Editorial

 

Hampton Creek Foods subject of negative reporting in Business Insider

Aug 28, 2015
    

On Friday 21st August, EGG-CITE published an editorial dealing with Hampton Creek Inc. (formerly registered as Beyond Eggs Inc. and Hampton Creek Foods Inc.). The privately-held company founded on December 11th 2011 by Joshua Tetrick is located in San Francisco.

The company was the subject of negative reporting in an August 5th article in Business Insider authored by Biz Carson. Hampton Creek Inc. was the subject of an FDA warning letter this past week regarding the trade name Just Mayo™ for the mayonnaise substitute which does not contain eggs. The FDA also drew attention to spurious or unsubstantiated claims relating to cardiovascular health on the company website.

One of the allegations in the Business Insider article relates to the fact that Hampton Creek intentionally left off the word “concentrate” from the lemon juice ingredient listed on the Just Mayo label. Tetrick states in his rebuttal, “it was an honest mistake and within days of being notified by a team member I sent out the following to supply chain and creative (sic) “IMP:Let’s change to lemon juice concentrate.  Easy label change”.  On Saturday 15th August, an eight ounce container of Just Mayo was purchased from Target Superstore, Renaissance Blvd. Durham NC.  The ingredients listed include the designation “lemon juice”.  The container was imprinted SF13315 B 10:17, Use by Feb 15, 2016.  Accordingly, the accuracy of the response by Tetrick is questioned, in that the product label still lists the ingredient “lemon juice”.  It is however stressed that the actual ingredient description is a technicality. The significance relates more to the specific response by Tetrick and his veracity than whether added lemon juice is or is not derived from a concentrate.

It was alleged that despite Hampton Creek claiming inclusion of 7,000 plants plants in a company  database, it has less than 1,000 and closer to 400 species or varieties.  Tetrick maintains that the allegation is false and that the Hampton Creek research database contains botanical, molecular and functional data across more than 100,000 plant species and varieties.  It is doubtful whether a database of 100,000 plants could in any way contribute to product development and product quality compared to a database of 1,000 plants.  It is a contention of EGG-CITE that claiming or even possessing a database with details on 100,000 plants is irrelevant puffery. 

A dissident employee claimed that Just Mayo was developed by a consulting food-development company. Tetrick asserts in his rebuttal that this was untrue and that the Just Mayo™ product was developed by Hampton Creek.  Tetrick stated, “we’ve always said that we started with a product development firm and then opted to move our R&D in-house.  We launched our formula more than a year later, and have done three mayo overhauls since”.

   

Egg Industry News

 

Source of Imported Breaking Stock

Sep 2, 2015
    

The USDA-AMS Livestock, Poultry and Grain Market News released on August 20, 2015 lists the source of breaking stock imported into the U.S. from June 23rd through August 13th.

Nation

Dozens

Germany                

2,988,510

Spain

2,706,510

Portugal

2,457,840

Canada

1,276,800

France

601,860

Lithuania

386,365

Mexico

329,400

Latvia

162,000

The total of 10,909,005 dozen represents the output of a hypothetical flock of 4 million hens using conventional production parameters.

 

   
 

Kroger Grows by Acquisition

Sep 2, 2015
    

According to the Motley Fool newsletter their analysis shows that Kroger Inc. with revenue in excess of $105 billion in 2014, has grown during the past decade mainly by acquisition.  Noteworthy acquisitions include a merger with a Dillon Company in 1983 acquiring King Sooper’s and City Market and Harris-Teeter.

This strategy limits over-trading in an industry which is growing by 2 percent per year in sales.  Establishing new supermarkets requires attracting clientele from existing stores which can be expensive in terms of promotions and advertising. 

   
 

USDA Price and Inventory Report, August 31st 2015.

Sep 2, 2015
    

The Midwest market for Extra Large and Large sizes fell by approximately 6 percent and this past week. The national trend since the onset of HPAI is shown in the figure reflecting the Combined Regions price for Large which is updated each week by the USDA. It is apparent that the shell egg market is responding to the forces of supply and demand and prices fell due to a number of factors including a full pipeline through DCs to stores and possibly lowered demand due to significantly higher prices at the shelf compared to seasonal averages.

   
 

NLRB Decision of Concern to Franchise QSRs

Sep 2, 2015
    

The decision of the National Labor Relations Board in relation to the Browning Ferris case concerning “joint employer” liability has profound implications for all QSRs. The NLRB decision expands the prevailing standard to include business entities directly or indirectly controlled by a holding company and presumably by a franchiser.

