Newsletter July 2017 Volume 5 - Issue 5
Distributor News Vol. 5 - Issue 5 Inside This Issue Distributor News 2-3 Industry News 4-8 Consumer Trends 9-14 Retailer News 14-20 Shows & Events 21
Nassau Candy Distributor Acquires McClain’s Old Florida Gourmet
Specialty confectioner, Nassau Candy Distributors, has announced it will combine McClain’s Old Florida Gourmet with its own distribution division, Nassau Candy South. Once the transaction is complete on July 27, 2017, owners of the distribution company, Kelly Abercrombie and Taylor McClain Mock, will be account managers and report directly to Nassau Candy. Abercrombie said McClain’s has a 13,000-square-foot warehouse in Sarasota, Florida, that houses its products. Those products will also be moved to Nassau Candy South’s facility in Riviera Beach, Florida next week. However, Citra Products of Florida, which produces kitchen utensils for eating fruit and is also owned by Abercrombie and Mock, is not included in the McClain’s transaction. ‘Synergistic combination’ “We consider this a synergistic combination,” Abercrombie said. “McClain’s had grown to the point where we had to make a decision about significantly expanding logistics, technology, and geographic penetration, which Nassau Candy already has.”
Contact Headquarter Office 1831-A Howard St. Elk Grove Village, IL 60007 630.539.3100
Follow Us
cafortune.com 2
“The transaction also provides our customers with a larger number of products and short-run private label customization, and they still will be able to hand pick their order and buy less than case quantities,” she added. The candy and chocolate confectionery portfolio currently represents 50% of McClain’s overall sales, and the other half the business comes from specialty food items produced within the state, Abercrombie told ConfectioneryNews. The company carries national candy brands, including Jelly Belly, as well as local products such as Anastasia Confections, and it services the Florida Aquarium, airports within the state, Miami Zoo, gift shops and other channels where tourists purchase candies, Abercrombie said. McClain’s has experienced 10% year-over-year growth in sales since it started in 2008, and it hopes to double its business and targets 40% to 50% growth rate by the end of 2017.
Source
Distibutor News KeHE Website Collects Industry Awards for Outstanding Design KeHE Distributors’ dynamic new website (KeHE.com) has received industry recognition for outstanding design from The Communicator Awards, the Davey Awards and the W3 Awards. “We are honored to receive this global recognition for our new website,” said Ari Goldsmith, Executive Director of Marketing, KeHE. “The colorful aesthetics, easy navigation and enriched content of our website reflects our refreshed branding and reinforces our role as a leading distributor of natural and organic, specialty and fresh products.” KeHE received the following prestigious awards: - The Communicator Awards (2017) – Award of Distinction: General Food and Beverage Websites - Davey Awards (2016) – Silver Winner: Websites-Manufacturing - W3 Awards (2016) – Silver Winner: Corporate Communications The annual “best of the web” competitions are judged and overseen by the Academy of Interactive and Visual Arts (AIVA), a 600+ member organization of leading professionals from various disciplines of the visual arts dedicated to embracing progress and the evolving nature of traditional and interactive media. Entries are judged on their merits based on a standard of excellence as determined by the AIVA, considering the category entered.
Source
Supervalu Acquires Central Grocers’ Illinois Warehouse Supervalu purchased a nearly 1-million-square-foot warehouse in Joliet, Ill., earlier this week for $61 million. The seller was the currently bankrupt cooperative, Central Grocers Inc. The acquisition is expected to help the Minnesota-based supplier better serve what President and CEO Mark Gross described on a recent conference call as “several” incoming customers who were previously served by Central Grocers. Before filling for Chapter 11 bankruptcy in May, the 100-year old Central Grocers served 400 independent grocers throughout the Chicagoland area. “The acquisition is intended to help Supervalu provide faster and more efficient service to its dynamic and diverse customers by expanding its distribution capabilities, and to provide an additional avenue to assist with the expansion of its Market Centre business,” said Jeff Swanson, VP of communications for Supervalu. Due to Central Grocers’ current financial standing, the transaction had to be approved by the U.S. Bankruptcy Court.
Source
3
Industry News Carrier Transicold to Offer New EPA-Approved Refrigerant for North America Truck and Trailer Systems
C arrier Transicold will begin offering the new-generation refrigerant R-452A as an alternative for use in its truck and trailer refrigeration systems, following the July 21 announcement that the Environmental Protection Agency (EPA) has approved the refrigerant for transport refrigeration applications. Carrier Transicold is a part of UTC Climate, Controls & Security, a unit of United Technologies Corp.
