDonald’s banking on consumers lovin’ new packaging
McDonald’s is banking on diners lovin’ its new global packaging that will emphasize the hamburger chain’s products and food over the lifestyle of its customers.
The new wrappers, boxes and other containers will now carry photographs and graphics of food and ingredients, as well as playful stories and information about the products. The new packaging is meant to build brand loyalty with the 56 million customers served daily, even as McDonald’s has seen an increase in demand for its low-priced menu items amid the weak U.S. economy.
Mary Dillon, McDonald’s global chief marketing officer declined to say how much the initiative costs, but said the project was the biggest in the company’s history and that it spent a little more than normal on the effort.
“We are putting the focus on our food,” she said at a media event in Chicago. “This new packaging will actually help us reintroduce our iconic products to our customers and showcase new food.”
The new packaging, which will be adapted for most countries and include nutritional information, will roll out across all 118 countries in which McDonald’s operates over the next two years, starting in November in the United States, United Kingdom and Ireland. Dillon said it will not necessarily boost sales, but is meant to build stronger ties with consumers.
The packaging was developed by Boxer, a unit of UK-based Marketing Store Worldwide that also developed the current packaging.
McDonald’s also announced the latest movie tie-in for its child-focused Happy Meal program. The partnership with DreamWorks movie “Madagascar: Escape 2 Africa” begins when Nov. 7 and rolls out globally through March 2009.
Check Out Line: Yummy profits for food companies
Check Out the joy at Kraft and Kellogg.
Both Kraft, the largest North American food maker and Kellogg, the world’s largest cereal company, posted third-quarter profits that topped Wall Street’s expectations thanks to price increases and new items. The results are yet another nod to the fact that while you may shun clothes, jewelry or furniture during crunch times, you still gotta eat.
But Chief Executive Irene Rosenfeld of Kraft, with brands from its namesake cheese and Maxwell House coffee to Oreo cookies and Toblerone chocolates, warned that tight credit conditions could cause some retailers to liquidate their inventories, which could affect product shipments in the fourth quarter.
Still, the company stood by its forecast for 2008 earnings before some one-time items and for 2009 net income.
For its part, Kellogg, which makes Rice Krispies and Pop-Tarts, said it was confident about touching the high end of its 2008 per-share earnings target.
Other companies in the consumer and retail world that also revealed quarterly results on Wednesday include Procter & Gamble, Jones Apparel, Williams-Sonoma, and Office Depot.
Also in the basket:
-
Resident Shop Talk Expert
-
