The U.S.

Food Industry
Opportunities and Challenges for Swiss Companies.
Summer 2006. osec.ch

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Editor and Contributor Claudine M. Haeni Contributors: Paul S. Anderson, Ally Gunduz, John F. Lemker, Frank Ustar, Martin von Walterskirchen and Daniel A. Wuersch Swiss Business Hub (USA) uses primary, secondary sources and tertiary sources of information to produce a variety of reports on the American market for small to medium sized Swiss enterprises. For further information on our services, please contact: Martin von Walterskirchen Director Swiss Business Hub USA 737 N. Michigan Avenue, Suite 2301 Chicago, IL 60611 Telephone: 1-312-915-0061 Fax: 1-312-915-0388 e-mail: martin.walterskirchen@eda.admin.ch While this report is intended to provide an overview of this specific market and its opportunities at the time of its edition, each individual manufacturer, exporter or company may have to conduct their own analysis to get a better understanding of the possibilities and opportunities available to them. You are encouraged to explore and develop your opportunities based on research and in-depth analysis. Readers should take note that the Government of Switzerland does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations, associations, companies and individuals listed herein. Readers of this report should verify the accuracy and reliability of the information contained herein before making a business decision. © Swiss Business Hub USA 2004 - 2009

Table of Contents
1. Introduction and Summary. 1.1. Opportunities. 1.2. Marketing. 1.3. Regulatory Environment of the Food Market. 1.4. Acknowledgements. 2. The U.S. Food Industry. 2.1. Facts and Figures. 2.2. Trends in the Food Industry. 2.3. Eating Away From Home. 2.4. Non-Alcoholic Beverages. 2.5. Manufacturers of Food & Beverages. 2.6 Mergers & Acquisitions. 3. Supermarkets and the Grocery Industry. 3.1. Facts and Figures. 3.2. Store Types. 3.3. The Shopper. 3.4. Facing the Competition. 3.5 Growth Opportunities. 4. The Specialty and Gourmet Food Stores. 4.1. Facts and Figures. 4.2. Specialty and Gourmet Foods. 4.3. Buyers of Specialty Food. 4.4 Specialty Food Suppliers. 4.5 Trendspotting. 4.6 Products. 5. The Commercial and Institutional Food Industry. 5.1. General. 5.2. Restaurants. 5.3. Restaurants in Hotels and Casinos. 5.4 Challenges. 5.5 Trends 5.6 Distribution Channels. 5 5 5 6 6 7 7 8 9 9 10 11 12 12 12 12 14 15 17 17 17 19 19 19 20 23 23 23 25 26 26 26 6. Natural and Organic Food. 6.1. Overview. 6.2. Definition of Organic. 6.3. The Organic Food Shopper. 6.4. Trends. 6.5 Pricing. 6.6 Retail Channels. 6.7 Distribution and Purchasing. 6.8 The Foodservice Segment. 7. The Functional Food Sector. 7.1. Overview. 7.2. Definition and Regulations. 7.3. Consumption Trends. 7.4 Price Trends. 7.5 Marketing Considerations. 7.6 Retail Channels. 7.7 Distribution. 8. Food Distribution. 8.1. Overview. 8.2. The Role of the Importer. 8.3. The Role of Food Brokers. 8.4 The Specialty Food Distribution System. 8.5 Distribution to Retail Outlets. 8.6 Some Larger National Distributors. 8.7 Food Service Distribution. 8.8 The National Distributors. 8.9 Co-Packing. 8.10 Supply Chain. 8.11 Food Marketing. 8.12 Consumption Trends. 8.13 Product Pricing. 8.14 Private Store Brands. 8.15 Promotion. 8.16 Category Management. 8.17 Food Packaging. 27 27 28 29 30 30 31 32 32 33 33 33 34 36 36 36 37 38 38 38 39 39 40 40 41 41 42 43 43 43 44 45 46 47 48

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The U.S. Food Industry

The U.S. Food Industry

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9. Marketing Agreements and Strategic Partnerships. 9.1. In General. 9.2. Marketing Arrangements. 9.3. Contract and Tort Issues. 9.4. Exploring and Evaluating Market Opportunities. 9.5. Marketing Agreements. 9.6 Cooperation with U.S. Companies. 10. Regulation of Food by the Food and Drug Administration (FDA). 10.1. Introduction. 10.2. Bringing a Food to Market in the U.S. I: Categorization of a Food. 10.3. Bringing a Food to Market in the U.S. II: Food Composition and Ingredients. 10.4. Bringing a Food to Market in the U.S. III: Food Labelling. 10.5. Manufacturing Food. 10.6. Bioterrorism Law. 10.7. Enforcement.

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1. Introduction and Summary.
Martin von Walterskirchen, Swiss Business Hub USA The purpose of this report is to help Swiss companies seeking to enter the American market for food products. These interested companies will gain insights into selected market segments and an overview of the potential opportunities and challenges they face when entering the American food market. The USA is the largest and most sophisticated market in the world. The economy of the U.S. is expanding and is likely to continue to grow over the next years. There are, at present, no indications that the U.S. will lose its predominant role in global issues or its economic strength. The result is unparalleled purchasing power. The American food market differs in many aspects from the Swiss and European markets. The size of the USA and the American way of life confront each producer with considerable logistic challenges and offer opportunities for innovative manufacturers and distributors. This study concentrates therefore on the most important interfaces between manufacturer and consumer (supermarket and grocery industry, specialty and gourmet food stores, and the restaurant and food service industry sector) and provides information on sectors offering windows of opportunities for Swiss food manufacturers (natural and organic food, functional food). troduced entire aisles of regional foods, reaping success with this approach. The mainstream consumer of today is looking for value, i.e. good quality at lower prices. This fact has a strong impact on retailers’ profits. Swiss food products are generally niche, high quality, sophisticated and high priced and, therefore, contrast with the mainstream American food market. Additional burdens are created by the low exchange rate of the U.S. Dollar. There are, however, three distinct segments of the U.S. food market that offer significant opportunities for Swiss food products: • The power of quality and exclusivity versus low price: One in every 125 Americans is a millionaire. This segment of the population spends more than an aggregate $97 billion per year. Taste, freshness, innovation, sophistication, quality, exclusivity, design, cachet, image, and healthiness are more important sales arguments than price. The U.S. gourmet and specialty food market in general has enjoyed a compound annual growth rate of 7% for several years. In 2000 it had reached the $20 billion mark, of which 55% of sales were made in supermarkets. Retail sales for this market topped $34.8 billion in 2005 (please refer to Chapter 4). The same is true for the up-scale restaurants and hotels who depend on the distributors of high-end ingredients used in gourmet and healthy food preparation. • The Natural and organic food sector shows a booming doubledigit growth rate with estimated $14.5 billion in sales in 2005, and it is expected to climb to $16 billion in 2006. The forecast is set at around 18.4% of continued annual growth through 2008 (please refer to Chapter 6). Please note that organic standards in the U.S. are different from Swiss standards. A product may, therefore, qualify as organic in Switzerland but not in the U.S. and vice versa. • High quality private label: One in five products purchased in grocery outlets is a “private brand” product. Private label has long been considered as being of lower quality than its national brand counterparts, but store brands are being recognized favourably and are moving in upscale direction (please refer to Chapter 8.14).

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11. Importing into the USA. 59 11.1. General Background. 59 11.2. Basic Customs Considerations. 60 11.3. Entering Merchandise into the U.S. 61 11.4. Food and Drug Administration (FDA) Requirements Enforced by Customs / The Bioterrorism Act of 2002. 62 11.5. Customs – Trade Partnership Against Terrorism (C-TPAT) and Related SecurityCompliance Issues. 64 12. Annexes. 12.1. Trade Associations. 12.2. Periodicals. 12.3. Trade Fairs. 12.4. U.S. Government Agencies. 12.5. Links to Sources. 12.6. The Authors of the Study. 65 65 66 67 67 68 68

1.1. Opportunities.
In 2005, sales of food-based retailing in the U.S. represented a $1,000 billion industry, and it is estimated to reach $1,200 billion by 2010. This corresponds to 26% of total U.S. retail trade. We estimate that food retail sales will grow at an average of 4% annually through 2013. Over the past decade as income levels have risen in the U.S., the percentage of disposable income spent for food has declined to about 10%. At the same time, a growing slice of the pie has been going to the food-away-from-home segment, which now garners 45% of total dollars spent. Projections depict that by 2010 consumers will spend 53% of every food dollar on meals, snacks and beverages away from home. The 35 to 44 age group claimed the highest overall food spending per household. They were also the highest spenders for food-at-home. The under age 25 group showed the lowest spending pattern for food-at-home. The Hispanic population is the fastest growing ethnic group in the U.S. with an estimated aggregate disposable income of $800 billion. The average Hispanic shopper is health conscious and spends approximately $117 per week on groceries compared to $87 per average U.S. shopper. Supermarket chains have responded and in-

1.2. Marketing.
The environment in which a shopper makes his/her food buying decisions is extremely competitive. The average time a U.S. consumer spends in a supermarket is 17 minutes. During this time the shopper can see only 25-28% of the store’s merchandise. The average exposure to each item in a store is 0.09 seconds; hence, the necessity of a concise marketing strategy for your products in the U.S. market, The U.S. Food Industry 5

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The U.S. Food Industry

Anastasia M. This trend has remained over the past few years and is expected to continue. I want to extend special thanks to acknowledge the contributions of the following people. Department of Agriculture sales of food-based retailing represented approximately 26% of all U. domestic or international. Discount Stores 42% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Figure 2: Food Expenditures and Projections 2002-2013 (Source: USDA. and identifies the most common issues of interest to food importers. According to the Bureau of Labor Statistics. • In addition there are numerous legal issues that can determine the success of marketing food products in the United States. ingredients. provided the company is willing to make a careful assessment and plan accordingly. (Swiss Business Hub USA. is regulated by. Washington. Food Industry 7 Figure 1: U. This can be tied to their higher salary ranges.5% (Source: Data of U.4). The U. Spending by region shows highest expenditures in the Northeast with more dollars going towards dining out. nutrition value per serving size. Facts and Figures..S. They were also the highest spenders for food-at-home. President. Department of Homeland Security. Food Marketing Institute. Chicago. One of the significant drivers in the spending habits is the household head’s education level. which represents farmers.5% and 4. Geneva. household today allocates substantially more income dollars to housing (approximately one third). Ally Gunduz (Swiss Business Hub USA. The U. the Bioterrorism Act requires that any facility.4. Based on figures published by the Census Bureau and the U. the higher the dollars spent for food away from home dominate. private and public companies that are engaged in the later stages of consumer food production.S. Frank Fischer and Randy Hanken. Claiming as much as 20% at some point. DC. Bureau of Customs and Border Protection (“Customs” or “CBP”). The South showed the lowest spending patterns for food. must register with the FDA. Please note that the Share of Food and Beverages of “Clubs and Supercenters is 3. Cambridge. New York). consumers have spent around 10% of their disposable income on food over the past 9 years. Food Industry .S. Food Industry. Swiss Business Hub USA. These labeling requirements include but are not limited to the name. whether to market through a distributor or reseller or on his/her own. Swiss Business Hub USA. Osec Business Network Switzerland. and through. is the world’s largest producer of food and agricultural products. The West was the leader in spending for food-at-home. President. New York). By Claudine M. Sales of food-based retailing were estimated at around $1 trillion ($960 billion in 2004). • As a consequence of the terrorist attacks on September 11. John Lemker. (Bell. • Before market entry.S. which manufactures. The manufacturer has to determine if its product is subject to any specific rules applicable to composition.5% inclusive). Sales in Food and Beverages are highlighted in black. WPP Global Retail Initiatives.S. the U. The rationale behind this requirement is to ensure that the FDA can quickly locate and neutralize faulty food processors in the case of delivered or accidental contamination of food (please refer to Chapter 10. Trade Commissioner. The break-down of expenditures between food-at-home and food-away-from-home in 2004 was 5. Frank Ustar. On one side is agribusiness. etc. Los Angeles).and the importance of professional customer education through advertisement and cooperation with grocers and brokers. Claudine Haeni. 1. $ 800‘000 2. Susi Gerber. The U. Projections suggest that food retail sales will continue to rise steadily at around 4% annually through 2013. The 35 to 44 age group claimed the highest overall food spending per household. net content. The higher the level of education.S. The challenges brought forth by the regulatory environment are surmountable. Chicago. (Swiss Business Hub USA.and Daniel A. Chicago). Eric Desbeaumes. Boyd & Lloyd. Gwen Morrison. allergens. Management Ventures. single males take the lead over single females. Chicago Manufacturing Center. retail trade of $4. Chicago). Secretary General of FIAL. It gives the publisher pleasure to thank the authors of this study: Paul S.3. On the other side are food manufacturers and packaging companies. declaration of ingredients. • Understanding the US food distribution system (please refer to Chapter 8) gives the Swiss food manufacturer important information for making sound decisions. MA. and Mirjam Groeneweg. Haeni. U. processes. Chicago. 1.S. Food is subject to complex labeling requirements. transportation and education than in the past. Census Bureau) The food and beverage industry encompasses all companies that manufacture or process food and beverages for human consumption. Wuersch (Wuersch & Gering Attorneys. Chicago. packs or holds food for animal or human consumption in the U. labeling or manufacturing requirements. Alci Contractors Technology. Chicago).S.1. Regulatory Environment of the Food Market. 6 The U. Chapter 11 describes the structure of CBP and its operations. Retail Trade 2005. whose help in the conceptual phase of the study and/or in assembling this text was invaluable: Guy Emmenegger. (Figures for food-away-from home encompass direct spending in restaurants and other food establishments and exclude food served in airlines or during hospital stays). figures on food spending by career reveal that professionals and employees at management levels rank number one in food expenditures.S. the Swiss Association for the Food Industries. 2001. Daniel Bangser. Economic Research Service) Increases in actual dollars spent for food consumption have been moderate and projections through 2013 reveal a continuation of modest annual gains.S. All Other 19% 6% Health & Personal Care Stores Pharmacies & Drug Stores Grocery Stores 11% Food Services Drinking Places 10% $ 700‘000 $ 600‘000 $ 500‘000 $ 400‘000 $ 300‘000 $ 200‘000 $ 100‘000 $0 Food At Home Food Away from Home 7% Supercenters Beverage Stores 1% 5% General Mechandise Chain & Department Stores.S. Jafari. legal system is complex and needs to be treated with respect. Inc. Swiss Business Hub USA Consumption The average U.6 and Chapter 11. ranchers and private and public companies that are involved in the early to middle stages of food production. Acknowledgements. products need to be in conformity with FDA rules and regulations (please refer to Chapter 10). John Rand. such as.1% respectively and remained unchanged in 2005. The Store.S.S. The under age 25 group showed the lowest spending pattern for food-at-home. The U. In contrast. Chapter 9 Marketing Agreements and Strategic Partnerships provides information on these important issues.1 trillion in 2005 (food and beverage based sales in super centers and warehouse clubs of 3. the percentage of disposable income allocated to food has steadily declined during the past five decades. • Importation of Swiss food products: The importation of products into the U. Anderson (Sonnenberg & Anderson. 2.S. When looking at spending patterns based on gender. Dining out in one-person households takes precedence in both genders.

Target Corporation also has plans to enlarge the grocery section in all of its stores.419 4.564 4. good quality at lower prices. They are being joined by Generation Y (ages 18 to 27)and X (ages 28 to 41) who believe in a healthy diet as a preventive measure against a wide variety of diseases. It comprises all commercial eating and drinking places. Texas. Conventional retailers have been forced to double up on their promotions and marketing campaigns in their struggle for survival. The mainstream consumer of today is looking for value. with the baby boomer numbers growing fastest. and shoppers who are generally better educated.2.1 billion in 2005. consumers have more choices for their shopping trip destinations than ever. “Premium” and “Limited Edition” have become buzz words for high quality.) The restaurant industry is a highly competitive environment that has been experiencing more consolidations. A fair number among them went as far as developing and establishing their own niche stores. The U. and monitoring of sugar intake (glycemic index) to fight the growing problem of obesity and its paramount effects on the health care system. are paving the road to healthier eating habits.921 2003 44. In March of this year Wal-Mart announced its plans to incorporate organic and a wide variety of upscale specialty foods into its food product selection. Non-Alcoholic Beverages. families were full-time dualearner households in 2005. easy access to the Internet affords the consumer the ability to make price comparisons prior to their trip to the stores.6% and Cott Corporation (private label) with 5. Wal-Mart has also become the biggest customer to a fair number of food and beverage manufacturers. their market share had exceeded 11% in 2004.110 3.4%. Competition and the Consumer Competition among retailers has been fierce over the past several years and continues to accelerate. extensive testing of consumer satisfaction and the ability to operate at a more cost-efficient level.994 14. down over 4% within the past year alone.Retail Channels. The mountain areas are expected to set the pace with 6.234 26. Food Industry 9 Ethnicity One of the fastest growing ethnic groups are the Hispanics.030 Taste and Convenience Time pressured consumers are looking for prepared meals and stores that make their shopping trips easier.S. 156. In 2005. Companion animals and their well-being continue to gain in importance.895 5. Spring Fancy Food Show 2006 Two of the latest trends that demanded the visitor’s attention were: • Foods and food ingredients and personal care products that promote antiaging. is part of a pilot program Wal-Mart launched. supercenters on one end and specialty/gourmet stores on the other. 150.1% market share.588 4. To build market share and stay ahead of the competition from general merchandisers.gov. remained the market leader with a 43. The baby boomer generation which accounts for nearly 30% of the U. snack bars. Cadbury Schweppes PLC with 14. the traditional food retailers have started to expand their specialty services and departments to attract the discriminate segment of food shoppers and to retain their existing patrons. limited-service places (fast food). this industry has been dominated by small businesses.644 88. According to the trade publication Supermarket News.467 35.S.S. government in partnership are promoting health and wellness. exciting dishes. Supercenter leader Wal-Mart Stores Inc.053 22.992 26. the largest food retailer in the nation.749 105. Today. i.714 3. Scarcity of time has the consumer also looking for food-on-the-go such as repackaged portions of salads. and tasteful innovations offering bold flavors for moments of indulgence. 2005 marked the year of “Finding Your Niche” among the nation’s traditional retailers according to studies conducted by the Food Marketing Institute and Progressive Grocer Magazine. Retailers will have to understand the consumer’s “food psyche” and reflect that in their product palette. warehouse clubs Costco and BJ’s and other retail formats have been further expanding their already large selection of food products. Hispanics will represent more than 50% of the U.S. . yogurt drinks. Some of these big food companies realize more than 10% of their annual sales through Wal-Mart. Pet nutrition represented the fastest growing market segment in specialty foods in 2005. The year 2006 should see further growth of approximately 5%. Restaurant sales growth is predominantly expected in the Pacific (California to Alaska and Hawaii) and South Atlantic (Delaware to Florida) Regions. generally smaller neighbourhood markets are focused on gourmet and specialty foods (66%). non-alcoholic beverage retail industry is dominated by four companies: in 2005 Coca Cola Co. Shifts such as these make it essential for manufacturers and retailers to understand and consequently focus on their target markets. foodservice industry consists of a wide range of away-fromhome eating places. (For more details please refer to Chapter 5.1% growth.S. Trends in the Food Industry.S. Historically. In the U. This 8 The U.4. On the consumer side. The sixth report of the U.S. Region Europe North America Asia Pacific Latin America Middle East & Africa Total 2004 52. The U. The store opened recently and includes not only organic and specialty foods on a grand scale. as the consumers’ focus on price has dampened loyalty. Dietary Guidelines Advisory Committee on Dietary Guidelines emphasizes fiber-rich diets. and manufacturers have been hampered in their efforts to cover higher commodity and production expenditures.. This development has also spurred the creation of Fine Casual and Family Casual Dining. Depending on the occasion the consumer may purchase high quality items at a specialty/gourmet store and make an additional stop at a supercenter to buy mainstream goods and look for bargains.S. Taste is the main driver behind consistent demand and purchasing habits by the consumer.8% of sales for food consumed at home in 1991. Food Industry trend is having a strong impact on retailers’ profits.1 billion in 2005. Moreover. followed by Pepsi Cola Co. Retailers need to consider the different needs of both groups and target them accordingly. In the past few years larger chains have started to take over the lead by introducing standardized menus. According to Beverage Digest consumption of carbonated soft drinks showed a decline for the first time in 20 yeThe U. followed by North America (see Figure 3). A focus on individual needs among consumers encourages innovation and a wide variety in new product offerings.504 33. According to the Bureau of Labor Statistics.4%. New products bear a significant risk of not being accepted by the consumer or experiencing a short lived existence. The second fastest growing ethnic group is of Asian background.S.082 11. a new restaurant segment (see Chapter 5). Today. not only among baby boomers.328 6. Eating Away From Home.429 27. economics.742 40. will help influence this trend greatly on a long term scale.456 46.086 177. Europe is the leader in new product introductions. the two economic leaders of the nation in recent years. One of the new communication tools about the importance of nutrition and health features dietary guidelines and is accessible to anybody at www. Two thirds of these new. food sales at supercenters and warehouse clubs claim more than 14% market share. 1 ACNielsen 2. A newly designed store in Plano. obesity and diabetes in particular.877 2002 2001 Total 2. The highest number of introductions occurred in the beverage segment with nearly one fifth of all launches.3. Introduction of New Products Introduction of new products reached nearly half a million over the past four years. Wal-Mart. population and is very concerned about nutrition and weight issues.S.345 117.000 supercenters with grocery departments and it is estimated that this number may triple by 2010.e. Food manufacturers and the U. Wal-Mart operates more than 2.433 462. more than half of all U. demographic shifts.923 140. The effects of this proactive approach has marked the beginning of a long term trend on the consumers’ food shopping behaviour and promises significant growth in the categories of natural foods and organics and various specialty and gourmet foods. followed by bakery goods (12%) and confectionery (11%). Their aggressive pricing is capturing an ever larger group of consumer food dollars. 2. A great number among them wait for sales before making a purchase. high intake of fruits and vegetables. population. natural/organic (50%) and ethnic (25%). but also features an elaborate wine department and a sushi bar. Shifts in Demographics The 15 to 24 year olds and the 55+ are the two largest age groups in the U. are further changing the landscape of the American food business industry.000 new products found their way into the market around the globe. • Natural/organic and gourmet food and supplements for companion animals. Demographic trends such as a growing baby boomer generation represent an older and wealthier population which should further sustain a steady growth pattern for some time to come. 40. more discriminating and more worldly.220 33.592 18. This development comes at a high price and severely limits product pricing flexibility. alone there were 16. Retail sales for carbonated soda drinks accounted for $68.000 new product introductions. fruits. with 31.122 99. Trips to traditional food stores have declined on average. dominates the food market scene. Furthermore. Antiaging has become a buzz word. In response to these industry changes. From a global perspective. with the main industry segments being divided into full-service restaurants. and food contractors and institutional food services.S. population in the near future. Generation Marketing and Behaviour-Based Segmentation1 have gained in importance throughout the industry. from restaurants and cafeterias to bars. Whereas these retailers claimed a mere 1. Rising income levels and a harried lifestyle have greatly influenced the popularity of dining out among Americans. but also among Generations X and Y with the connotation “prevention of disease and preservation of health”.mypyramid. Health and Wellness Nationwide concerns over rising health issues.171 Figure 3: Global New Product Introductions by Region (Source: Mintel) Food Ingredients Revolutionary change in the food industry sends Chefs traveling all over the world to discover local and exotic ingredients to use in newly created. According to the National Restaurant Association sales of the foodservice industry were estimated at $486.

