ORTUNE
Natural Specialty Bakery
Newsletter December 2015 Volume 3 - Issue 10
Industry News ORTUNE Natural
Specialty
December 2015 Vol. 3 - Issue 10 Inside This Issue Industry News 2-4 Consumer Trends 4-5 Distributor News 6 Retailer News 7-12 Shows & Events 13
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What’s in Store for the New Year
Bakery
It’s that time of year again: out with the old, in with the new. As 2016 approaches, prognosticators are coming out with their lists of food trends for the coming year, which reflect and portent changes in the way people eat, including their perception and consumption of snacks and bakery products. If recently published lists are any indication, it seems health and wellness will continue to impact these categories. For example, in its annual assessment of the upcoming year’s top 10 food trends, the Chicago-based market research firm Technomic projects that consumers will remain negative on G.M.O.s, noting that “Whatever the science says, many consumers have made up their minds: no genetic tinkering with their food.” Likewise, the Specialty Food Association, New York, predicts a continued focus on better-for-you foods. “Health and convenience come across loud and clear in 2016’s trend forecast,” said Denise Purcell, head of content for the S.F.A.’s daily newsletter. “Consumers gravitate toward simpler foods and beverages, often sustainable and local, and they respond to products and new store formats that make their lives easier.” As for snacks, better-for-you snacks are increasingly viewed as meal replacements by single diners and on-the-go parents and their kids, according to the S.F.A. report. Meanwhile, self-proclaimed “supermarket guru” Phil Lempert recently released his list of food trends for 2016, which include the move toward a new way of eating. Pointing out that consumers are getting more of their nutrition information from the Internet, he said that algae, nuts, vegetables and yeast will be used to add more nutrient value to protein-based products and that more free-from items will hit the marketplace. Some of those trends are already evident with snacks made from perceived better-for-you ingredients, like kale chips from brands such as Rhythm Superfoods, sold in flexible bags, and hemp seeds and chia seeds from brands such as Navitas Naturals, sold in standup, recloseable pouches, among others. Packaging formats from some of these healthy items are innovative, too, like Ruby Rockets’ recently launched snack “tubes,” a line of dairy-, gluten- and G.M.O.-free blends made with vegetables, fruits and plant-based protein and packaged in convenient tubes with a 90-day shelf life. Finally, supporting S.F.A.’s prediction of less food waste generated
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Industry News What’s in Store for the New Year cont... by manufacturers, some new products reflect steady interest in both health and sustainability. One case in point is the Ocean’s Halo line of seaweed snacks from San Francisco-based Frontier Foods, Inc., available in consumable sheets and packaged in a 100% compostable tray and box. “Ocean’s Halo’s compostable packaging sets it apart from any other product in the category. We invest heavily in ensuring that all of our products are in compostable and recyclable packaging,” remarks co-founder Mike Shim, adding that market research conducted for the company underscored the importance of sustainability to its consumers. Source
Industry Groups Criticize Inaction on GMO Labeling Food industry organizations are taking members of Congress to task for failing to reach an agreement this year on legislation that would have prevented what they call a “costly and confusing 50-state patchwork” of mandatory GMO labeling laws. “It is unfortunate that Congress has failed to take action this year to stop a patchwork of costly and misleading state labeling mandates, an issue of tremendous importance to consumers, farmers, food and beverage companies,” declared Pamela G. Bailey, president and CEO of the Grocery Manufacturers Association. “In January, food manufacturers will face exponentially increasing costs totaling hundreds of millions of dollars to comply with Vermont’s GMO labeling mandate.” Bailey said there is bipartisan agreement that “genetic engineering should not be stigmatized – it is the technology that feeds a hungry and growing world,” and that consumers should have access to consistent and helpful information about genetic engineering.
“Given there is so much common ground, we welcome [Agriculture] Secretary [Tom] Vilsack’s willingness to bring parties together in January to forge a compromise that Congress could pass as soon as possible,” Bailey said. “We are hopeful that compromise will establish a uniform national standard for foods made with genetically engineered crops.”
