Press Association 7 June 2004
- Shoppers will vote with their feet and switch brands if companies fail to comply with "green" legislation, according to a new report today.
A survey of 1,000 people showed that 94% backed laws aimed at reducing CO2 emissions and one in three would be prepared to buy goods from another company if their usual supplier missed environmental targets.
Consultants LogicaCMG (correct) said the findings showed that firms failing to meet new regulations on emissions would face a consumer backlash,
One in six of those polled said they would be happy to accept price rises of up to 25% if it led to emissions being cut from factories and other buildings.
A separate poll of 250 senior executives showed a third did not believe consumers would care about firms complying with regulations.
"Our study shows that both consumers and industry are in favour of the reduction of carbon emissions and consumers are prepared to pay a premium for environmentally friendly goods and services," says Jim Yeats, managing director of LogicaCMG.
"Unfortunately it is apparent that most companies have not made much progress towards compliance, in fact two thirds of UK companies have yet to set a budget to be able to comply, and they will suffer the consequences - not just in terms of fines but in something less tangible, but ultimately more valuable - customer loyalty."
Copyright 2004 The Press Association Limited
Press Association
6.30.2004
Paper Recovery Rate Tops 50 Percent
No. 124 Tuesday, June 29, 2004Page A-1 ISSN 1521-9402
Recycling Paper Recovery Rate Tops 50 Percent
In 2003, an All-Time High, Report Says
More than half of the paper consumed in the United States during 2003 was
recovered, a trade group said June 28, describing the rate as an all-time
high in the history of paper recycling.
The American Forest & Paper Association (AF&PA) said in the 2004 edition
of its annual Recovered Paper Statistical Highlights that 49.3 million
tons of paper, or 50.3 percent of the paper consumed in the nation in
2003, was recovered.
Fred von Zuben, chairman of the AF&PA Recovered Fiber CEO Committee, told
BNA the association had set a 50 percent recovery goal in 1995, as well as
a 55 percent recovery goal to be reached by 2012.
"At the moment, there is a great need for recovered fiber," he said.
Paper recovery has generally been on the upswing during the past 15 years,
according to the association. The 2003 rate reflects an increase of 69
percent from the 1990 level of 33.5 percent and is a 3.4 percent increase
from the 2002 rate of 48.2 percent or 47.6 million tons, the association
said.
Far more paper is recovered for recycling than is sent to landfills, the
report said. While 49.3 million tons was recovered in 2003, 37.7 million
tons wound up in landfills.
In addition, the association said, paper that is not recycled might go to
waste-to-energy facilities or wind up in permanent or semipermanent
applications, such as construction projects. AF&PA said every ton of paper
recovered for recycling saves 3.3 cubic yards of landfill space.
AF&PA described the recovery level as even more impressive, given that
approximately 10 percent of paper and paperboard cannot be recovered.
More than 80 percent of all paper mills in the United States use recovered
paper to make their products, the association continued. This recovered
paper represents 37 percent of the raw material used to make new paper and
paper products. The remaining 13 percent of the more than 50 percent of
paper recovered is targeted for other uses such as insulation and exports,
von Zuben said.
Industry Investment
During the past five years, von Zuben said, the paper industry has
invested billions of dollars on upgrading its ability to recycle paper,
and now all that is needed to increase the percentage of paper recycled is
the paper.
"As more paper products enter the home and office for work and pleasure,
there is additional potential for greater recovery of high-quality
products such as white computer paper, copier paper, office stationery and
paperboard packaging," von Zuben said in a statement. "Greater recovery of
these paper products will help ensure a steady, reliable supply of
recovered paper for our country's paper manufacturers."
To help achieve its 55 percent goal, the association said, AF&PA in 2002
entered into public-private partnerships with the Environmental Protection
Agency, Keep America Beautiful, CarrAmerica, an office management company,
and others to encourage localities, office buildings, schools, and
individuals to recover more high-quality paper in their communities and
workplaces.
For example, last year, the association began participating with EPA's
WasteWise program.
"This is a new relationship we've tried to establish within the past year,
working as partners, not as enemies for the first time," von Zuben told
EPA.
An EPA spokesman could not be reached for comment. According to the
agency, WasteWise partners submit annual reports and have access to agency
assistance in developing and implementing quantifiable waste reduction
programs. EPA launched the waste reduction program in 1994. Program
partners commit to initiating, expanding, or improving company programs to
collect recyclables.
WasteWise partners in the forest and paper products industry have set
goals to develop and market recyclable corrugated shipping pallets, and to
identify customers with significant waste associated with paper products
and integrate recycling services into business relationships, according to
EPA.
The American Forest and Paper Association's Recovered Paper Statistical
Highlights is available
By Linda Roeder
Recycling Paper Recovery Rate Tops 50 Percent
In 2003, an All-Time High, Report Says
More than half of the paper consumed in the United States during 2003 was
recovered, a trade group said June 28, describing the rate as an all-time
high in the history of paper recycling.