Water. Company 2005 34. teas and coffee followed closely with 19.885 10. More direct selling of their products to restaurants. Crystal Geyser and Evian were two brands which experienced declining sales.1% and sugar and fructose sweetened natural sodas 1.3 4.ars.S. Sales figures for 52 weeks ending February 19. Over decades the top national food companies have built a solid reputation and established themselves with a strong brand-name recognition.9 2.254 18. some of the big food companies (H.S. Food Industry Figure 5: Top U. Improved product mix. Unilever PLC. have been concentrating on more efficiency through lowering of their operating costs. Brand Aguafina (Pepsi) Private Label Dasani (Coca-Cola) Poland Spring (Nestle) Propel (Gatorade Company) Dannon (Danone*) Arrowhead (Nestle) Deer Park (Nestle) Crystal Geyer (Crystal Geyer Co) Evian (Danone*) Sales ($ Millions) 370.177 2004 32. UK. Inc). A survey conducted by Food Processing Magazine and GrantThornton LLP revealed that approximately two thirds of the food manufacturers participating believed that health promoting foods will be their major growth market in 2006.2 3.8 5. Company Reports) The packaged food and beverage industry has seen key commodity prices rising and then leveling off for a while. Energy Drinks took the lead in the non-alcoholic beverage market with a leap in growth of close to 70% and sports drinks experienced a 20% increase. PepsiCo’s Aquafina. Bottled water experienced a per capita consumption that rose from 17. The health and wellness trend promises continued growth in water and all 10 The U. especially on school premises. institutions and schools and product innovations coupled with aggressive marketing may impact profits positively. and Cargill Inc. food and beverage manufacturers in 2005 (ranked by sales). market 25 years ago.562 26. 2005 ( Source: Information Resources. Beverage manufacturers must follow multiple regulations that include Standards of Identity.3 (1. The U. Market Evian was the first single-serve bottled water introduced to the U. Figure 5 shows the top publicly traded U.261 26.0 5. Coca Cola Classic was down 2% and Pepsi 3.7 7. reducing supply chain expenditures. and acquisitions came to a close in 2005 with an additional 75 announced but not completed.6 9.9 3.8 94.706 14.2%.S. Coca-Cola Enterprises ConAgra Foods General Mills Pepsi Bottling Group Inc.441 21. It became the trailblazer of today’s array of carbonated and non-carbonated bottled water.014 23.6 307.6. the Nutrition Labeling Education Act and the FDA’s Good Manufacturing Practices (GMPs).104 19.6 133. Sara Lee Corporation Kellogg Co. Sales of natural sodas grew around 15% between spring of 2004 and spring of 2005.8 44. Manufacturers of Food & Beverages. Private Label surged with a 30% growth rate.2 24.. 450 400 350 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 Packaging & Equipment Supplies Soft Drink.07 3. remained in the leading position. The Coca-Cola Co.070 10. * Allianz on the U. Research figures promise continuation of strong growth.906 9.6 % Change to previous Year 2.0 5.613 % Change 6 11.S.119 18. Standard & Poor’s indicates that the intense competition in the food industry has led the top food companies to increase their domestic advertising expenditures. To enhance their profit margins. Kraft Foods. Food and Beverage Companies in 2005.6%. Heinz Co. eliminating less profitable brands and divesting of unprofitable operations. innovation and increased marketing campaigns and promotions are strategies these companies employ as they strive for profitability.6) 5. 2006 showed doubledigit growth and unchanged positions for the leading brands. The latter are predicted to decline as consumers have become aware of their high sugar content.081 11.1 49. The main reasons for this surge in demand can be attributed to consumers’ concern about the safety of municipal water supplies as well as bottled water having finally carved its niche as a “refreshment beverage” in the American market.2 Kraft Foods Inc.J.244 11. The trend in cost-cutting and reorganization is predicted to continue to impact this mature industry. Food and beverage companies continue in their efforts to optimize their management and production lines. Groupe Danone. introducing new technologies to track inventory.4 169. 2. Food Industry 11 .7 284.8 gallons in 2004. Single-serve bottled water showed continued growth at an 18% growth rate for the 52 weeks ending February 19.) Figure 6 : Mergers and Acquisitions in the Food Industry 2005 (Source: The Food Marketing Institute) According to the Food Marketing Institute 323 mergers. fruit drinks and ready-to-go teas. Estimates by Standard & Poor’s predict moderate growth for some of the big players.2 gallons in 2000 to 23. Figure 4 : Bottled Water Sales for 52 weeks ending March 20.5 nonalcoholic beverages that are also low calorie/low carbohydrate. France and Cadbury Schweppes PLC. UK.566 11. sports drinks. PepsiCo Inc.168 29.2 0. Standards of Quality.113 32. Carbonated beverages sweetened with fruit juice increased 13.4 141. This illustrates a continued decline in M & A activity over the past five years. calciums and antioxidants has become the “in thing” and the consumer responds positively.4 1. Tyson Foods Inc.7 11.0 3. They tend to stay away from regional products and preferences on their home turf. Fortification with vitamins.5. ranked by Sales in $millions.S. General Mills and ConAgra Foods Inc. A high number of deals were registered among multi-product food manufacturers and beverage companies.5 15.9 28.962 19. Reasons for this decline vary from media reports claiming a connection between soft drinks and obesity to recent research data that showed high levels of the carcinogen benzene in soft drinks to parents fighting for better nutrition for their children. are the biggest privately held companies. Together they generated aggregate sales of $210 billion in 2004 (latest figures available). which is contrary to their strategy in their international markets.2 9. Juice Manufacturers Raw Products & Ingredient Supplies Wholesalers & Distributors Restaurant & Foodservice Food Manufacturers 3. or feature innovative mixtures of fruits and possibly organic ingredients according to Beverage Spectrum. (Source: Standard & Poor’s.1 25. Sara Lee Corporation.7 6.158 14. energy drinks.S.0 % Market Share 15. Mergers & Acquisitions.3 12. very specific regulatory environment. Mars Inc.0 126. Among the major foreign food and beverage competitors were and remain Nestle SA of Switzerland.2 76.5%. 2006. Regulations Bottled water falls under a separate. Number one bottled water. To insure profitability their operations focus on multi-million dollar products they can sell on a national basis.1 85.5 5.

0 52. and non-foods.000 20. Ralphs Grocery. canned food.0 25. One third of space is reserved for non-food items.000 square feet selling space and annual sales of $2 million plus. Feb 2006) The U.534 1.S. Food Industry Wal-Mart Supercenter. Merchandise and grocery sold in bulk. Inc. Inc.633 7.09 $ 3. Annual Sales and Number of SKUs present Averages of the respective Store Formats. Condiments.745 36. produce. E. health/beauty care products. Inc.2.544 272 619 563 2.31 $ 8.06 Superstore 40. H. dry groceries.000 Limited Assortment Supermarket Other (Small Grocery) Stores Specialty/Gourmet Retailers N/A <5. Haeni. Wal-Mart Neighbourhood Market Kroger.E.28 $ 7. drive-to store offering a limited line of high convenience items. (Sources: Willard Bishop Consulting and ERS/USDA). H. general merchandise and seasonal items. Delhaize America. Compact. The mainstream consumer focuses on economics and is concerned about the price of a product.6% despite the slight decline in store locations nationwide. Vons Market. Albertson’s. 12 The U. Inc. approximately 200 store locations less compared to 2004.532 16.745 58.501 1. Prescription-based drug store with at least 20% of total sales from consumables. Jewel-Osco.288 32. video rental. grocery industry has experienced a succession of consolidations leading to intensified competition among supermarkets themselves and from other retailers. Save Rite Figure 7: The top 10 Supermarket Chains in 2005 (Source: The Super 50. Other $ 11. Dominick’s Finer Food Stop & Shop.E. Full line of dry groceries. More than 50% of them operate a gas station. warehouse clubs and convenience stores with or without selling gasoline. By Claudine M. A supermarket is a retail business with a minimum of 5. Butt Grocery Co. as they are generally responsible for the household budget. ethnic/international.07 $ 4.Butt Central Market Save A Lot. common check-out. The majority of the shoppers prefer to do their shopping during the day.8 Number of SKUs 22.S. Publix Supermarkets. traditional and non-traditional grocery stores. >50% sell gasoline and fast food. Note: Store Size.000 N/A N/A 3.000 N/A N/A <2. Sales ($ million) 7.000 N/A N/A Figure 8: Traditional and NonTraditional Store Formats. small selection of perishables (dairy and prepared foods) and nonfood items. Cub Foods. chain operators account for 11 or more retail stores. Hannaford Food & Drugs.052 supermarkets nationwide in 2005.422 8.) How $100 Is Spent Perishables Beverages Non-Food Grocery Snack Foods Main Meal Items Health & Beauty Care General Merchandise Pharmacy $ 50. Aggregate supermarket sales were estimated at $478. health focused or organic. Now they sell 20% to 80% grocery and consumable items at aggressively low prices. restaurants. locally grown or produced.3. Banking. The trend towards store brands continues to expand. Tops Publix Super Market Food Lion. traditionally sell staples and knickknacks. This mature industry consists of an array of businesses ranging from traditional supermarkets to superstores and small grocery stores to non-traditional supercenters. Shoppers Food Warehouse Winn-Dixie.05 $ 8. canned food. May include in-store banking. meats. Annual sales reach a minimum of $2 million. Of those stores two thirds belonged to a chain. Convenience stores operate on a higher margin with a limited selection of staple groceries.800 Ann. Independent operators generally own less than 11 retail stores. Long opening hours. his purchases represent a combination of store brand and national brand products and a desire for new innovative items. Facts and Figures.000 50. The top 10 players have held their positions in 2005 with the exception of H.528 276 617 943 Top Banner Names Figure 10: Who is the Shopper? (Source: Progressive Grocer) The survey conducted by Progressive Grocer revealed that the preferred days to shop were unanimously the weekends starting Friday.480 10.e. produce and non-food items. Trader Joe’s. Supermarkets are divided into two main categories. H. whereas older and higherpaid shoppers in metropolitan areas gravitate more towards national brands. Smith’s Food & Drug Albertson’s. Smaller than conventional format with very limited services. In general. Shaw’s Safeway. the remainder consisted of independent operators. 1. Often found in urban areas or strip malls. meats.9 billion for 2005.1. items kept in stock. The Shopper. which moved up to eighth position and pushed Winn-Dixie to tenth position. (For more details on private label see Chapter 8.S. Nationwide there were 2.092 Number Number Stores Stores 2005 2004 2. Drug Stores N/A N/A N/A Figure 9: How the American Average Shopper spends $100 at a Grocer (Source: Progressive Grocer – 73rd Annual Report of the Grocery Industry. Kash n’ Karry. Butt Food Store. independent supermarkets accounted for the remainder. e.848 18. dry cleaning.3. Full line of dry groceries. Swiss Business Hub USA Store Format Traditional Store Formats Conventional Supermarket Store Size (sqft) 25.0 N/A High Wholesale Club 135. Inc. The chains’ gain can primarily be traced to food sales at supercenters. Combination food store and full-line drug store under one roof. Wal-Mart’s supercenters alone accounted for close to $100 billion in sales in 2005. Female grocery shoppers in particular show a preference for lower-priced store brand products. Wegmans and Whole Foods are among the most successful grocery stores selling their higher quality store brands and focusing on their clients’ needs and desires and fostering store loyalty. 3. Safeway. representing a growth rate of around 8. Over the past decade the U.000 SKUs (Stock-Keeping Units) 3.39 Dollar Stores N/A N/A N/A Convenience Stores 3. According to Progressive Grocer Magazine.765 1.0 N/A <2.572 826 853 1. non-traditional stores carry less than 65% food items. April 2006) Who Shops Female Head of Household Male Head of Household Both Other 69% 19% 11% 1% Company Wal-Mart Stores Kroger Co. 60% to 70%general merchandise. Progressive Grocer.(typically 40%. sporting goods. foremost from mass-merchandisers and warehouse clubs. Stores specializing in a specific food category. etc.E. Grocery makes balance. Inc. Sales $ Million 2005 98.g. nonfood items. Small corner grocery store with limited selection of staples and other convenience foods. Giant Food Store.733 23.540 824 876. Inc. i. At least half of this space is dedicated to grocery items. Ahold USA. easy access. Non-Traditional Formats Supercenters 170. Includes grocery products. Food Industry 13 . Traditional store formats sell at least 65% grocery and consumable items.700 22. Store Types. electronics.797 1. Butt Grocery Co. Super Valu. Winn-Dixie Stores. there were 34.089 1800 2.66 $ 4.09 $ 3.175 supercenter stores averaging sales close to $40 million per supercenter store. SKU = Stock-Keeping Units. florist shop. volume hybrid format of a supermarket/drugstore combination and discount store. Chain supermarkets generated over 90% of total sales.000 51.000 Food/Drug Combo 55. ready-to-eat and heat foods.0 N/A Staples. Supermarkets and the Grocery Industry. A membership retail/wholesale hybrid with a limited variety of products in a warehouse environment.

investments in the newest and most efficient technologies and keeping employee costs in check (Wal-Mart employees are non-unionized). traditional retail food stores are continuously looking for new avenues to attract and retain customers. consumers are taking advantage of it.S.7% 10. ranging from high blood pressure and high cholesterol. These new stores operate under the name Sunflower Market. According to estimates by Standard and Poor’s Wal-Mart generated sales from its supercenters and neighbourhood stores close to $100 billion in 2005. will continue to expand. More self-scanning stations address the customer’s time issues. an impressive selection of perishables.3% Non-Traditional Linear (Traditional) 49. At this point.6% 79.8% 10. Government’s latest Dietary Guidelines have been shifting the consumers’ focus to a healthier lifestyle and are creating sales opportunities. specialty stores and gourmet markets. Differentiation from lower cost retailers on one end (WalMart. 100. More than two thirds of supermarkets hold cooking demonstrations in their stores for their patrons to be able to taste various foods and expand their cooking talents. that are used together by the consumer are being rearranged and featured in the same aisles. grains. they owned 554 Sam’s Clubs.S. all to be completed by 2006. • Safeway of Pleasanton. retailing used to thrive by focusing on the environment of a store’s particular location. for example breakfast foods such as cereals. The first Sunflower Market opened its doors in January 2006.4% 12. nuts and yogurt. Projections suggest a market share of more than 17% by 2009. The idea is to open the door to low volume and rare technologies and pave the way to turn them into industry standards.0% 2. Wal-Mart has embarked on yet another trail. Despite the fact that profit margins on grocery items are not high. • A.0% 60. The The U. 6 and 7 for more details). The McKinney supercenter is experimenting with materials. Additionally. online grocers.. • Natural and organic foods have been the fastest growing segment in food retail totaling $14. supercenters compensate by attracting large numbers of consumers who also buy general merchandise at higher margins. Generally. All these measures taken should help food retailers to preserve their competitive edge.5. Marketing studies reveal that the average consumer frequents three to four different stores carrying groceries to fulfill the different needs. Natural and organic foods may be placed in the center of the store instead of locating them around the periphery of the store. bakery. see also Chapter 3and 4) is one of the most important components for supermarkets to concentrate on in order to move out of the unfavorable “middle position” in the industry. monounsaturated oils among others have noticeably resulted in higher demand and consumption of fresh fruits. Remodeling and expansion of existing stores is another strategy Kroger believes will help it to remain competitive. • Ethnic food is another fast growing segment with immigrant families introducing their surroundings to a whole new taste palette. • Publix developed a store format for the health-conscious consumer under the name Green Wise Market. Costco. Wal-Mart Stores Inc. With its recent opening of a supercenter in McKinney. The consulting firm forecasts a market share of close to 40% for non-traditional stores within the same time frame. • Save-a-Lot grocery stores focus on a limited number of stockkeeping units and have expanded their private label assortment. The first store is scheduled to open its doors in 2006 and will be in direct competition with super natural Whole Foods stores. New store formats and concepts are their latest approach to migrate away from the “middle position” to strengthen their position and keep a competitive edge. The new supercenters will feature specialty foods and upscale services and include a sushi bar and a wine department offering bottles at a price of up to $500 as well.4.0% 1988 1993 1998 2003 2008 Figure 11: Traditional and Non-Traditional Store Formats’ Share of Grocery and Consumables with Projections until 2008 (Source: Willard Bishop Consulting) As the selection of food sellers expands. salads.0% 20. 142 Lifestyle stores opened their doors in 2004 and plans for another 300 were ready to open closely thereafter. FDA’s official approval of heart-health claims for whole grains. Successes and failures will manifest themselves over time. between 9pm and 6am. • Private label products are gaining in recognition. Store-branding fosters customer loyalty. Willard Bishop Consulting predicts that traditional grocery store formats will decline below 50% by 2008. 3.g. it is too early to make predictions. neighbourhood supermarkets. the traditional grocery stores have seen their customers’ loyalty slowly erode. the amount of materials in the construction of a facility and wherever possible substitute renewable materials in the construction and maintenance of a store location. with an estimated aggregate disposable income of $800 billion.0% 31. processes and technologies that should reduce the amount of natural resources required to operate and maintain a store.approximately 19% prefer evening hours between 5pm and 9pm and a 4% take advantage of night hours. promote health and wellness by offering a wide array of fresh produce and stock up on natural and organic foods. vegetables. Lifestyle stores allow for flexibility to give the individual store locations room to tailor their assortments to their particular location. omega-3 fatty acids. Their increased market penetration through aggressive store openings combined with price advantage will continue to contribute to consumers making more trips to non-traditional stores. Wal-Mart is also the industry’s price leader.9% 15. Authoritative government and self discovery primarily through internet information sources (e. • Kroger has been improving their product palette and is focusing on superior customer service.5% 7.0% Traditional Convenience 73.S. Expansion plans included 240 to 250 new supercenters (160 relocations/expansions).gov) have been visibly dictating consumer behaviour recently and are important indicators for the serious trend spotters.4% 56. the world’s largest company.9% 89. Safeway embarked on a year long marketing campaign that highlighted its new Lifestyle stores which feature a large selection of natural and organic foods. Traditional supermarkets have also begun to look at new concepts and experiment. 3. Safeway also launched its own private label brand to create a proprietary experience nowhere else found.0% 40. floral design center and a sushi and olive bar. Supermarkets concentrate and cater more to the consumer’s changes in taste. Texas.0% 0.0% 80. a contributing editor to the Institute of Food Technology’s publication states that by 2004 65% of grocery shoppers had redirected their diets to manage health conditions naturally. • New lines of ready-to-eat natural and organic baby food have entered the market and are changing the U. a full-service meat counter. is the undeniable market leader in this segment. as well as warehouse clubs and supercenters are competing for market share and trying to win the consumer’s dollars. www. product prices are 20% to 40% lower than national brands and a retailer’s margin is around 35% to 40% versus a 27% average margin on national brands (see Chapter 8 for additional details). Various avenues are embarked on. weight issues to preventive measures against heart disease and cancer.mypyramid. Private label brands are known to increase customer’s loyalty.5 billion in 2005 and estimated at $16 billion by the end of 2006. Historically.3% 8. As of end of May 2004 Wal-Mart owned and operated 1808 supercenters and 89 neighbourhood markets in the U. • Delhaize America’s newly launched stores Sweetbay highlight specialty foods offered at competitive prices and feature their signature produce department “Harvest Market”. etc) and specialty stores on the other (Whole Foods. Total sales of supermarket items at supercenters captured a market share of 14% of the grocery industry in 2005.0% 39.S.S. At present.2% 12. Today. Wild Oats and Trader Joe’s. Wal-Mart has been closely working with Oak Ridge National Laboratory for testing and analysis of systems and materials. Safeway’s Lifestyle stores are able to compete with upscale and supercenters as well. It should be noted though that such rearranging of products may affect the manufacturers and the cost for slotting fees. The strongest sales growth will be claimed by supercenters. Progressive Grocer points to the fact that there is a clear trend among the supermarkets to return to local roots. • The U. Growth Opportunities. Its focus on lowest possible cost includes leverage with food manufacturers through its sheer size. Wal-Mart’s latest major announcement revealed its plans to capture the interest of the more sophisticated consumer by substantially adding organic foods to its product assortments and going upscale with new store openings. As traditional stores continue to lose ground and see their market share drop. syrups and pancake mixes are grouped together. Food Industry 15 Success through Differentiation Because of the fierce competitive environment. California changed its identity and rebranded itself in 2004 by launching its new Lifestyle concept. With more shopping options to choose from. Food Industry Wal-Mart’s dominant position threatens the traditional chain food and drug retail industry. The number of consumers following this trend keeps growing. 14 The U. Wal-Mart preserves one acre of wildlife habitat for every acre developed and wants to expand its best management practices in environmental conservation. non-traditional channels led by supercenters. Product palettes and promotions would specifically appeal to local demographics. starting in Texas. baby food landscape. Facing the Competition. The Hispanic population is the fastest growing ethnic group in the U. “Finding One’s Niche” has become most important in their search for their identity. 25 to 30 neighbourhood markets and 30 to 40 Sam’s Clubs. Products . Elizabeth Sloan. • Supervalu built new stores that offer low-price natural/organic product and represent direct competition to the high priced natural/organic stores of Whole Foods and Wild Oats Markets. Private label products also offer economic advantages to both the consumer as well as the merchant. develop and improve prepared foods.S. Nearly 40% of the consumers regularly buy natural and organic foods and the majority among them make their purchases at their primary supermarkets versus a specialty food store (see also Chapters 4.