Developed by the refrigerant manufacturing industry to reduce environmental impact, R-452A has a global warming potential (GWP) that is almost half that of R 404A, the hydrofluorocarbon (HFC) refrigerant used in most land-based transport refrigeration applications. Carrier Transicold will offer the new refrigerant as an option to R-404A later this year. “As a near drop-in substitute, R-452A offers similar levels of refrigeration performance, fuel efficiency, reliability and refrigerant charge in new equipment as R 404A, and we are pleased to be able to make it available to refrigerated transport operators seeking a lower GWP option to advance environmental sustainability,” said David Brondum, director, product management and sustainability, North America Truck, Trailer, Rail, Carrier Transicold. R-452A is a refrigerant blend with a low-GWP hydrofluoroolefin (HFO) as one of its key components. “Carrier Transicold has extensive experience with R-452A, having first offered it in 2015 to help Europe’s transport refrigeration industry respond to the European Union F Gas Regulation, which is driving down Europe’s use of traditional HFC refrigerants with higher GWPs,” Brondum explained. Extensive work has been done by Carrier Transicold in preparation for a similar transition in the United States. Brondum noted that the EPA has not banned R-404A for transport refrigeration applications, enabling refrigerated haulers to choose the option best suited for their operations. This allows for considerations of price and availability, fleet size and maintenance budgets. “Going forward, fleets may want to consult with their Carrier Transicold dealers to determine which refrigerant solution is appropriate,” Brondum said. While Carrier Transicold will continue to offer R-404A, it will also provide R-452A as an option for new model Vector™ and X4 Series trailer refrigeration units, Supra® truck units and direct-drive truck units that currently use R 404A. The new refrigerant can also be used as a drop-in replacement for Carrier Transicold units already in service, although certain older models may require component retrofits or software updates, which can be accommodated through Carrier Transicold’s network of authorized dealers. “Carrier Transicold’s larger goal of reducing the GWP of its transport refrigeration equipment goes well beyond the benefits of R-452A,” Brondum noted. “We are committed to pursuing the commercialization of HFC-free refrigerants in road transportation refrigeration by building upon our expertise with CO2 refrigerant, also known as R-744.”
continues next page...
4
Industry News Carrier Transicold to Offer New EPA-Approved Refrigerant for North America Truck and Trailer Systems Cont...
CO2 refrigerant has a GWP of only 1, roughly 2,000 times better than R 452A and 4,000 times better than R-404A. It is also nonflammable, non-ozone-depleting, globally available and cost effective. Carrier has successfully applied CO2 refrigerant in CO2OLtec stationary commercial refrigeration systems widely used throughout Europe, in NaturaLINE® container refrigeration systems used by major container shipping lines in support of global commerce, and prototype trailer refrigeration trials with two major European supermarket chains.
Source
Big Food Companies are Trying to Reverse the Curse of the Center Aisle Shoppers are increasingly shunning the center of grocery stores and hugging the perimeter as they trade packaged food for fresh food. That’s bad news for an industry that’s already struggling. For years, nutritionists have been urging Americans to swap out processed foods for fresh options like fruits and vegetables. People now seem to be listening, and deflation among fresh food products has made eating healthier a more affordable option. Consumers’ quest for fresh is compounded by competition from private-label brands, demands to lower prices and Amazon’s impending purchase of Whole Foods — which is seen accelerating both price pressure and the shift to fresher food. The result? Packaged food sales have declined, and earnings have disappointed. Some companies have cut jobs and shuttered factories. Wall Street has not been forgiving. The S&P 500 has increased nearly 14 percent over the last 12 months, while packaged foods and meats companies in the index are down more than 11 percent over the same time period. Kellogg, General Mills, Campbell Soup and J.M. Smucker all hit 52-week lows Tuesday. Despite mounting pressure, legacy brands are not giving up. They recognize the challenges the industry faces, but some companies may not be able to overcome them easily. ‘The old way of business is changing’ The same ingredients that helped propel big brands to the top two decades ago are helping erode trust in them today. Brands are scrambling to scrub their products of fat, sugar and other unwanted ingredients, while convincing consumers they still deserve a spot in their shopping carts. Packaged food companies have dealt with health trends before. They have survived carb-free, transfat, low-fat and low-calorie movements. This time may be different. This time, shoppers don’t have a defined enemy. They want natural, clean food. It’s a broad desire, and it’s one that challenges what packaged food is at its core. continues next page...
5
Industry News Big Food Companies are Trying to Reverse the Curse of the Center Aisle Cont...
Companies can tweak their recipes to make them more desirable to health-conscious consumers, but they can only do so much before the product is unrecognizable. Even with changes in the center aisle, some shoppers are trying to avoid processed foods altogether and are sticking to the perimeter of the stores, where they typically find bakery, deli, seafood, produce and meat products. “Overall, there’s just a lot of uncertainty in the industry and the old way of business is changing, and the old way was going on for so many years,” said Richard Bode, principal consultant at Cadent Consulting and a former marketer at Kraft. Nielsen data suggest companies that offer more fresh food are growing faster than those who don’t. Fresher stores experienced a 4 percent growth in sales last year, compared with 1 percent for other stores. “There just continues to be growth and interest in fresh that curtails a lot with consumer preference and thought around health- and wellness-type products, organic, natural and clean-label,” said Meagan Nelson, client director at Nielsen Fresh. Even when shoppers do venture down the aisles in the center of grocery stores, they may grab private-label products instead of the name-brand ones. Many shoppers overcame their aversion to store brands during the recession, said Yosi Heber, founder and president of Oxford Hill Partners and a former marketing executive at Kraft and Dannon. Once they took the risk, they liked what they tasted. Some companies have fared better than others in the changing industry. The ones that Wall Street likes best right now are those that have the potential to merge with or acquire others. ‘A big part of the story’ Analysts agree that merging with and acquiring companies is the best strategy packaged food producers have to turn around sluggish sales. They want to see companies ditch brands that aren’t working and grab ones that are. Nestle announced last month it would explore selling its U.S. confectionery business, which includes brands like Butterfinger and Baby Ruth. Despite Nestle’s history with candy, it makes more sense for the company to invest in growing categories like water, said Heber. Investors salivated at the prospect of a Kraft Heinz takeover of Unilever earlier this year. Shares of Kraft Heinz spiked only to fall again when its bid failed. Unilever shares have climbed ever since. “(Mergers and acquisitions are) a big part of the story, particularly because it’s easy to underestimate the influence these large packaged food companies within the grocery store — even if some of their products are a little bit out of step with where their target consumers seem to be settling,” said Zain Akbari, an analyst at Morningstar. Wall Street expects Kraft Heinz to pursue another acquisition, most likely Mondelez, the snack company and Oreo producer that was spun off from Kraft in 2012. Mondelez CEO Irene Rosenfeld sidestepped questions about the possibility in an interview with the Chicago Tribune this week. She said Kraft Heinz is likely to buy something, but that Mondelez’s focus would remain on growing its business. continues next page...