The American Forest & Paper Association (AF&PA) said in the 2004 edition
of its annual Recovered Paper Statistical Highlights that 49.3 million
tons of paper, or 50.3 percent of the paper consumed in the nation in
2003, was recovered.
Fred von Zuben, chairman of the AF&PA Recovered Fiber CEO Committee, told
BNA the association had set a 50 percent recovery goal in 1995, as well as
a 55 percent recovery goal to be reached by 2012.
"At the moment, there is a great need for recovered fiber," he said.
Paper recovery has generally been on the upswing during the past 15 years,
according to the association. The 2003 rate reflects an increase of 69
percent from the 1990 level of 33.5 percent and is a 3.4 percent increase
from the 2002 rate of 48.2 percent or 47.6 million tons, the association
said.
Far more paper is recovered for recycling than is sent to landfills, the
report said. While 49.3 million tons was recovered in 2003, 37.7 million
tons wound up in landfills.
In addition, the association said, paper that is not recycled might go to
waste-to-energy facilities or wind up in permanent or semipermanent
applications, such as construction projects. AF&PA said every ton of paper
recovered for recycling saves 3.3 cubic yards of landfill space.
AF&PA described the recovery level as even more impressive, given that
approximately 10 percent of paper and paperboard cannot be recovered.
More than 80 percent of all paper mills in the United States use recovered
paper to make their products, the association continued. This recovered
paper represents 37 percent of the raw material used to make new paper and
paper products. The remaining 13 percent of the more than 50 percent of
paper recovered is targeted for other uses such as insulation and exports,
von Zuben said.
Industry Investment
During the past five years, von Zuben said, the paper industry has
invested billions of dollars on upgrading its ability to recycle paper,
and now all that is needed to increase the percentage of paper recycled is
the paper.
"As more paper products enter the home and office for work and pleasure,
there is additional potential for greater recovery of high-quality
products such as white computer paper, copier paper, office stationery and
paperboard packaging," von Zuben said in a statement. "Greater recovery of
these paper products will help ensure a steady, reliable supply of
recovered paper for our country's paper manufacturers."
To help achieve its 55 percent goal, the association said, AF&PA in 2002
entered into public-private partnerships with the Environmental Protection
Agency, Keep America Beautiful, CarrAmerica, an office management company,
and others to encourage localities, office buildings, schools, and
individuals to recover more high-quality paper in their communities and
workplaces.
For example, last year, the association began participating with EPA's
WasteWise program.
"This is a new relationship we've tried to establish within the past year,
working as partners, not as enemies for the first time," von Zuben told
EPA.
An EPA spokesman could not be reached for comment. According to the
agency, WasteWise partners submit annual reports and have access to agency
assistance in developing and implementing quantifiable waste reduction
programs. EPA launched the waste reduction program in 1994. Program
partners commit to initiating, expanding, or improving company programs to
collect recyclables.
WasteWise partners in the forest and paper products industry have set
goals to develop and market recyclable corrugated shipping pallets, and to
identify customers with significant waste associated with paper products
and integrate recycling services into business relationships, according to
EPA.
The American Forest and Paper Association's Recovered Paper Statistical
Highlights is available
By Linda Roeder
6.10.2004
Hot new logo from A.D.
.
The draft logo is open for creative input. Please either email me any thoughts or input you have or post it using the comment feature below. Thank you much amanda for the great design!
The draft logo is open for creative input. Please either email me any thoughts or input you have or post it using the comment feature below. Thank you much amanda for the great design!
6.05.2004
As Shoppers Grow Finicky, Big Food Has Big Problems
Kraft Buys Back to Nature,Seeks Upscale Offerings;Atkins Diet Takes a Bite, At Giant Eagle: 375 Cheeses
By SARAH ELLISON
Staff Reporter of THE WALL STREET JOURNAL
May 21, 2004; Page A1
Tracey Daugherty grew up on Kraft Macaroni & Cheese, but she won't feed it to her 18-month-old son. That's a huge problem for Kraft Foods Inc.
With $31 billion in sales last year, Kraft says it still helps fill pantries in 99% of U.S. households. But it and the other giants of the processed-food industry have hit a wall in growth, barely managing to stay ahead of gains in the population.
Two big factors: price pressure from stores such as Wal-Mart, now the nation's largest food retailer, and continued competition from grocery-store brands.
That's why Kraft needs consumers such as Ms. Daugherty, who are setting the tastes for the next generation. The 33-year-old Pittsburgh mom, whose lawyer husband is trying to lose weight on the Atkins diet, says she started to worry about sodium and artificial foods when her son was born. These days she opts for fresh produce, chicken, fish and an occasional Amy's Organic frozen dinner when pressed for time.
"Kraft's products definitely have a childhood nostalgia, so it's hard to completely give up on them," she says. "But they're not on my shopping list."