As shown in above figure. In 2005 sales reached $34. • Convenience becomes center stage. Specialty and Gourmet Foods. Specialty food stores claimed around 20% of sales.343 1.24 19 2. Sales of specialty and gourmet foods showed growth at all three sales channels with specialty and natural food stores gaining ground. easy-to-clean-up. supercenters and warehouse clubs held their stake in this food segment with annual sales of specialty food exceeding 70%. as they are generally sold at regular retail prices and typically generate a higher margin. For food retailers specialty foods are an important segment. Food Industry The U. specialty food sales have registered record sales. These products are also offered in a variety not available otherwise in the market and feature superior packaging. shopper. Main retail channels such as traditional supermarkets. in turn. Note: Cheese. Together these segments comprise 30 product categories. The specialty foods and gourmet market in the U.0 20.3% rise for all foods combined. merchandise traditionally not part of a drugstore’s product selection.72 18 1. the prevailing tendency to view mass-market products as bland and the “mainstreaming” of gourmet foods dictate the American consumer’s demand for highquality upscale products and unique tastes (Specialty Food Magazine). freshness dating.1 37.7% versus a 5. This trend is expected to continue as the changing demographics. Larger format drugstores show a trend of adding convenience • foods. Competition for specialty food market share among the various retail channels continues at an accelerated pace. defined as being made with high-quality ingredients. 2003 $ Million % Share 14.78 73 3.23 100 Figure 12: Sales of Specialty Food by Retail Channel. (Source: Specialty Food Magazine) 16 The U.92 72 4. has experienced a steady compound annual growth of 7% over the past several years. Close to one quarter of all sales can be attributed to this segment. In the 1980’s Americans began to introduce high-quality goods in every supermarket category.02 9 22.6 51. The Specialty and Gourmet Food Stores.74 9 20. drinks and greeting cards.2. Pretzels & Snacks 2003 4. Food Industry 17 . produced in small quantities. not only improves store traffic.S. Specialty food and gourmet stores range from small mom-and pop operations to mass markets. Easy-to-prepare meals. Cheese. easy-toopen and pre-cleaned. there are 26 specialty food categories that accounted for substantially higher sales than their mainstream equivalents. Meat/Seafood. generally see their health and beauty care products soar 15% to 20% in their first year of operation.9 4. sophisticated.S. • Supermarkets which add a pharmacy and operate as a one-stopshop emphasizing convenience. specialty food and gourmet products are 2003-2005 % Change 13 29 33 18 2005 $ Million % Share 15. Haeni.0 37.84 100 Main Retail Channels Specialty Food Stores Natural Food Stores Total 2004 $ Million % Share 14. Segment Condiments Juices & Functional Beverages Cheese Coffee & Cocoa Chips.27 17 1. Pretzels & Snacks. Facts and Figures. and Chips. Juices & Functional Beverages. This. Regional.000+ specialty foods and gourmet stores in the U.063 991 % Change 0. a two year span.160 1. Four segments define specialty and gourmet foods: Ethnic. 4. reaping success with this approach. rich in texture and featuring innovative ingredients and unusual flavors and shapes underline the exclusiveness expected in this sector. Prepared Foods.S. stretching the definition of gourmet standing for refined.8 billion and claimed a total market share of 8%.1. According to Gourmet Retailer Magazine. Condiments account for over one-fifth of all specialty food sales. Imports (80% from Europe) and Artisan. The five largest specialty food categories comprise Condiments. pre-cut and precooked food items are in high demand and sales have been skyrocketing.05 75 3. exclusive. but also helps improve their margin.S. Supermarket chains have responded and introduced entire aisles of regional foods. unique. having great taste and possessing unique qualities.651 1. By Claudine M. resealable packaging. Handmade items (artisan). From 2003 to 2005. Bread account for approximately 38% of Specialty Food Sales and are not included in above Figures.622 889 907 776 820 2005 4. Between 2003 and 2005 alone specialty food sales rose by 17.18 100 Figure 14: The Five Largest Specialty Food Categories (Source: Mintel/SPINSACNielsen) There were five specialty food categories substantiating each more than 50% sales growth between 2003 and 2005. Swiss Business Hub USA 4.average Hispanic shopper is health conscious and spends approximately $117 per week on groceries compared to $87 per average U. Coffee & Cocoa.51 8 18. Currently there are an estimated 14.S.

Figure 13: Percent Sales Growth for Specialty Foods and Mainstream Foods by Product Category for 2003-2005. sauces and seasonings.6% 32. Specialty Food Suppliers. Approximately 50% among them generate annual sales of $500. Functional & Ready-to-Drink Tea & Coffees Yogurt & Kefir Juices & Functional Beverages % Growth 2003-2005 147. reflecting the long standing tradition in this industry. (Source: Mintel/SPINSACNielsen). • Apothecary Jars filled with Chocolate Fruits (chocolate covered sun-dried plums. one third is shipped directly to retailers. Moreover. • Classic dessert sauces and syrups upgraded with premium ingredients to intensify flavors. Pretzels & Snacks Coffee & Cocoa Condiments Conserves. Beverages took the lead with 1. Food trends that will establish themselves often start on the West Coast and move eastwards according to food marketers’ observations. According to Mintel. • Baby Boomers are the leading purchasers in this market segment.100 specialty food products were launched in 2005. is likely to earn $100. available in eight flavors. • California Roasted Pecan Oil and Roasted Pistachio Artisan Oils (small batch productions). Across America the leading and most successful Chefs are focusing on their customers. • The Hispanic and Asian populations tend to be above average buyers in this segment of the food industry. food scene. Seeds.S. This diverse group of specialty food distributors encompasses small domestic entrepreneurial manufacturers with just a few products as well as billion dollar distributors with tens of thousands of specialty food products. 4.0 65.000 to $4 million. and Walnut Hors d’Oeuvres Crackers and Orange Cranberry Shortbreads. Although this is a slight decrease from 2004 (5. Jams & Nut Butters Cookies & Snack Bars Cooking Oils Crackers. what they order. Functional.6 12 4 22 10 28 48 53 4 33 17 6 23 31 7 4 14 10 9 8 Percent Mainstream Foods 3 18 6 1 16 3 1 1 8 -1 2 1 -10 13 5 16 10 31 1 9 2 -1 5 22 -0. peaches. Grains & Rice Beverages (Carbonated. Portland and San Francisco are the leaders in discovering what may be next on the restaurant scene. Seattle. Poultry. They. Food Industry The U. Trendspotting. Percentages do not include Sales through Wal-Mart. for the winter holiday season.1 Figure 15: The Top Five Specialty Food Categories between 2003 and 2005 ranked by Sales (Percentages) (Source: Mintel/SPINSACNielsen) • Flavor Magic Gourmet Seasoning Sheets. Convenience Foods Fruits & Vegetables (Frozen & Shelf-Stable) Nuts. what they eat and what they dislike on a daily basis. for the summer months. The newest products introduced at this year’s Fancy Food Show included • Artisan Croutons. Buyers of Specialty Food. Household income. Vintages are clearly indicated on the front of each wrapper along with tasting notes on the back. Four out of five importers specialize in specialty foods from Europe. Distributors Retailers Other (not specified) 51. more than 5. Distributors and brokers generally represent several manufacturers. manufacturers take classic recipes and turn them into new. Dips (Refrigerated & Shelf-Stable) Seasonings Soups Sweeteners Teas Percent Specialty Foods 8 26 66 51 61 148 24 12 21 37 0. are also into gourmet cooking themselves and into the ingredients that go along with it. no preservatives. Pizzas. Chocolatour single origin chocolate bars offering a world tour of chocolate containing cocoa from Java. The packaging of these products is of highest quality and exceptional (eye-catchers). Salsas.000 or more annually than the average population and over 50% have a college degree. • The specialty food buyer in the U. Mixes. ready to bake hors’d’oeuvres made from finest ingredients. Crispbreads & Rice Cakes Dairy: Cheese Dairy: Milk and other Dairy Dairy: Yogurt & Kefir Desserts & Puddings (Frozen & Shelf-Stable) Eggs Entrees. apricots and nectarines). Despite a failure rate of 50% to 90%. Other product categories that registered a significant amount of novelties included confectionery. 4. Specialty foods can make up a large percentage of a household’s spending. a new way to season meat and fish.314).3 5 4 4 15 9 Segment Bread & Baked Goods (frozen & non-frozen) Water Carbonated. in limited edition flavors. Dried Fruits & Trail Mixes Pastas (Shelf-Stable) Sauces. They are handmade. is one of the trend spotters who is at home in the world of gourmet dining. The James Beard Foundation Awards are the nation’s preeminent honors for culinary professionals.7 53. introduction of new products is at a high rate and generally enhances a store’s sales performance. e. They are generally the wealthiest among the various consumer groups. Fitness and healthy eating habits direct his focus toward on “Betterfor-You” foods and beverages that are low in fat and sugar and provide nutritional benefits (added vitamins and minerals). distributors are the preferred sales channel of importers. Supplies & Flours Beans.. are health conscious and willing to pay for high quality and uniqueness. handcrafted with the finest all-natural ingredients in three extraordinary flavors to be added to soups or salads. adventurous and unconventional creations.3 51. etc. culinary expert and chef Nick Zukin. Grenada. a direct result of the growing ethnicity in the U.4.S. Imports from all other continents are on the rise. Ready-to-Drink Tea/Coffees) Beverages (Juices & Functional) Beverages (Water) Bread and Baked Goods (Frozen/ Non-Frozen) Candy & Individual Snacks Cereals (Cold & Hot) Chips. followed by other trade shows).g.3. Trader Joe‘s. The organization is dedicated to fostering and furthering the practice and appreciation of the culinary arts in America. consumers who purchase specialty foods tend to be more loyal and spend more on average per grocery trip. More than 50% of all imported specialty food products go to market through a network of distributors.S.2% reach annuals sales in excess of $10 million. Retailers also take into account recommendations from customers.319) and 2003 (5.8 61. it is nevertheless still considerably above the previous years’ number of new products. According to Specialty Food Magazine approximately 60% of retailers follow their customers’ input. bakery goods and pet foods. where a strong demand in fine food paired with the highest level of service has been manifesting itself for some time. He talks about the newest observations and developments in the Northwest corner of the U. followed by the Mountain and Middle Atlantic regions.. Food Industry 19 .. which also happens to be the birth place of Starbucks and James Beard2. syrup infused with lavender or a combination of ginger and vodka.007 new product launches.Product Category Baking Mixes.5. He is drawn to ethnic foods and regional cuisines across the globe. 4. 18 The U. Spring Fancy Food Show 2006 Exhibit Showcase As consumer tastes become increasingly sophisticated. their closeness to their clientele is the key to their success and their being the indiscriminate trend spotters in the U. • People living in or near cities are more likely to purchase specialty foods. the empty nesters among them in particular.S.S.S. 4. • People with children are as likely to purchase specialty foods as people without children.5% 15. (Source: NASFT) Figure 16: Annual Sales of Specialty Food Importers by Channel (Source:Mintel/Market Tools) According to Specialty Food Magazine. and in trade magazines. Shelf-Stable Meat. education and geographical location are the primary aspects of the specialty food buyer.9% New Products The discriminate specialty food consumer is on a perpetual hunt for new products of high quality that appeal to his senses and taste real. Chef Zukin mentions that Portland is adopting Chef Alice Walker’s 2 The James Beard Foundation is a national not-for-profit organization based in New York City. The majority of retail stores discover new specialty foods at trade shows (foremost at the Fancy Food Shows. Importers of specialty foods range from individuals focusing on a limited number of traditional products to large companies handling major brands of various countries around the globe. • The purchase of specialty foods is highest in the Pacific and Northeast regions of the U. • Artisan Artichoke & Mixed Olive Mini Quiches and Lobster Newburg Puffs.S. all natural. in limited edition flavors. Seafood Frozen Entrees. Aside from their talents. Well-known food journalist. Tanzania. • Basil Hors d’Oeuvres Crackers and Summer Citrus Shortbreads. often produced in small batches (limited editions) and feature the most unusual and exquisite combinations of texture and flavors.

been the only success story with their technological breakthrough of “slow churned”. (Walker was one of the founders of the Edible Schoolyard program to establish healthy eating habits at schools). Cheese Artisan and farmstead cheeses are and remain a favorite food of the American consumer. They are as well gaining market share in school vending machines thanks to Stonyfield Farm partnering with distributor United Natural Foods Inc. For example.S. and Cocoa Cardona is a semi-soft goat’s milk cheese rubbed with cocoa.6 billion gallons in 2004. The USDA’s published figures show an annual production of 1. 4. together with food scientists. interesting tastes and a welcome menu change for the healthconscious consumer ensure this trend to continue.6%. He is the creator of Nuevo Latino cuisine. It should be noted however that the non-chocolate segment showed diminishing sales in 2004 compared to previous years and further decline is expected due to consumers’ mounting dietary concerns. Organic chocolate sales took the lead and are estimated at a growth rate of 30% on an annual basis. According to Packaged Facts. Their choice ranges from Brie to smoked Cheddar. Natural/Organic/Vegetarian Organic and natural foods have expanded phenomenally and are joining the upscale world of gourmet with unique products and new tastes. cocoa or cinnamon. Non-traditional shapes. Food Industry 21 . It differs from sports drinks that are meant for recovery after a strenuous workout. Products specifically for kids have been gaining market share. According to Mintel International. Promotions are based on better-for-you. Products are made appealing to adults in general. the French Laundry in Yountville in the heart of Napa Valley. This trend has been rapidly expanding into home entertaining and casual dining. the American consumer has continued to associate ice cream with indulgence and has shown little interest in light (50% less fat) ice cream. in 1994. further supported by chefs creating menus with the finest foods available and a rise in regional cuisines. making light ice cream that rivals in taste any full fat premium or super premium ice cream. Artisan cheeses are enjoying steady growth. soymilk. guarana. France. individual cups. smaller.S. Super Premium and Premium Ice Cream.2 billion market holds promise for further robust growth through innovation. Frozen Desserts and Frozen Novelties The U. and sales climbed to $11. Natural products include pita and soy chips. The $3. the “Enfant Terrible” of modern French cooking was born and raised near Strasbourg. The company that launched this type of beverage was Red Bull.2 lbs. while private label yogurts take second position. Energy Drinks have been readily adopted by the “on-thego” consumer and Generation Y. nuts and an assortment of snacks. Yogurt Yogurt is in great demand. to baby boomers and kids in particular. has the task to create aseptically packaged (shelf-stable) products for its mass retail and upscale gourmet stores. uses only the purest and freshest ingredients for her menus at her top restaurant. Private label has been gaining market share with supermarkets and mass merchandisers discovering the value of ice cream sales. Condiments As there are no clear guidelines what condiments encompass. He was also a recipient of the James Beard Award. was developed with 20 The U. it has remained the market leader. bold flavors and attractive packaging. Organic products offered in the vending machines range from yogurt to smoothies. mustards and horseradish. so does Cadbury Schweppes. Jean-Georges Vongerichten. cereals with heart-health claims and products specifically formulated for women to name a few. California. yogurt has experienced dynamic sales showing a 7. Growth for 2006 is expected in the 5% to 7% range. a spoonable yogurt line for small children. Mintel came up with their own definition (in order of market share): condiments comprise sauces. aged Gruyere.S. Chef Thomas Keller originally from Southern California has been known for his innovation and dedication to the culinary scene. Florida. Unusual tasty ready-touse grated cheeses and ethnic-style cheese blends find their way into the kitchen to add pizzazz to a bland menu. Food Industry The French Laundry’s influence. be it organic. Cultured dairy products are staples in the daily diet and in meal preparation of the Hispanic population. Growing variety. Growth in this mature market demands constant innovation. executive chef and owner of famous Chez Panisse in Berkeley. His observations confirm a continuing and growing interest and demand in ethnic foods and innovative cuisine with exotic flavors. In one single year he received three James Beard Awards. It is sold in multipacks.6. His French Laundry Cookbook has brought him national and international recognition and many awards. A growing number of individuals turn their passion for gourmet food into a business. over 90% of U. and school and university communities. to piquant aged Provolone and Tete de Moines. Yogurt and yogurt drinks have established themselves as healthy snacks for the wellness conscious consumer and manufacturers are making sure that all demographics are taken into account. Cheese is an alltime favorite food and growth is expected to continue. Only ingredients of impeccable quality are being used. liquid form and squeeze tubes for spoon-free eating. chocolate and string cheese. has created a culinary R & D facility. Despite health consciousness. His restaurant acquisitions included one of the top restaurants in the U. is the world leader in the production of ice cream and frozen desserts. The time-pressured twoincome households have been integrating the use of condiments in their daily meals and in entertaining. salad dressings and (olive) oils. manufacturers and technologists. Van Aken owns Norman’s Restaurant in Coral Gables. Alice Walker. jams.9 billion. Recently he opened Bouchon (Artisan) Bakery. chocolate confectionery sales accounted for $15. Convenience and creative applications have been winning forces. vitamins and minerals. jellies and spreads. Its current Chef Kurt Stiles. has The U. coriander. and was the recipient of the James Beard Humanitarian Award in 1997. a blending of European “haute cuisine” with South American and Caribbean Islands elements. California. Chocolate and Non-Chocolate Confectionery Premium & Gourmet chocolate represents approximately 10% of the confectionery segment and typically contains as much as 80% cocoa solids compared to low-cost chocolate generally consisting of 50% to 70% sugar. New variations feature rinds rubbed with smoked paprika. Private label sales projections suggest a growth rate of 7% through 2008. Products. Dark chocolate has become the favorite after the publication of studies pointing to its health benefits such as its antioxidant and heart-healthy vasolidation effects. and is one of the leading chefs on an international scale. While most top brands of various dairy products have been experiencing a healthy growth rate.S. Non-chocolate confections reached $7. Global and regional influences are guiding this segment and organic and artisanal products have been rapidly gaining market share. Chef Zukin also points to the trend of artisan foods. a Napa Valley Cabernet wine. Ice cream and frozen desserts constitute a $21+ billion market. inositol. In 2004 per capita consumption was 31. an all-time high. nonorganic or natural. one of the four top domestic ice cream manufacturers. Functional foods come in with fortified yogurt and yogurt drinks. They are also very popular as a mixer in alcoholic beverages at home parties as well as in night clubs. and taste are key market drivers together with attractive “onthe-go” packaging. This market is expected to reach $2 billion in the not too far distance (ACNielsen– Trends).1 billion in 2004. sales have risen sharply. recently rated number one for its Columbian coffee. His culinary vision and bold approaches to innovation have consistently set new standards and turned him into a superb trendspotter. Harvest Moon is a domestic washedrind cow’s milk cheese which tastes like Pont L’Eveque. sugar and specific ingredients such as ginseng. The savvy consumer has discovered premium and gourmet treats for special moments of indulgence. probiotic bacteria. as well as a drinkable variation for infants and toddlers (Mintel). cumin. locally grown ingredients of highest quality. One of their new products is YoBaby. Pepsi offers two brands in this category. Consumers have also discovered the use and convenience of natural cheese spreads and uniquely flavored cheeses in sandwiches or served as a snack. Americans dining out upscale have become accustomed to the cheese course as a unique ending of a meal. She has been a strong supporter of farmers’ markets and sustainable agriculture. Cheeses are perceived as a natural and healthful food item and the latest introduction has come in the form of organic cheeses and cheeses that feature exciting new flavors.8 billion. Mintel’s research revealed an 18% increase in sales between 1998 and 2003 alone.simple dishes that often feature organic. Alternative/Energy Drinks This category of mostly carbonated drinks contains a combination of caffeine. up 1. The higher educated consumer shows an eagerness to expand his culinary knowledge and exhibits a passion for handmade unusual products. bitesize.. Walker is also the author and co-author of several cookbooks including a children’s story and cookbook. Chef Stiles predicts that shelf-stable products are the future and consumers will learn to accept aseptically packaged products (source: Prepared Foods). Chef Norman Van Aken has been following America’s evolution in its eating habits and cooking methods for decades. this includes retail (approximately one third of total sales) as well as food service channels. and also that Caribou Coffee Company. Across America.7% growth rate within the past year and a continued upward trend is expected. vitamins B6 and B12 to provide quick bursts of energy.S. Keller has also moved closer to the world of wines. cooking and sharing food. Organic Stonyfield Farm has been moving towards the top faster than any other brand. artisan shops open their doors and offer their clientele products that range from the finest handmade bakery goods and confectionery to savouring pates and gourmet cheeses with exciting new tastes. Dreyer. also in Yountville. With more retailers having adopted vegetarian foods into their segments. In 1996 she established Chez Panisse Foundation to help support cultural and educational programs to foster a deeper connection to growing. Frozen novelties were purchased at a 20% higher rate by households with children. fiber. Yoplait Original is the market leader. households purchase at least 4 quarts of ice cream per month on average. The opening of his restaurant Jean-Georges in the Trump International Hotel & Tower in New York earned him an immediate four-star review and several of the most prestigious awards. Modicum.