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Industry News Industry Groups Criticize Inaction on GMO Labeling cont... Likewise, the Coalition for Safe Affordable Food announced: “The failure of Congress to act will result in enormous costs to the agriculture and food industry who work tirelessly to feed a growing world population. Nearly 500 agriculture and industry groups in all 50 states have been urgently calling for Congress to pass uniform, national food labeling legislation to prevent serious and costly disruptions to the food production and supply chain. And now the burdensome threat of the Vermont law looms large.” While a bipartisan effort to pass the Safe and Accurate Food Labeling Act in July garnered support of 45 Democrats, action stalled in the U.S. Senate. “The negative consequences of the patchwork of state labeling mandates will be felt by farmers, businesses and consumers starting early next month – and only Congress can act to prevent it,” CFSAF declared. Leslie Sarasin, president and CEO of the Food Marketing Institute, added: “While we conclude the 2015 legislative session on several positive notes, we were extremely disappointed that lawmakers did not include a federal standard for GMO labeling. Still, we remain positive, since leaders of the U.S. Senate Agriculture Committee have already indicated that they will press for action in January and U.S. Department of Agriculture Secretary Tom Vilsack has indicated his willingness to also engage.” Earlier this month, GMA member companies announced a national transparency initiative that will make it easier for consumers to get ingredient information on demand. “SmartLabel provides consumers with a cornucopia of information at their fingertips about the ingredients in food, beverage and other consumer products,” Bailey said of the web-based mobile app. “We are working to ensure that vast majority of products that consumers purchase will have SmartLabel in the next several years. By the end of 2017, we estimate that 20,000 food products will disclose through SmartLabel whether they contain ingredients sourced from genetically engineered crops – and that number could triple once a Congress passes a uniform national standard for GMOs. Source
Consumer Trends Gluten-Free Growing Despite Changing Perceptions Nearly half of Americans consider gluten-free diets to be a fad, but 67% more consumers are eating gluten-free foods than two years ago, according to research from Mintel. Twenty-five per cent of consumers said they consume gluten-free foods, even though the amount of gluten-free diet doubters has grown to 47% in 2015 from 31% in 2013. But the skeptics haven’t hindered sales of gluten-free foods. The category has grown 136% from 2013 to 2015, reaching estimated sales of $11.6 billion in 2015. Gluten-free food sales grew to
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Consumer Trends Gluten-Free Growing Despite Changing Perceptions cont... 6.5% of total food sales in 2015 from 2.8% in 2013. Of those buying gluten-free foods, Mintel’s research showed 90% are satisfied with the available options, and 35% agreed the quality of gluten-free foods is higher than before. In fact, 26% of consumers said they are willing to pay a premium for these higher-quality gluten-free options and that the products are worth their added cost. Those gravitating toward gluten-free foods are not all gluten intolerant or gluten sensitive. Mintel’s research showed that consumers perceive foods with any free-from claim to be healthier and less processed. Thirty-seven per cent of consumers said they eat gluten-free foods because they believe it is better for their overall health, while 16% claimed they do so because “gluten is bad for you.” Eleven per cent consume gluten-free products because a health care professional suggested they eliminate gluten from their diets. Despite consumers linking gluten-free foods to health, those eating gluten-free foods for weight loss dropped 25% in the past year. Twenty-three per cent of consumers said they only incorporate gluten-free foods into their diets some of the time, indicating that consumers are beginning to view gluten-free foods as a contributing factor to overall well-being rather than weight loss tools. Twenty-seven per cent of gluten-free food consumers are looking for gluten-free labels on food packaging, but trust in gluten-free product claims has slackened. Forty-five per cent of consumers trust that products bearing a gluten-free claim actually are gluten-free, down from 48% in 2014. Another 45% agreed that manufacturers should not label products as gluten-free if they never contained gluten in the first place. “While some consumers view the gluten-free diet as a fad and are looking for improved nutrition and ingredients in gluten-free foods, consumption continues to trend upward,” said Amanda Topper, senior