Food giant Kraft Foods has announced that it intends to split the company into two separate listed companies. The current Kraft foods will be comprised of Kraft’s snack business which includes the Oreo, Chips Ahoy, Tang, Trident and Cadbury brands. The other company which will be spun-off will be focused on the North American grocery market and will include Velveeta and Kraft cheese, Oscar Mayer, Philadelphia Cream Cheese,  Jell-O, Miracle Whip, Maxwell House coffee and Capri Sun drinks.

The snacks business would have 2/3 of revenues ($32 billion out of Kraft’s current $48 billion) and is the largest company in the global candy and gum market with a near 15% share. The grocery business would have the other third ($16 billion) of Kraft’s current revenue and has an established well known brands in the North American market.

Why Split?

The two new parts of Kraft currently have different focus, characteristics, opportunity and challenges that this break-up will accentuate.

Kraft’s snack business has a global reach and a particular focus on the opportunity for high growth in developing countries. Meanwhile, the new grocery business is a more mature market and has a tighter geographical focus but due to its maturity has reliable sales and can likely offer an attractive dividend to investors.

In an encouraging move, the world second largest food and beverage producer Kraft (second only to Nestle) has announced a plan to reduce the amount of sodium in its products by 10%.

There has long been evidence linking high sodium intake with high blood pressure and associated heard diseases but reducing the amount of salt in foods has been a long standing challenge. This is especially true in Canada where a recent study has shown that packaged foods are much saltier than elsewhere in the world.

Hopefully by following the lead of Campbell Soup and now Kraft, food producers will try to reduce their product’s sodium levels and make their products as well as their customers healthier in the process.

Backed by private investors, a company called Cheese New Brunswick have announced that they will be opening a new cheese plant near Sussex, New Brunswick. The facility will create a new hard cheese similar to the popular Reggiano-Parmiagiano cheese from Italy.

Due to cheese labelling restrictions, the cheese cannot be called Reggiano-Parmiagiano unless it comes from a very specific region of Italy but it doesn’t prevent Cheese NB to create a very similar cheese under a different name which has not yet been revealed.

The $10 million plant which is scheduled to commence construction within 6 months, with completion in a year in a half. Due to the time required to age the cheese, it is expected that cheese will not be available on retail shelves for 3 years or so. Cheese New Brunswick has already secured a sufficient milk quota to create the volume of cheese that it expects.

Under optimistic scenario of maximum capacity a maximum of 40 employees will be needed for the Cheese New Brunswick operation.

Overall this is great news for the Sussex area and the agricultural community in New Brunswick. Any operation that uses local agricultural products and hires local people is a positive development. I’m looking forward to tasting this new cheese. I just wish that I didn’t have to wait for three years.

More info:

Cheese New Brunswick

CBC Information Morning Saint John interview with Cheese NB investor Mario Ruffalo

CBC News – New Brunswick – Cheese N.B. plans $10M facility.

Nadeau Poultry Farm a large chicken processor located in northern New Brunswick, has announced a layoff of 175 workers which is approximately half of its staff. The managers of the plant state that the staff reduction is caused by a lack of a supply of chickens to process after its prime chicken supplier and soon to be competitor Westco diverted a large amount of chickens to an Olymel plant in Quebec.

The poultry processing company has been in a long running dispute with competitor Westco over the supply and processing of chickens in New Brunswick and Nova Scotia. Westco and Olymel have teamed up and are planning to build their own slaughterhouse facility in Northern NB in the near future.

Nadeau is still hoping to get the New Brunswick government to pass a law which prohibits export of chickens for processing. I personally don’t see the provincial government to pass such a bill at a time where it is trying to open up trade borders with its neighbour Quebec.

Update: Nadeau employees have tried unsuccessfully to block shipments of chickens to Quebec. http://an.capacadie.com/actualites-regionales/2009/9/10/le-poulet-de-westco-prend-la-route-du-quebec

It appears that there are still talks to try to resolve the situation according to the premier.

Part of the problem with the current food supply chain is the disconnect between producer and consumer. Information about where food is grown or manufactured as well additional information about growing techniques or specific manufacturing process are not available to consumers. Even after extensive research, it is often difficult to know where our food comes from. It is easy to disguise products as local and to hide their origins or details concerning their production.

I am currently reading a Twinkie Deconstructed which is dedicated to examining and tracing the origin and method of manufacture of each of the ingredients in the popular cake snack Twinkies. Ever wonder what Polysorbate 60 is? This book drive the point across of how far we have become separated from our food sources and how little information we really have about the food (and food like substances) that we eat.

Tracking the food we eat

I’ve already written about pilot programs that use RFID to track food from farm to plate but other initiatives using barcodes could also be effective in tracking food. Several companies including FoodReg and TraceTracker are trying to address issues surrounding traceability of items in the food supply chain. Databases can track origin or specific growing conditions of the food being tracked. For examples TraceTracker and Intel are teaming up to develop a system that allows tracking of halal foods.

Maybe someday I will really be able to tell whether the apples for my apple juice came from the farmer down the road or from some tree halfway around the world.

Have you ever noticed that certain food items that you buy don’t seem to last as long as before? This could be due to the practice known as short sizing.

What is short sizing?