General.6 billion. This figure is supported by economic trends and mounting time pressure resulting from a rise in single-parent and dual-income households. Food Industry 23 Figure 17: Projected U.1. Continued rising household income and the convenience of eating out with a large number of reasonably priced restaurants to choose from is solidifying the fact that eating out remains an integral part of daily life in the U.6 1.Snacks Snack foods are the daily companion of the U.7 billion in 2005. with the sub segment of military service 22 The U. Whole grain product sales accounted for $4. Snacks can consist of a healthy energy bar. colleges.1 343. Sales of sweet and salty snacks grew at a 4% rate in the past two years and reached sales of approximately $27 billion according to Packaged Facts.9 135.S.S.1 2006) 173.2% and 9. Conventional snacks are experiencing a transformation away from containing unhealthful ingredients. is predominantly chain-oriented. waffles.2.5% respectively. According to the National Restaurant Association the restaurant industry experienced solid revenue growth in 2004.9 15. hospitals and extended care facilities. 5. In 2005 institutional services were estimated at total sales of $40. 2005 = Estimates. The commercial and institutional food industry in the U.79 billion in 2004 and are predicted to reach approximately $7. supply shortages caused by diseases (BSE) and severe weather spurred wholesale food price increases by 5%. more desirable. pizza dough and tortillas.S. The commercial segment reached estimated sales of $443.9 23.7 billion (Source: Standard & Poor’s). Yogurt Stands Bars/Taverns Total Commercial Eating & Drinking Places Food Contractors Lodging Places Other Commercial Sales Total Commercial Foodservice Institutional Foodservice Military Foodservice (Continental U.9 34. adding ethnic components and new flavors. Wendy’s The U. and airplanes) and others. brownies.6 1. from an estimated 26% in 1960 to nearly 50% in 2004.1 5. By Claudine M.1 Whole Grains New studies have revealed the benefits of lowering the risk of heart disease and reducing weight by intake of whole grains. As a consequence many restaurants were forced to raise their menu prices to ease margin pressure.S.000 chains in the U. an industry trade magazine). The publicly traded companies dominating the restaurant industry range from fast-food operators (McDonald’s Corporation. bars and ice cream parlors.4 142. sporting and recreational camps and transportation were estimated to show the highest growth rate with 5. This price hike was much higher than in preceding years and.1 443.0 25. Currently there are an estimated 294.S. is commonly referred to as the foodservice industry. Nevertheless. Frozen Custard. Department of Agriculture food away from home as a percentage of total food expenditures has steadily risen. Operators of high-end restaurants in tourist areas also profited from a favorable currency exchange. patés or a small frozen item such as pizza.S.8 511. especially transfats. Products in this category range from the traditional whole grain breads and buns to innovative whole grain cookies. consumer and their purchase parameter ranges from gas stations to food stores. together with rising energy costs.7 40. sales for natural and organic cookies have shown a 51% increase within the past year.1 billion in sales. Forecasts predict that by 2010 more than 53% of every food dollar will go towards food consumed away from home. Small-batch. chips.0 31. According to Mintel/ SPINS.7 467. they represent approximately 72% of all restaurants nationwide and they also claim approximately 58% of revenues and half of all patrons’ visits.7 360.000 independent restaurants and 234. pretzels. The consumer including health-conscious parents are looking for high quality.0 47. but it can also include a range of other foods such as a small serving of cheese. severely impacted profits. 2006 = Projections) (Source: National Restaurant Association) The commercial segment is the largest and constitutes all types of restaurants including cafeterias. Foodservice 2005) 164. Institutions comprise all noncommercial establishments such as schools. Haeni.6 41.S. at $1. clubs.3 15.7 45.S. Together. According to the U. correctional facilities and transportation (trains.2 5.S. conveniently packaged gourmet snacks featuring new unusual flavors are a winner and are driving growth. and the West favors Asian and Mexican cuisine. The institutional foodservice segment includes all sales to institutional organizations and businesses operating their own foodservice. movie theaters all the way to the most upscale specialty and gourmet stores.S.5 15.5 billion by 2009. Foodservice Industry Sales (in Billion Dollars.4 5. as the weak dollar made vacationing in the U. 5. This report will concentrate on the commercial side and focus on high-end restaurants. Food Industry . The Commercial and Institutional Food Industry. tasty whole grain crackers with zero partially hydrogenated oils content (transfats linked to heart disease). Swiss Business Hub USA 5. Whole grain and organic cookies are climbing the list of favorites at a fast rate. In 2005 the foodservice industry as a whole accounted for an estimated $486. Estimated projections for the U. Of those.6 5. plants and offices. cruise ships. only) Total U.7 16. Category Full-service Restaurants Limited-service Restaurants Commercial Cafeterias Social Caterers Ice Cream.S. Independent restaurants have the most locations in the Northeast. vending areas. 8% of the industry. dried fruits.S. foodservice industry show a growth rate of 5% for the industry as a whole as well as for the commercial sector in particular.7 486. Among the consumers’ favorites are healthy (low in sodium and absence of saturated fats) high-protein and fiber-rich nuts including the more expensive almonds.S. The restaurant industry defines two main segments: full-service restaurants and limited service (fast food) restaurants which again are divided into chains and independents (the Nation’s Restaurant News. a handful of nuts and raisins. Restaurants. The Southeast U. Snack producing companies are accentuating positives in nutritional labeling and are experimenting with variety.

Washington. Florida. and the French Laundry in San Francisco offers the most expensive vegetable tastings anywhere at $125.S. Jean-Georges Vongerichten of New York’s Jean Georges and JoJo. Fine Dining and High-Price Fine Dining High-price fine dining restaurants are generally run by individuals and families or limited partnerships. The fast food industry has recovered from low sales in the past few years which were impacted by a rapid gain of market share through high quality and service from quick casual operators. as follows: • Marriott Hotels/Resorts/Suites $1. • The Mansion on Turtle Creek. It is part of a new dining. Panera Bread Co. Restaurants in Hotels and Casinos. Inc. caviar. Burger King. Dallas 24 The U. low prices and plain décor. The National Restaurant Association estimates that food and drink sales at hotels reached $24. The ongoing program generates crowds every year and has proven to be a successful avenue to create repeat customers. with $25. They are typically located in larger. there are approximately 82 restaurant companies operating in hotels and motels. four stars = outstanding.S. For example. Then there are the highrollers who enjoy fine dining in the high priced restaurants. Cracker Barrel Atmosphere Quick counter service. and as Thomas Keller of the French Laundry in Yountville. Baja Fresh (owned by Wendy’s International) Figure 19: Limited Service Restaurant Categories (Swiss Business Hub USA 2006) The baby boomers. Type Fast Food Specialty Full Service Full service restaurants offer sit-down service for dinner.. lobster. to encourage sales the New York Restaurant Group dedicates one week every half year to a special wine and dine program. newly priced at $225. San Francisco • The French Laundry.C. Nobu Matsuhisa and Bobby Flay are scheduled to open Carmine’s (Italian cuisine) at the Atlantis. located in the new Time Warner Center offers menus at $300 to $500 that included ingredients such as whitetruffles and fugu (blowfish). inns and resorts in over 3’000 locations within the U. • Chef Matsuhisa will open Nobu Restaurant at the all-suite Royal Towers. entertainment. Checks average $7 to $10. Food Industry 25 Figure 18: Full Service Restaurant Categories (Swiss Business Hub USA 2006) Limited Service Restaurants Limited service or fast food restaurants offer quick counter service. hotels..) to full-service chains (Darden Restaurants Inc. Fine dining restaurants that feature a quality wine list generate 20% to 40% of their food and beverage sales from their wine programs and some restaurants achieve an impressive result of up to 50%. those born between 1946 and 1964. Denny’s Restaurants. Now at a stage of maturity and affluence. At Ducasse in the Essex House in New York City. California are among them. This category of visitors represents the backbone of the gambling industry. Manhattan • Jean Georges. 5. Applebee’s International Inc. Jack in the Box Starbucks Corporation based on their annual U.7%. At present. Casino Hotel Restaurants On an annual basis. Midscale restaurants with relaxed atmosphere. Chains that do not fit any category in the restaurant business due to their type of product sold or their mode of serving. Brinker International Inc. It opened its 30th location at the Tropicana Casino and Resort in Atlantic City. were the first generation growing up on fast food. Wendy’s. New Jersey. Meals can be eaten on location or taken out. Applebee’s International Inc. and Canada. Philadelphia • Aujourd’hui in the Four Seasons. situated in a $2 billion high-rise. according to Restaurant & Institutions. the tasting menu features foie gras. Within the past year some luxury restaurants have reached new heights in their menu pricing. Ryan’s Family Steak House Inc. Average check exceeds $10 for entrée. notably Gray Kunz. the menu includes a “Zillion Dollar Lobster Frittata” at a price tag of $1’000. The success of these eating places depends heavily on their advertising strength and in luring customers with new innovative menus focusing on health. Berkeley • Seeger’s. hamburgers. In order to accommodate a wide range of patrons of varied ages and budgets. about 18 months ago. motels. casino hotel restaurants generate more revenues from food and beverage sales than the typical high-class hotel restaurant (around $18+ million annually on average). to bars and lounges. retail and spa complex within The U. many casinos incorporate several restaurants. Mc Donald’s Corporation has remained number one in the fast food industry.4% increase compared to 2004. higher than in traditional limited service units and lower than in full service casual dining restaurants.S. These joint ventures enhance the image and quality of the resort’s food operations and the reputation of the restaurants. Jean Georges Restaurant in the Trump International Hotel & Tower in New York. Some of the top restaurants that have received a five star rating (five stars = one of the best in the country. Top Chains Darden Restaurants. the Dining Room at the Ritz-Carlton Hotel in Naples. salads and sandwiches. a resort consisting of three hotels with 2’300 rooms located in the Bahamas. Grill/Buffet Family Restaurants Casual dining with specialization in grilled items and self-service bars offering salads and desserts. “Quick casual” are limited or self service restaurants that feature upscale menus with items such as gourmet soups. Masa’s. Meals can be eaten on location or taken out. one of the hotels at the Atlantis resort. and milk-fed veal. and the Belvedere in the Peninsula Hotel in Beverly Hills. reached sales of $1. Atlanta • Charlie Trotter’s. cosmopolitan areas and cater to a small but growing number of affluent Americans. A regular hotel typically has just one to two restaurants on the premises. Chipotle Mexican Grill (recently spun off from McDonald’s). Other notable quick casual places include Chipotle Mexican Grill (recently spun off from McDonald’s Corporation) and Quiznos Subs. Outback Steakhouse Inc. These establishments have become serious competitors to fast food chains.). ranging from fine dining to casual.S. At Norma’s in Le Park Meridien in Manhattan. The following are examples of hotel/restaurant partnerships: • Famous Chef/Restaurateurs Jean-Georges Vongerichten. is managed by a culinary dream team and includes some of the most recognized chefs. low prices and plain décor. Top Chains McDonald’s Corporation.6 billion in 2005. system wide food and beverage revenues (ranked by estimated sales per unit) are. Palm Beach • The Herbfarm Restaurant. sales in 2005. This food court. Menus encompass such items as sandwiches. this group is being targeted with a new restaurant concept that has been gaining ground quickly. offering a prix fixe menu with unlimited tasting of top quality wines. The top three hotel chains . gourmet salads and gourmet sandwiches. The Palm Restaurant. Las Vegas • L’Escalier in the Breakers. Their star rating has been a helpful guideline to the quality of the various establishments and has been viewed as one of the best in the country.). Chicago • Trio. Quick Casual Type Dinner House Atmosphere Casual and fine dining.8 billion in 2005. The National Restaurant Association estimates sales at full service restaurants at $164.09 billion • Hilton Hotels $ 979 million • Sheraton Hotels $ 885 million Restaurants in Hotel Operations Hotel restaurants have the primary function of providing a comfortable dining experience to the hotel guests.S. foremost Panera. The Mobil Travel Guide has been a reliable source for select restaurants.S. Unusual and sophisticated restaurant concepts feature major players such as Charlie Trotter of Chicago. Yountville (Napa Valley) • Chez Panisse. Sales at limited service restaurants accounted for $135.6 billion or 27. chicken and pizza.International Inc.. Evanston • Alain Ducasse. D. a 5. A well managed restaurant that can distinguish itself and meet the expectations of guests is important to further the establishment’s revenues. This constituted an increase in sales of 4. Outback Steakhouse. Fine dining restaurants claim approximately 12% of U. There are also partnerships between restaurant operators and resort owners.6 billion in U. Woodinville.3. restaurant industry sales according to Raymond James & Associates. This bakery/ cafe operator was one of the fastest growing quick casual restaurant chains over the past four years. three stars = excellent) within the past 20 months are: • The Dining Room.8 billion in 2005. They have significantly higher per unit sales volumes than fast food restaurants and their prices range from low to high. The mainstream casino visitor is on a tight budget and typically frequents the buffet style restaurants. It is a segment that has started to show signs of maturation. and Bobby Flay will follow suit and open Mesa Grill on the same premises by the end of 2006. Luxury Fine Dining Food Courts The first luxury food court was opened in the Time Warner Center in New York City in February 2004. Limited or self service restaurants that feature upscale menus with items such as gourmet soups. Panera Bread Co. Boston • Le Cirque in the Bellagio. Golden Corral (Division of Investors Management Corp. and catering and banquet facilities.. former executive chef of Lespinasse in New York. International house of Pancakes (Division of IHOP International). cater to all ages.8% of total foodservice industry sales in 2005. Since its opening other famous chefs have joined and opened their own establishments. known as the ultimate hang-out for celebrities. Food Industry Shifting their focus from low pricing to product innovation encouraged sales growth in the past two years. A fair number of hotel restaurants have made a name for themselves and received awards. an increase of 5% over 2004. is a perfect example. Manhattan • Le Bec-Fin.

these companies have created their own distribution divisions.4 18. The quick-casual segment sees growing sales with upscale products that focus on fresh ingredients and unusual flavors. Within the same time span.200 2 17.830 10.1. Today’s chemical-intensive farming faces increased opposition.381 1. and beef cattle increased by 79.6.S. Natural and Organic Foods.5 2005 595. food producers.) Total Food Sales ($ Million) Organic Food Sales ($ Million) Organic Food Penetration (%) Organic Food Growth (%) Figure 20: Sales and Growth of Market Share of Organic Food in the U. a 6. The casinos in Las Vegas attract many highrollers. geared to offer one-stop shopping. Safeway. Swiss Business Hub USA 6. • New Federal.2 21 2001 521. Organic Valley Family of Farms launched their own co-op “Generation Organic”. sophistication and cutting edge menus. In 2005 their co-op counted 723 farmers in 22 states. This research farm is the first such establishment and is scheduled to produce certified organic milk by the end of 2006.435 heads. (Source: Nutrition Business Journal Estimates based on OTA 2004 Manufacturer Survey and Plunkett Research Ltd. The Tropicana complex is the largest complex within a resort in Atlantic City.5. Horizon also supports another 130 dairy farmers who are in transition to organic management. To profit from the boom in organics. products. supported by the highest level of service. 5.000 hotel rooms in the city and vicinity. like H.359 1. Food service establishments buy over 20% of wholesalers’ grocery and related products. This also provides them with a relatively low-cost avenue to test market new products. The forecast for annual growth through 2008 is set at around 18. In order to increase their business and participate directly in this trend. Department of Agriculture’s Economic Research Service. systems distributors and specialty distributors.) The U. Campbell Soup Co.9% increase over the preceding year. 5. The mounting concern over the explosive surge in healthcare costs has also prompted the company to team up with the World Health Organization and the U. the indiscriminate use of pesticides.379 6. State and Local Regulations: New regulations such as an expanded ban on smoking in various states. Haeni. Restaurant owners have added a variety of new innovative menus that address the consumer’s health and insatiable search for variety and adventures in taste. and vice versa. Food Lion and Kroger all stock on average up to 20% in organic items.5% of the nation’s aggregate food and beverage sales. SYSCO is the leading company in this category.S. Organic Valley doubled the number of farmers joining them. It should be noted that organic standards in the U. therefore.831 7. Business travel is expected to continue its upward trend. Challenges. as far as founding the Global Advisory Council on Healthy Lifestyles. and increases in the current federal minimum wage to more than $7 (from $5. Broadliners carry a wide range of food.4% according to the Organic Trade Association. • Independent of economics time-pressured Americans love to eat out. McDonald’s Corporation developed a menu series which includes vegetables. Small-chain and independent grocers as well as conventional food stores like Albertson’s.S. Trends. Another alliance formed between Stonyfield Farm in Londonderry.4. Within three years. thus confirming a growing demand for organic dairy and meat. organically raised milk cows increased by 52. fruit.000 leadership gift to build an organic dairy farm for education and research. The company went 26 The U.6 2002 538.the resort. They are finding their way into mainstream retailing and onto the menus of restaurants. milk and yogurt. educational and technical support to approximately 300 certified organic family dairy farms who supply around 75% of the company’s organic milk. Heinz. equipment and supplies and are. favorable demographic trends such as the baby boomers who have the discretionary income to elaborate on expensive vacations and. Smaller plates and sophisticated wine programs paired with great hospitality are in.104 1. Nevada keeps its number one rank as the location with the largest casino business. Horizon Organic provides financial. entertainment.S. Fast food places have countered the rising health consciousness of the American consumer by introducing new low-fat and low-carbohydrates food and by adding a wide range of fruits and salads to their menus. According to the U. paves the way to success in a fiercely competitive environment.8 billion in 2004 (includes foods. antibiotics in livestock and genetically modified crops has been fueling a strong interest for “better-for-you” foods to the point where demand for organic supplies is starting to outpace supply and the need and possibilities of locating and using foreign suppliers has become reality.2 nable agriculture enjoy growing acceptance.4 20. therefore. This situation offers a window of opportunity for Swiss food manufacturers. which granted a $200. Food Industry 27 .600 14. Distribution channels to restaurants and other food service establishments are classified as broadliners. the restaurant industry has been increasingly faced with the following issues: • Food Safety Concerns: Incidents of mad cow disease and avian flu have been responsible for sharp rises in food prices and have greatly affected the restaurant industry. By Frank Ustar and Claudine M. qualify as organic in Switzerland but not in the U. The strong growth pattern in eating out has captured the interest of many food companies. featuring amenities such as indoor dining.727 12.285 heads. university and school cafeterias. insecticides. According to Standard & Poor’s overall profitability for this industry should be positive and. 6. Ahold.2 million acres farmed under management of 8. Organic and natural foods are key elements of a trend which may be called whole health solutions. • Differentiation through innovation. retail shops and a spa. At this point in time. (For more details on distribution channels.9 Las Vegas and Atlantic City Las Vegas.4 2004 572. there were 2. The restaurant itself seats 250 people and includes a private dining space for 100 guests. • Obesity: A growing health concern of the nation has resulted in some lawsuits.033 8. Distribution Channels.S. Gourmet dining embracing high quality ingredients and simplicity has become a favorite.6 17. • High fine dining and luxury restaurant establishments live by their chef’s ability to evaluate their patron’s feedback and to spot trends.S.5 billion in sales in 2005 and are expected to climb to $16 billion by end 2006. the nation’s largest USDA certified organic dairy producer.9 20.5% to 27. Department of Health and Human Services to educate the public on a long term basis and promote the importance of healthy nutrition and fitness.9% to 74. Aside from fierce competition. With a growing number of consumers focusing on their well-being. the nation’s third largest super2003 554.J. Organic foods and beverages alone reached an estimated $14. It has a highly developed infrastructure and offers more than 134. while Atlantic City is a convention center and its 12 casinos are more typically frequented by low-stakes day trip visitors. are different from Swiss standards. more retail channels are concentrating on this line of business and are introducing a substantial assortment of organic products under their private label. Food Industry 5. business communities and government are steadily forming and help organic and sustai2000 498.6% within a two year span (2001-2003).S. retirees traveling should support this forecast. please refer to Chapter 8. The recurrence of zoonotic diseases has resulted in rising concerns among consumers and interest groups on food safety. they claim approximately 2. A product may.500 2. and ConAgra. Approximately half of Nevada’s winnings are generated in the Las Vegas Strip area. The interest in organic and natural foods has turned a once minor market niche into a booming double-digit growth sector with aggregate sales of $45. Alliances among consumers. Ingredients are often local and include organics.15) are threatening to curtail the profits of eating establishments.035 certified organic farms depicting a growth rate of 15. and increasingly in the cafeterias of hospitals and other institutions. Almost all segments in the restaurant business have experienced obesity-related lawsuits in the last two years. supplements). The resort premises feature over 2’100 hotel rooms (350 plus suites) and include 21 restaurants. Additionally. This development has continued with campaigns and programs such as the launch of a $13 million Land Stewardship by Horizon Organic. New Hampshire and the University of New Hampshire.624 1. valued at $245 million. Overview.