6
Industry News Big Food Companies are Trying to Reverse the Curse of the Center Aisle Cont...
Wall Street considers both Kraft Heinz and Mondelez moderate buys. RBC Capital’s David Palmer recommends buying Kraft Heinz because it has “unapologetically cut and innovated its way” to growing its margin to 29 percent within three years. “By most if not all metrics we as stock analysts observe, we believe Kraft-Heinz is unequivocally ‘the best” today,”’ Palmer wrote in a note in May. Pinnacle Foods is another Wall Street favorite. The company discussed a possible merger with Conagra earlier this year. Talks ended last month, with sources saying the two companies did not plan to revisit them. Rumors are still bubbling about the possibility, and Pinnacle is considered a strong buy. Aside from the merger speculation, Pinnacle has been successful in shopping around for healthier brands. In 2009, the company picked up Birds Eye Foods, which offers frozen vegetables and meals. In 2015, it acquired Boulder Brands, whose portfolio includes healthier lines such as Evol and Earth Balance. Neither acquisition was in the fresh realm, but both aligned with shoppers’ desire for products with a healthier image. In 2016, Pinnacle’s health and wellness portfolio represented 55 percent of the company’s sales, according to its annual report. Investors have rewarded Pinnacle; its stock has risen 22 percent over the past year. The strategy is not isolated to Pinnacle. Kellogg acquired natural food producer Kashi in 2000. General Mills bought organic food company Annie’s in 2014. Unilever purchased fancy ketchup maker Sir Kensington this year. Acquisitions like these may have broader implications on companies than simply profit. “For someone that’s been at a big company for say, 20 years, has a certain way of doing things that almost becomes a sixth sense,” Bode said. “When they see a smaller brand that’s very creative and moves very fast, of course they’re going pick up some of that.” ‘It isn’t too late’ Big food is facing a reality that numerous other industries have already experienced: business as usual simply isn’t enough to succeed anymore. Legacy brands are still selling. But they’re not growing, and that’s a problem. “It isn’t too late, but they really need to get the ball rolling because what’s happening is instead of growing at 5 to 10 percent, many of them are flat or are declining 1 percent. And that’s not acceptable to shareholders,” Heber, the consultant and former food exec, said. General Mills is one company that some on Wall Street have lost confidence in. The company’s sales dropped 11 percent between fiscal 2015 and 2017, as key categories began to struggle. Chobani’s Greek yogurt growth decimated General Mills’ Yoplait sales. Since 2015, General Mills’ yogurt sales are down 24 percent, according to an SEC filing. General Mills rolled out its own Greek yogurt, but it didn’t gain much traction. Last month, the company released a new French yogurt called Oui in an attempt to capitalize on shoppers’ Greek yogurt fatigue. Time will tell if this helps its sales. continues next page...
7
Industry News Big Food Companies are Trying to Reverse the Curse of the Center Aisle Cont...
At its investor day Wednesday, General Mills outlined how it segmented its brands into “foundation” and “growth” categories. It displayed confidence in the foundation businesses, which include Pillsbury refrigerated dough, Betty Crocker baking mixes and Progresso soup. At the same time, General Mills is investing more resources into its natural and organic businesses. By 2020, General Mills expects its portfolio of nine such brands to generate $1.5 billion in net sales. But the plan wasn’t encouraging enough to change analysts’ recommendations. Stifel Nicolaus analyst Christopher Growe maintained his $3.11 earnings per share estimate, or 1 percent growth, for fiscal 2018 after attending the investor day. “And, with the stock trading at just 17x on a P/E multiple basis and 11x on an EV/EBITDA basis (slightly below its peers) we continue with our Hold rating as we foresee limited upside for the shares until a sustainable level of sales growth improvement takes hold,” Growe wrote in a research note. Wall Street casts even more doubt on Kellogg, J.M. Smucker and Campbell Soup. Many analysts recommend holding shares of all three, and one even suggests selling Kellogg and Campbell. The three companies sell products that are almost exclusively in the center of the grocery store. Former marketers Heber and Bode say it’s possible for companies to attract shoppers down their aisles, but it will require a completely new approach. Traditional media like television and newspaper ads used to be the main focus. Heber and Bode said companies should now focus on grabbing shoppers’ attention when they’re actually at the grocery store. Regardless of what strategy big food companies deploy to start growing again, they need to do something soon. Amazon’s deal to purchase Whole Foods has shaken already weary investors. No one knows exactly what to expect. But if history is any indication of what could happen, legacy brands likely know to expect something. They ought to be ready for whatever that something is.