At issue is the reality that franchisers are now equally responsible with their franchisees for labor rates.  EGG-CITE and CHICK-CITE have commented previously on the fact that McDonald’s Corporation has agreed to increase wage rates for employees of company-owned stores.  They maintain that they have no power to set rates for the employees of their franchisee’s stores.

In many localities, state and county laws have been passed designating minimum wage rates higher than the Federal standard.

   
 

Response to Petition on the Animal Welfare Act

Sep 2, 2015
    

The National Chicken Council has submitted comments to the Animal and Health Plant Inspection Service in relation to the petition by the National Anti-Vivisection Society to amend the Animal Welfare Act regulations governing research facilities and experimental subjects.

The petition would require a change in the reporting system maintained by AHPIS and would decrease the number and need for animals used in research.

It is the contention of the National Chicken Council that current inspection of research facilities is adequate and that Institutional Animal Care and Use Committees at Federal facilities and Land Grant universities are capable of maintaining an acceptable standard of welfare. Based on recent allegations concerning the USDA-ARS Meat Animal Research Center in Clay Center, Nebraska this contention may not be universally supported. (See posting in CHICK-CITE of March 11th 2015 reviewing the New York Times allegations)

In their petition, the National Chicken Council reiterated the policy of humane handling and treatment of poultry used in scientific research. It is considered neglectful of the organizations representing egg production that a parallel submission was not submitted supporting  U.S. research on hens.

   
 

Shortage of Eggs in Trinidad

Sep 2, 2015
    

According to a news report in the Trinidad and Tobago News Day, the Association of Trinidad and Tobago Table Egg Producers acknowledge that eggs were being imported from other Caribbean countries because of an “unexpected decline in production”.  The exact cause of the “major interruption in the normal supply of local eggs available nationwide” is still under investigation.  The Vice-President of the Table Egg Producers Association Dennis Ramsingh attributed the shortage to culling of old hens with a delay in production by their replacements.

Any acute interruption in the supply of eggs especially if associated with mortality should be regarded in a serious light and appropriate diagnostic procedure should be initiated to exclude the possibility of avian influenza, Newcastle disease or some other infection.  Clarification from the Government that the current egg shortage is only due to inappropriate flock placement schedules would be reassuring.

   
 

Re-Population of Depleted Midwest Flocks

Sep 2, 2015
    

According to a release by the UEP, egg producers are making progress in repopulating flocks.  A spokesperson noted that approximately 18 months will be required to restore production to a level consistent with a national holding of approximately 305 million hens.  This presumes placement according to a regular staggered schedule to optimize egg size.

The majority of the approximately 40 million hens lost as a result of HPAI were housed for production of egg liquid.  Accordingly,  the only restraint to repopulation following decontamination of farms will be the availability of chicks and hence pullets.  Egg size is less significant for egg-breakers and with current high prices for stock, breakers will maximize their use of pullet facilities and expedite filling of in-line operations. 

It must be remembered that projections for restoration of production in the Midwest industry are based on the anticipation that there will be no further outbreaks of catastrophic HPAI infection.  Appropriate biosecurity precautions are being implemented to prevent a recurrence of infection in the spring of 2016 when migratory waterfowl return from their winter habitat in Eurasia.

   
 

Politicians Favor the RFS When Campaigning in Iowa

Sep 2, 2015
    

Candidate Hillary Clinton is supporting the RFS in her cycle of pilgrimages to Iowa. As the most recent supplicant for Iowa voter approval, she naturally supports the Federal ethanol mandate which determines the quantity of biofuels to be added to the U.S. supply of gasoline.

Her affirmation of the RFS was made during a speech in Ankeny, near Des Moines on Wednesday August 26th.  Her newfound interest in agriculture and energy is reminiscent of Governor Chris Christie of New Jersey embracing gestation crates for sows.  Neither Candidate Clinton nor Candidate Christie have any real knowledge or interest in the policies they are supporting but they have to comply with the expectations of Iowa voters who have a parochial and narrow preoccupation with corn and hogs. 

Politicians are cognizant of the faux pas made by then candidate Michael Dukakis, who when asked what alternatives crops Iowa farmers might cultivate during a time of over-production and low prices, he volunteered that they should try Belgian endives.  Truly a kiss-of-death moment for any campaign, even without the subsequent tank and helmet photo-op.

   
 

Farmers in Germany to be Compensated for Hens with Entire Beaks

Sep 2, 2015
    

The Agriculture Minister of Lower Saxony, Christian Meyer has confirmed that 250 farmers in the state have applied to participate in a program which will compensate for holding 600,000 laying hens at reduced stocking density and with entire beaks.  Participating farmers will undergo special training in management of non-beak trimmed flocks and will be monitored by extension advisors.  Farmers will receive a state subsidy of approximately $1.90 per hen for their adherence to the program which will cost taxpayers in excess of $1.1 million.