Figure 21: Corporate Ownership of Organic Food Companies (Canadian Organic Growers and the Certified Organic Association of BC. 28 The U. Despite growing demand for natural and organic food.C. Frozen Food Eggs Meats and Poultry Soups / Sauces Percent 37 25 23 21 18 17 12 Organic Labeling and Certification3 Organic production and handling operations are required to be certified by a third party accredited by the USDA. Definition of Organic. artificial sweeteners. Among food manufacturers. confectioneries and condiments. an advocacy group based in San Francisco and Washington. Food Industry 29 .J. these small companies do have to follow NOP’s strict standards and confirm that they indeed do so through documentation. the more frequent the purchases and the more specific the reasons for purchasing. More recently. Up to now the profile of the typical organic shopper has been a highly educated. cheeses. Cadbury & Schweppes Groupe Danone (France) Organic Brand Acquired Odwalla Muir Glen. as consumers call for exact clarification and education. affirmed its decision to join the organic food business movement by introducing organic foods under their Member’s Mark line. Complete information on NOP and its regulations can be found on their website www. food business. and even wines have made headway.3% of purchasers opted for meats without antibiotics and hormones. convenience and appearance. this profile will experience some modification. bioengineered genes or petroleum. unless an agreement exists between the two countries recognizing foreign certification agencies. however.. The profile also depicts a consumer who is knowledgeable and in- Segment Fruit / Vegetables Cereals. Generation Generation Y Generation X Younger Baby Boomers Older Baby Boomers Matures Age Group 18 -27 28 – 41 42 – 51 52 – 60 61+ Percent 51 55 57 50 46 6. As organics go mainstream.What the Shopper is Buying (Source: Shopping for Health 2005 Survey conducted by the Food Marketing Institute. Generally. A key factor driving consumer demand for organics is the perception that organic foods promote health and well-being. except producers who sell less than $5.C. D. Figure 22: A fair Number of Food Manufacturers have created their own Organic Brands (Source: Canadian Organic Growers and the Certified Organic Association of BC. Washington. Cadbury Schweppes Dole PepsiCo ConAgra Campbell Soup Tyson Organic Brand Established Ben & Jerry’s Organic. Crops must be grown without synthetic pesticides. • Proper records must be maintained for at least five years and inspection of such records by the certifying agency must be permitted. Such foods may not be irradiated. Heinz Co. a more economical alternative to supernatural food stores Whole Foods and Wild Oats. natural.J. foods that fall under the Organic Standard must be grown and processed using organic farming methods that recycle resources and promote biodiversity. antibiotics.usda. 3 Please refer to Chapter 10. 76. Cascadian Farm Boca Foods. interest groups and consumers alike are voicing growing concerns about large scale organics. Yogurt / Other Dairy Products Packaged Foods – Snacks..S. However. Morningstar Farms/Natural Touch Foods Horizon Organics Hain Celestial Group Inc. D.2. • On-site inspection must be permitted. According to the NOP. help cure illnesses and simultaneously are protective of the environment. which announced its acquisition of Albertson’s to become the nation’s second largest supermarket chain introduced Nature’s Best with 50 organic products and plans to add 100 more organic products under private label by the end of June 2006. and functional foods and nutraceuticals. 69. Products that contain less than 70% organic ingredients may not use the term organic other than to list specific organic ingredients. Products in this or the aforementioned category can (but are not required to) display the USDA Organic seals.) Initially. some of the biggest companies have established their own extensions into organics by acquiring well-known organic brands over the past five years. SuperValu Inc. Figure 23: Regular Buyers of Organic Food (Source: Shopping for Health 2005 Survey conducted by the Food Marketing Institute. 55. 6. Orville Redenbacher’s Organic Campbell’s Organic Nature’s Farm Regulations for product labeling are as follows: • “100% Organic” contains only organic ingredients. D.4 “Organic Claims” Figure 24: Organic Food . The first Sunflower store opened in Indianapolis in January of 2006.C. A survey conducted by the Center for Food Safety.S. Washington. Department of Agriculture established the National Organic Program (NOP). Organic refers not only to the food itself but also to how it was produced. These shoppers also tend to be less knowledgeable about what “organic” means and the role that the organic sector plays in the overall scheme of the U. There are no specific governmental regulations beyond the health codes that apply to all foods except for “truth in labeling. Food Manufacturer Coca-Cola General Mills Kraft Kellogg Dean H.2% for foods which have not been irradiated. implement and update annually a production and handling system plan to be submitted to the certifying agency. Figures 14 and 15 reveal who is buying organic food and what they shop regularly. consumers who up to this point refrained from purchasing organic products due to pricing and scarcity will have a better opportunity of choice. the less concerned the consumer is about price. growth hormones. counterparts and must be certified by a USDA approved certifying agency. On average he/she spends $26 more on a trip to the grocery store than the consumer of conventional food. The Organic Food Shopper. dairy products. SuperValu Inc. produce and grain opened the door for organic food to become prominent. (Partial Equity/Strategic Alliance) Green & Black’s Stonyfield Farm (Partial Equity) Food Processor Unilever General Mills H. Heinz Co. • “Made with Organic Ingredients” contains 70-95% organic ingredients and may list up to three of them. With NOP. revealed that consumers do care about how animals are treated and how organic products are produced and where they originate. Foreign suppliers must meet the same requirements as their U. The annual Earth Day campaign “Go Organic” and a general consensus on the importance of a healthy population will help bridge the gaps in awareness and knowledge among a wider spread consumer pool. affluent consumer who lives in a high income area. As a consequence the USDA is considering tightening the rules to ensure high standards for certified organic food. Breads. beverages.” By this definition all organic foods are natural but not all natural foods are organic. took one step further in 2005 by launching its own private label brand “O Organics”. 2006) volved in environmental. Food Industry The U. At the same time.S. prevent disease. According to the Organic Consumer Association an estimated 12% of America’s 106 million American households purchase primarily organic products and approximately 50% of all consumers claim to buy organics occasionally.000 annually in organic products. Back to Nature Kashi. flavors and other artificial additives. strict standards for the production and sale of organic foods were implemented. colors.gov/nop/. stabilizers and emulsifiers.3.ams. especially in the specialty stores Whole Foods and Wild Oats that dominate the retail market.S. also established a natural food line store under the name Sunflower Market. convenience foods such as frozen foods. health and life style issues. • “Organic” contains at least 95% organic materials. Less “committed” shoppers tend to be more affected in their buying decisions by price. herbal teas. Most countries do not have such an agreement in place. The term Natural applies to all foods (except meat and poultry) that are minimally processed and free of synthetic preservatives. 2006) With corporate ownership expanding and organics moving mainstream. confusion prevails about the definition of organic. but not actual grazing time on the pastures. hydrogenated oils. Increasingly. organics are also rated safer and better tasting than “regular” foods. According to a survey by the Natural Marketing Institute. Ragu Organic Gold Medal Organic.S. In 2002 the U.market chain. Major conditions for certification include: • The applicant must establish. The greater the involvement. Beverages. as have Federal organic rules. Wal-Mart Stores Inc.6% for foods grown without pesticides. All producers are subject to these guidelines. which require only “access to pasture” for livestock. Certified organic labeling through the USDA has become the center of hot debate. Pastas Milk.7% for non-bleached grains and 47.and sewage sludge-based fertilizer. Organic livestock must have access to the outdoors and be given no antibiotic or growth hormones. Sunrise Organic Heinz Organic Nantucket Nectars Organic Dole Organic Tostito’s Organic Hunt’s Organic.

Butt Grocery. the price premium has dropped to 20% or less and as production continues to grow other products will have to follow that trend as well. While 10 years ago the prices may have been double for organic versions. Popular trends are overstuffed sandwiches. by moving them to the center aisles. pasta and string cheese. facility design. consumers of organics are looking for easyto-prepare and convenience products. In addition. have also had the effect of narrowing the price gap. or using the concept of “store-within-store” (e. a European-style attitude about food is slowly evolving. Food Industry . Kellogg’s or Kraft. Special items for children are also emphasized and include organic apple sauce.S. The company’s goal is to reach $12 billion in sales by 2010. “Better For You Foods” have become a preferred choice. with organic coffee being a subset within that category. Campbell Soup is marketing its organic tomato juice. the broadening interest in organic products encourages a trend of narrowing the differential. With many items. Giant Eagle and H. and Frito-Lay introduced a new line of organic tortilla chips.) and a Minneapolis based marketing agency launched a nationwide educational and promotional campaign. Across the board.g. Supermarkets. With the obvious move to “mainstream”. In addition to national brand awareness campaigns. tours and product samplings. Both the rapid growth of production and wide availability of raw materials have contributed to the narrowing of the gap. Produce.5. produce and floral. desserts and confectionery. The stores are organized into five geographic regions each with its own regional director who is responsible for store operations within his/her region. onions and bagged salads have fallen due to the economies of scale. food service. The same holds for organic ketchup and other commodities produced by large food producers that are able to take advantage of economies of scale more so than smaller producers. Nature’s Marketplace of Wegman’s). As a consequence. especially the appli cation of pesticides and their effect on a child’s body. snacks. especially in everyday categories such as milk and dairy. there are specialists for the different product categories of natural living. and others. Food promotions in these major chains tend to stress the health and wholesomeness of the product offerings and so far have failed to link those factors with the prevailing brand image of the foreign supplier. classes. Private label products are on average 27% less expensive than national brands.4. outdoor and direct mail to gain new customers as well as repeat business while promotional activities are also directed to more targeted consumers based on demographic characteristics. meat/poultry/ seafood and grocery merchandising who manage centralized buying programs and formulate store-level merchandising. organic food suppliers need to refocus and consider convenience without jeopardizing the organic ideal. Over the past five years sales of organic and natural foods have been steadily increasing through all major retail channels including mass merchandisers. With this shift in spending pattern. prepared foods. Retailers included Whole Foods. 6. In 2005 the Organic Trade Association (OTA). A fair number of Americans are changing their spending patterns. Here the price gap between organic and conventional versions has been closing. meat and poultry. totaling $1. The price premium of cereal from Kellogg’s newly acquired division Sunrise dropped to 15-20% from the over 50% it enjoyed prior to the acquisition. Pricing Mass marketing of organic food has an upside for the consumer. 30 The U. They range from Stonyfield Farm’s new naturally sweetened light yogurt and the new YoBaby Plus Fruit & Cereal with DHA yogurt all the way to Weight Watcher’ line of yogurts and smoothies (offered in nine flavors). D. Successfully linking country brand image with the wholesomeness of its organic foods would appear to be a strategy that foreign suppliers and their promotion organizations should consider prior to entering the U. the largest national specialty chain of organic foods with 184 retail stores. Yogurt is a product that has enjoyed a stupendous demand. Marketing activities at Whole Foods are focused less on advertising than those of conventional supermarkets. further influenced by store branding. The chain has developed a trend-setting policy in regard to treatment of animals and the meat which is sold in its stores: 6. Horizon. the price differential remain higher. Where organic options came in at a later stage with smaller production volume. The joining of large manufacturers. For Whole Foods. Participants included 58 grocers in 43 states who were backed by leading organic brands. the differential now is closer to 15-20%. followed by natural food stores accounted for the majority of the sales. herbal teas and more. environmental conditions. and prepared and grain-based foods. potato chips. Whole Foods plans include the development of 78 additional stores. in transportation and throughout processing • Annual inspection of each producer • Successful completion of a third-party food safety audit of each processing plant and a humane slaughter audit Whole Foods offers nearly 1. Here also the brand has commanded a higher price and the organic equivalent has followed that trend. • No antibiotics • Each producer must provide annually an affidavit which outlines the raising and handling of animals including feed. The 2005 campaign generated sales increases of 5% and more for participating retailers with established organic programs and reached up to 100% for retailers just entering this market segment. grocery. beverages. Most specialty stores now carry 100% organic coffees. For 2006. produce. They are the preferred channels for foreign food suppliers. car-friendly cups and drinkable lunches. In-store displays tend not to feature country branding but highlight the country of origin only as a secondary factor. supermarkets have been expanding their assortment of organic products by applying a mix of conventional and organic product displays. Baby boomers are perpetually searching for antiaging foods and products. but a combination of increased production of scale and the development of secondary markets has led to more competitive pricing. Four are corporate brands sold in each store nationwide. from fresh produce to dairy products. At the corporate level. organic salsa.000 organic products under its private label to take advantage of the still relative shortage of nationally known organic food brands. specialty and organic coffees and teas are sold through the Allegro Coffee Company subsidiary. beer. In less than one year this natural line has grown to make up four of the top five natural organic snack products sold in supermarkets. Pregnancy and parenthood often serve as a catalyst for consumers to switch to organic products. together with Earth Day Network (based in Washington.E. Demand for organic baby food and products for children of all ages is on the rise. As with traditional foods. organic chocolates.6. baked goods. The survey done by the Natural Marketing Institute (NMI) also showed that. as a result of the campaign. e. potatoes. Food Industry 31 Whole Foods Market This chain consists of 184 stores and is represented in most states. With competition among different types of retail channels being the norm today. market and to choosing the large natural food chains as their retail sales vehicle. taste fairs. peanut butter. pricing will become more competitive. Soy-and Rice-based Beverages. One in ten meals now is eaten “on the go”. cheese.g. soymilk and coffee. in-store promotions predominate such as signage. organic wine. newspapers.S. Nature’s Path. employee training. Kroger. Prices for apples. perishable products make up 67% of total sales. Second quarter 2006 financials revealed double digit sales increases for the 10th consecutive quarter. Generations Y and X are quickly adopting a behavioural pattern that fosters good eating habits and allows for preventative measures that address disease and the decline in health in their golden years. Wild Oats Markets This is the main competitor of Whole Foods with 113 stores nationwide and sales exceeding $1 billion as per second quarter 2006 financials. Numerous reports published by various organizations over the past decade have fostered a growing concern about the usage of chemicals in the food chain. word-of-mouth recommendations are the main vehicle by which the chain promotes itself. The concern about a healthy lifestyle is also no longer a preoccupation of the baby boomer generation. instead. One can generalize that price differentials are the smallest in those areas where organic versions entered the market early and captured the greatest share. Whole Foods Markets and Wild Oats Markets are the two natural food markets that offer the largest assortment of organic specialty foods with the highest margins. TV.3 billion. While organic foods have commanded a price premium from 35-55% on average. Organic brands were represented by Earthbound Farm. Whole Foods carries primarily natural foods with a limited selection of conventional national brands according to specific quality criteria. Initially the price of organically grown produce was double that of its “regular” counterpart.6. Trends. Other categories carried include seafood. They would rather spend more now and be healthier later. It was followed by a second campaign in spring of this year. Wild Oats Markets advertise in traditional media outlets such as radio. Hain Celestial. The U. Tea and Chocolate have been less commoditized and are more brand oriented. Coffee represents a commodity which entered the market early and was able to be positioned as a specialty item. and onedish dining. The yogurt’s probiotic bacteria helps the digestive system and its prebiotic counterpart helps the body absorb much needed calcium which aids in the prevention of osteporosis. placing a higher value on food expenditures and spending less in other areas. Retail Channels. The first campaign took place in spring under the name “Go Organic” and reaped great success. and one quarter of all restaurants offer take-out food which can be eaten in the car.S. Whole Foods also offers regional and storecentered products. national awareness of organics increased by 8% and more than 60% of customers chose organics over conventional products. medical practices and animal welfare at the farm. up from 57% ten years ago. all organic segments experienced strong growth within the past two years. carrots.C. Several brands have launched new products. Wild Oats Market.

Chinese medicine has documented claims of health benefiting ingredients in food that date back as far as 1000 B. ethnic foods. Local store buyers tend to focus on local products and the proper product mix necessary to maintain a neighborhood feel for the stores. The food service segment currently accounts for approximately 4% of total organic sales. 7. Predictions call for an annual growth rate of 20%. Blue Diamond. Whole Foods does most of its purchasing now on a regional and national level so as to enable the chain to negotiate better discounts with producers and distributors. They coordinate marketing programs. Fortified products promote health benefits such as “Calcium helps build strong bones”. Moreover.e.S. The law mandates that a health claim be authorized in the labeling of FDA regulated products only if significant scientific agreement among qualified experts exists about the validity of the relationship described in that claim. They usually exceed the minimum daily nutritional requirements of an individual. Under the NLEA. The majority of items carried by Tree of Life consist of nationally recognized brands such as Horizon Organic. i. has been experiencing rapid growth.S. hardto-find gourmet items. have the responsibility for payment of invoices. household will not only buy organic food. but most importantly they purchase the products from the manufacturer and. tablets or capsules). although nutraceuticals are more correctly defined as parts isolated or purified from foods and sold in medicinal forms (powders. salad greens. Inc. Products are typically procured through a combination of specialty wholesalers and direct distributors. but their menu schedules are challenged by frequent shortages of supplies. Among the cultures in the Orient. therefore. household cleaning agents and organic clothing. Substantial clinical efficacy and documentation are an important part of a company petition submission to the FDA. Overview. in 2005 in U. This chain owns two produce procurement centers which facilitate the procurement and distribution of the produce. diabetes and osteoporosis. Definition and Regulations. poultry. As a rule. The margin of these distributors averages about 32%.S.7. The health claims authorized under the NLEA are statements that describe a relationship between a food substance and a disease or other health-related condition. deliver products. Haeni. Kraft. Such distributors operate on margins of between 28% and 35%. or in some instances decrea- the sales of each item and adjusting the product mix accordingly. provide information on retail purchasing policy and merchandising.7 billion by 2007 which represents a market share of more than 5% of total food sales. Organic menu offerings enjoyed an increase of 9% in 2005 and the use of organic ingredients increased by 12% with meat. kosher and various organic foods that may not be available in the major supermarkets. Food and Drug Administration (FDA) has defined any specific food used for the prevention or treatment of disease as drugs.follows: Dry Breakfast Foods $4. broader knowledge in nutrition and a change in attitude in general towards food have also modified consumer demand.C. This relieves the manufacturer from handling multiple accounts receivable including the verification of credit or assuming the risk for various retailers. This market.S. According to a survey conducted by Natural Food Network the general industry consensus is that organic products are going to be sold everywhere within the next two decades and that the average U. Manischewitz. a research firm forecasts continued growth at an average annual growth rate of 14% until 2010. legumes and breads being the most popular.8. 32 The U. Examples of whole foods are fruits and vegetables and grains which are naturally high in content of phytochemicals and common examples of fortified or enhanced foods include • Cereal and bread with added isoflavones • Fruit juices with herbs that have alleged immuno-enhancing properties such as Echinacea • Margarine with added phytosterols to reduce cholesterol • Salad dressing with omega-3 polyunsaturated fatty acids. The U. called functional foods. By Frank Ustar and Claudine M. The Functional Food Sector.S. food has been associated with preventive and therapeutic benefits for centuries. both shall be used here to mean the same. Restaurant chains like O’Naturals and Panera have been following suit. Both Whole Foods and Wild Oats Markets have been using United Natural Foods as their primary distributor. vegetables. United Natural Foods also operates Hershey Import Company as a subsidiary.3 Figure 25: Top Three Functional Food Categories in the U. Business Communications Company.3 categories in(Bottled Water. 7. Natural foods distributors offer the best opportunities and programs for producers of natural and organic foods. The prevailing distribution channels for organic foods are • Natural food distributors • Specialty food distributors • Grocery distributors • Produce distributors All of the above handle natural and organic foods but only the first category of distributor handles such items exclusively. The term “functional food” is often used synonymously with the term nutraceutical. The Foodservice Segment. Distribution and Purchasing. dairy and meat farmers. Food Industry . A provision in the FDA Modernization Act of 1997 (FDAMA) provides an additional expedited process for manufacturers to use health The U. however. 2005 Natural Food Merchandiser mentioned the top three functional food Soft Drinks the U.S. For the purposes of this report. Western cultures have begun to recognize and accept the view that the intake of certain food ingredients is health promoting. no claims may be made without adequate scientific evidence. While the U. Examples are seaweed as a purified marine source or ginseng powder derived from pressed plants. They do not claim to prevent disease. food and drug companies are using the results from scientific research and technological advances to their benefit in developing and bringing new products offering medicinal value to market. three seafood processing and distribution facilities as well as a specialty coffee roaster and distributor. Increasingly. the 1999 Nutraceutical Research and Education Act has defined nutraceuticals as a separate regulatory category which permits health claims previously reserved for drugs only. McCormick. Over time. In the institutional food service segment a certain number of operators for universities and colleges aim at offering 100 percent organic menus. The two largest natural food distributors are United Natural Foods and Tree of Life.S. They can be a conventional whole food in its natural state or a novel food where a specific ingredient was increased. or removed. It should be noted that the lack of a formal definition for functional foods makes it difficult to estimate the true size of this market segment and that figures may vary by information sources. The restaurants’ patrons are willing to pay a premium for organic menus and enjoy the frequent changes of the menus that come with the seasonal availability of the various products.6. a rise in serious health issues among the general population and health care costs threatening to spin out of control have certainly helped to influence this redirection in thinking. companies petition the FDA to consider new health claims.2. The distributor tries to optimize the product category and intra-category mix at both its own facilities level and those of the retail store. Food Industry 33 7. the two large national distributors manage a complete product category as well as the product mix within each category as opposed to the more traditional approach of the retail store tracking Specialty food distributors do not focus on natural and organic foods but specialize in foods like foreign goods. Nestle and others. A survey conducted by Restaurants & Institutions in 2005 revealed that 50% of the establishments have registered an increase in orders for organic menu items within the past two years.1. Dollar Billion (Source: Natural Food Merchandiser July 2005) sed. but also reach for organic/ natural personal care products. In the fine dining segment. Functional Foods are foods or dietary components that may provide a health benefit beyond basic nutrition.2 Snacks and Nutrition Bars $2. Naturade. In response. market is estimated to reach around $37. The most well established and scientifically sound approach to labeling and marketing a functional food is through the use of FDA approved health claims delineated by law under the Nutrition Labeling and Education Act (NLEA) of 1990. Swiss Business Hub USA 6. The eating habits of two thirds of American consumers are affected by concerns about weight as well as health issues foremost heart disease. A fair number of these restaurants make their purchases through local farmers and co-ops to obtain the highest quality of products possible and simultaneously support local organic produce. Annie’s Homegrown.S. Demographics. a “risk reduction” relationship. in 2005 as Gatorade) $5. Hain Pure Food. Thirteen NLEA health claims authorized by the FDA currently exist. Soda. almost two thirds offer organic menus.