food analyst at Mintel. “Large and small manufacturers are entering the gluten-free category, increasing the availability, quality and variety of gluten-free foods while Americans display interest in incorporating these foods into their diet. However, since trust toward manufacturers’ labeling of gluten-free foods has slightly waned, they should consider providing messaging about the steps taken to ensure their products are gluten-free to reassure consumers. Americans have come to expect brands and products to be transparent and trust that the items they purchase are as advertised.” Restaurants are catering to the gluten-free consumer as well. According to Mintel Menu Insights, gluten-free as an ingredient claim on menus grew 127% in the past three years and is now the top nutritional ingredient claim. Ten per cent of U.S. restaurants now feature a gluten-free menu, appealing to the 22% of gluten-free food consumers who are more likely to visit restaurants offering a specific gluten-free menu. The number of items on those menus grew 9% from 2012 to 2015, with gluten-free as a dish claim growing by 24% over the same period, making gluten-free the top menu item claim. “While finding gluten-free foods away from home can prove difficult for gluten-free food consumers, there has been growth in gluten-free restaurant options as gluten-free diets have become more popular,” Ms. Topper said. “In the past, it may not have been feasible for celiacs and gluten-free food consumers overall to find these foods at restaurants. Moving forward, there should be more expansive gluten-free menu offerings as the food service industry competes with retail for the rising number of gluten-free Americans.” Source
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Distributor News Arbor Investments Acquires DPI Specialty Foods, Inc... Arbor Investments announced today that it has completed the acquisition of a majority equity stake in Ontario, California-based DPI Specialty Foods, Inc. from Dublin, Ireland-based Ornua CoOperative Limited. With approximately 1,800 employees and annual revenues in excess of $1.0 billion, DPI is one of the largest specialty food distributors in the United States. The Company sells gourmet, ethnic, organic and better-for-you foods to national, regional and independent retailers, quick service restaurants and foodservice operators through eight distribution centers across the United States. DPI excels at enhancing its customers’ product offerings through customized sales, marketing and logistics solutions. Ornua will retain a minority equity interest in the Company and DPI’s existing senior management will continue to lead the organization.
“DPI has an impressive thirty-year record of profitably driving customer sales growth through individualized programs that combine best-in-class product selection, logistics and merchandising with a highly-focused and flexible service model,” said Alan Weed of Arbor Investments. “With a diverse network of national and international vendors, DPI has the pulse of specialty food trends, particularly in the dynamic gourmet, perishable, specialty, natural, organic, local and ethnic foods categories that retail customers and discriminating consumers demand.” Russ Blake, DPI’s President and CEO, commented, “A unique specialty food product offering is the lifeblood of successful grocers. DPI’s service-centric model, providing a full suite of individuallytailored solutions, sets us apart from our competitors. Arbor understands our value proposition and is a hand-in-glove fit with our Company. We are enthusiastic about unlocking DPI’s potential.” “The specialty food distribution sector presents a great investment opportunity,” added Arbor CEO, Gregory Purcell. “Retail grocery America is crying out for an alternative distribution model to stop, drop and run. Increasingly, retailers and foodservice operators are realizing the value of partnering with a distribution service provider like DPI who can provide geographic scale, individualized customer service and deep merchandising services. Going forward, we expect to deploy Arbor’s resources, capital and over 20 years of acquisition expertise to acquire family-owned specialty distributors to augment DPI’s strong foundation and further enhance its already formidable standing in the specialty food distribution industry.” “The sale of DPI is consistent with Ornua’s strategy of reallocating capital and assets to support our continuing investments in enhanced routes to market for Irish dairy products through our businesses across global markets,” commented John Jordan, Ornua Foods CEO Europe and Latin America. “As we evaluated potential acquirers, Arbor and its exclusive focus and stellar reputation in the food and beverage industry stood out. We believe that Arbor is the optimal equity partner to drive continued growth at DPI.”
