Hershey’s new center creates jobs in Utah
OGDEN, Utah The Hershey Co. has decided to build a distribution center in Ogden, Utah, creating about 125 full time-jobs.
According to published reports, Hershey is said to have earned $5 billion in revenue last year and employs a total of 13,000 people worldwide.
Hershey was given a financial incentive from Utah of about $2.6 million, and the company plans to invest about $39 million in the center. Construction is set to start in the spring.
Packaged food companies find ways to maintain quality and save money
NEW YORK Packaged food companies, pressured to shore up profits squeezed by soaring commodity costs, are finding unique ways to save on costs. General Mills, for example, in recent months, reduced the number of pretzel shapes in its Chex and other snack mixes to three, from 14. But research found that consumers cared more about the variety of pretzel flavors than shapes. That move, combined with other manufacturing improvements, is saving the division more than $1 million a year.
In a similar vein, Minneapolis-based General Mills cut in half the number of pasta shapes it uses in Hamburger Helper, to 10. Food engineers and marketers even worked on the pasta bits so they nested together, enabling the company to shrink the box, reducing the cost of raw materials by 10 percent. Chief Executive officer Ken Powell says General Mills had no choice. “With commodity prices increasing, we needed to think about how we generate productivity in a more powerful way.”
Cost savings are a big issue for the food companies that gathered for the Consumer Analyst Group of New York annual conference Feb. 19-22 in Boca Raton, Fla. Globalization—the rise of consumer incomes in India and China, in particular—is pushing up demand for all sorts of commodities, including such foodstuffs as wheat, corn and dairy products. The price of wheat, for example, has doubled in the past year and is at an all-time high.
Meanwhile, the push for alternative energy sources is leading some farmers to divert corn to that use, and creating spot shortages of such grains as soybeans, as farmers divert acreage to the more lucrative crop, a trend that industry experts say likely won’t change in the foreseeable future.
Food companies are passing along much of their higher costs to consumers, in the form of price hikes or smaller packages. Sara Lee has raised bread prices four times in the past year and a half, and expects another increase before the end of June, says chief executive officer Brenda Barnes. At General Mills, price increases accounted for two to three percentage points of the company’s first-half sales gain of 7 percent.
So far, consumers have been willing to pay the higher costs, because the overall price of a full shopping cart is less than eating out. Still, food companies are feeling the pinch. As a group, their stocks are down about 11 percent since Dec. 1, according to UBS Securities.
So the 25 chief executives who gave presentations in Boca Raton went to some lengths to assure analysts they can pare costs from their operations and meet profit expectations. On Feb. 20, for instance, Kellogg’s chief executive officer David Mackay confirmed the company expects to deliver earnings for the current year of $2.92 to $2.97 per share—roughly in line with the $2.99 expected by 16 analysts surveyed by Bloomberg Financial Markets—through a mix of brand building, new products, price increases, and productivity gains.
That last part—finding cost savings without compromising quality—is where companies often get the most creative. ConAgra expects to save $20 million in annual costs by reducing the number of can sizes to 20, from 100, over two years, for everything from Hunt’s tomato sauce to VanKamp beans. That initiative is part of a larger drive for $225 million in cost savings in the company’s 2009 fiscal year. ConAgra has been viewed by analysts as a laggard in the consumer-products field, but chief executive officer Gary Rodkin told analysts that earnings for the second half of its fiscal year will be higher than the previously estimated 70 cents per share.
General Mills has outperformed many of its beleaguered peers in part by rolling out new, higher-margin products such as Progresso light soups and good-for-you snack bars. On Feb. 19 the company raised its earnings outlook for its fiscal year, ending in May, to a range of $3.64 to $3.66 per share, up from a range of $3.39 to $3.43. That’s an increase from the $3.18 per share—and $1.14 billion total—General Mills earned in fiscal 2007. Analysts expect sales to rise 6.4 percent this year, to $13.2 billion.
Study shows correlation between salt intake and sugar soft drinks in children
DALLAS A study published in the new print and online issue of Hypertension: Journal of the American Heart Association found that children who eat less salt are more likely to drink fewer sugar-sweetened soft drinks. This would allow a significant decrease in their risks for obesity, elevated blood pressure and later-in-life heart attack and stroke.
St. George’s University in London was the first to examine the effects of children’s salt consumption in relation to fluidity consumption. In their 1997 study, a sample of about 1600 people ages 4-18 years old recorded their salt and fluid intake using a seven-day dietary record, and weighed all of their food and drink intake on digital scales.
The study produced findings that there is, in fact, a correlation between salt intake and soft drink consumption. Feng He, a cardiovascular research fellow at St. George’s stated that “From our research, we estimated that 1 gram of salt cut from their daily diet would reduce fluid intake by 100 grams per day.” They also predicted that reducing salt-intake by 1 gram each would reduce sugar-sweetened soft drink intake by 27 grams per day, after considering physical factors in the children like age, and body weight.
By reducing salt intake the researchers believed that there would be significant health benefits for children. He states “It is important for children to eat a low-salt diet to reduce their risk of having a stroke or a heart attack later in life.” Dr. He stated. “All physicians should give their patients appropriate advice on how to reduce salt in their diet.”
In relation to this study, the American Heart Association is also working hard to fight obesity in children by teaming up with the William J. Clinton Foundation and creating the Alliance for a Healthier Generation. To find out more and to contribute to the alliance, visit www.healthiergeneration.org .