flaxseed and cranberries.6 0. Calpis Company’s AmealPeptide™.6 0. Omega-3 and EFA top the list of most-asked-for ingredients in the specialty supplement category. 2006) 34 The U.7) 9.6 20.2 (1. Coca Cola’s flagship energy drink Full Throttle. among other claims.851 40. high Fiber Products Cholesterol reducing Oils and Margarines Fruit Juices with added Supplements/ Vitamins Yogurts with Acidophilus Cultures/ Probiotics Milk with added Supplements/Vitamins Bread with added Supplements/Vitamins Fermented Drinks containing good Bacteria Soy Milk Cereal with added Folate 50 36 29 21 25 24 4 8 14 % Global Average 40 31 29 25 18 17 16 14 11 Since heart disease and maintenance of proper cholesterol level rank among the most pressing health concerns in the U. and the category well surpasses this figure.2 0..9% (IRI. and the National Academy of Sciences.1) 4. Chromium Picolinate as food additive has recently been petitioned with the U.8 (1. dairy industry has embarked on ambitious programs to raise the awareness of consumers of the health-enhancing effects of dairy products in reducing osteoporosis. reducing insulin resistance and Type 2 diabetes. Food Business News Magazine released the results of an on-line survey conducted by The International Food Information Council (IFIC) in November 2005 to gain insight into consumers’ attitudes toward food for health.S. and globally.0) 4. Food Industry 35 . is an enzyme believed to have a role in regulating appetite and body weight. Single-serve sparkling fruit juices are also showing strength in the market. South West Co. Sales of non-aseptic energy drinks in food.S. Especially geared toward women are soymilk products fortified with vitamin A.4% in 2005. An especially fast-growing category of water is “energy water”. the Centers for Disease Control and Prevention. addresses prehypertension which afflicts about 45 million Americans. electrolytes and glucose are a fast-growing category of water. which has been on the market less than one year but already holds the category’s number 7 spot.6 Figure 28: Top Energy Drinks by Brand (52 Weeks October 2. Energy Drinks Despite strong gains for the past several years.5 ounce cans.claims if such claims are based on current published authoritative statements from pre-defined federal scientific bodies. This has sparked some controversy and discussion among physicians.100 participants worldwide.9 2. designed to lower blood pressure.S.4 17.3. soy and olive oil fortified with vitamin E and Omega-3. (IRI).060 participants (age 18 up).999 192.347 93. Of the 1.4 4. by ABIC International Consultants. The U. Healthy oils are marketed by Heart Beat Foods’ Smart Balance Natural blend of canola.652 860.7 0.S. Beverage Juice fortified with Vitamins & Minerals Water fortified with Vitamins & Minerals Flavored Water Tea fortified with Herbals Tea fortified with Vitamins & Minerals Juice fortified with Herbals Drinkable Yogurt Bottles/Canned Smoothies Soy Beverages Water fortified with Herbals Organic Beverages of any type Percent 56 39 36 34 32 27 26 26 25 22 21 Significance of Ingredients Consumers are increasingly interested in learning about healthenhancing food ingredients.298 40 18.956 N/A 2. Other ingredients which are being promoted are marine-based Omega-3 fatty acids. cholesterol lowering foods and beverages are appearing on retail shelves. plants and nut-based omega-3s have sparked an upsurge in products containing Omega-3 such as Anchor’s Heart Wise Omega-3 milk. Health claims for fish. 2006). vitamins B-6. taurine.S. and essential fatty acids (EFA) from nuts.3 4. Figure 27: Consumer Preferences for various Beverages (Source: The Hartmann Group 2003) Figure 26: Percentage of Consumers who regularly buy Functional Foods. 7. Sales for 2005 topped $390 million according to Information Resources. has added a low-carb dairy milk drink to its line of health drinks which is ultra-filtered to remove lactose. Other heart-healthy drinks include White Wave Silk’s Omega-3 fortified cholesterol-lowering soy milk. the two major sales channels for the young crowd. 2005) (Source: IRI. AMP-Activated Protein Kinase. 83% confirmed their interest in expanding their knowledge and only 5% showed no interest. Dollar Sales % Change to (thousands) prior Year 213. Infant formulas fortified with DHA and Omega-3 make up a rapidly growing segment of the functional ingredient market.5 36. Coca Cola’s sugar-free Tab Energy will be offered in midsized 10. Food and Drug Administration (FDA) to be recognized as.0 9.383 N/A Market % Change to Share prior Year 54. Figure 27 shows the consumer preferences for various beverages. docosahexaenoic acid (DHA). Below figures show the results of ACNielsen’s twice-yearly global online consumer survey.6 0. Whole Grain. glucosamine and condroitin in ready-to-drink teas by various suppliers and various teas fortified with peppermint. licorice. available both individually and in four-packs. a powder mix. A survey conducted by IRI for the 52 weeks between October 2004 and October 2005 provided the following results on sales of the top Functional Ingredients in Drinks Since 2003 Americans may have bought more bottled water than beer or coffee. E and foliate. Ajinomoto launched Amino Vital Ready-to-Drink as a single-serve sports water and.8 16. such as Hansen’s Energy Water containing ginseng. not just young males.S. or chamomile. Consumption Trends. Adding in sales at convenience stores and gas stations. E and omega-3s plus extra calcium. Fruit water and soy water are being marketed as well. The survey conducted in November 2005 gives insight into consumers’ choices of certain regularly bought functional foods in the U. vitamin B. 40% of shoppers sought out health and nutrition information in 2003 and frequently turned to health professionals for advice on diets for specific health problems. B-12. A major reason for this growth is that the energy drink category has expanded to include all demographics. These bodies include only those “with official responsibility for public health protection or research relating to human nutrition” such as the national Institutes of Health. as well as other outlets not tracked by IRI. obesity and diabetes. Coca Cola’s Heart Smart juice contains plant sterols while PepsiCo’s Tropicana Essentials Healthy Heart orange juice is based on a nutrient bundling of potassium.5 1. Targeted marketing primarily addresses the young party-going crowd with these stimulant drinks.S. Inc. C.391 89.0 5. C. by Key Category (Source: ACNielsen) Brand Red Bull Rockstar Monster Energy Sobe Adrenaline Rush AMP SoBe No Fear Full Throttle Rip It Hansen’s Lost Energy SoBe Lean Disease-specific foods According to the Food Marketing Institute.4 37.6 4. is also expanding its reach among women as well as calorieconscious men with the launch of a sugar free version in later 2006. Diabetics are likely to see an increasing variety of low-carb and sugar-free products. drug and mass merchandise outlets jumped a whopping 69. A segment of the population catching the attention of energy drink marketers is women.4 (5. This trend has continued. Functional Food Purchased Regularly % U. Additional functional food elements are lutein and zeaxanthan offered by Roche. Inc.8 2’454 156. while sales of nonaseptic sports drinks surged 20. Food Industry The U.3 0. the energy drinks category shows no signs of slowing down.4 0. The majority of these energy drinks contain more than 100 milligrams caffeine per 12 ounce container plus herbal extracts and dietary supplements which makes them more potent than a 12 ounce cup of coffee that contains on average 200 milligrams caffeine. the largest with over 21.249 53.

The arrival of mainstream manufacturers in a particular category can also have a large impact on organic price points.6% AAGR for the next three years is expected according to Mintel. not the 50 to 100 percent range typically found between organic and natural up to that point. caffeine.497 % Increase 50. Dollar (thousands) Sales Projections of Functional Beverages (Source: Business Communications Company) Power Bars Power bars can be cereal-based or may have another base such as soy which is high in protein and offers all essential amino acids. 7. Since a fair amount of confusion and uncertainty remains among consumers as to the efficacy of the ingredients. that 36 The U. using only healthy ingredients and positive wellness messages. In cases where the producer’s brand is less well known. The role of food brokers is of some importance due to the many small health food stores which rely on new product introductions by brokers. test and register functional food ingredients is reflected in the retail price which tends to be higher than that for non-fortified or even organic foods. Fitonat USA’s Phosphor is an instant energy drink packaged in single-shot-sized bottles. Retail Channels. We may see more being added if the trend to convenient small portion drinks or foods takes hold.3 295. Consequently. PowerBar’s ProteinPlus Carb Select and Promax’s CarbConscious bars are fast sellers in the low-carb high-energy category.0 36.168 2002 3. The cost to develop. On the other hand. Cereal and snack/power bars have enjoyed overall strong growth.4.7. Natural energy sodas are rapidly growing in popularity as well. The wholesale distribution of functional foods is not substantially different from that of other organic foods as the retail channels are largely identical. it wanted the price differential to be in the 15 to 20 percent range.728 2007 4.500 200 8. The large vitamin/supplements chains such as General Nutrition Centers (GNC) have begun to add fortified drinks.300 168 8. Sales of functional foods were originally confined to health food stores. Soy protein-based bars are entering the market targeting teens and young adults. the pricing structure at these stores is higher than that of the chains. confidence in the company producing the product and its health claims for the product are important factors in gaining consumer acceptance. Brand establishment is critical and a major factor in the success of well-known food producers. low-carb foods are likely to be available in most supermarkets since this has become a mass phenomenon on which the large chains as well as the big food producers can capitalize. When Kellogg’s decided to come out with its Sunrise organic cereal.028 2.S. Examples are Blue Sky’s Blue Energy Soda fortified with ginseng. American National’s Ginseng Rush. A good example of this trend is the organic cereal market.600 4. that means that time and money needs to be invested in a consumer education program to get the message across.900 3. and a continued upward trend at an estimated 7. If the consumer does not understand the health benefit.8 27. GNC also offers individualized consulting. however. The following figures project sales of functional (fortified) beverages within a six year time span: the price differential will narrow as the acceptance of functional foods by consumers increases. Large chains such as GNC have their own regional warehouses to which distributors deliver.S. for one. 7.S.5. can adopt the wellness-oriented strategies of the most successful companies. This helped significantly to reduce prices overall. An added benefit of this restrained approach to marketing is that the product avoids the pitfall of being “pigeonholed” into a narrow niche. What can companies do to gain acceptance in the market place? Brand owners. but even supermarkets are increasingly opening shelf space The U. power bars and other ready to eat or drink items. Food Industry 7. Chilled Juices Sports Drinks New Age Beverages Energy Drinks Total 2001 2. together with high protein powders are slowly moving beyond their sports niche. Usually those shelves carry the lesser-known brand products while big name producers such as Kellogg’s reserve space in their allotted area in the store.S. Marketing Considerations. Price Trends. Whole Foods and Wild Oats specialty chains tend to not differentiate functional foods from other organic or natural items within the store. cranberry juice is a good example. Protein and its sources has become of major concern to food producers. Food Industry 37 .8 Figure 29: U. that of the retailer may make up some of this deficiency. but retains its appeal to a broad base of customers. The active ingredients are added with the twist of the cap for instant maximum energy.800 1. The producer Ocean Spray never went much beyond a simple claim of its juice being healthy and refreshing although consumers have used it in the belief that it is effective against urinary tract infection. Similar considerations apply to the functional food segment. for example. consumers have come to place trust in the product lines carried by chains such as Whole Foods or Wild Oats. for “natural foods” which encompass organic and functional foods. It is likely.energy brands in the U.200 2. Distribution. Some products benefit from an established image of being healthy without having specific claims attached. 7.8 40. The consumer’s perception that his/her needs are unique requiring some advice from the retailer is likely to sustain the niche covered by smaller health food stores and may prevent functional foods from becoming a significant factor in the supermarket assortment. also a sparkling soda.6. guarana and all-natural colors and flavorings. is geared especially to athletes.200 497 11. Intrinsic health or high protein bars are one segment in the cereal bar food category which. demand for soy as a source of protein has surged.000 3. Clif Bar offers a baked energy bar made with whole grains and fruit while Probar’s High Performance Whole Food nutrition bar is made from 15 blended natural foods. These chains are the main outlets although there are a variety of smaller independent health food stores whose owners pride themselves on individual customer service and consulting. produce. or they can choose the ultra-niche disease risk reduction message. They must also consider carefully before they add a new ingredient whether their target consumers will really accept it and understand its health benefits.

For a foreign exporter. Small distributors on the other hand tend to specialize in handling more limited types of products and moving them through more specialized channels all the way to specialty retail stores. Food Industry 39 Broker . Broker – Retailer The broker takes an active role in the merchandising at the retail level including product display.Distributor The broker usually makes product presentations to the distributor.4. The broker functions as an agent of the manufacturer and establishes close relations with both distributors and retailers for the benefit of the manufacturer which he represents. Branches are maintained by manufacturers in different parts of the country or within a region depending upon the geographical scope of sales. 38 The U. Brokers serve an important role in the distribution chain and act as lynchpin of the entire system. Manufacturer’s sales branches account for 25% of all grocery items distributed.specialtyfoods. regional specialty distributors may be the preferred choice for reaching regional high-end markets. Choosing the right distributor is one of the critical decisions that an exporter has to make and that decision encompasses the role that the distributor has to play. He also oversees any discount arrangements that the manufacturer makes with the distributor to be passed through to the retailer for special promotional purposes.8.org) The specialty food distribution channel accounts for 2-5% of retail store sales. General-line distributors sell a broad range of dry groceries.S. 8. However. The commission payable to the broker ranges usually from 2-7%. The broker often is able to offer incentives to the retailer for the purchase of certain product quantities. however. the latter usually is the preferred choice of partner since especially small-to-medium size exporters find it difficult to get consideration from large importers Smaller specialty importers are more likely to work with the exporter in establishing a Figure 30: Most Valued Specialty Food Distributor Services (Source: Specialty Food Distributors and Manufacturers Associations www. Large importers handle a broad assortment of items and tend to be very selective in the products they carry. His role is vital for the functioning of the system and will be reviewed in more detail later. They buy and sell goods owned by others on commission. the types of retailers on which the distributor concentrates his efforts. The broker maintains the records for those transactions as well as for various promotional activities offered by the manufacturer. By Frank Ustar and Ally Gunduz. chocolate or frozen foods.S. food distribution structure is complex due to the geographical size of the market and the great variety of retail outlets available to the consumer. a national distributor may be the best vehicle by which to reach the nationally operating organic food chains. the know-how in the targeted product segment. The most important function is to introduce new products to the retailer . territory or targeted retail channel. government which place an additional burden on both the exporter and the importer. Importers in most cases also function as distributors so that there is usually no clear distinction between the two functions. Most often. The logistics of moving the products through the distribution channels in the most efficient manner is the main business objective of these types of firms. food service establishments. taste testing and demonstrations.1. Brokers serve an important role in the distribution chain and act as lynchpin of the entire system. The Role of Food Brokers. these evaluative techniques don’t always tell the whole story and can lead to “high-cost” decisions. assist in designing packaging and labeling. Generally speaking there are three types of middlemen in the food industry: Merchant wholesalers typically buy and resell from a variety of suppliers.3. Service Category Experience Ordering Guaranteed Sales In-Store Promotions Implementation of Merchandising Programs Split Case Buying Individual Store Marketing Variety Image Enhancement Controlling Inventory Costs % of Respondents 82 64 36 36 27 74 36 36 27 Broker . In certain markets such as that for organic foods. 8. Branches carry inventory while sales offices do not. He does not take title to the goods but functions as an agent of the manufacturer. Food Industry Agents and brokers are responsible for 19% of all grocery item and related product sales. In the case of some specialty foods. schools. others on a narrow range of items such as pastries. The food broker functions as a lynchpin for the entire distribution network. marketing. brokers sell food products to distributors although some larger retailers also buy directly from food brokers if the retailer maintains his own warehouse. Merchant wholesalers account for over one half (56%) of all grocery items and related product sales. He has both the knowledge of the needs in the market and the experience to handle the regulatory and logistical requirements that underline the import process. The type of channel that is optimal for a particular supplier depends on the type of product and the targeted retail outlets. Merchant wholesalers are also classified according to the type of products that they handle. governmental entities. Overview. In many cases they do not require a minimum import volume. Certain chains such as Tree of Life or United Natural Foods. For a Swiss food manufacturer.Manufacturer As mentioned. Arranging promotional opportunities with the retailer makes up a significant part of the broker’s activities. the broker acts as an agent of the manufacturer. Specialty food distributors can identify trends in the food market and work with the retailer to identify product mix/shelf set changes that will take advantage of these new trends and opportunities. and the marketing assistance that he can provide to the producer. which are well-known for their broad coverage of organic foods. also offer other types of specialty foods including ethnic items. Specialty distributors tend to concentrate their activities on higherpriced foods or items which are targeted to specific consumer groups in more upscale retail outlets. Many small importers started out as wholesalers and as such maintain close relations with the retailers they serve which represents an important advantage for an exporter since specialty foods are “pushed” through the channels of distribution rather than “pulled” by heavy promotion and branding outlays which are often unaffordable to smaller exporters. others on a regional basis. They may also purchase grocery items from or deliver to other wholesalers. perishable foods and non-food products sold in grocery stores. Traditionally retailers evaluate their distribution options by “gut feel/experience” or by substituting average dry grocery distribution costs to estimate the costs of distributing specialty items. and solicit purchase of the items from the distributor. Following is an outline of typical broker relationships with the other channel members and their significance. His relationship with the various participants in the network is a significant factor in achieving successful market penetration. This is especially important in light of the new bioterrorism regulations of the U. and may involve merchandising flyers. The broker functions as an agent of the manufacturer and establishes close relations with both distributors and retailers for the benefit of the manufacturer which he represents. sales and promotional tools that have proven successful. 8. advise the exporter on the needs of the specialty retailers to which they sell or handle arrangements with food brokers. Some focus on products from a limited number of countries. The U. They know which new items will have the biggest impact. Food Distribution. consumer buying trends. If the retailer meets the required purchase quantity he receives a discount from the distributor who in turn “charges back” the cost to the manufacturer. Such distributors play an important role between the manufacturer The U.S. He negotiates the terms of sale subject to the final approval of his principal. Some channels operate on a national. consolidate the items and deliver them to the retailers. This arrangement often is exclusive based on product category. shelf space arrangements including resetting store shelves. Swiss Business Hub USA 8.S. market entry strategy. Figure 30 lists the benefits that retail buyers derive from their relationship with specialty distributors.2. There are a number of reasons why a small to medium size Swiss food company should consider using a specialty food distributor. Most of these activities are charged to the manufacturer. The Specialty Food Distribution System. These elements enable him to assist the manufacturer in formulating a strategy for launching a new product or expanding the principal’s market share. the importer is the starting point in the distribution chain. The Role of the Importer. The broker stays on top of product and marketing trends in the industry. Importers are more readily distinguishable by the breadth of their product range. newspaper and direct mailer inserts as well as demonstration and tasting programs. His role is vital for the functioning of the system and will be reviewed in more detail later. Several distribution networks exist that assist the food suppliers in reaching the end consumer. and price and delivery considerations.

as needed. Large distributors often purchase on conditions not attractive to smaller suppliers in terms of volume. In the foodservice industry especially chain restaurants are serviced by large distributors such as Sysco Corporation. Category management of specialty food and sections (please refer to Chapter 8. Remove damaged. The company also supplies a wide variety of non-food items. Producer discounts and advertising allowances negotiated with the distributor are thus passed through to the retailer. vegetables and desserts. • • • • • • • • • • • • • • • • • • • • • • • • • • • • Make sales and product introduction calls to chain buyers Obtain authorization from the buyers to place products in stores. drug store chains. coupons and other trial use programs. Safeway. especially smaller suppliers. plates and cups. special events and promotions. Products distributed by Sysco Corporation include a full line of frozen foods. Sysco estimates that it purchases from thousands of independent sources. Albertson. and the increasing demand for the variety. Partnership programs with suppliers are another marketing tool offered by this distributor. Provide and place point of purchase materials in store. Distribution to Retail Outlets. Upscale regional food chains as well as local specialty stores are the primary target markets for this type of distributor. Provide sales and profit reports to the retailer. 8. employ buyers who specialize in searching for overseas products. Demographic analysis. price and return. Handling of lower volume brands. Food Industry 41 8. Ensure technology link-ups and data sharing. Sysco‘s operating companies offer daily delivery to certain locations and have the capability of delivering special orders on short notice. The following lists4 illustrates this role and provides an understanding of the scope of their services. fruits.S. Fleming. menu planning advice. store by store “niche” marketing. Nash Finch). This arrangement reduces both labor and operating costs. natural food distributors. Food brokers act as agents for Hain within designated territories. dented. Cross merchandise in several sections of the store.g. Set up and conduct in-store demonstrations and tasting. and a full line of canned and dry foods. While integrated retail-wholesale operations may show improved operating efficiencies. imported specialties and fresh produce. The latter refers to the ability of the distributor to return items to the supplier if they do not sell within an agreed upon period of time. Nearly 34% of all food distribution centers are operated by such integrated retailwholesale establishments. Provide central billing or store by store billing. and the supercenters noted above which have the product delivered directly to their distribution centers.6. Other retailer-oriented promotional activities are • In store signage and promotional material including shopping bags and end cap displays • Assistance with planning and setting up product displays • Assistance with store layout • Provide product data information such as best seller lists. such as meats. Distribution to retail food stores may be categorized as merchant wholesaling (Supervalu. Set up and manage special displays. “Store-within-the-Store” Sales to retail stores are showing a declining tendency which may be due to increasing integration of wholesale functions by large retailers.. organic and imported foods which may not be available in the traditional supermarkets. growth of natural and organic foods has shifted from the natural food channel to the grocery channels as mainstream grocery distributors and retailers offer these products to meet consumer demand and awareness. A majority of Hain Celestial products are sold through independent food distributors. Certain product lines have seasonal fluctuations (e. the general aging of the population. The company also utilizes advertising and sales promotion expenditures via national and regional consumer promotion through TV and magazine advertising. with about 200 sale items offered by the retailer. pricing decisions are under their discretion. Food Industry . close contact with customers and the ability to provide a full array of products and services to assist customers in the foodservice operations are of primary importance in the marketing and distribution of products to the traditional customer segment.7. some distributors such as United Natural Foods. club stores and grocery wholesalers. 8. busier lifestyles. Train store personnel on the handling and selling points of products. traditional independent distributors. although Hain does participate in pricing in connection with promotional activities. hot tea products.S.16 Category Management). direct-store delivery and integrated retail-wholesale. usually classified as specialty distributors. Food Service Distribution. including paper products such as disposable napkins. especially the supercenters such as Wal-Mart and Costco. The larger national distributors do not consider new-product introduction as one of their primary functions which makes them an undesirable entry point to the U. Recently. restaurant and kitchen equipment and cleaning supplies. baking and cereal products and soup sales are stronger in cold months while sales of snack food products are stronger in warm months). Remove unsold product and provide full credit to the store. the largest U. tableware such as china and silverware. usually on a non-exclusive basis.S. Ahold. Each flyer includes detailed information on selected suppliers. Create in-store programs. Purchasing is usually carried out The U.and the retailer. The food service or food-prepared-away-from-home. Stock the shelves of each store. Hain’s customer base consists principally of mass-market merchandisers. As a rule. and receive commission for their services. fresh meats. convenience and entertainment afforded by the proliferation of restaurants and other foodservice operations. Factors influencing this trend include increases in dualworker and single-parent families. Price the product in store for each store. Take position and maintain an inventory of products. since food purchases in the foodservice industry have grown more rapidly than food purchases in the retail grocery industry over most of that time period. Rotate and freshen stock in the stores. Some Larger National Distributors. out of code. market for foreign suppliers. Write orders in store.8. Provide co-op advertising programs to share or lower the cost of advertising. spoiled. Food distributors purchase products from Hain for resale to retailers. Third party logistics partnering. including placement fees. Provide shelf tags (tags with a code and description of the product). food safety training and assistance in inventory control as well as access to various third-party services. Especially the latter type is becoming more prevalent with large retailers such as Kroger. remain significant players accounting for 38% of total distribution. warehousing. Prepare and provide planograms and shelf diagrams for maximizing sales and exposure. These companies may also provide regional test marketing services before committing to a national distribution strategy. Provide less-than-case quantities of products. supermarkets. Hain utilizes a direct sales force for sales into natural food stores that has allowed the company reliance on food brokers. manage in-store inventory. and other products that can not be sold. Ethnic merchandising.5. growing affluence. They service a broad spectrum of stores and offer excellent opportunities for quality natural. the prompt and accurate delivery of orders. Wholesalers sell to the following outlets: • Retailers 40% • Other Wholesalers 25% • Food Service 22% • Exports 3% • Government 2% • Others 8% 4 Specialty Food Distributor and Manufacturers Association United Natural Foods United Natural Foods also distributes monthly regional customerspecific flyer programs featuring the logo of the participating retailer 40 The U. This approach is advantageous to a smaller producer because it does not require significant resources and can provide a high level of customer feedback. store usage reports and easy to use product catalogues • Maintain website domain for retailers 8. These suppliers consist generally of large corporations selling brand name and private label merchandise and independent private label processors and packers. The National Distributors. On the other hand. Their advantage vis-a-vis their competitors is their ability to continually improve operating results by maximizing economies of scale in purchasing. distributor of food products for this industry segment with a market share of about 14%. Deliver to each store. Hain Celestial Group Hain Celestial products are sold in all 50 states and in approximately 50 countries. This share has grown from about 37% in 1972. Sysco‘s operating companies distribute both nationally branded merchandise and products packaged under Sysco‘s private brands. none of which individually accounts for more than 10% of the company‘s purchases. fully prepared entrees.S. Sysco‘s operating companies also provide ancillary services relating to foodservice distribution such as providing customers with product usage reports and other data. cooperative ad vertising and advertising in distribution catalogs. recipes and product features. Hain uses a mix of trade and consumer promotions as well as media advertising to market its products such as trade advertising and promotion. transportation and general and administrative functions. Because food distributors take title to the products upon purchase. Over half of these sales orders are received from third party food brokers. market represents approximately one half of total food purchases made at the consumer level.