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Retailer News A&P Closings Lead To Rise In Vacancies In N.J. Corridor With the effects of the Great Atlantic & Pacific Tea Co. (A&P) bankruptcy rippling through the market, the combined vacancy rate along central and northern New Jersey’s 10 major retail corridors escalated to 8.3 from 7.4 percent a year ago, according to a new survey by R.J. Brunelli & Co. According to the survey, although A&P was a major contributor to the big-box vacancy surge along the central region’s corridors, northern counties were more of a mixed bag, with closed Kmarts in Paramus and Randolph and the shuttered Macy’s at Ledgewood Mall (now undergoing redevelopment) combining for nearly 324,000 s.f. of the market’s 1.02 million s.f. of empty big-box space. “Clearly, the A&P bankruptcy was the big story for New Jersey retail real estate in 2015,” said R.J. Brunelli CEO/Principal Ron DeLuca, who directs the firm’s survey. “While the bankruptcy process is still being played out, along the 10 central and northern retail corridors alone, recent closures of five A&P and three Pathmark locations that remain unclaimed placed more than 438,000 s.f. of space on the market. Indicative of the impact of the closings, had those stores remained occupied, the aggregate vacancy factor for the two regions would have edged up 20 basis points to 7.6 percent.” DeLuca added that those totals exclude a number of A&P, Pathmark and Food Basics locations off the corridors that have yet to attract approved bids in bankruptcy court. “Still, a number of supermarket companies pounced on the opportunities presented through A&P’s demise to expand their New Jersey footprint, most notably Acme, which took 35 sites, including 25 in northern counties, five in the central region and another five in the southern Shore region. These sites, most of which were located outside the 10 corridors, accounted for nearly half of the 72 locations the chain took in an area extending from Maryland to Connecticut.” Stop & Shop, the second largest player in the A&P auction, took 24 locations in the metro New York area, including three in northern New Jersey. The eight other New Jersey locations acquired to date through the auctions—all but one in northern counties—were taken by smaller operators, including several focused on ethnic fare. That group includes California-based Tawa Supermarket Inc., which announced lease acquisitions of Pathmark locations on Route 1 in Edison and in Jersey City. This will pave the way for a Garden State debut for Tawa, which currently operates 39 Asian supermarkets under the 99 Ranch Market name in California, Washington, Nevada and Texas. “Tawa’s move is emblematic of ethnic grocers’ efforts to seize opportunities in areas whose demographics are appropriate for their offer,” said DeLuca. “We suspect that some of A&P’s remaining locations throughout the state could go to ethnic operators in the months ahead. More conventional chains looking at former A&P sites include The Fresh Market, Best Market, Kings and others. However, given the competitive climate, we believe that a fair number of locations will ultimately go to non-food uses”
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Retailer News A&P Closings Lead To Rise In Vacancies In N.J. Corridor cont... Richard Brunelli, the firm’s chairman-principal, added, “Still, the impact of this huge bankruptcy could have been far worse. Apart from the A&P’s that were scooped up at auction, the past 12 months brought strong absorption of some big boxes that had been on the market for multiple years, as well as well-located spaces that were empty for a year or less. With the overall economy and housing market continuing to recover, albeit at a slow space, prime spaces along the corridors should not sit empty for long. Spaces in ‘B’ and ‘C’ centers, however, will remain challenging, requiring landlords and their brokers to work closely with traditional and non-traditional tenants— and, in some cases, zoning officials—on creative solutions.” Source
Mark Doiron Joins Schnucks as Chief Merchant St. Louis-based Schnuck Markets Inc. has hired industry veteran Mark Doiron as its new chief merchant. Doiron, who has more than 25 years of experience in the food and grocery industries, will be responsible for procurement and merchandising throughout Schnucks’ 99 supermarkets. He serves on the company’s senior management team and reports to the Schnucks Chairman and CEO Todd Schnuck. Doiron succeeds Steve Harper, who retired earlier this year. “We are pleased to welcome Mark to our team,” Schnuck said. “He brings valuable and unique experiences to this leadership position, and we look forward to his contributions as we continue on our mission of nourishing the lives of our customers.” Before joining Schnucks, Doiron was president of Sure Winner Foods, a frozen-food distribution
company based in the northeastern United States. Previously, he was chief supply chain officer for Belgian food retailer Delhaize’s U.S. operations. “I am excited to join Schnucks,” Doiron said. “After getting to know the company, the St. Louis area, and seeing Schnucks’ Midwest locations, it was clear that this would be a great fit for both myself and my family.”