Source
8
Consumer Trends Exciting Trends and Innovations Abound at Specialty Food Association’s 2017 Summer Fancy Food Show The 2017 Summer Fancy Food Show, held June 25-27 at the Javits Center in New York City, remains the premier place to spot the newest trends in specialty food. After all, with more than 2,600 exhibitors from around the world showcasing 180,000 different specialty food and beverage products, it’s the largest specialty food trade show in North America. With such an array to consider, the Specialty Food Association Trendspotter Panel had quite a job exploring the show floor daily to discover on-trend product innovations. The Trendspotter panel brought together diverse perspectives from retail, foodservice, and culinary education, and included Ken Blanchette, FreshDirect; Jonathan Deutsch, Drexel University; Perla Nieves and Alysis Vasquez, Midnight Market; Alison Tozzi Liu, James Beard Foundation; and Elly Truesdell, Whole Foods Market. “Overall, consumers are seeking out better-for-you foods and beverages made with quality ingredients. They want to make a good choice, even when indulging,” said Denise Purcell, head of content for the Specialty Food Association. “For instance, they are looking for foods that give them added servings of vegetables or are good sources of protein or have a health benefit. But they also need to be convenient as frequent snacking and meals-on-the-go are the common ways consumers eat now. And above all, they need to taste good.” “The Trendspotters’ picks reflect current food, beverage, and consumer trends,” said Purcell. “Categories like beverages and snack bars, for example, have grown over the past two years, according to our latest State of the Specialty Food Industry research, and are forecasted to continue to grow. This list reflects that with new coffee, tea, and sparkling beverage introductions, as well as savory bars.” “Plant-based foods and beverages are another area of growth and innovation,” she continued. “At the Summer Show, not only did exhibitors showcase plant-, tree-, and nut-based products across categories from waters to cheese and meat alternatives to chips, but we also saw a glimpse into the future of food within the Taste Tomorrow section of LevelUP, a new interactive attraction that looked at the future of food, consumers, and commerce. There we saw that plant-based foods are being used in everything from seaweed pastrami to edible algae.” Here are the Trendspotters’ picks of on-trend product innovations from the 2017 Summer Fancy Food Show: New and Creative Beverages - Afineur, Cultured Coffee. Biotechnology company using controlled natural fermentations. “Brand new to market. The double fermentation process is attractive for people who love coffee, but may have stomach issues with the traditional brewing process.” — Elly Truesdell, Whole Foods Market - The Hudson Standard, Strawberry Rhubarb Shrub. Based on a Colonial American tradition of blending fruit, spices, vinegar, and sweetener to make a concentrated syrup. Using New York state organic apple cider vinegar and local strawberries and rhubarb, the shrub is an ideal balance of sweet and tart. “Refreshing, spritzy, and flavorful.” — Alison Tozzi Liu, James Beard Foundation - The Owl’s Brew, Radler. Organic, no artificial ingredients. Premium beers blended with fresh-brewed organic teas, infused with real fruits and botanicals. Reported to be the first-ever line of tea paired beer and the first stand-alone line of Radlers on the market. “A refreshing and light beverage. We loved the array of flavors that were presented and it’s definitely marketed towards women.” — Perla Nieves & Alysis Vasquez, Midnight Market continues next page...
9
Consumer Trends Exciting Trends and Innovations Abound at Specialty Food Association’s 2017 Summer Fancy Food Show Cont...
- Smith & Salmon, Sap! Birch Soda: Organic, non-GMO, gluten free. Sparkling birch sap beverage. “There are so many exciting trends in just one can! This line is expanding from the maple soda and seltzers to include the whole forest. This new birch water soda is made by tapping the sap from birch trees, which offers a subtle caramel flavor in this light bubbly drink. It’s also an excellent and innovative example of sparkling drinks or waters with low sugar and plant-based or health-focused ingredients. This entire can has only 25 calories and 6 grams of sugar.” — Elly Truesdell, Whole Foods Market - SunUp, Green Coffee. Premium, organic, tea-style drink made from unroasted coffee beans. “Loved the fact that it has the caffeine of cold brew, but tastes and digests more like tea. The unsweetened is very tasty! We’re always looking for zero sugar options.” — Ken Blanchette, FreshDirect Better-for-You Snacking - Lebby Chickpea Snacks, Dark Chocolate. Gluten-free, vegan, kosher. Lebby chickpeas are roasted through a process that was perfected over centuries to give a great texture and flavor. Chickpeas are packed with protein, vitamins and minerals and contain 70% less fat than roasted peanuts. Flavored with natural ingredients. “These chocolate- covered chickpeas were really unexpectedly delicious.” — Alison Tozzi Liu, James Beard Foundation - Rooted Food Co., Popped Lotus Seeds. Gluten-free. The lotus flower is a giant lily found in wetlands and contains edible seeds known for their medicinal and nutritional value, Rooted Food Co. roasts and flavors them. “Loved the cheddar and chive, and jalapeno varieties. The size of the snack bag was great, and I loved the natural variety in sizes of the seed puffs.” — Elly Truesdell, Whole Foods Market - Sheffa Foods, Savory Bars. Gluten-free, non-GMO, vegan, kosher, low in sodium and sugars. Wholegrain brown rice partnered with quinoa, millet, amaranth, chickpeas, and sunflower seeds, with a touch of olive oil that creates a crunchy, perfectly seasoned bar made without sweeteners or fruits. “The savory bar has been the holy grail for bar makers and these guys nail it.” — Jonathan Deutsch, Drexel University Plant-Based Foods - Miyoko’s Kitchen, Mt. Vesuvius Black Ash Cultured Nut Cheese. Organic, non-GMO, free of cholesterol, lactose, egg, gluten and soy. Coated in black ash with a dense, smooth, creamy texture, and a mildly tangy, buttery sweetness. “Super rich and very on trend in every way—ash-rind cheeses, plant-based products, non-dairy. It hits on all cylinders!” — Elly Truesdell, Whole Foods Market - Nanduto Home Cooking, Cassava Leaves Jerky. From Indonesia-based Nanduto Home Cooking (imported by Jawa Import). “The cassava leaf jerky is almost like a thin rice cracker; it’s crunchy and savory, with just the right amount of spice. The use of cassava leaf is unexpected and innovative.” — Alison Tozzi Liu, James Beard Foundation
continues next page...