Ms. Daugherty and millions of other consumers are shopping at Whole Foods and other such markets, demanding healthier, tastier, more sophisticated foods -- and they're willing to pay for it. Many are also growing wary of the very feature upon which Big Food built itself: mechanized food production and highly technical innovations to create "better than natural" processed food.
While natural foods and gourmet items still represent a small portion of overall food spending, they boast the best growth rates in the food industry. To capture a portion of that growth, the food behemoths are being forced to upend old business models, find new suppliers and rapidly improve the ingredients and quality of their products.
For Kraft, the nation's largest food company, keeping up with consumers' rapidly changing tastes has been especially tough. Four years ago, Kraft made a big bet on high-fat snacking when it purchased Nabisco, the nation's biggest maker of cookies and crackers. The timing was terrible: The deal was made just as consumers were becoming obsessed about obesity and other food-related health issues. Kraft's more recent efforts to buy its way into the organic world have had mixed results. Kraft's profit for the first quarter fell 34%, following a rise of just 2.4% last year. The company's shares were trading at $29.95 in 4 p.m. New York Stock Exchange composite trading yesterday, down 47% from their peak in June 2002.
Kraft last year held discussions to buy or license the brand name of Organic Valley, a LaFarge, Wis., organic-dairy cooperative where sales grew 25% last year to $156 million. The meetings were friendly, but the farmers that control Organic Valley were "aghast" when Kraft suggested using their organic milk in highly processed products such as Lunchables, said someone who was there.
"They were talking about making organic processed food, and that's not something that jibed with the farmers," said another person familiar with the discussions. No deal transpired, but Organic Valley is now supplying organic milk and dairy products to Kraft.
Both companies declined to comment on the details of the talks. But George Siemon, CEO of Organic Valley, said: "We've been approached by every major food company in the country, and we really believe in organics from the ground up, and we believe in our independence."
Old Playbook
Other big food companies also are struggling to redefine themselves. At first, the industry stuck to its old playbook: adding new features to mainstay brands. These iconic names stayed ahead of generic rivals through brand extensions (Kraft Thick 'N Creamy Macaroni & Cheese, Oreo Double Stuff). Kraft spent a fortune on advertising and commanded a higher price than store brands. The Oreo cream was thicker. The Chips Ahoy! cookie had more chips. But the underlying product was the same.
In the last several years, Campbell Soup Co. has spent hundreds of millions of dollars refitting its factories to improve its soups. Unilever, dragged down by low-growth products like margarine, is revamping its Slim-Fast diet products and other products to fit the new low-carbohydrate craze. Nestle SA, which has spent roughly $20 billion acquiring brands from Ralston Purina pet food to Hot Pockets frozen sandwiches, is looking for growth in the intersection of food and pharmaceuticals -- known in the business as "phood."
Back in 2000, Kraft looked as if it was putting itself on top of the food chain when it agreed to buy Nabisco. A year later, Philip Morris Cos. (now Altria Group Inc.) floated 16% of Kraft on the public market. The IPO, still one of the largest ever, carried big expectations. The company promised double-digit growth rates, and Kraft's portfolio of brands including Oscar Mayer meats, Jell-O gelatin and Ritz crackers was the envy of the food industry.
But last year, higher costs for retiree pensions and rising prices for commodities such as flour, milk and cocoa put a dent in Kraft's earnings. Growing worries about obesity and the mass appeal of the Atkins low-carbohydrate diet also took a toll.
After a series of earnings misses, Kraft late last year demoted its co-CEO, Betsy Holden, widely identified with Kraft's recent stumbles, and elevated her counterpart, Roger Deromedi, to the sole CEO post. Mr. Deromedi, who had run the company's international businesses, quickly moved to cut 6,000 jobs, or 6% of Kraft's work force. He lowered the company's long-term targets for profit growth, saying Kraft needed to invest more money in freshening brands that had fallen out of favor.
"You can't keep selling the same thing forever," Mr. Deromedi said in an interview earlier this year. "Consumers are changing. Unless you change your offering enough to keep it fresh for today, then you are going to have a more significant problem going forward."
Since he took his position, he has bought up tiny companies like Veryfine Products Inc., maker of the fast-growing Fruit20 flavored water, and expanded Kraft's deal with Starbucks Corp. to distribute its Tazo tea in addition to Starbucks coffee in grocery stores.
The company is also working to increase the healthiness of its offerings, such as removing artery-clogging trans-fats from Triscuits and Oreos, and launching smaller, 100-calorie "snack-packs" of some products.
Still, with the lion's share of the company's sales in products like traditional Oreos and Maxwell House coffee, Mr. Deromedi also defended Kraft's existing lineup: "It's not like we need to completely transform ourselves because what we're making today isn't being eaten," he said. "You have to offer a range of products to a range of consumers."
Kraft executives say they have been steadily pushing into the gourmet market. Company executives estimate that about $2 billion in sales now come from brands like Gevalia mail-order coffee, Boca soy burgers, Athenos cheese, Balance bars, Altoids mints, DiGiornio Pizza and its licensing deals with Starbucks and others.