Supply Chain. concessions. they may have been designed for different equipment.12. For example.9. Some co-packers simply blend and package products. high-volume business. or. and may even help formulate or refine the products. Contracts should also include detailed exit agreements that spell out how remaining product and ingredient inventories will be handled if the contract is terminated or a product is discontinued. Aramark is another foodservice distributor who provides a range of business dining services.S. which requires the foreign producer to stay abreast of all technical matters. projected product volumes will influence how good a match a foreign producer and a U. At same time. Nearly as many (64%) report that they are in the information-gathering stage with RFID. Food Industry The U.through centrally developed purchasing programs and direct purchasing programs established by the company’s various operating companies. or new equipment will have to be purchased. freshness.. These tight margins leave little room for error. Any marketing program must be based first and foremost on the eating habits of the consumer and research on consumption trends is the critical for developing an effective marketing strategy. merchandise and novelty sales. demand planning is being performed collaboratively. radio frequency identification (RFID) and the electronic product code (EPC). In other cases. Examples of co-packing are outside contracting and private label. catering. Who pays for and owns the equipment depends on the situation. or substitute in-house ingredients to streamline inventories. vending and coffee services to thousands of business and industry clients. too. but use copacking as a means to build their business up to capacity. retailer and end consumer. vegetables and semi processed (ready to eat) salads must be presented to consumers in immaculate condition while maximizing shelf life to avoid costly waste. easy to clean. Food companies are using increased delivery frequencies. If a producer has very low volumes or a single product to sell. Chili Lime Tilapia and Teriyaki Salmon or Smithfiled foods’ refrigerated Flavors’ Brand Southwestern Meatloaf in Chipotl Sauce or Healthy Choice’ Grilled Basil and Tuscany Chicken. Food marketing strategies must take into account all levels of the supply chain.. healthy and convenient products are likely to show then greatest success in the marketplace such as Morey’s Marinated Asian Sesame Ginger Shrimp. copackers turn away large volumes that would cause them to exceed their capacity or make them too dependent on one customer. 8. change the name to „ roasted garlic & pepper aioli“ • The client asks the manufacturer to develop an exclusive recipe for them. and have no technical department at all. The manufacturer‘s equipment needs to be compatible with the proposed foreign products. convenience stores. the broker. according to a study conducted for GMA by Computer Sciences Corporation (CSC). An example would be to take a basic mayonnaise and adding roasted garlic and cayenne and. Fresh. Convenience. and recreational and lodging services. Outside contracting is an arrangement between a company that is processing a product and a second company that is already processing a similar product or has the appropriate equipment to prepare the end product.10. In true co-packing arrangements the marketer will almost always set product and ingredient specifications. In this case. Primary functional areas targeted for IT investment include trade promotions and supply chain planning. retailers must be able to secure high quality local and imported products all year round. 8. the manufacturer. with freshness dating. Sometimes the co-packer may ask for some credit on the label such as a statement saying. manufacturer will be. Two-thirds of GMA member companies report that they are actively synchronizing base item data with trading partners. Aramark is the largest supplier of catering services to sports facilities in the U. Therefore. whereas a formula for a beverage or a sauce may require considerable adjustment to achieve the correct solids level.11. the original company continues to sell the product under its own name. The activities as well as materials used in the marketing process must be coordinated at all these levels and provide a consistent and coherent picture of the product to be marketed. This requires wholesalers to act as both local agent and a value added sourcing specialists. Some foreign producers choose to closely control their ingredients by purchasing and managing their inventories directly. and have never been run at a production level. Also. while 38% are designing RFID programs. Ingredient-management practices also need to be specified. Co-Packing Contract Considerations Many factors need to be considered when signing a contract with a co-packer. and 19% are actively testing RFID. supplies or finished products? Will the retailer require compliance with quality and safety standards as certified by a third-party audit? The services of an attorney who is well versed in such agreements must be consulted to avoid unpleasant surprises and lay the groundwork for a profitable partnership. There are several reasons why a company would arrange to have their product produced by a second company. „packaged by. a dry soup mix may be upsized with minimal difficulties. All other elements of the strategy such as pricing. Co-Packing. Along with meeting increased demand for organic and imported specialty fruits and vegetables. comes in resalable packaging. 2004). many manufacturers may not want to bother. co-packers can offer the gamut of quality assurance and R&D services. This requires that fruits. some products scale up more easily than others.. including on-site restaurants. One of the biggest challenges for a manufacturer is taking the foreign producer’s existing formula and adapting it for in-house equipment. How will the product be distributed? If it is to be shipped to a central warehouse. While Sysco continually develops relationships with suppliers. the manufacturer would go to work on developing a recipe for a „chiliginger mustard“ • The client already has his own recipe and he would like the manufacturer to duplicate it as closely as possible using commercially available ingredients. Five % report they are piloting RFID with customers. Oftentimes. Consumption Trends. distribution and transportation are all reported to be high on company priority lists. retail. Increasingly. Some manufacturers make no money at all. cook at home are important trends which may at times even be contradictory and present marketing challenges to both domestic and foreign producers. smaller orders and faster order cycle times to keep costs low while meeting their customers‘ and consumers‘ increasing demand for fresh food. 42 The U. a manufacturer may use the ingredients originally specified.S. Co-packing refers to the processing of a food product by a manufacturer other than the original processor. Food Industry 43 .S. Priority areas in 2005 ran the gamut from demand planning and inventory management to collaboration oriented IT systems such as e-procurement (electronic procurement and PIM (product information management). or the relationship will not be successful.” There are 3 basic types of „co-packing“: • The client uses the manufacturer’s recipe and slightly ‚tweaks‘ it to give it a twist and to make it „proprietary“. Manufacturers offer varying levels of assistance to those who want to put a formula into production. while 2% are implementing RFID. Co-packing is inherently a low-margin. Super quick foods in aseptic microwavable pouches are being offered by major brand-name producers such as Tyson Foods and Rice-A-Roni. easy to open and precooked are features most desired by consumers (survey by Yankelovich. He may feel that both „ginger“ & „chili“ flavored products sell well in their region and he would like private label mustard. Manufacturers typically charge 5% to 15% over production costs. banquet and catering service.S. In addition. • Proliferation in fruit and vegetable product variety. he just does not have a recipe. Over the next couple of years more retailers will also emphasize both demand planning and inventory management systems. For example. it has no material long-term purchase commitments with any of them. packaging and promotion will then need to be aligned with the results of the research. Depending on the wishes of the foreign producer. In this case the client normally knows what he wants. Food Marketing. formulas are developed on a test scale. Others allow the co-packer‘s purchasing agent to handle this responsibility. It goes without saying that the co-packer and foreign producer should have similar standards of quality and sanitation. 8. Food that is easy to prepare. Other supply chain areas such as manufacturing. what requirements will be imposed on the manufacturer? Will the product be shipped in boxes or over wrapped trays and on which kind of pallets? Will there be need for storage of ingredients. Aramark provides certain of its food service clients with facilities management services. • Increased attention to maintaining the „cold chain“. Some of the latest trends in the fresh fruit supply chain: • Increased focus on freshness. They include • • • • space and equipment limitations consolidation of resources reduced labor and administration costs quality and safety assurance 8. GMA companies are making significant progress toward global data synchronization. distributor. executive dining rooms and conference center management. On rare occasions.

5) to 0.9 -1.7 1.0 to 3. supercenters and convenience stores that increasingly offer a broader array of food products to their price sensitive and time pressured customers.3 0. Olives.2 7.2 4.S. Increased penetration of the 2005 2. club warehouse stores.0 to 1. Whole-grain baking products are another important trend embraced by major brand-name producers such as General Mills with its wholegrain Big G cereal.4 2.4 0.4 9.2 7.0 3. The index of retail food prices which had risen significantly in 2004 due to a combination of unexpected shocks in the supply system.3 6.36 45 Figure 31: Retail Food Price Changes from 2003 through 2006 (estimated).5 4.4 3.96 1.4 2.7% in 1998 to 32.20 percent in 2003 and the return on owner’s equity was 9.0 2.0 to 4. 8% to eggs). More recently however. salty Sales in Units Unit sales % change over previous year 835 -3 250 -1.S.6 3.04 0.5 0.6 3. Kraft Foods JM Smuckers are removing transfats from all snack foods.0 (0. Return on total assets.5 Beverages (carbonated) Beverages (refrig.6 5.5 2.6 6.7 7.5 2. Retailers’ efforts to improve quality and packaging of their own brands has been rewarded with incremental sales and profits and has become a major factor in customer loyalty. New regulations covering allergen labeling provide further impetus to the targeting of foods to these consumer segments.38 in the same year. Grocery expenditures vary by region.02 1. retail sales of private label food and beverages amounted to $118 billion in 2003 as estimated by Packaged Facts and are expected to grow to $150 billion by end 2006.0 to 5.0 (2.3 2. In 2003 the industry’s after-tax net profit was 0. Pasta lines made from whole wheat are showing up on shelves as well. Fish plays a major role in that market segment which has penetrated also the traditional fast-food segment with some of the major chains offering seafood sandwiches.116 426 78 57 142 188 687 637 238 403 134 130 89 468 354 -1.6 4.0 2004 3. The outlook for 2006 remains unclear due to the worldwide rise in commodity prices.93 1.5 4.5 2.5 1.7 -4 69 28 3 3 Share of total product category in % 6 12 2 6 9 59 36 19 15 6 2 7 47 39 20 29 13 86 5 30 5 Item Consumer Price Indexes All foods Food away from home Food at home Meat.7) 1.1) 3.9 2.52 30 -2 0 Average price per unit In $ 1. The new Dietary Guidelines for Americans address the strong concern about heart disease and marketers are moving rapidly to develop transfat free foods.6 2.0 2.74 36 25 118 2 77 2 2.0 3.0 to 1. 8.9 1.0 to 1. the perception of store brands has changed significantly.5 11 21 2 2 2 4 0. Traditional supermarkets are losing market share on the one end to the super centers and warehouse clubs and on the other end to specialty retailers in the organic food sector such as Whole foods and Wild Oats or regional upscale specialty stores such as d’Agostinos on the East Coast or Gelson’s and Bristol Farms on the West Coast. December 2004 – December 2005 (Sources: IRI. Relish Rice Salad dressings (shelf-stable) Snack (Bars.5 -6. followed by shoppers in the West ($95). Such items have long been considered as being of lower quality than their national brand counterparts. These non-traditional outlets have increased their share of food-at-home expenditures from 17.Premium food has been the category most sought after by food marketers. Private Label Buyer.5 to 3.0 to 3.79 1. Allergies are another concern that food producers are addressing (19% of consumers are allergic to milk.S. 16% to seafood or tree nuts. granola bars) Snacks (nuts. 8. According to AC Nielsen Homescan Consumer Insights „Retailers are increasingly using private label not just as a way to boost margins.2 2. Food Industry . According to the Private Label Manufacturing Association. Source: Bureau of Labor Statistics. Department of Agriculture The U.9% in 2004. burgers. 14% to wheat. poultry. with no major shifts in that pattern in 2004 and 2005.3 14.0 to 3.19 3. Traditional retailers compete with discount superstores. 15% to peanuts.3 6.1 1.4% to below 60%.4 0.0 42.58 2.6 0. Pepperidge Farm’s Whole Wheat English Muffins.0 3. one in five products purchased in grocery outlets is a “private brand” product.24 2.0 2.4 1. 2003-2004). Dollar million. Private Store Brands.5 2. Forecasts by Economic Research Service of the U. pressures from a recovering economy and higher energy prices did level off and even decline in 2005.5 to 2. Lean Cuisine.08 2. the store‘s own brands have led to their consumers‘ perception of a higher quality store overall.88 cents (FMI Annual Financial Review. and Hershey is adding more fiber to its line of sugar-free products.S.5 0. Low-fat foods across all retail channels are a major trend with mandatory transfat labeling. Households on the East Coast averaged the most ($100 per week).7 57.. fish Meats Beef. was 3. At the same time.0 to 1.0 to 3.25 2.5 0.0 1.7 9.5 Forecast 2006 2.4 3.5 8. veal Pork Other meats Poultry Fish and seafood Eggs Dairy products Fats and oils Fresh fruits and vegetables Processed fruits and vegetables Sugar sweets Cereals and bakery products Nonalcoholic beverages Other foods 44 The U. burritos.0 Figure 32: Sales and Growth of Private Label Categories.8 2. Product Pricing. Fishspecific condiments appear to be making strong inroads as well. Sara Lee’s premium breads.5 0.2 -7 20 31 8 5 3 4 4 -0.1 2.46 2. promotion and pricing must meet the image of the retailer for the product to be successful.0) 0.2 (0. The intense competition among food retailers is demonstrated by profit margins which continue to hover around 1 cent on each dollar of sales. traditional retailers decreased their share from 73.S.9 3.88 1.4 0. South ($88) and the Midwest ($85) (FMI 2003).5 to 3. Wilbur Candy Company has launched zero transfat cinnamon drops. Brownberry’s Natural Oatmeal and 12-Grain Breads. Unit Sales in million.0 to 3. Low-calorie entrees are marketed by Heinz.8 (0.41 2.8 7. In some cases (like Trader Joe‘s).7 0.9 2. Light cheeses such as Laughing Cow’s Light and Creamy Swiss Bites follow the same trend.9 2.5 to 3.0 2. Major brands such as Frito-Lay.86 1.9 2. U.9 2003 2.0 2.0 3.1) 1.5 to 4.6 0.26 6.4 11.659 878 190 37 22 50 544 541 106 271 284 92 14 43 158 261 -1. market by mass merchandisers proves that price and choice are important for the food shoppers who increasingly view super centers and warehouse clubs as their primary level of supermarkets in terms of quality and freshness of food selection.0 1.3 2. the return generated by the firm’s asset base.3 1.0) to (1. February 2006) Private Label Category Sales in US $ Sales % change over prior year 852 -2 471 0 70 32 141 -2 252 19 6.0 (1. Sales in U.13 2.0 0.9 6.3 1. From the manufacturer’s viewpoint the product image.13.5 7.0 1.504 2.4 8.42 1. Price remains a high priority in the selection of retail outlets.0) to 0.2 -5 1.2 1.1 1.7 2. Juice & drinks) Candy (Chocolate) Candy (non-chocolate) Coffee Dairy (Milk) Dairy (natural cheese) Dairy (processed cheese) Dried Fruit Frozen Appetizers/Snack rolls Frozen Dinner/Entrees Frozen Pizza Frozen Plain Vegetables Frozen Seafood Pasta Pickels.14.5 1. Inc.0 (13.45 2.88 1.0 5.4 0. Food Industry Relative importance in % 100. but also to differentiate themselves in the market when it comes to consumer shopping patterns“. seeds) Snacks.0 13.0 1. Unilever is offering trans fat free margarine.

Such premium store brands provide the gourmet buyer with additional choices at a better price than company brands.Reasons for the growth in private label sales are • increased price consciousness of the consumer • greater push of store brands due to bigger profit margins • less brand loyalty among younger shoppers • increase in own manufacturing by big-box retail chains One clear trend on the part of retailers is to move store brands in an upscale direction. The amount of slotting fee varies by region. CVS and RiteAid are the top drugstore chains offering private label items. The segment is likely to flourish as innovation (flavored varieties) drive the industry. Food Industry 47 . the Safeway Select Line now features 1. while private label grew 17. Milk.pay-to-stay allowances. which offer every-day low prices. warehouse clubs outlets. This points to the importance of close supply chain management. and whether the supplier has a wellthought-out advertising program. Private label has earned more than 20% of the bottled water category already. Private Label Purchase Households with Children Blue Collar Households Female Heads of Household (age 45-55) Female Heads of Household (age 33-44) Household of 5+ Members Low Income Household % of total 40 27 23 19 15 9 According to the publication Private Label. on the part of retailers. in-store audits data. and deli were only subject to „light“ usage of slotting allowances. • Reduce the shelf space devoted to slow moving items in order to stock the products that customers prefer.16. Category Management. Alternatively. This payment by manufacturers to persuade channel members to stock. Wal-Mart’s Great Value brand is the best selling store brand in the U. • focusing on delivering consumer value It is driven by the retailers’ requirement to develop their categories and satisfy customers profitably.5% to capture $4 million in sales and about a half percent of category share.Importance by Retailer (Source: ACNielsen Homescan Store Brands) 8. Food Industry The U. Retailer Save-a-Lot Kroger Safeway CostCo Walgreen’s Wal-Mart Sam. Costco is a trendsetter for its “cobranding” strategy which involves linking private label brands and national brands. • Improve speed-to-shelf and decrease out-of-stocks. This makes it essential for manufacturers to be category rather than brand focused and retailer rather than internally focused. drug stores and mass merchandisers (except Wal-Mart). if at all. In addition. Although common. For example. fresh meat and seafood. Others that are sometimes also referred to as slotting allowances may include fees for premium product placements. slotting fees are neither uniformly requested nor offered. display and support „new“ products may also be spread out in a series of installments. fees to have products remain on shelves . beverages. i. manufacturers provide free cases of new products to help gauge consumer demand. Figure 33 gives a breakdown of the buyer categories. • Keep popular items from selling out. It has been estimated that a program’s first year cost can be as high as $30 million when used by large stores with annual maintenance and marketing costs reaching $5 million and more. whether consumer testing has been carried out. not individuals. grocery market. Most of these programs are free although some retailers charge a one-time fee to become a member. in baby food. Although food retailers send targeted offers to individuals. retail type and product. supermarket chains with PL brands are Kroger. The most common allowances are for new products . Figure 33: Purchases of Private Label excluding Bread. they can enlist an application service provider. e. discounts or rebates for price conscious shoppers.e. • Determine how product deletions affect their best customers. The aim is to grow retailers’ categories revenue and profits through their brands by focusing on the consumer in developing and monitoring targeted strategies for profitable growth. While private label barely had a presence.000 per grocery item. Promotional spending is on the increase both as a percentage of gross sales (17. Frozen foods. introductory discounts per unit. together with dry grocery. Bottled water generated almost 12% to capture $800. The slotting fee cost varies depending on numerous factors. they can be assumed to range from a low of $50 for fresh bakery products due in part to direct-store delivery and $10.g. data from groups. Albertson’s launched its own brands in 2003 with 35 items and has been expanding that line rapidly throughout 2004 and beyond. and snacks are especially the subject of slotting allowances. or fees to be paid if a product fails. In many cases slotting allowances are commingled with other promotional allowances for product displays and demonstrations. consumer and shopper research).260 items. Trader Joe’s relies almost exclusively on its own store label. Supermarket retailers are tracking potential store-brand categories as new opportunities and introducing products under their own banner that threaten categories that have been dominated by other brands. Some stores track total purchase amounts and shopping frequency but not individual items. Figure 32 shows the sales and growth rate of certain private label categories from December 2004 to December 2005 for all supermarket. Eggs (Source: ACNielsen) 46 The U. Albertson’s and Safeway.’s Club Target Percent Private Label 51 28 25 21 21 17 10 8 8. Loyalty Programs Food retailers use loyalty marketing program. Smaller operators may be able to mitigate some of the costs by buying off-the-shelf software. Promotion. Households with children are the most frequent buyers of private label products followed by blue-collar households which stands to reason due to the lower cost per item compared to national branded items.S. coupons.4 million of sales.9 million. whether the product is carried by competitors in the same market. and in some instances. While retailers are hesitant to disclose both the existence and amount of such fees. convenience food and delivery services for busy shoppers. they typically analyze data at an aggregate level. About 40% of food retailers offer loyalty programs. limited assortment and other stores. also known as frequent shopper programs. Retailers without such programs include supercenters.S. • a joint retailer/supplier process for evaluating and managing categories • as separate business units • on an item by item basis by ..S. On the other hand. With many retailers receipt of a slotting fee does not guarantee any particular shelf placement except that the product is given an opportunity to gain exposure.S. Wal-Mart Stores Inc.15. IRI reports that the total category was essentially flat at $878. A few categories showed special strength in 2005.. such as whether the supplier has a proven track record. “Slotting allowance“typically refers to a lump-sum. Kroger’s Private Selection nearly 500 items. • Reveal when products were sold and whether they were sold on or off promotion and the profit margin on each sale. The amount can be as small as several hundred dollars to have a product introduced in a single store to many thousands of dollars for a chain-wide promotion. Walgreens. The top three U. The basic prerequisites for a category management system are • Information and technology (the data necessary to fuel the category management process include retailer scanning data. Category management as opposed to single-product management is widely practiced by the major retailers although critics have charged that it leads to a sameness in the product selection which can prevent the retailer from differentiating itself from the competition. household maintenance products. produce.so-called new product introduction fees. Many successful programs enable retailers to customize their offering to the interest and preferences of individual customers. Category management involves5. Procter & Gamble and Kraft Foods were the leaders among manufacturers. up-front payment by a food manufacturer to have its products placed on supermarket shelves. savings clubs or reward-card discounts to identify their best customers and reward them with discounts on groceries. such as on eye-level shelves or special displays. distribution and stocking. Stores use the data gathered through these programs to • Identify the promotions that appeal most to various customer groups. and take steps to keep those customers from taking their business elsewhere. market data.3% in 2003 up from 14% in 1999) and as a percentage of total marketing spending (54% in 2003 up from 49% in 1996). direct store delivery bypassing the retailer’s warehouse may entitle the manufacturer to a reduced or entirely waved slotting fee as the retailer thereby avoids the cost of warehousing. • Collaborative trading partnerships • company structure that aligns best practices across all channels • category management benchmarks oriented toward the best practices of the industry as a whole 5 ACNielsen Figure 34: Private Label .