10
Consumer Trends Exciting Trends and Innovations Abound at Specialty Food Association’s 2017 Summer Fancy Food Show Cont... Healthful Meals on-the-Go - Cucina and Amore, Farro Meal. Preservative-free, gluten-free, non-GMO, vegan (except Basil Pesto). Ready-to-eat quinoa meals in four different flavors. Comes with fully cooked quinoa, mix-in sauce, and a spoon. Enjoy as is or heat it up in its microwaveable cup. “Farro Meal stuck out to us as the most trendy for the ‘person on the go.’ The concept makes being healthy effortless with a blend of farro and veggies in a microwavable container.” — Perla Nieves & Alysis Vasquez, Midnight Market - Fawen Ready-to-Drink Soup, Broccoli and Cauliflower. Organic, vegan, gluten-free, no added sugar, no artificial preservatives, kosher. Drinkable soup in an eco-friendly bottle. “Among the many drinkable soups I saw over the past few days, in cardboard pourable packaging and single-serving ‘drink’ bottles, this one stood out for the flavor, as well as the addition of turmeric, an ingredient that is also trending. It also stood out to me for the use of cauliflower, an ingredient that is so popular in the restaurant industry right now.” — Alison Tozzi Liu, James Beard Foundation - One Culture Foods, Ramen Cups. Non-GMO, free of artificial flavors. Microwaveable ramen bowls with a variety of influences: spicy Japanese bowl, Taiwanese beef, Vietnamese pho, and Chinese chicken noodle. “The brand incorporates some really smart details. The Japanese spicy ramen is made with a bone-broth reduction, the optional salt packed allows for nice customization, and everything is compartmentalized. Their packaging is also fantastic.” — Elly Truesdell, Whole Foods Market - Smart Harvest, Organic Fruit and Vegetable Smoothie Blends. Organic, non-GMO, no added sugar, non-diary, gluten-free. Quick frozen, resealable pouches are a convenient way to make a delicious smoothie. “Easy, more variety, large distinctive pieces.” — Ken Blanchette, FreshDirect Tsubi Soup, Spicy Red Miso. Gluten-free, non-GMO, vegan, no MSG, fully traceable farm to fork. Freeze-dried instant soup cube that delivers the delicious and nutritional benefits of authentic Japanese miso in an easy-tomake, single-serve package. “Plant based, nothing artificial, delicious, easy, just add hot water to dry cake.” — Ken Blanchette, FreshDirect
Source
Trends in Deli, Dairy and Bakery
Convenience, snacking and new products highlight trends at this year’s IDDBA show.
Trend: Convenience Customers are looking for ready-to-make meals. A prepackaged meal includes all the fixings you’d need for dinner. All you do is steam the meal in the microwave or oven and it’s good to go. The options are heavy on seafood, as many customers shy away from cooking fish at home themselves. Customers love noodle bowls, but they can often become difficult to carry or put together themselves, so a noodle bowl option is a great way to offer a ready-to-heat meal. The soup container packaging can be great for takehome options while the buffet option is great for in-store dining. Salad shakers are also a fun way to offer a prepackaged and proportioned salad with all the right components. Just add dressing, shake and enjoy. continues next page...
11
Consumer Trends Trends in Deli, Dairy and Bakery Cont...
Trend: Hot in foodservice Poke is the “it” trend in restaurants right now. Retailers can also take advantage of the trend by offering prepackaged poke bowls or by adding a poke bowl buffet station in the deli.
Trend: Snacking Protein is tall he rage when it comes to snacking, and prepackaged options hit the mark. Quinoa snack bowls specifically hit on protein, but in another trend: plant-based foods. Snack packs often include a dip and dipper for a convenient on-the-go snack. Hummus has also been big on the show floor this year. Trend: International flavors As the population becomes more diversified, offering so-called international flavors will be more important. For example, the sale of traditional breads from Mexico. The use of cheese also adds international flare to everyday vegetables. Trend: Mini desserts For customers looking for a less-indulgent dessert, mini donuts and muffins are a great option.
Source
Natural Channel Accounts for Bulk of Paleo Product Sales, but sales in Conventional Channels are Growing Faster, says SPINS
The natural channel may have the largest share of Paleo-positioned products, with US retail sales up 123.4% to $76.8m in the year to May 21, but the conventional channel experienced the most growth, with sales up 218% to $55.8m over the same period, says SPINS. Meanwhile, sales in the specialty gourmet channel were up 131.2% to $4.4m.
Total sales across all three channels were up 153.4% to $142.7m, says SPINS, which includes in its definition all packaged foods and beverages that feature the terms ‘paleo,’ ‘primal’, ‘caveman,’ or ‘ancestral diet-friendly’ on the packaging or website [whereas the IRI numbers we ran yesterday only cover products with Paleo in the brand name]. It also includes products that feature the Paleo Foundation Certification . This growth is seen as an indicator that Paleo-positioned products are not a fad, argued Jamie Phillips, SPINS director of scientific affairs. “Paleo positioned products are showing approximately 150% cross-channel growth rates including 400 new products in the last 52 weeks [ending May 21, 2017],” she told FoodNavigator-USA.
continues next page...