While its talks with Organic Valley were stalling, Kraft concluded negotiations to acquire the tiny Back to Nature brand, which generated less than $10 million in sales in 2002. Kraft estimates that the natural and organic category of food is about $15 billion and grows at a rate of about 9% to 10% a year.
In January, Kraft said it would expand Back to Nature into 19 new products and 15 reformulated granolas and cereals. Next month it plans to start selling those products, which include macaroni and cheese with organic cheese sauce, sesame ginger rice thins and organic cheeses.
Seeking the 'Seekers'
Kevin Scott, a Kraft general manager in charge of Back to Nature, says he's not out to get the "loyalists," who eat only organic and who make up less than 2% of households in America. Instead, he says he is targeting "natural or organic seekers," the 15% to 20% of households that buy a natural or organic product three to four times a year.
Mr. Scott says Kraft has established strict "ingredient principles" for Back to Nature, which includes using no artificial preservatives, colors or flavors; no genetically-modified corn or soy ingredients; no hydrogenated or partially-hydrogenated oils, and to use natural sweeteners like cane juice and fruit sweeteners. The Back to Nature brand uses organic ingredients whenever it can, says Mr. Scott. "Sometimes we can't source an organic ingredient in the quantity we need, or we can't find an ingredient that meets our flavor profile," he says. Back to Nature cheese and its cheese sauces are all stamped with the USDA Organic seal, which means the products contain at least 95% organic material.
At a Pittsburgh Giant Eagle grocery store, shopper Rebekah Beil, 27, shows just how much things have changed. The store's gourmet-cheese counter holds 375 varieties and the tapas cart holds 20 kinds of olives. The Kraft cheeses are aisles away in the dairy section next to the butter.
Eyeing the olives in the tapas cart, Ms. Beil said she sticks to the "perimeter" of the store, avoiding prepackaged products in the center. A real-estate broker, she cooks for her boyfriend most nights and shops on the weekends on the "strip," a collection of wholesale markets with Italian products, fresh fish and the like. She left the store with an assortment of deli meats, olives and cheese.
Organic and gourmet products, areas dominated by dozens of smaller players, are enjoying much faster growth than the giant food companies. The market for gourmet beverages and sweets has grown 48.4% to $14.7 billion since 1998, according to a study by market-research firm Packaged Facts. Specialty condiments and cheese sales have grown 26.3% to $5.5 billion in that period.
Some grocers have latched on to the trend. Last fall, grocery chain Albertson's, which long had relied on its low-end private-label entries, introduced a high-end line of frozen products called Essensia, which include tiramisu and ravioli striped with sun-dried tomato and flavored with basil pesto. "Our goal is to design food that can be served to the most discriminating dinner guests," says Terry Lee, vice-president of corporate brands for the grocery chains.
To understand the challenge Kraft faces, consider cheese, its single biggest product. In 1916, J.L. Kraft's patent for processed cheese helped catapult Kraft from a commodity business to a unique cheese company with a product that came off assembly lines with more consistent quality than natural cheese and stayed on shelves longer without spoiling.
The company's next cheese breakthrough was Velveeta in the late 1920s. Then in the 1940s, Kraft scientists started working on a way to produce cheese in slices. Using a "chill roll" machine that caused hot cheese quickly to cool as it revolved over a cold drum, a sheet of cheese could be uniformly sliced into three-inch squares and stacked. Within one year of its national introduction in 1950, Kraft Deluxe processed slices became the most successful product introduction in the company's then nearly 50-year history. Cheez Whiz hit store shelves soon after.
The company has honed its skills, chopping and processing cheese into snackable forms, over several decades, as consumers demanded more convenience. Starting in the early 1990s, "shredding cheese drove the business for many, many years," says Mr. Deromedi, who once headed the unit and still avows an "incredibly strong" passion for the cheese business. "We've had great success just slicing our chunks of cheese, or adding reclosable packaging."
While he says those kinds of changes "seem very mundane," they can boost sales with a relatively small investment. Kraft's bagged cheese cubes come in five varieties. Even Cheez Whiz is being marketed as a dip: It now comes in a wide-mouthed jar with a picture of a tortilla chip on the label. In March, Kraft introduced a new DiGiornio blend of shredded cheese with parmesan, romano and Asiago.
Lately, Kraft's cheese business has been pressured by an onslaught of high-end products. Last year, U.S. sales of natural Asiago cheese, primarily distributed by a handful of importers and private-label brands, jumped 43% to $7.4 million, according to Information Resources Inc. Sales of Kraft aerosol cheese, which includes Cheez Whiz, fell 9.6%. Kraft's natural cheese sales grew 5.3%, while sales of its processed cheese fell 2%.