   
 

 Ziggity Systems Welcomed as a Sponsor

Aug 28, 2015
    

Ziggity Systems specializes in watering systems with a concentration on water lines and nipples.

Based on experience and field research, the company supports producers with valuable educational web postings on topics promoting operating efficiency of nipples.

Robert Hostetler president of the second-generation company developed the concept of the Poultry Watering U to share information and to provide practical advice to producers.

Topics to be posted during succeeding weeks will include

  • preventing corrosion of stainless steel components in nipple drinkers,
  • reducing biofilm which has significant implications for flock health and
  • disadvantages of catch-cups.

The Poultry Watering U informational advisories will posted under the PRODUCTS tab.

   
 

ASDA Records Drop in Same-Store Sales

Aug 28, 2015
    

According to the Irish Times of August 19th, ASDA, the UK subsidiary of Wal-Mart Stores, reported a 4.7 percent decline in same-store sales for the second quarter of fiscal 2015.

Competition among the major supermarkets has intensified during the past two years with the major chains including TESCO promoting a range of products at low prices.  The traditional supermarkets have also encountered considerable erosion of customer loyalty from the small-store discounters including Aldi and Lidl.

   

Shane Commentary

 

Outlandish Prediction on Price based on HPAI

Aug 28, 2015
    

According to NBC News, Bret Hundley of BB&T Capital Markets commented on the rise in price of eggs occasioned by the recent HPAI outbreak.  This is very perceptive and obviously confirms his acumen and expertise which allows him to hold down a responsible position with a leading financial institution.  Where Hundley and I differ is his outlandish forecast of $6 per dozen in the event of subsequent outbreaks of HPAI. The $6 per dozen figure is presumably for generic eggs although he makes no distinction among categories of shell eggs. His prediction is contingent on “if bird flu gets closer to home for Cal-Maine Foods.”

   
 

Transition by McDonald’s to Offset Sales Decline

Aug 28, 2015
    

EGG-CITE and the financial press have reported extensively on the sequential-quarterly decline in U.S. same-store sales announced by McDonald’s Corporation.  Efforts to revitalize the company by incoming CEO Steve Easterbrook have received considerable publicity but it is evident that his efforts will take time before they are reflected in the significant operational and financial parameters. (see Q2 Results posted on July 27th 2015)

Press reports some time ago noted that McDonald’s was introducing a “create your taste” customization effort for their sandwiches.  When first proposed under the previous CEO, Don Thompson the initiative was roundly criticized as it was unworkable for a chain heavily committed to drive-thru window sales.

Aware of the trend towards “healthier” and “natural” menus as promoted by Chipotle, Panera Bread and smaller chains, McDonald’s is trying to emulate their successful competitors.  The “create your taste” concept was reworked, and will be tested in New York allowing customers to order using touch-screen pads and kiosks to select from among toppings and sauces some of which are new to the McDonald’s menu.  Whether this concept is applicable to as many as 3,000 restaurants is questionable.

As a gentle suggestion, McDonald’s may wish to apply consumer segmentation to their approach.  If a proportion of McDonald’s restaurants have menu items and décor to attract millennials, will I as a traveler know what to expect when I select a McDonald’s store?  After all the selling point for McDonald’s over the past four decades has been consistency in quality (or otherwise) cleanliness (or otherwise) service (or otherwise) which one expects of a name-brand franchiser.  By altering the ambiance and menu, in selected stores McDonald’s may end up with worst of all possible worlds. They may lose existing clientele with a suitably adapted intestinal flora and enzyme secretions to competing chains offering uniform products. Concurrently they may fail to attract fickle millennials who in any event are patronizing more upscale QSRs.

McDonald’s might well be advised to follow the attempts by Target, Walmart and even Whole Foods Market and develop a different store concept with a modified name to create a brand appealing to a defined demographic.  It is absolutely impossible for McDonald’s to become Chipotle in the same way that Texas Steakhouse could not aspire to become a one-star Michelin restaurant. I remember the failure of the McCafé concept in the early 2000s when McDonald’s tried to become Starbucks. They just could not transfer the ambience of an upscale coffee shop to a hamburger QSR. Now the McCafé is reduced to a machine or two somewhere down on the right side of the counter where the staff trip over each other working the drive-through delivery window.

   

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Dr. Simon M. Shane
Simon M. Shane
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Industry Prices: Wed Sep 2
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 Soybeans8.74 $/bu
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 Eggs, Producer210  ¢/doz
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