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Retailer News Earth Fare Expands Atlanta Footprint A milestone in the company’s 40-year history, Earth Fare, a specialty organic and natural foods grocery store, opened its 40th location Dec. 9. The new store, located at 3140 Ronald Reagan Boulevard in The Collection at Forsyth in Cumming, Georgia, expands the company’s Atlanta footprint to three stores. Highlighted by CNNMoney as the 6th Fastest Growing County in America, Cumming is a natural fit for the new, full-service, 23,000-s.f. store, says the company. Earth Fare offers an assortment of organic and local produce, more than 175 natural and organic bulk foods, humanely raised fresh meat, sustainable and traceable seafood and healthy to-go options for breakfast, lunch and dinner. The location will offer Earth Fare’s first Heirloom Organic Café and Juice Bar, which includes a completely organic coffee bar. “For 40 years, Earth Fare has earned its customers’ trust and loyalty by making it easy for them to make the healthiest food choices every day,” said Earth Fare President and CEO Frank Scorpiniti. According to the company, hundreds of customers lined up hours before the 7 a.m. opening to be among the first shoppers in the store. The first 100 customers in line received a mystery gift card valued at up to $500. Opening week specials and giveaways will continue over the holidays. Founded in 1975 in Asheville, North Carolina, Earth Fare operates stores across the Southeast, mid-Atlantic and Midwest. Source
Fareway Opens Larger Store In Belmond, Iowa Fareway Stores hosted a ribbon-cutting ceremony Wednesday for its new location at 512 River Avenue North in Belmond, Iowa. The new 13,100-s.f. store replaces Fareway’s original 8,700-s.f. Belmond store, according to the grocery chain. “We are committed to remaining in Belmond and appreciate the local support we’ve received for nearly 30 years. We are dedicated to continue to offer an unmatched, full-service meat department; farm-fresh produce; low, competitive prices; and only the highest level of customer service for the next 30 years,” said Fareway CEO Reynolds W. Cramer. “We also appreciate the efforts of city officials and other community members who worked so hard to make this new store location a reality.” The original Fareway in Belmond, located at 115 Second Avenue Southeast, opened in 1987. The last day for business at that store was Tuesday; the property is under contract to be sold in early 2016. The new store will continue to be managed by grocery manager Greg Herrold and market manager Jeff Meyers. The store will provide an additional check stand, wider aisles, expanded produce selection, more refrigeration, eight feet of additional meat selections and nearly double
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Retailer News Fareway Opens Larger Store In Belmond, Iowa cont... the frozen food selection. “Our new store will allow us to provide customers with more space to expand product variety,” said Herrold. “If you still don’t find what you are looking for, please ask, and we will do our best to make good on requests.” Fareway operates 112 stores in Iowa, Illinois, Minnesota, Nebraska and South Dakota. Source
Weis Markets Earns Grocery Stewardship Certification Mid-Atlantic grocery chain Weis Markets has been recognized for incorporating sustainability practices into its day-to-day operations that have helped it conserve resources and reduce the overall environmental impact of its 163 stores, distribution center and manufacturing facilities. The Manomet Grocery Stewardship Certification (GSC) sustainability award is based on waste, water use, energy use and greenhouse gas emission reductions in a company’s retail locations and supply chain. The GSC program was launched in 2012 and remains the nation’s only food retailing sustainability certification program. “A practical sustainability program has been an important focus area for our company since 2008. During this time, we’ve reduced our overall environmental footprint by 12.3%,” said R. Kevin Small, Weis Markets VP of store development. “The Grocery Stewardship Certification recognizes our progress and provides us with valuable insight about our overall performance in the sustainability arena. The GSC program also helps us engage with our associates in new ways and show our customers that we are continually adopting sustainable practices.” In recent years, Weis Markets has partnered with the EPA’s GreenChill program, rolled out its first store with all LED lighting and added a Green Leader role in each store to provide enhanced associate and customer awareness of the company’s sustainability commitment. As a result of its sustainable operating practices, Weis Markets is annually saving more than 64 million pounds of waste from going to landfills, 11.1 million gallons of water from being used, and 295,894 tons of greenhouse gases from being released, the company said. Sunbury, Pa.-based Weis Markets operates 163 stores in Pennsylvania, Maryland, New Jersey, New York and West Virginia.