Paul Peterson, vice president of sales at Lactalis SA, a $5.5 billion French dairy company that is the largest purveyor of Brie cheese in the U.S., estimates that U.S. sales have risen about 10% a year for the past three years, with last year's growth slightly higher.
These cheeses often require different skills than those of Big Food. Unlike the automated production lines at Kraft's plants, which churn out more than two billion pounds of cheese a year, the Lactalis U.S. plant in Wisconsin has its workers turn individual Brie circles by hand every day during the eight- to 10-day curing process. Some are ready earlier than others, and only trained workers watching the white layer of mold on each Brie circle can evaluate when it's ready.
As Kraft tries to move upscale with its Athenos and Back to Nature cheese lines, it is also still playing the repackaging game. It's latest effort: new labels touting cheeses as low in carbohydrates. "The products have always been low in carbs," says Mr. Deromedi. "It's not like we've had to create a whole new something to get at that."
thank you wsj
By SARAH ELLISON
Staff Reporter of THE WALL STREET JOURNAL
May 21, 2004; Page A1
Tracey Daugherty grew up on Kraft Macaroni & Cheese, but she won't feed it to her 18-month-old son. That's a huge problem for Kraft Foods Inc.
With $31 billion in sales last year, Kraft says it still helps fill pantries in 99% of U.S. households. But it and the other giants of the processed-food industry have hit a wall in growth, barely managing to stay ahead of gains in the population.
Two big factors: price pressure from stores such as Wal-Mart, now the nation's largest food retailer, and continued competition from grocery-store brands.
That's why Kraft needs consumers such as Ms. Daugherty, who are setting the tastes for the next generation. The 33-year-old Pittsburgh mom, whose lawyer husband is trying to lose weight on the Atkins diet, says she started to worry about sodium and artificial foods when her son was born. These days she opts for fresh produce, chicken, fish and an occasional Amy's Organic frozen dinner when pressed for time.
"Kraft's products definitely have a childhood nostalgia, so it's hard to completely give up on them," she says. "But they're not on my shopping list."
Ms. Daugherty and millions of other consumers are shopping at Whole Foods and other such markets, demanding healthier, tastier, more sophisticated foods -- and they're willing to pay for it. Many are also growing wary of the very feature upon which Big Food built itself: mechanized food production and highly technical innovations to create "better than natural" processed food.
While natural foods and gourmet items still represent a small portion of overall food spending, they boast the best growth rates in the food industry. To capture a portion of that growth, the food behemoths are being forced to upend old business models, find new suppliers and rapidly improve the ingredients and quality of their products.
For Kraft, the nation's largest food company, keeping up with consumers' rapidly changing tastes has been especially tough. Four years ago, Kraft made a big bet on high-fat snacking when it purchased Nabisco, the nation's biggest maker of cookies and crackers. The timing was terrible: The deal was made just as consumers were becoming obsessed about obesity and other food-related health issues. Kraft's more recent efforts to buy its way into the organic world have had mixed results. Kraft's profit for the first quarter fell 34%, following a rise of just 2.4% last year. The company's shares were trading at $29.95 in 4 p.m. New York Stock Exchange composite trading yesterday, down 47% from their peak in June 2002.
Kraft last year held discussions to buy or license the brand name of Organic Valley, a LaFarge, Wis., organic-dairy cooperative where sales grew 25% last year to $156 million. The meetings were friendly, but the farmers that control Organic Valley were "aghast" when Kraft suggested using their organic milk in highly processed products such as Lunchables, said someone who was there.
"They were talking about making organic processed food, and that's not something that jibed with the farmers," said another person familiar with the discussions. No deal transpired, but Organic Valley is now supplying organic milk and dairy products to Kraft.
Both companies declined to comment on the details of the talks. But George Siemon, CEO of Organic Valley, said: "We've been approached by every major food company in the country, and we really believe in organics from the ground up, and we believe in our independence."
Old Playbook
Other big food companies also are struggling to redefine themselves. At first, the industry stuck to its old playbook: adding new features to mainstay brands. These iconic names stayed ahead of generic rivals through brand extensions (Kraft Thick 'N Creamy Macaroni & Cheese, Oreo Double Stuff). Kraft spent a fortune on advertising and commanded a higher price than store brands. The Oreo cream was thicker. The Chips Ahoy! cookie had more chips. But the underlying product was the same.
In the last several years, Campbell Soup Co. has spent hundreds of millions of dollars refitting its factories to improve its soups. Unilever, dragged down by low-growth products like margarine, is revamping its Slim-Fast diet products and other products to fit the new low-carbohydrate craze. Nestle SA, which has spent roughly $20 billion acquiring brands from Ralston Purina pet food to Hot Pockets frozen sandwiches, is looking for growth in the intersection of food and pharmaceuticals -- known in the business as "phood."
