Ferré & Consulting Blog (English Version)

Hershey’s second-quarter net income fell 35% because of charges for restructuring and to write down the value of a joint venture in India. However, revenue still rose as the company sold more in terms of volume on the back of raised advertising spending.

The company has left its earnings outlook for the year unchanged. It earned $46.7 million, or 20 cents per share, for the three months ending July 4. That’s down from net income of $71.3 million, or 31 cents per share, a year earlier.

The company now plans to boost advertising levels by about 45 percent to 50 percent this year, up from its previous estimate of a 35 percent to 40 percent increase. But the additional increase in advertising won’t take place until late in the year, so the effect on sales won’t be felt until 2011. Some of that advertising budget will go toward growing Hershey’s business in international markets, where quarterly sales rose at a low double-digit rate..

The latest results included charges of 11 cents per share for a supply chain modernisation program and 20 cents to write down goodwill for the India venture,

“We will continue to apply our global confectionery know-how to India and other international markets, as well as to look for other opportunities in key geographies,” says chief executive David West in a conference call. He said Asia and Latin America were Hershey’s top priority in terms of acquisitions.

Companies confectionery, Hershey's

Lindt has expanded its bean-to-bar facility in Stratham, New Hampshire, US. It can produce 450 chocolate bars and 7,200 truffles per minute.

Chocolate has been produced here, at Swiss company Lindt & Sprungli’s sole manufacturing facility in the US, since 1989. But the plant didn’t have the capability to roast and grind beans to chocolate liquor and importing it became too expensive.
A five-year expansion culminated in the company’s inauguration of its new 40,000-square-foot bean roasting and cocoa liquor facility.

Lindt can produce 7,200 truffles and 450 bars per minute at the facility. The new roasting facility is the latest development of Lindt USA’s ongoing expansion efforts, which includes the addition of 350,000-square feet of production, packaging and distribution facility space over the last four years.

The company has also named a new vice president of operations. Robert Michalski will be based at the Lindt USA headquarters in Stratham and be responsible for all manufacturing, distribution, engineering, logistics and demand planning for Lindt USA.

Michalski has more than 25 years of experience in the food and beverage business. Prior to joining Lindt in June 2010, Michalski previously worked for M&M/Mars and Cadbury Italy.

Companies Chocolate, Chocolate Production Line, Lindt

The European Food Safety Authority has published its final guidance for data required to assess new food flavourings, and is looking to build on experience gained during evaluations to establish a positive list.

EFSA reassessing flavouring substances that are already in use in the EU, numbering around 2800 in all. However it has asked for more tests on some 530 substances, including some that have been assessed by bodies like the FAO/WHO’s JECFA committee. The list of flavouring substances needs to be adopted by the end of 2010, and will be included in the new flavouring regulation 334/2008 was adopted at the end of 2008.

New flavouring substances proposed for foods, however, will have to go through a risk assessment procedure, and petitioners will have to supply data to allow EFSA’s panel to form its opinion.

The draft guidance was published in November 2009 for public consultation, and some meetings have taken place between stakeholders, notably between the European Flavour Association (EFA) and EFSA.

The guidance document, was adopted on 20 May but only published this week.

EFSA said its panel considers it important to build on experience gained during the reassessment, and where possible new flavouring substances will be assigned to one of the existing flavouring group evaluations on the basis of structural and metabolic similarities.

For these groups, scientific principles and a group-based approach have already been drawn up. Data requirements for these chemically-defined substances are included in part A of the guidance.

The guidance will be particularly helpful for data submission on new flavourings that cannot be put into any existing group, however, as it sets out a procedure that will allow for individual evaluation. This is included in part B of the guidance.

Generally speaking, the panel will require data on:

• Identity of source materials
• Manufacturing process
• Specifications
• Assessment of dietary exposure
• Toxicological data

New regulation

EFFA president Heinrich Schaper said the main objectives of the new regulation are promoting the effective functioning of the internal market and giving high level of consumer protection.

One major change is the new and more detailed labelling requirements for natural flavours, and the reclassification of nature identical and artificial flavours as ‘flavouring substances’. These new requirements need to be on labels and in documentation by January 2011, but flavour firms’ regulatory and IT teams have been working on making sure the raw materials are classified for compliance for some time.