12
Consumer Trends Natural Channel still Accounts for Bulk of Paleo Product Sales, but sales in Conventional Channels are Growing Faster, says SPINS cont... In this same time period, multiple new protein supplements have been launched that cater to this niche. Significant growth in the category in all channels came from Ancient Nutrition , which has a bone broth protein powder. For the specialty channel, a top player was Primal Kitchen , which has powdered protein and collagen. If protein supplements led in terms of dollar sales growth, protein in the form of shelf-stable jerky and meat snacks took a clear lead in terms of overall dollar sales, which rose 81% $21.3m in the period, ahead of shelf stable wellness bars and gels (up 358% to $18m), frozen entrees (up 426% to $13.9m). Crackers, crispbreads, cereals—also in on the Paleo bandwagon Also on the rise were many snack categories, traditionally made of flour and other grains, which adherents of the paleo diet eschew. For example, sales of Paleo-positioned crackers and crispbreads increased by 420% to $6.6m, while chips, pretzels and snacks rose by 180% to $5.5m. “Interesting is that some categories that are showing growth, like chips, pretzels and snacks and shelf-stable cold cereal seem like a potential disconnect with the Paleo model, yet the ingredients chosen are perceived as healthier (e.g., organic cane sugar vs granular sugar) therefore allowing consumers more options for permissible indulgence while following a paleo diet,” Phillips said. There are also categories where Paleo-positioned products outpaced category growth overall, as is the case with Frozen Entrees (Paleo Positioned 426.21% vs Not Paleo Positioned 1.35%), Wellness Bars & Gels (Paleo Positioned 356.19% vs Not Paleo Positioned 7.59%), and Condiments & Dressing (Paleo Positioned 340.09% vs Not Paleo Positioned 0.06%). “It is worth noting that not all categories are showing growth—Refrigerated Plant-Based Milk & Creamer, Water, Desserts & Desserts toppings, Salsas & Dips are categories showing a decline,” she added. Getting rid of ‘Paleo’ in the brand name While Phillips sees Paleo as beyond just a fad, other market analysts beg to differ. In a recent interview with FoodNavigator-USA , Mintel’s director of innovation and insight Lynn Dornblaser said that “Paleo has a lot of appeal for a very small segment, and that very small segment talks about it all the time, so it feels like it’s way more important than it is.” Dornblaser added that brands should even consider avoiding Paleo claims on pack in order to avoid alienating more mainstream consumers. Meanwhile, IRI executive president and practice leader Sally Lyons-Wyatt agreed with Phillips. “What we have seen over the last ten years is that claims matter. If companies can either have Paleo in the title or something like ‘Paleo approved’ on pack, that’s a draw,” she said. Speaking independently from a brand perspective, Brittany Chibe, founder of Paleo granola brand Paleo Scavenger, concurs to some extent with Dornblaser. Having doubled sales in the independent channel and landed a distribution deal with KeHE Distributors, Chibe agreed that more retailers are asking for Paleo-positioned products—but her company is going through a rebranding and renaming project this fall. continues next page...
13
Consumer Trends Natural Channel still Accounts for Bulk of Paleo Product Sales, but sales in Conventional Channels are Growing Faster, says SPINS cont... “We’ll still be Paleo certified and a Paleo product, but it’s very siloed and can be limiting in terms of conventional retailers,” she said. In the Chicago food and beverage brand community, Chibe said she has seen other smaller Paleo brands take the word out of their name. But the message behind the movement still holds strong, and she’s keeping the Paleo Foundation certification on pack. “I think it’s more about being a better-for-you snack alternative,” she said.
Source
Retailer News Moody’s Downgrades Fairway Ratings An already difficult turnaround underway at Fairway Markets could get trickier now that Moody’s Investor Service has downgraded its ratings on its parent company by one notch. Moody’s last week cut both Fairway’s corporate family rating and its probability of default from Caa1 to Caa2 – ratings considered to be subject to very high credit risk. Sources said the downgrade would likely increase Fairway’s cost of capital as it attempts to regain footing following years of financial underperformance that led to a stay in Chapter 11 bankruptcy. “Although Fairway emerged from bankruptcy in 2016 with a lower debt burden, it’s operating performance continues to deteriorate as it faces a very difficult operating environment including intense competitive pricing pressure,” Moody’s VP Mickey Chadha said in a statement accompanying the downgrade release. “With competitive openings in Fairway’s geographic markets expected to continue from the likes of Wegmans and Whole Foods, improving profitability to a level that can support its capital structure will be very challenging for Fairway.” Abel Porter, the industry veteran named Fairway’s CEO in March of this year, took the bad news in stride, saying the rating change would not interfere with a turnaround that despite its early stages and limits to financial fuel has already cut Fairway’s same-store sales declines by around 80% since he took over, while doing a better job of fending off the negative impacts of competition. “The risk has always been here, but things are getting better,” he told SN in an interview Wednesday. Fairway is an iconic New York-based retailer that operates 15 stores and four wine and liquor outlets in Metro New York and had sales in excess of $675 million for the fiscal year ended April 2. continues next page...
14
Retailer News Moody’s Downgrades Fairway Ratings Cont... Porter said the turnaround involves thoughtful use of capital for minor remodels, expansion of conveniences like e-commerce, a renewed effort to keep stores clean and an emphasis on aggressive pricing and marketing in categories where Fairway has strong brand equity such as coffee, olive oil, cheeses, and fresh meats and produce. The company for example is building e-commerce behind a newly announced offer to provide free delivery on online orders of more than $99 through Labor Day, through Instacart. Moody’s said Fairway’s near-term liquidity was “adequate” and that its cash balance and cash from operations were sufficient to fund working capital for the next year. However, its alternatives for additional funding are limited as its current assets are already pledged to existing credit facilities, Moody’s noted. “We don’t have the luxury to buy a new car,” Porter confessed, “but we can put on a good coat of wax and shine up the rims and tires.” Moody’s rating change also reflected its expectations that competition could eat into Fairway’s business, although Porter characterized Fairway today as better able to withstand competition than it was in recent years, when Whole Foods openings resulted in prolonged sales slumps at area Fairway stores. Fairway was also its own enemy at times when its aggressive expansion earlier this decade resulted in some cannibalization. Porter said for example that a new Trader Joe’s in Brooklyn has not impacted sales at its stores there. A Whole Foods opening later this month in Harlem “will give us a haircut,” he said, “but a haircut on a high-volume store.” Wegmans won’t make its Brooklyn debut until mid-2019 although that store recently posted a job notice seeking culinary management trainees. Burt P. Flickinger III, managing director of Strategic Resource Group, in an interview Thursday told SN he was impressed with progress at Fairway which he said was beset also by effects of professional fees associated with its bankruptcy. “Abel’s done a Herculean job turning Fairway around given the difficult hand he was dealt,” Flickinger said. “The war is not over yet but Fairway is winning for the first time in five years.”