Back in 2000, Kraft looked as if it was putting itself on top of the food chain when it agreed to buy Nabisco. A year later, Philip Morris Cos. (now Altria Group Inc.) floated 16% of Kraft on the public market. The IPO, still one of the largest ever, carried big expectations. The company promised double-digit growth rates, and Kraft's portfolio of brands including Oscar Mayer meats, Jell-O gelatin and Ritz crackers was the envy of the food industry.
But last year, higher costs for retiree pensions and rising prices for commodities such as flour, milk and cocoa put a dent in Kraft's earnings. Growing worries about obesity and the mass appeal of the Atkins low-carbohydrate diet also took a toll.
After a series of earnings misses, Kraft late last year demoted its co-CEO, Betsy Holden, widely identified with Kraft's recent stumbles, and elevated her counterpart, Roger Deromedi, to the sole CEO post. Mr. Deromedi, who had run the company's international businesses, quickly moved to cut 6,000 jobs, or 6% of Kraft's work force. He lowered the company's long-term targets for profit growth, saying Kraft needed to invest more money in freshening brands that had fallen out of favor.
"You can't keep selling the same thing forever," Mr. Deromedi said in an interview earlier this year. "Consumers are changing. Unless you change your offering enough to keep it fresh for today, then you are going to have a more significant problem going forward."
Since he took his position, he has bought up tiny companies like Veryfine Products Inc., maker of the fast-growing Fruit20 flavored water, and expanded Kraft's deal with Starbucks Corp. to distribute its Tazo tea in addition to Starbucks coffee in grocery stores.
The company is also working to increase the healthiness of its offerings, such as removing artery-clogging trans-fats from Triscuits and Oreos, and launching smaller, 100-calorie "snack-packs" of some products.
Still, with the lion's share of the company's sales in products like traditional Oreos and Maxwell House coffee, Mr. Deromedi also defended Kraft's existing lineup: "It's not like we need to completely transform ourselves because what we're making today isn't being eaten," he said. "You have to offer a range of products to a range of consumers."
Kraft executives say they have been steadily pushing into the gourmet market. Company executives estimate that about $2 billion in sales now come from brands like Gevalia mail-order coffee, Boca soy burgers, Athenos cheese, Balance bars, Altoids mints, DiGiornio Pizza and its licensing deals with Starbucks and others.
While its talks with Organic Valley were stalling, Kraft concluded negotiations to acquire the tiny Back to Nature brand, which generated less than $10 million in sales in 2002. Kraft estimates that the natural and organic category of food is about $15 billion and grows at a rate of about 9% to 10% a year.
In January, Kraft said it would expand Back to Nature into 19 new products and 15 reformulated granolas and cereals. Next month it plans to start selling those products, which include macaroni and cheese with organic cheese sauce, sesame ginger rice thins and organic cheeses.
Seeking the 'Seekers'
Kevin Scott, a Kraft general manager in charge of Back to Nature, says he's not out to get the "loyalists," who eat only organic and who make up less than 2% of households in America. Instead, he says he is targeting "natural or organic seekers," the 15% to 20% of households that buy a natural or organic product three to four times a year.
Mr. Scott says Kraft has established strict "ingredient principles" for Back to Nature, which includes using no artificial preservatives, colors or flavors; no genetically-modified corn or soy ingredients; no hydrogenated or partially-hydrogenated oils, and to use natural sweeteners like cane juice and fruit sweeteners. The Back to Nature brand uses organic ingredients whenever it can, says Mr. Scott. "Sometimes we can't source an organic ingredient in the quantity we need, or we can't find an ingredient that meets our flavor profile," he says. Back to Nature cheese and its cheese sauces are all stamped with the USDA Organic seal, which means the products contain at least 95% organic material.
At a Pittsburgh Giant Eagle grocery store, shopper Rebekah Beil, 27, shows just how much things have changed. The store's gourmet-cheese counter holds 375 varieties and the tapas cart holds 20 kinds of olives. The Kraft cheeses are aisles away in the dairy section next to the butter.
Eyeing the olives in the tapas cart, Ms. Beil said she sticks to the "perimeter" of the store, avoiding prepackaged products in the center. A real-estate broker, she cooks for her boyfriend most nights and shops on the weekends on the "strip," a collection of wholesale markets with Italian products, fresh fish and the like. She left the store with an assortment of deli meats, olives and cheese.
Organic and gourmet products, areas dominated by dozens of smaller players, are enjoying much faster growth than the giant food companies. The market for gourmet beverages and sweets has grown 48.4% to $14.7 billion since 1998, according to a study by market-research firm Packaged Facts. Specialty condiments and cheese sales have grown 26.3% to $5.5 billion in that period.
Some grocers have latched on to the trend. Last fall, grocery chain Albertson's, which long had relied on its low-end private-label entries, introduced a high-end line of frozen products called Essensia, which include tiramisu and ravioli striped with sun-dried tomato and flavored with basil pesto. "Our goal is to design food that can be served to the most discriminating dinner guests," says Terry Lee, vice-president of corporate brands for the grocery chains.