Food Safety EFSA, food flavourings, lavouring substances

Confectionery giant Cadbury is launching a new limited edition flavour of its Dairy Milk Bar of Plenty.

Money from the sales of the confectionery bar will go towards Help the Hospices, which offers care and support to the terminally ill.

The bars will be on sale in either Honey Flakes or Caramelised Pecans flavours, which are combined with creamy Dairy Milk chocolate.

Luciana Andreoni, brand manager for Cadbury Dairy Milk, said: “As with the current Cadbury Dairy Milk Bar of Plenty flavours, Honey Flakes and Caramelised Pecans were the result of our researchers going through hundreds of recipes until the tastiest combinations were found…We’re sure Cadbury Dairy Milk fans will love the flavour and really get behind this cause.”

Recently, it was reported by Inside Facebook that Cadbury would be launching a new music game on the social media site, which would be aimed at promoting the confectioner’s products in Australia.

Chocolate, Companies Cadbury, chocolate bar

Made from canola and sunflower seeds, the oils are said to have a ‘unique’ combination of high oleic and low linolenic fatty acids that delivers the benefits without oil performance or food taste.

Improved health, performance and flavor attributes are claimed for the new Omega-9 Oils Ingredient Solutions from Dow AgroSciences designed for use in baked goods, snacks and packaged foods. Dow’s David Dzisiak, commercial leader oils, said: “Omega-9 Oils have a healthier profile with zero trans fat, the lowest level of saturated fats among cooking oils, and are uniquely high in heart-healthy monounsaturated (omega-9) fat.”

A recent study by the International Food Information Council (IFIC) revealed that more US consumers (69 percent) are concerned by the types of fat they consume than are worried about the amount of fat they consume (67 percent).

Nutrition panels

According to a company statement the oils can “improve nutrition panels by reducing the bad fats and increasing the good fat” to help produce products that have the following nutrition label statements:

• Zero trans fat.
• Low (or significant reduction in) saturated fat.
• High heart-healthy monounsaturated (omega-9).

In addition to cleaner labels through simple ingredient lists, produced without hydrogenation, interesterification or additives, the oils maintain functional product qualities including flavor, texture, mouth-feel and shelf life, said Dzisiak.

Omega 9

“Because omega-3 shortening is naturally stable, it can provide equal or longer shelf life to products containing traditional, high saturated fat shortenings,” added Dzisiak. “This is achieved without the use of antioxidants preserving a cleaner product label that consumers want.”

Applications include spray oils, cooking oils and shortening for baked goods, snacks and packaged foods.

Breads and cakes

Food oil use in the US alone exceeds 22bn pounds per year. About 60 percent of food oil is used in packaged foods with the top four key uses being salad dressings and mayo, margarine, biscuit and crackers and breads and cakes.

About 30 percent of food oil is used in food service, primarily for use in frying foods with the remaining ten percent sold as cooking oil.

Meanwhile, the first US company to use Omega-9 Oils Ingredients Solutions is Weaver Popcorn, Noblesville, Indiana. The company’s new Pop Weaver microwavable popcorn has a more than 50 percent reduction in total fat including 60 percent less saturated fat.

“Other popcorn manufacturers were removing trans fats by using industry standard palm oil or coconut oil, both of which dramatically increase saturated or bad fats,” said Dzisiak. “Our Omega-9 Solutions Team helped Pop Weaver develop a smarter solution – one that maintained their signature taste while improving the health profile of the snack.”

Ingredients fatty acids, omega 9, trans fats

The perspective of food manufacturers and other stakeholders on the costs and benefits of enforcement provisions for the new EU Regulation on food flavourings is being sought from the UK Food Standards Agency during a three month consultation phase.

The EU flavouring regulation 1334/2008 was adopted at the end of 2008 and is due to fully replace directive 88/388/EEC from 20 January 2011.

Inconsistencies in the regulation of flavourings and food ingredients with flavouring properties in the bloc along with differences regarding the application of maximum levels of certain biologically active principles (BAPs) which may be present in flavourings and food ingredients have created the need for uniform EU controls.

The controls aim to “ensure the free movement of safe and wholesome food, and to take into account the new scientific and technological developments for flavourings,” reports the FSA.