Source
Hy-Vee Gains Footing in Convenience Store Market with New Super-Sized Format
Never one to sit still for long, Hy-Vee has rolled out plans for another new format. Just two years after entering the Minneapolis-St.Paul market, the retailer has announced a super-sized convenience store and gas station format for Lakeville, MN. According to local source, Twin Cities Pioneer Press, the concept is slated at 8,800-square-feet.
“What we’re trying to do with this concept is meet the needs of those folks who live busy lives,” Phil Hoey, HyVee’s real-estate director, told the Lakeville City Council. “So this is quite a bit larger than the largest convenience store you’ve been in.” continues next page...
15
Retailer News Hy-Vee Gains Footing in Convenience Store Market with New Super-Sized Format Cont...
The convenience store has been approved to build on a lot three miles away from a 91,000-square-foot Hy-Vee supermarket. The location will offer prepared meals along with smaller iterations of its usual produce, dairy, and meat departments, along with the Market Grill restaurant and a Starbucks coffee shop.
Tara Deering-Hansen, Group Vice President of Communications for Hy-Vee, confirmed that the company is looking at other Twin Cities locations for the super-sized convenience store concept, according to the source. This news comes on the heels of the April unveiling of the Hy-Vee Fast & Fresh format, measuring between 12,000and 16,000-square-feet, in West Des Moines, IA, demonstrating that the retailer is no stranger to exploring new concepts. Earlier this year, the company also announced a corporate restructuring.
Source
Amazon to Implement Tech Innovations and Automation at Whole Foods
When you think Amazon, one of the first things you think of is probably the company’s innovations in tech. From being an early leader in e-commerce game and holder of a wide array of tech-focused patents, to its state-of-theart distribution and robotics operations, Amazon knows what it’s doing in this arena. So, now that the company has acquire grocery retailer Whole Foods, what new innovations will our industry see piling in? According to a new report by Bloomberg, think robots. “We will be joining a company that’s visionary,” said Whole Foods’ Chief Executive Officer John Mackey, according to a transcript of an address to his employees. “I think we’re gonna get a lot of those innovations in our stores. I think we’re gonna see a lot of technology. I think you’re gonna see Whole Foods Market evolve in leaps and bounds.” “We will be joining a company that’s visionary,” said Whole Foods’ Chief Executive Officer John Mackey, according to a transcript of an address to his employees. “I think we’re gonna get a lot of those innovations in our stores. I think we’re gonna see a lot of technology. I think you’re gonna see Whole Foods Market evolve in leaps and bounds.” “The easiest place for Amazon to bring its expertise to bear is in the warehouses, because that’s where Amazon really excels,” shared Gary Hawkins, CEO of the Center for Advancing Retail and Technology, according to the source. “If they can reduce costs, they can show that on the store shelves and move Whole Foods away from the Whole Paycheck image.” continues next page...
16
Retailer News Amazon to Implement Tech Innovations and Automation at Whole Foods Cont...
Automation is one of Amazon’s key strategic advantages over some of its less techy grocery counterparts, but it has barely scratched the surface as far as automation for perishable items such as produce. Amazon employs the use of robots in its vast network of distribution centers, but can this method translate to the same success in a landscape where you must have a touch gentle enough to not destroy, say, a loaf of bread, but strong enough to transport a pallet of massive deli meats? A big challenge for Amazon, Bloomberg says, will be applying these logistical tools previously focused on durable products like books and toys to delicate perishables that require a gentle touch and a highly controlled temperature. Experts sas Amazon’s warehouse space for fresh distribution is not where it needs to be to compete with other major retailers that have been building their U.S. presence in the market over the last 10+ years. This Whole Foods deal now gives them an incentive to reinvent its methods on how groceries in the future will be distributed. Brittain Ladd, a supply chain consultant who spent two years working on Amazon’s grocery push, told Bloomberg that Amazon may be looking towards a network of automated warehouses for its grocery operations. The source suggests this would likely mean 1 million-square-foot facilities—large enough to serve businesses including Whole Foods, Amazon Fresh, and Prime Pantry. Ladd said these would most likely utilize robots and automation. “The goal will be to create as advanced a distribution capability as possible to provide customers with exceptional service and the freshest of fresh produce, vegetables, and meat,” Ladd said. “Amazon will win the battle against Wal-Mart by winning with fresh food.” While we’re still in the very preliminary stages of uncovering just what an Amazon-tinged grocery retail environment might look like, all signs point to a promising future.