To understand the challenge Kraft faces, consider cheese, its single biggest product. In 1916, J.L. Kraft's patent for processed cheese helped catapult Kraft from a commodity business to a unique cheese company with a product that came off assembly lines with more consistent quality than natural cheese and stayed on shelves longer without spoiling.
The company's next cheese breakthrough was Velveeta in the late 1920s. Then in the 1940s, Kraft scientists started working on a way to produce cheese in slices. Using a "chill roll" machine that caused hot cheese quickly to cool as it revolved over a cold drum, a sheet of cheese could be uniformly sliced into three-inch squares and stacked. Within one year of its national introduction in 1950, Kraft Deluxe processed slices became the most successful product introduction in the company's then nearly 50-year history. Cheez Whiz hit store shelves soon after.
The company has honed its skills, chopping and processing cheese into snackable forms, over several decades, as consumers demanded more convenience. Starting in the early 1990s, "shredding cheese drove the business for many, many years," says Mr. Deromedi, who once headed the unit and still avows an "incredibly strong" passion for the cheese business. "We've had great success just slicing our chunks of cheese, or adding reclosable packaging."
While he says those kinds of changes "seem very mundane," they can boost sales with a relatively small investment. Kraft's bagged cheese cubes come in five varieties. Even Cheez Whiz is being marketed as a dip: It now comes in a wide-mouthed jar with a picture of a tortilla chip on the label. In March, Kraft introduced a new DiGiornio blend of shredded cheese with parmesan, romano and Asiago.
Lately, Kraft's cheese business has been pressured by an onslaught of high-end products. Last year, U.S. sales of natural Asiago cheese, primarily distributed by a handful of importers and private-label brands, jumped 43% to $7.4 million, according to Information Resources Inc. Sales of Kraft aerosol cheese, which includes Cheez Whiz, fell 9.6%. Kraft's natural cheese sales grew 5.3%, while sales of its processed cheese fell 2%.
Paul Peterson, vice president of sales at Lactalis SA, a $5.5 billion French dairy company that is the largest purveyor of Brie cheese in the U.S., estimates that U.S. sales have risen about 10% a year for the past three years, with last year's growth slightly higher.
These cheeses often require different skills than those of Big Food. Unlike the automated production lines at Kraft's plants, which churn out more than two billion pounds of cheese a year, the Lactalis U.S. plant in Wisconsin has its workers turn individual Brie circles by hand every day during the eight- to 10-day curing process. Some are ready earlier than others, and only trained workers watching the white layer of mold on each Brie circle can evaluate when it's ready.
As Kraft tries to move upscale with its Athenos and Back to Nature cheese lines, it is also still playing the repackaging game. It's latest effort: new labels touting cheeses as low in carbohydrates. "The products have always been low in carbs," says Mr. Deromedi. "It's not like we've had to create a whole new something to get at that."
thank you wsj
6.01.2004
'Organic' outcry heeded Feds withdraw changes allowing more pesticides
- Carol Ness, Chronicle Staff Writer
Thursday, May 27, 2004
The Bush administration abruptly reversed itself Wednesday and withdrew four changes in organic food standards that critics had said threatened to undermine public trust in the word "organic."
Agriculture Secretary Ann Veneman announced that "we are taking action to rescind" the four changes made to organic food regulations by National Organic Program administrators in April and reported in The Chronicle on Saturday.
Those changes, which the department called clarifications, had expanded the use of antibiotics in organic dairy cows and pesticides in crops, allowed livestock to eat nonorganic fishmeal and deregulated "organic" seafood, cosmetics and pet food.
The reversal was in response to a broad wave of outrage from organic farmers, the $11 billion organic food industry, its advocates and Republican and Democratic supporters in Congress. They objected both to the changes and to the fact that National Organic Program administrators made them in private without consulting their own advisory board or organic producers.
Veneman, at the end of a telephone news conference on food exports in Washington, D.C., said the clarifications were made in "good faith" to resolve questions that had arisen over how to put the 2-year-old organic standards into effect.
In rescinding them, Veneman also ordered the Agricultural Marketing Service, which oversees the National Organic Program, to "work with the National Organic Standards Board" to resolve the problems that led to the changes in the first place.
She mentioned the "tremendous amount of interest" and "concern" raised about the changes over the last few days.
The controversy over the four rule changes was just the latest of many arguments that have erupted over private decisions by administrators of the organic program to define precisely what farmers, dairies and other organic producers must do to meet the organic standards.
USDA-accredited organic certifiers have applied various interpretations of the standards, leading to conflicts. For example, some have relied on wording in the standards to allow antibiotic use in dairy cows, while others, citing different wording, have forbidden antibiotics.
Supporters of the standards, including U.S. Sen. Patrick Leahy, D-Vt., who wrote the organic food act, say the law requires that the public and the board be included in working out answers to such conflicts, which will continue to arise as more businesses go organic.