Natural compliance

One major change is the new and more detailed labelling requirements for natural flavours, and the reclassification of nature identical and artificial flavours as ‘flavouring substances’.

These new requirements need to be on labels and in documentation by the January 2011 enforcement date. However flavour firms’ regulatory and IT teams have been working on making sure the raw materials are classified for compliance for some time.

Labelling costs

The UK watchdog said it is now seeking an industry response on the familiarisation, enforcement and relabeling costs associated with the new regulation. “Information on the frequency at which businesses re-label products in this category is limited,” said the FSA.

However, it reports that discussions between it and stakeholders have indicated that a relabelling cycle of three years would be a reasonable assumption, and relabelling costs would tend to fall in the range of £1,500 to £3,000 per product.

There are new controls establishing maximum levels of BAPs in certain foods and the UK food agency comments that “in practice, the food manufacturing industry may well choose to move to the use of liquid flavouring extracts made from herbs and spices because the levels of BAPs will be more easily controlled.”

The FSA said that the deadline for receipt of industry comments on the proposals is 14 October 2010.

EFSA assessment

New flavouring substances proposed for foods, under the regulation, will have to go through a risk assessment procedure, and petitioners will have to supply data to allow the European Food Safety Authority to form an opinion.

EFSA is currently reassessing flavouring substances that are already in use in the EU, numbering around 2,800 in all. A definite list, as part of the new law, needs to be adopted by the end of 2010.

The FSA draft consultation document can be read here .

Food Safety, Ingredients biologically active principles, flavouring regulation, food ingredients, labelling requirements

A product’s sales volume will affect how much emphasis Kraft Foods Inc. places on reducing the product’s sodium content, said Richard Black, vice-president of global nutrition. For example, reducing sodium content by 15 mg in a product with 100 million lbs in annual sales would have more overall impact than by reducing sodium content by 200 mg in a product with 3 million lbs in annual sales.

Black spoke 19 July in a session titled “Sodium in Foods, Striking the Right Balance” at IFT 10, the Institute of Food Technologists’ annual meeting and food exposition in Chicago. The session drew about 350 people with some sitting against the wall because all the chairs were taken.

Kraft Foods, Northfield, Illinois, USA, has a goal over the next two years of reducing sodium content by an average of 10% across its entire portfolio. Because of the company’s emphasis on sales volume, some foods will experience a greater reduction than 10%.

Kraft Foods will seek cost reduction in other areas to balance out increasing ingredient costs associated with sodium reduction, Black said. Salt may cost 9c to 12c a lb while ingredients that replace salt are higher. A Kraft salt replacer costs about US$1.20 per lb, Black said.

“Now you see the challenge we have,” he said.

Black gave hypothetical examples about the potential costs of reducing sodium in Kraft products. Using figures that were for illustrative purposes and not based on actual data, Black said a 25% sodium reduction in Ritz crackers hypothetically may require additional ingredient costs of about US$1 million per year. Additional charges of about $300,000 per year hypothetically could come in such areas as product development, warehouse and labeling.

Since Kraft has about 3,500 products, sodium-reduction costs hypothetically could exceed $1 billion per year, Black said.

“This is not an excuse,” he said. “We have to be able to solve this problem. We will be held accountable. We should be held accountable.”

Sodium reduction will present different problems for different products. If sodium content is reduced by 50% in ranch dressing, consumers may not detect it as less salty, Black said.

“But it tastes like Miracle Whip,” he said. “It’s not always a salty thing you’re doing.”

Formulators must consider texture and yield when reducing sodium content.

“If you reduce sodium in a hot dog too far, it literally turns to mush,” Black said. “There’s a level below which you cannot go and still have a hot dog. The same is true for cheese.”

Sodium also is in alkalizing agents in cocoa, he said. Whenever Kraft adds cocoa to its cookies, the company needs to work with its cocoa suppliers to reduce sodium content in cocoa ahead of time, or before Kraft starts working with it.

Companies Kraft, Sodium reduction

Confectionary giant Nestle has revamped its Milkybar packaging, aiming it squarely at adults.

