Grocery Store Guru

All about the grocery industry, from a store level perspective.

Maple Leaf CEO steps into a GF mess

I read with great interest an article posted by Jax over at Gluten Free Ontario. You can read it here:

http://www.facebook.com/#!/GlutenFreeOntario/posts/226739044115922

For the record, I don’t thing he meant to portray GF the way that he did. We must remember that this was not a prepared statement (which one can go back and correct), but comments made during a conference call. For all I know he may actually believe that GF is bunk (I know many in the grocery industry that do, and liken it to Atkins), but even if that’s the case I can’t imagine he’d go on the record in the name of his company and say it.

What I do think is that GF makes a great scapegoat for the issues that the Canada Bread unit of Maple Leaf foods is having right now.

Canada Bread’s major competitor is Weston’s Bakery, which owns the license for Wonder Bread in Canada. Their parent company is Weston, which also owns the Loblaws family of grocery stores (Loblaws, No Frills, Fortinos, Valumart, YIG, Zehrs and others). It’s not a stretch to see why these grocery stores feature the Weston Bakery breads rather than the Dempsters breads (sorry – Canada Bread will always be Dempsters to me!) And even though that only cover 1 of the 3 major grocery retailers in Ontario, they’re the one gaining market share.

So rather than blame declining sales on the declining market share of their customers – a problem that Maple Leaf has no control over, why not frame it as people moving to a GF diet… something he then portrays as a solvable problem. The investors listening to the conference call would rather hear that the sales decline is the result of a solvable issue than something that out of the company’s hands.

As for the statement about making a GF bread, I don’t doubt that Maple Leaf has no interest in making a GF bread – but not for the reasons given. Again, the CEO makes it sound like there’s no money to be made there, and that all GF bread tastes bad. Anyone that’s tried Udi’s or the new Kinnikinnick breads knows that’s simply not true. So why wouldn’t they be interested?

The amount of money that Maple Leaf would have to sink into making a GF bread would be huge. Usually, when introducing a new product, the investment is almost all in the marketing – they already have the plant and some of the machinery. It’s a matter of re-purposing part of the facility, or even sometimes just scheduling a different run on the same machinery. For a GF bread, however, it’s a different story. There is a general mistrust in the GF community of anything made on shared machinery, or even in a shared facility. I think that Maple Leaf is aware of that, and know they would need all new machinery at a minimum, and preferably a different facility. That causes capital issues, as well as Logistics issues.

This soon after the Listeria issues that Maple Leaf had, I don’t think they’re willing to risk another contamination event either!

To pull this long ramble together, I think the CEO knew he had to shoot down the notion of a GF Bread, and could use GF as a great scapegoat for Canada Bread’s disappointing numbers. I just think he chose his words poorly, and could have benefitted from a prepared statement on the matter. Maple Leaf already provides a lot of GF option through it’s other business units – Schneider’s has GF options, and Maple Leaf is the largest supplier to M&M Meat Shops, including some of their GF options as well. It would do the GF community well to continue to support the companies that are making and labeling their products GF, even if their CEO needs a kick in the pants.

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August 9, 2012 Posted by | Industry | Leave a comment

General Mills buys Food Should Taste Good, leaves bad taste in my mouth

The last 15 years has seen many small successful food companies bought by larger ones… heck, even large food companies bought by even larger ones. Now that the Health Foods/Natural Foods category is gaining market share in leaps and bounds, many organic and specialty food companies are becoming buyout targets for the big guys.

The grocery industry trade publications are looking at the General Mills purchase of Food Should Taste Good (www.foodshouldtastegood.com, maker of all natural chips) in a couple of different ways. Some say it’s an attempt by GM to compete against it’s largest rival Kellogg’s in the Healthier snack category – Kellogg’s owns Kashi and has a significant portion of the category already. Others are saying it’s GM trying to chip away (sorry for the pun) at Pepsico, who owns snack giant Frito Lay (as well as Gatorade, Minute Maid, Quaker….).

From the consumer’s point of view, is this a good thing?

First off, I have to admit I’m almost always against it. I don’t see consolidation as a positive force – it takes away the diversity and creativity of the people that make our food. Rather than taking pride in crafting an excellent product, the focus of the large corporations is always profit first. Smaller companies are often able to keep their focus on creating that superior product, knowing that a happy customer is a repeat customer – and profits will be the result.

The key will be how GM chooses to handle it’s new aquisition. Will it keep the current operational management, and run it at arms length? In this case, Food Should Taste Good may be able to keep is core values intact. They could experience increased profitability through GM’s superior buying power for base ingredients, and increased volume using GM’s wider distribution and larger retailer base. As long as the Food Should Taste Good unit produced healthy profit numbers, maybe GM would be happy to keep out of the day to day operations. Ah, to dream.

Or, as I would suspect, will they try to bring “efficiencies” to Food Should Taste Good? In this case, GM would be looking at how to squeeze more profit out of the current operation. It may not happen right away, but down the road someone is going to look at the relative cost of high quality base ingredients and figure that they could make more money using the cheaper stuff. It’s in the nature of the large corporations to do so – numbers are all that really matters. I can’t pretend that I know how Food Should Taste Good makes their chips, but “streamlining” the production process is another way that companies can squeeze for more profit. In both of these cases, the final product is likely to be effected.

I don’t yet have faith that conventional consumer packaged goods companies understand the very customers they’re looking to gain by buying these companies. While price is always a factor in any buying decision, the quality of the final product tends to be the primary factor for people that are buying health/natural/specialty foods. We know that even the cheapest product in these categories will likely cost more than it’s conventional counterpart, so the customer needs to feel that the quality of the final product justifies the premium price. Just ask Metro about the dangers of low cost options – having a Gluten Free product recalled for containing Gluten can not have had a positive impact on their store brand specialty products.

In the short term, this will look good for the consumer – increased availability, and likely some new product innovation. I, however, will keep a curious eye on the final product.

Two quick case studies, so you don’t think I’m coming out of left field:

In the 90’s, Humpty Dumpty came out with a line of potato chips called “Extreme”. They were slightly bigger bags than they’re competitors, and they had a ton of flavouring on them. For 6 months, they were the most popular thing in the chip aisle in the store I was working at. Then, the tinkering began…. the bag became smaller, and there was less flavouring in each bag. The product line disappeared as quick as  it arrived. The people making the decisions didn’t understand what it was that was making their product so popular, and they made their product just like everyone else’s. I still dream about Extreme Buffalo Wing chips….

Kraft Foods bought Christie in the early 2000’s, if memory serves. The reason I can’t nail it down in my head is because Kraft didn’t really change anything when they took over… Christie ran like it always did. That went on for a few years, and then the efficiencies began. When I went back to working in a discount grocery store in 2009, Christie no longer had their own sales reps – the Kraft guy was taking care of everything. One person doing more work NEVER leads to better quality work, and since the Christie’s (and now Kraft) reps actually wrote the orders for their stores, their work was kind of important. Then, Christie eliminated their warehouses and started using a third party logistics company to both warehouse and deliver their products. Deliveries started arriving late or not at all. Sure, I imagine that the Christie’s operation is costing Kraft less money, but I also will tell you that they went from being one of the best suppliers I worked with at the store to average at best. Eventually, that catches up with the bottom line.

Brent

April 17, 2012 Posted by | Industry | 1 Comment