While praise for Veneman's action poured out instantly from all corners of the organic food community, some players said program administrators still need to prove they can work with their advisory board and the public.
"Secretary Veneman has taken a gigantic step toward re-establishing the public-private trust that went into developing U.S. national standards in the first place," said Katherine DiMatteo, executive director of the Organic Trade Association, part of a coalition that raised the public alarm over the issue.
At Stonyfield Farm, an organic dairy in New Hampshire that opposes the use of antibiotics and other drugs in cows, Vice President Nancy Hirshberg said she was sending a letter of thanks to Veneman.
We were really stunned," said Hirshberg. "It really doesn't happen often that democracy prevails and voices are heard."
Leahy, whose office had been circulating a letter opposing the changes in the Senate, also lauded Veneman. But he added: "The organic standards and labeling program is still in its infancy, and this is a critical time for its credibility. This program's credibility has been built with full public and stakeholder participation, and we need to keep it that way."
Standards board Vice Chairman James Riddle of Minnesota said the four reversals are good news and he's looking forward to working with the U.S. Department of Agriculture in a "truly collaborative manner" on "a whole host of issues" awaiting action.
"It's a bigger issue," he said.
Bob Scowcroft, executive director of the Organic Farming Research Foundation in Santa Cruz, said, "We can't manage organic rules by uproar."
He added that the USDA needs to make a "true good-faith effort to trust the public's involvement. ... It remains to be seen whether they will do that or not."
URL: http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2004/05/27/MNGBT6SHM71.DTL
Thank you San Francisco Chronicle
Thursday, May 27, 2004
The Bush administration abruptly reversed itself Wednesday and withdrew four changes in organic food standards that critics had said threatened to undermine public trust in the word "organic."
Agriculture Secretary Ann Veneman announced that "we are taking action to rescind" the four changes made to organic food regulations by National Organic Program administrators in April and reported in The Chronicle on Saturday.
Those changes, which the department called clarifications, had expanded the use of antibiotics in organic dairy cows and pesticides in crops, allowed livestock to eat nonorganic fishmeal and deregulated "organic" seafood, cosmetics and pet food.
The reversal was in response to a broad wave of outrage from organic farmers, the $11 billion organic food industry, its advocates and Republican and Democratic supporters in Congress. They objected both to the changes and to the fact that National Organic Program administrators made them in private without consulting their own advisory board or organic producers.
Veneman, at the end of a telephone news conference on food exports in Washington, D.C., said the clarifications were made in "good faith" to resolve questions that had arisen over how to put the 2-year-old organic standards into effect.
In rescinding them, Veneman also ordered the Agricultural Marketing Service, which oversees the National Organic Program, to "work with the National Organic Standards Board" to resolve the problems that led to the changes in the first place.
She mentioned the "tremendous amount of interest" and "concern" raised about the changes over the last few days.
The controversy over the four rule changes was just the latest of many arguments that have erupted over private decisions by administrators of the organic program to define precisely what farmers, dairies and other organic producers must do to meet the organic standards.
USDA-accredited organic certifiers have applied various interpretations of the standards, leading to conflicts. For example, some have relied on wording in the standards to allow antibiotic use in dairy cows, while others, citing different wording, have forbidden antibiotics.
Supporters of the standards, including U.S. Sen. Patrick Leahy, D-Vt., who wrote the organic food act, say the law requires that the public and the board be included in working out answers to such conflicts, which will continue to arise as more businesses go organic.
While praise for Veneman's action poured out instantly from all corners of the organic food community, some players said program administrators still need to prove they can work with their advisory board and the public.
"Secretary Veneman has taken a gigantic step toward re-establishing the public-private trust that went into developing U.S. national standards in the first place," said Katherine DiMatteo, executive director of the Organic Trade Association, part of a coalition that raised the public alarm over the issue.
At Stonyfield Farm, an organic dairy in New Hampshire that opposes the use of antibiotics and other drugs in cows, Vice President Nancy Hirshberg said she was sending a letter of thanks to Veneman.
We were really stunned," said Hirshberg. "It really doesn't happen often that democracy prevails and voices are heard."
Leahy, whose office had been circulating a letter opposing the changes in the Senate, also lauded Veneman. But he added: "The organic standards and labeling program is still in its infancy, and this is a critical time for its credibility. This program's credibility has been built with full public and stakeholder participation, and we need to keep it that way."
Standards board Vice Chairman James Riddle of Minnesota said the four reversals are good news and he's looking forward to working with the U.S. Department of Agriculture in a "truly collaborative manner" on "a whole host of issues" awaiting action.
"It's a bigger issue," he said.
Bob Scowcroft, executive director of the Organic Farming Research Foundation in Santa Cruz, said, "We can't manage organic rules by uproar."
He added that the USDA needs to make a "true good-faith effort to trust the public's involvement. ... It remains to be seen whether they will do that or not."
URL: http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2004/05/27/MNGBT6SHM71.DTL
Thank you San Francisco Chronicle