Source
Whole Foods Announces Solid Q3 Earnings, Analysts Speculate Amazon Could Grow to $1 Trillion Reporting solid sales and strong returns for shareholders in the wake of its announced acquisition by Amazon, Whole Foods Market announced financial results for its third fiscal quarter ending July 2, 2017. Meanwhile, seeing stock prices surge, some analysts have suggested that the acquiring company, Amazon, could become the first trillion-dollar company as a result of the proposed merger. “For the quarter, we delivered record sales and free cash flow, and returned $44 million in dividends to our shareholders,” said John Mackey, Co-Founder and CEO of Whole Foods, in a company press release. “Our comparable store sales improved sequentially on a one- and two-year basis in the third quarter, and that momentum has accelerated 220 basis points in the fourth quarter, resulting in positive overall comps for the first three weeks.” continues next page...
17
Retailer News Whole Foods Announces Solid Q3 Earnings, Analysts Speculate Amazon Could Grow to $1 Trillion Cont... Highlights of the report included: Total sales increased 0.6% to a record $3.7 billion, while comparable store sales decreased 1.9% Net income was $106 million or 2.8% of sales, with diluted earnings per share of $0.33 EBITDA was $293 million, or 7.9% of sales The company also noted operating cash flow of $277 million, free cash flow of $145 million, and returned $44 million in dividends to shareholders, ending the quarter with $1.5 billion of total available capital compared to $1.0 billion in total debt. And while same store sales declined, financial news source Bloomberg reported that declines were less severe than anticipated, prompting many to speculate that the previously embattled retailer was on the rebound. Whole Foods noted that the definitive merger agreement with Amazon—in which the tech-giant will acquire the grocer for $13.7 billion cash at $42 per share—will prevent the company from adjusting their outlook for fiscal 2017. At the same time, analysts from CNBC have speculated that, barring any unforeseen circumstances, the completed merger between Amazon and Whole Foods could result in the former company’s stock doubling in value in a short time. Equity analyst James Cakmak, of Monness, Crespi, Hardt, & Co., told the news source that the company could reach a truly impressive record value.
“Honestly, this could be the first trillion-dollar company,” Cakmak speculated on the financial news program “Squawk Box.” He added, “I mean there is very low risk for the FTC to not approve this deal. But if they do rubber-stamp it as a yes, I think there’s very little to stop this from becoming a $2,000 stock.”
Source
18
Retailer News Target Remodels Underway in Dallas Market Target has kicked off a $220-million, 28-store renovation project in the Dallas-Fort Worth market. It’s the Minneapolis-based retailer largest remodel investment in a single market, and part of its plan to reimagine hundreds of stores across the country over the next three years. Earlier this month, eight North Texas stores completed their remodels, and celebrated with grand reopening events for customers. Cross-Merchandising 2.0 Each reimagined store got a top-to-bottom overhaul with customized design and functionality. The food and beverage department was updated with wood-grain fixtures, new flooring, LED lighting and products merchandised together to offer customers meal ideas. For customers convenience, there are new grab-and-go foods in the front of the stores. For housewares, the home department features inspirational product vignettes and displays that let guests shop everything they need for a certain area of their home without having to go to each of the different sections of the store. The retailer also updated its order pickup and ship from store services that make it easier for customers ordering online. The Dallas-Fort Worth remodels are scheduled to be completed this fall.
Source
Wegmans Same-Day Grocery Delivery Coming to Western, Central NY
Wegmans Food Markets will expand same-day grocery delivery services to Rochester, Buffalo and Syracuse starting on August 1st, 8th and 15th. Instacart, the technology-driven grocery delivery company, will allow Wegmans customers to complete their shopping online and have their items delivered to their doors within as little as an hour. Wegmans shoppers will be able to fill their virtual cars with everything from produce, meat, seafood, cheese, baked goods and many other items by visiting this website, or by downloading the Instacart app. Customers can also use their Wegmans Shoppers Club number to receive available discounts. Instacart waives the delivery fee on new customers’ first orders. After that, delivery starts at $5.99 on orders of $35 or more. They also offer express membership deals, enabling unlimited free, one-hour deliveries on orders over $35 for an annual fee. Officials say they annual fee varies by location from $99 to $149. Source
19
Retailer News Sprouts Partners with Amazon Prime Now for Denver Service
While Instacart and Shipt have been signing grocery accounts at a furious pace, Amazon Prime Now has slowly grown its retailer partnerships in cities across the country. Sprouts, which operates more than 250 stores in 13 states, is the largest grocer to join with Amazon, and now offers delivery through Prime Now in several cities, including Los Angeles, San Diego, Austin and Dallas. At an investors’ conference last year, Sprouts CFO Brad Lukow said the natural and organic retailer was very pleased with the Amazon partnership. The benefits seem clear: Sprouts is working with the world’s most powerful e-commerce provider and has access to its many Prime members, potentially expanding its market reach. The ability to offer free two-hour delivery to many Prime users gives the grocer an advantage in metro markets where shoppers are increasingly turning to e-commerce. But there seem to be potential conflicts within the partnership. Amazon’s own grocery service, AmazonFresh, beat Sprouts to the Denver market when it rolled out less than a month ago. The e-tailer also offers groceries through its Prime Now service. The company’s grocery offerings dominate its Prime Now landing page, where Sprouts appears as a separate tab under “Shop Local Stores.” Shoppers loyal to Sprouts will find their way to the grocer’s e-commerce offerings. And the retailer does offer attractively low prices on fresh foods and produce. But the customer experience very much belongs to Amazon, which could impact sales and brand awareness for the fast-growing grocery chain. Ultimately, Sprouts remains focused on store growth, including expansion into a crowded East Coast market. Amazon, meanwhile, continues to slowly circle the grocery space. Its AmazonFresh Pickup service went live last month, while its checkout-free Go store appears to be back on track.
Source
20
Shows & Events
21