Ferré & Consulting Blog (English Version)

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