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Retailer News Whole Foods Reveals More Details in its $1 Billion Buyback Plan More details surfaced this week about Whole Foods’ planned share buyback program, with the Austin, TX-based company revealing that it will issue $1 billion in ten-year senior unsecured notes at an interest rate of 5.2 percent. Whole Foods will use the proceeds for “general corporate purposes,” Standard & Poor’s Ratings Services (S&P) told the Wall Street Journal, including the recently announced, open-ended $1 billion share repurchase program. Last month in an announcement that coincided with its Q4 financial report, Whole Foods unveiled plans to enter into a $500 million five-year revolving credit facility, as well as initiate a buy back of $1 billion of its own shares. Analysts believe this move may be a signal that the company believes its stock is undervalued at its current price. “Whole Foods remains the leader in the natural and organic sub-segment of the highly fragmented food-retail industry yet its overall share of the food-retail industry is still relatively small and under pressure,” S&P said in a release In an announcement that followed Whole Foods’ Q4 report, Standard & Poor’s downgraded its outlook of Whole Foods from “stable” to “negative,” explaining, “The negative outlook reflects our view that credit protection measures could erode more than we had previously anticipated given the increase to debt and continued competitive headwinds that pressure sales and margins.” Prior to Whole Foods’ announcement, the company’s shares had reached a month low of $29.15, but as of December 1st at 1:20 PM EST, shares were on the rise to $29.88.
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Retailer News Natural Grocers To Open First Store In Little Rock, Arkansas, Next Month Natural Grocers will open its first store in Little Rock, Arkansas, on Tuesday, Jan. 19. The store is located at 9210 Rodney Parham Road. It will be Natural Grocers’ second location in Arkansas; the company currently operates a store in Fayetteville. Colorado-based Natural Grocers says it will provide the Little Rock community with fresh produce that is exclusively USDA Certified Organic, as well as other healthy, affordable, organic and natural products. The store will feature a mix of national brands and locally-grown, raised and manufactured products from Arkansas in a small, neighborhood market environment. The Little Rock store also will feature a nutritional health coach and offer free nutrition education classes to the public. As part the of the Jan. 19 grand opening, Natural Grocers will have a ribbon-cutting ceremony at 7:55 a.m. and will then distribute mystery gift cards to the first 60 customers in line. Gift cards will be in the amount of $5, $10, $25, $50 and $100. Customers won’t know the amount of their gift card until they check out. The store also will offer a tasting of healthy and food from its Paleo Wraps class. The opening of the Little Rock store begins with a live performance by Charlotte Taylor and Gypsy Rain from 8-10 a.m., followed by a series of free grand-opening celebrations, including food tastings, cooking demonstrations and nutrition classes with nutrition experts. All activities will take place from noon-4 p.m. on the following dates: • Saturday, Jan. 23: Taste the Difference Food Standards Make; • Saturday, Jan. 30: Gluten-Free Tasting Expo and Health Fair; • Saturday, Feb. 6: Paleo Fair; and • Saturday, Feb. 13: Sweet Sensations Health Fair. Natural Grocers operates more than 100 stores in 18 states. The company is celebrating its 60th anniversary in 2015.
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Shows & Events
Show
Location
Date
Fancy Food Show
San Francisco, CA
January 16-19, 2016
KeHE Summer Selling
Atlanta, GA
February 1-4, 2016
VMC Show
Kansas City, MO
February 9-11, 2016
UNFI Orlando Tabletop
Orlando, FL
February 18-19, 2016
UNFI Shipper & Case Stack Show
Flushing, NY
February 24, 2016
KeHE Northeast Tabletop
Philadelphia, PA
February 24, 2016
KeHE Midwest Tabletop
Milwaukee, WI
March 2, 2016
KeHE Midwest Tabletop
Minneapolis, MN
March 9, 2016
Expo West
Anaheim, CA
March 10-13, 2016
KeHE Great Lakes Tabletop
Bolingbrook, IL
April 6, 2016
Affiliated TX Food Summer Show
Texas
April 14, 2016
KeHE Southwest Tabletop
Dallas, TX
April 20, 2016
KeHE Natural Spring Show
Chicago, IL
April 20-21, 2016
KeHE Great Lakes Tabletop
Fort Wayne, IN
May 4, 2016
UNFI Foxwoods Tabletop
Mashantucket, CT
May 11-12, 2016
Haddon House
Orlando, FL
May 16-19, 2016
KeHE Southeast Tabletop
Orlando, FL
May 20, 2016
UNFI Portland Show
Portland, OR
June 8-9, 2016
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