The practice of short sizing consists of slightly reducing package sizes while keeping the prices near the same level. This has the effect of reducing the amount of food required to be manufactured thus reducing the manufacturer’s cost. In some cases, the packaging remains identical but the amount of food in the package is reduced. As prices are kept the same, manufacturers increase their profit margin. Some manufacturers claim that the practice is used to prevent the need to raise prices but the effect for the consumer is the same, less food for the same price.

Short sizing can and does happen in other retail packages such as shampoo and cleaning supplies but it can be seen most often in food products.

Does it really matter?

Short sized packages are typically slightly smaller than the previous packages which they replace. For example, a 1 litre jar of peanut butter might be reduced to 975 ml or a 500 g box of crackers might get replaced by a 450 g box. The small change has the effect that many consumers will not notice the smaller size and simply purchase the product as they had before.

Slight reductions in sizes, especially to odd sizes can also make it more difficult for shoppers to perform unit cost calculations for comparison shopping. 5$ for a 500 ml can of juice makes it easy to calculate a 1$ per 100 ml unit cost. 5$ for a 475 ml can of juice however is a bit tougher to calculate the unit cost of $1.05 per 100 ml. By making it more difficult to compare unit costs, it is hard for grocery shoppers to know if they are really getting a good value for their food dollars. Although I can’t find the original study, reportedly, in a UK study : “When provided with only the total price and weight for six different sizes of baked beans, just 7% of consumers could accurately calculate the lowest unit price.”

People are taking notice

Many consumers are growing frustrated with short sizing and recently the mainstream media such as the NY Times and the LA Times have picked up stories of consumer frustration.

Does it bother you that packages are shrinking without getting any cheaper?

Update: Another article about short sizing: http://www.moneyville.ca/blog/post/1033350–why-juice-boxes-are-10-smaller-but-cost-the-same

In 2007, the Canadian government announced new regulatory changes with respect to cheese sold in Canada that may affect the quality, content and perhaps the price of cheese in your supermarket.

Cheese labelling changes

The changes are fairly minor but the updated law will require imposes compositional standards for cheeses. In other words there will now be minimum percentages of milk and cream required to make and sell cheese under certain labels such as cheddar in Canada. This is in contrast to today where cheese manufacturers have no limits on the percentages of other milk ingredients (modified milk ingredients) which can be used to manufacture cheese.

The entire list of regulations concerning not only cheese but other dairy products can be found at: http://laws.justice.gc.ca/en/C-0.4/SOR-79-840.

Not everybody views this change as positive

While the dairy industry and smaller cheese producers support the amendments, the industry’s biggest cheese processors such as Kraft Canada and Saputo are fighting the labelling changes as they claim that the reduction of modified milk ingredients (mostly imported) from their cheese making process in favour of raw milk (local I might add), will raise prices and in the end hurt cheese consumption.

As previously stated on the CBC’s Marketplace, there is more to the story however. Modified milk ingredients can be imported into Canada tariff free unlike milk and cream which are typically used to make cheese and ice cream. These low cost milk ingredients are then used to make lower quality products.

Quick resolution?

Hopefully the legal challenges will be quickly struck down and Canadian can finally be assured that what they are buying in their stores really is the cheese that they expect.

See also: http://www.theholmteam.ca/Canadian.cheese.pdf

The battle is brewing over chicken processing in New Brunswick.

The Players

In one corner is the long established Nadeau Maple Lodge (owned by Ontario based parent company Maple Lodge Farms) who currently operates New Brunswick’s only chicken processing facility in the northern New Brunswick community of St. Francois de Madawaska.

In the other corner is Groupe Westco who is a major poultry production group and holds a large amount of the chicken production quota (around 50%) for the province. Joining Groupe Westco in this corner is Olymel, Canada’s largest poultry and pork processor based in Quebec.

Round 1 : Attempted Buyout

Groupe Westco in an effort to assert control over the chicken vertical from egg to plate, made an offer to purchase Nadeau’s chicken processing facility. Nadeau countered that the offer made by Groupe Westco was more of a threat in order to acquire its facilities at reduced price. The claim being that Westco threatened to stop sending any of its chickens to Nadeau if it did not agree to the buyout. Nadeau refused to sell its processing assets to Westco.

Round 2 : Threats

After being rebuffed by Nadeau Poultry, Groupe Westco formed a partnership with Quebec’s Olymel. The goal of the partnership is to build a slaughterhouse in St. Francois in order to process Groupe Westco’s chickens. Until the facility is completed, Westco plans to ship its quota of chickens to an Olymel processing plant in Quebec beginning in July.

Many people including Nadeau claim that Groupe Westco’s actions are anti-competitive and Nadeau Maple Lodge has even filed a complaint with Canada’s competition tribunal. More importantly, many worry about whether the plans for a new processing facility is simply a negotiating tactic on Westco’s behalf in order to acquire the Nadeau slaughterhouse. The other concern is that by shipping chickens to Quebec for processing, processing jobs at the Nadeau plant would be lost to Quebec.

Round 3: Government gets involved

At the beginning of June, the government of New Brunswick amended some legislation in order to allow the government to enforce, if needed, a temporary halt of out of province chicken shipments. This amendment is intended to promote some stability in the sector. Westco is claiming that the government is interfering with the free market and favouring one producer over another.

I think that the provincial gov’t fears that if poultry is taken out of province for processing, not only does it take processing jobs out of the province but that it may put Nadeau Maple Lodge out of business which could cause even more damage to an already fragile northern New Brunswick economy.

It will be interesting to see which way the feathers fly….