The firm has introduced what it has dubbed “sophisticated packaging” to boost sales of the white chocolate bar among older demographics.
According to Nestle, while the chocolate bar is normally associated with children, 60 per cent of total sales for individual Milkybars were to adults.

Graham Walker, Nestle UK trade communications manager, said: “We fully expect Milkybar Raisin and Biscuit, with its sophisticated packaging and huge adult-focused media support to bring even more adults to the brand.”

He also urged confectionary retailers to separate Milkybar from other children’s sweets and place it with “eye-catching point of sale at the till”.

Nestle recently launched its biggest ever cross-category marketing strategy.

The Get Set, Go Free campaign incorporates advertising on confectionery singles and multipacks, chocolate biscuit bars, cereals and Nesquik milkshake powder, and is backed by a £3 million marketing push.

Chocolate, Companies Milkybar, Nestle

Despite mounting speculation that Sara Lee Corp. is exploring the sale of its fresh baking business, a Wall Street analyst whose comments in May helped spur the speculation warned that “separating the Sara Lee bread brand from Sara Lee Corporation will be messy.”

The analyst, Robert Moskow of Credit Suisse, issued the comments 20 July in the midst of a flurry of press reports stating that Sara Lee has hired an investment banker to explore the possibility of selling the baking unit.

Contacted by Milling & Baking News last week, Sara Lee declined to comment on the reports that it has hired an investment banker or that its baking business is for sale.

“We think this is the right strategic move for Sara Lee,” Moskow said of the possibility the baking business could be on the block. “The bread business is low margin, zero-growth, and running at a competitive disadvantage in our opinion because of its high labor and benefit costs. In addition, bread has its own direct-to-store distribution network, so Sara Lee would not suffer any loss of scale with customers if it disposed of it.

“Separating the Sara Lee bread brand from Sara Lee Corporation will be messy. Sara Lee would have to license the Sara Lee brand to the buyer, and thus lose quite a bit of control over the brand equity. As a result, we think a sale process would take a long time.”

The rush of coverage began last week with a 19 July story in Crain’s Chicago Business stating that Sara Lee was looking for buyers. Other news outlets, including The New York Times, The Wall Street Journal and Bloomberg News followed with stories.

Crain’s and many of the articles last week based their stories on a 25 May investment report from Moskow in which he noted, after a meeting with Sara Lee corporate management, that the baking business was now being led by a turnaround specialist and wondered whether the parent company may be looking to sell the division. Milling & Baking News first covered the 25 May report in a 1 June, Page 1 story (see Milling & Baking News of 1 June, Page 1) that prompted inquiries at Sosland Publishing Co. from certain news outlets, including Crain’s, in the weeks that followed.

While a number of news stories specifically mentioned the largest other U.S. baking companies as potential buyers of the Sara Lee baking business, Wall Street analysts have suggested that finding a strategic buyer could be difficult.

Moskow said that a selling price for the baking business of US$1.5 billion posed by Bloomberg News as a possibility, “sounds too high.”

“Recall that Sara Lee paid $2.8 billion for the bread business in 2001,” Mr. Moskow said. “But sales have fallen to US$2.2 billion since then and EBITDA is only US$150 million. Why would anyone pay 10x EBITDA for this strategically challenged business?

“We believe private equity and Bimbo are the likely targets. We can’t imagine a scenario where Campbell’s Pepperidge Farm would ever consider it.”

Companies baking business, Sara Lee

Consumer goods giant Unilever has managed to break Nestle’s ice cream monopoly on the beaches of Rio de Janeiro, it has been reported.

For 30 years, Nestle has been the sole seller of ice cream in the city’s public spaces but now, Unilever has been granted a license to sell its products in major sites around the city, reports the Rio Times.

Unilever owns Kibon and it currently has around a 70 per cent share of the ice cream market in the Brazilian capital but this could increase its share.

Recently, the consumer goods giant announced it would be running a marketing campaign in the UK with fashion retailer ASOS.

Called the Temptation 100 campaign, it will centre around a game featuring clothing items specially selected by ASOS’ fashion team and is the second drive by Unilever on the retail website in recent months.

The winner of the game will receive ASOS items and runners-up will take home discount vouchers for Magnum Temptation.

Companies, Ice Creams ice cream monopoly, Nestle, Unilever