By Daniel A. The reason for this seems to be that flexible packaging is 75% to 90% lighter than rigid packaging. In addition to understanding the regulations of the Food and Drug Administration (FDA) discussed in Chapter 10 and the import regulations discussed in Chapter 11. a subsidiary in the form of a corporation.S. even relatively modest damages inflicted on a single consumer can become a multi-million dollar problem for the manufacturer of the defective product. Wuersch.g. 9. It appears that about 99. Retailers prefer at least a year‘s storage on shelves to meet their requirements for non-perishable dry food packaging. A major growth sector is packaging that caters to consumers with limited time for food preparation. food packaging industry. reflecting consumer and retailer awareness of the issue of waste disposal. constitution established a federal system in which the 50 states (and the District of Columbia) maintain considerable autonomy. and the Swiss-U. The food and drink market represented $2. Even non-perishable. this decision is made once a certain market penetration threshold has been achieved. each with a multitude of potentially applicable statutes..S. on their own. MAP/CAP packaging is the fastest growing sector with an average annual growth rate of 13.S. In General. and take less room in landfills. or through intermediaries. unfair trade laws and anti-trust laws.S. it can be beneficial to establish a physical presence in the U. These issues include the risks associated with tort liability for health risks posed by food products.S. and an agreement to provide services for the manufacturer (e.6% over the next five years. rather than a branch (or a subsidiary in the form of a transparent entity for tax purposes).S. patent or copyright law) or state law (e. Thus. distributors or resellers. the U. so the food will last from the manufacturer to the table.g.S. therefore. and their biodegradable inks are also increasingly evident on the market. subsidiary and structuring its relationship with the Swiss parent.17. Income Tax Treaty of October 2. 8. dry foods need to have an extended shelf life.. Controlled packaging includes aseptic and retort packages. Like Switzerland. The U.1. and that food and beverage packaging is accountable for two-thirds of the $120-billion U. There has been a significant change in the canned food market.S. provides instructions to suppliers in its Supplier Handbook as to the process of presenting new products to the company which make it clear that the category managers have prime responsibility for acceptance or rejection of the product. E. such as Saupiquet’s diced tuna in a Doypack.S. Aseptic juice boxes for example make up approximately 9% of the juice market but comprise only 3% of the waste. markets Swiss food manufacturers need to consider other legal issues that can determine the success of marketing food products in the U. including income tax laws.From the standpoint of promotions.S. and then resell them at a mark-up to other distributors. 1996 should first be understood. Food Industry 49 .S. Through the multiplication effect of the class. regulations. And finally.9 billion dollar active packaging market in 2003. a category management perspective strives to achieve the following: • attract new users to the category increasing penetration for the category • encourage existing users of the category to buy more and thus increase their weight of purchase • encourage all users to buy more often increasing their frequency of purchase Safeway. Prior to forming a U. To reduce these risks to a manageable level. when entering the U. Agents are independent contractors who solicit sales of products or services of a domestic or foreign company for a commission.S. For Swiss companies. training customers. must be packaged in either gas permeable or re-closable packaging to avoid spoilage. moisture controllers and ethylene absorbers to help reduce the pathogens and gases that contribute to food spoilage. or approximately 17 per cent of the entire U. Packaging is likely to perform a key role in establishing and maintaining consumer confidence. Other areas are exclusively governed by federal law (e. the Swiss parent company may directly become subject to taxation in the U. a transparent sealable microwaveable tray for omelet’s or fresh ready-made food.8% of all food and beverage items are at one time encased in some sort of packaging.S. modified air packaging (MAP) and biodegradable packaging. Wuersch & Gering LLP 9.S. or organizing promotions at trade shows or in retail outlets). In order to be considered as a supplier a new applicant must purchase the ACNielsen New Item Information Package which allows Safeway to make decisions quickly about the product’s “fit” with other items in the category under which it is classified based on the Safeway Merchandising Identification Code (SMIC). Annual sales 48 The U.S. A relatively new concept in food packaging is active packaging. Otherwise. If a food product poses a health risk to consumers.g. easier to compact..g. The growth in hi-tech packaging is a significant development for the food and drink industry. These intermediaries can either be independent third parties or related parties. Recently. new packaging ideas have been developed in response to growing food manufacturer fears about food safety and tampering. One innovation on display at the show is the Plastobreiz tray. Food Industry Marketing through a U. of this sector reached $13 billion last year. Often.4 billion of the total $5. Safeway reviews the categories on a specific schedule which involves item placement and selection. and court decisions. a subsidiary is generally necessary to avoid income tax consequences for the foreign parent in the U.S. manufactured by Thimonier. A large number of packaging firms are launching products made of 100% recycled materials. one of the largest grocery retail chains. the impact of rules of international taxation contained in the Internal Revenue Code of 1986 (including the transfer pricing regime pursuant to Section 482). trademark law.S. 52 legal systems can govern the marketing of food products in the U. Marketing Agreements and Strategic Partnerships. respect for the complex legal environment and careful planning is required. Marketing Arrangements. wholesalers or retail customers. packaging industry. contracts and general tort law). Metal cans are declining and being outperformed by flexible packets or cartons. This sector includes oxygen scavengers. a company can be sued in a so-called class action in which a plaintiff can sue on behalf of all members of the class of consumers harmed by the defective product. Retail trends indicate that perishable foods comprise over 50 per cent of all foods and.2. These class actions are a powerful tool in the hands of a lawyer who represents the class on a contingency basis. the high cost of litigation and the tax implications of doing business in the U. Food Packaging. to more effectively market products. a distribution agreement can include elements of an agency relationship for certain products. Subsidiary or Branch In certain circumstances. Swiss companies can either actively market their products in the U.S. and limit the risks associated with a failure of these efforts. typically is the desirable form for a physical presence in the U. including agents. 9. Certain areas of the law fall both within the scope of authority and jurisdiction of the federal and the state governments. Space allocation (percent of cubic feet) is paid for by the vendor (see slotting fees). Because food products are targeted to reach a large group of consumers. Sometimes there are several legally significant relationships between a manufacturer and its intermediaries. If a foreign company is marketing its products through employees in the U. companies may be subjected to lawsuits in several states. federal legislation restricted the ability of lawyers to shop for a sympathetic forum in state courts in class actions on behalf of consumers located in different states. such as joint ventures or subsidiaries. commercial risks.. Distributors and resellers purchase goods or services from a manufacturer or service provider. typically calculated as a percentage of gross or net sales. Environmentally friendly biodegradable packaging is another growth area..

a manufacturer may. alternative dispute resolution (such as arbitration or mediation) is often used to resolve contract disputes. a distribution agreement should contain restrictions on the representations and warranties that a distributor is authorized to make vis-à-vis its customers. business partner. and by the jurisdictional provisions of the Rules of Civil Procedure for the federal courts. 2.. However. An important statute.” Swiss companies should be aware of the risks that can result from an incomprehensive contract with a U.S. the federal courts have jurisdiction in contract disputes between a U. food exporters should be aware of the fact that certain of these terms may have a slightly different meaning in domestic U. the case law is often supplemented (but not replaced) by statutes (e. The law on contracts and torts is state law. The amount and type of commission varies greatly.S.S company (e. Except for Louisiana. restricted from publishing any confidential information (e. Agency Agreements As briefly described earlier. if problems with a product result in liability claims in the U. 1965. Antitrust issues raised include possible prohibited price fixing. general terms and conditions should Distribution Agreements The issues arising in connection with distribution agreements are in many respects similar to those discussed with respect to the agent. The conflict of law rules of states determines which state law applies to a contract or a tort matter between residents of different states (or foreign countries). Consultants typically perform services for a time-based flat fee. Tort Claims A tort claim can be brought against a food manufacturer if it can be shown that a food manufacturer negligently caused damages to resellers or consumers in the U. Because damages resulting from the violation of a confidentiality agreement are difficult to prove.S. In addition. common law does not permit a party to deny responsibility for willful misconduct or gross negligence. the jurisdiction of the various state courts is determined by the so called “long-arm” statutes of the states. confidentiality agreements typically permit the disclosure of confidential information in these circumstances.. Generally. performance based compensation or a combination of the foregoing. risks that it will likely be first in the line of fire. there are limitations. be sued in a so called class action by one consumer on behalf of the entire class of affected consumers.S. To avoid being bound by unexpected terms. Under U..S. contain such a limitation. For example. § 2. As in an agency agreement. guage in a written agreement (parole evidence rule). New York General Obligations Law of April 23. When structuring agency agreements. confidentiality agreements should specify that injunctive relief is available to remedy any violation of the agreement. Arbitration rules that are well established include those of the American Arbitration Association (AAA) and. which has been adopted by all states (with certain exceptions and modifications) is the Uniform Commercial Code (UCC). based on sales volume and including penalties for an agent’s failure to reach a minimum sales level (e. In its Article § 2 (which was not adopted by Louisiana).. To ensure the enforceability of a confidentiality agreement. In a contract for the sale of goods by a merchant. Agents therefore have a legitimate interest in limiting their liability to acts for which they can reasonably be held responsible and in securing the support of the principal in defending such claims (including indemnification for its costs and damages). a distributor will have liability concerns similar to those aforementioned. in which case law (court decisions). 9. and a foreign company if the amount in dispute exceeds $75. This can be achieved by a tiered commission-structure. Depending on the circumstances. Rule § 2-207. Compliance with the requirements promulgated by the FDA or the USDA does not protect a manufacturer from this type of liability. situations where the general terms of a seller and those of a buyer contradict each other. Despite the understandable desire to keep contracts “short and simple.S. under certain circumstances. all states and the District of Columbia follow the English common law tradition.g. the parties may also choose the courts or arbitration forum that have jurisdiction over any disputes arising in connection with their contract.5.” i..e. Otherwise. However. rather than statutes. Confidentiality Agreements Entering into a confidentiality agreement with a potential business partner in the U. These rules generally permit the parties to a contract to select the law that shall govern their relationship. The U. an exclusivity and possibly a non-compete clause may be appropriate elements of a consulting agreement. American contracts tend to be longer and more comprehensive than their European counterparts. because it permitted a food product to be contaminated in an unsanitary environment).S.S. and exclusion of third parties from competition. 9. financial projections) or from using the confidential information for its own purposes. Delivery and price terms are essential elements of any purchase and sale. 2 in particular provides that in every contract for the sale of goods there is an implied warranty that title to the goods is transferred to the buyer. Consultants should be bound by a confidentiality agreement (which can either be part of the consulting agreement or a stand-alone agreement). the terms of consulting agreements should permit an easy termination of the relationship and clear milestones that define the expected results.4. On the other hand.) Because the agency relationship may not be clear to a customer (or the general public). 2 also contains a special rule. In a contract. In contract disputes. reduced commissions. for international contracts.org). In the case of a tort claim. the expected volume. the potential partner is not Contractual Risk Allocation Because there is no uniform statutory law that regulates all aspects of contract law. these limitations are not effective vis-à-vis third parties. companies typically require strict adherence to their terms of purchase or sales. is also a party to several treaties that can apply to a contract between a Swiss and a U. law.S. depending on the product. Under the common law “mirror image” rule. Exploring and Evaluating Market Opportunities. effective as of January 1. on the other hand. In addition.g. and the consulting agreement should specify that any work product created by the consultant belongs to the client.g. Marketing Agreements. the UCC establishes the rules applicable to contracts for the sale of goods. the Vienna Convention on the International Sale of Goods (“CISG”) of 1980). except where these warranties are conspicuously disclaimed with language prescribed in UCC Art. Most commercial risks can be freely allocated to either party to a contract.S. while liability for statutory or tort liability can be limited vis-à-vis a contract party.S. Tort law is still mostly governed by case law. California Commercial Code. When using trade terms.S. implied warranties of merchantability and fitness for a particular purpose are deemed to be given. however. the information covered must be described as precisely as possible and may not include non-confidential information. According to these rules. Otherwise. the mirror image of each other). distribution agreements can create additional issues under applicable intellectual property law and federal anti-trust law. Implied Covenants and Warranties A contract party may not only be liable for commitments and representations expressly made in a contract. Large U.g. the issues discussed should be considered when structuring the relationship with a U.S. rules of civil or criminal procedure and certain laws and regulations. buyers (or licensees) in consideration of a commission. Under the UCC rule.e. the agreement should clearly define the role of the agent and specify that the agent is not authorized to commit the principal or make unauthorized representations on its behalf. a tort claim can also be brought against the manufacturer of a food product without proving negligence (strict liability) if the manufacturer brought the food product into circulation despite known health risks and without adequate warnings (e. courts will decide which law has the “most significant relationship” with the contract in question. the rules of the International Chamber of Commerce (ICC). (e. a uniform statute drafted by the National Conference of Commissioners on Uniform State Laws in partnership with the American Law Institute (see www. exclusivity and other factors. Contract and Tort Issues.S. Because a distributor will use the intellectual property rights of a Swiss manufacturer (including its trade marks and patent rights). for “battle of the forms.nccusl. a valid contract can only be formed if offer and acceptance are identical (i. traditionally determined the law. Therefore. carcinogenic food additives). marketing plans. the most significant relationship is typically with the state in which the tort has been committed. distributor. it may become necessary to hire consultants in the U. Chapter 106 of the General Laws of Massachusetts). an acceptance which contains terms that are different from those contained in the offer can lead to a valid contract if the new terms do not materially alter the offer and the offer did not expressly limit the acceptance to the terms of the offer. Despite its roots in the English common law. is a necessity before any serious discussions are held on a future cooperation. Consulting Agreements During the evaluation and market development phase. Food Industry 51 . etc. and contracts are interpreted strictly based on the lan50 The U. 2 rules as mentioned before.S. recipes. The agent.S. it is important to create incentives for the agent to maximize the sales for the principal. If many consumers are (potentially) harmed.g. Purchase and Sale Agreements Agreements for the sale or delivery of food products to U. Otherwise. resellers or customers are generally governed by UCC Art. loss of exclusivity in a particular territory. Food Industry The U. In the absence of a choice of law by the parties. limitations of implied warranties must follow the UCC Art.. an agent is retained to solicit offers from U.000.9.g. the principal could become liable for unauthorized promises or warranties made by the agent to third parties. 1963 (“GOL”). UCC Art. but also for implied covenants and warranties. be required to be disclosed to third parties or governmental authorities.3. confidential information may. In order to avoid a violation of a confidentiality agreement. such as INCOTERMS. UCC Art. Contract and Tort Law in the U.

(2) the scope of the licensee‘s rights (exclusive/non-exclusive use). The licensor can also lose the protection of its mark if the license does not provide that all goodwill created in the mark by the licensee inures to the benefit of the licensor. Manufacturing Agreements Rather than exporting a food product that is manufactured in Switzerland. maintaining the quality of the manufactured products. A trademark license can either be a separate agreement or be included in another agreement (e. Supermarket chains also typically have guidelines or handbooks that vendors are expected to follow. copyrights. Because patent and copyright license are rarely of interest to food manufacturers.S. a food manufacturer may manufacture the product locally in the U. Through registration. on the other hand. The decision making process. the mark is no longer used in commerce or the owner of the mark permits the use of the mark by unauthorized persons or in a manner that diminishes the value of the mark. both the principal and the manufacturer can be liable for damages resulting from defective products. Because the Swiss manufacturer makes valuable intellectual property and know-how available to the U. Food Industry Supply Agreements In a supply agreement. or trade secrets). Therefore.S. Patent and Trademark Office. the publication of confidential information or the loss of its value may make a know-how license unenforceable. it is important that the manufacturer can show that the contamination would not have occurred. Swiss companies should consider that.S. the transfer of the knowhow or trade secrets. trade. in particular supermarkets. A trademark license should define (1) the territory within which the licensee has the right to use the trademark. or marketing food products. is the so called slotting fees. These guidelines are incorporated into the purchase contract by the supermarket‘s purchase order and can cover shipping and delivery requirements. Use of the ® symbol without a valid registration is prohibited in the U. and the return of the confidential information at the end 52 The U. Contrary to the agreements discussed so far. coding.Licensing of Intellectual Property There are different types of licensing agreements. Licensing of Know-How and Trade Secrets The issues that must be addressed in licenses of know-how or trade secrets are similar to those previously discussed. compliance with regulatory requirements and a fair allocation of the liability are primary concerns that need to be addressed in these agreements. A trademark registration is prima facie evidence of the exclusive ownership of a mark. had the packaging company followed the manufacturer‘s guidelines. (the “TM” symbol . Licensing of Trademarks Trademarks can be created under federal or state law. Companies. a license agreement must permit the licensor to monitor the quality of the goods that the licensee sells under the licensor’s mark. they are not illegal. and (3) the time period during which the licensee may exercise these rights. manufacturing agreements raise many of the issues previously discussed. both under the Lanham Act and under state law.or service marks. market (whether to a U.S. Food Industry 53 . While there is controversy regarding the influence that these fees may have on competition. timely delivery (and payment). Although the life of a trademark is not limited. Under the federal Lanham Act. the common denominator of all types of joint ventures is the achievement of a common purpose by two or more parties through a joint decision making process. rights in trademarks or service marks can also be created through the simple use of a mark in commerce. It is important to remember that the protected know-how is secret at all times during the term of the license. (if this does not diminish the value of the „Swiss made“ product) either in a subsidiary or through a third-party manufacturer under a manufacturing agreement.S. 9. Slotting fees can take the form of an upfront cash fee. Packaging Agreements An agreement regarding the outsourcing of the packaging of its food products for the U. Depending on the nature of the cause of liability. the owner of the mark is permitted to use the ® symbol in connection with the registered mark. manufacturing. Moreover.™ may be used with unregistered marks). adherence to manufacturing guidelines. Legal Aspects of Marketing to Retailers A particularity of marketing food products to retailers.S. and the licensor must in fact exercise its control rights. taxation. Slotting fees are product placement fees that manufacturers are to pay to retailers.S. and sometimes to wholesalers. their participation could subject them to U. The supplier. ownership and protection of intellectual property and the rights and obligations of the parties in the event of a break-up or sale of the joint venture (or interests therein) are key issues that should be addressed in a joint venture arrangement. the following discussion is limited to licenses of trade marks and trade secrets. shelf-life and penalties for non-compliance. Allocating the risk associated with product liability can become tricky in manufacturing agreements. a service fee for stocking or promoting the goods.S.g. Because unincorporated joint ventures are generally treated as partnerships for tax purposes. In addition.S. the nature of the protected information needs to be carefully defined in the license agreement.6. trademarks used to distinguish products can be registered in the U. However. However. agency or distribution agreement). is interested in being excused from performing its obligations in the event it becomes unable or commercially unreasonable to adhere to the terms of the contract and in limiting its liability for the use of the supplied material or components to the maximum extent possible. If any contamination occurs during the packaging process.S. A know-how license does not need to have a time limitation. the scope of authorized users. The U. of the license term should be clearly regulated in the agreement. supervision and monitoring of the joint venture’s activities. a discount or a rent for floor space (in particular where a supermarket vendor is permitted to put its own display into a store). Because the confidential information is revealed to the licensee for the purpose of a commercial activity. the customer is primarily concerned with securing the timely supply of raw material or product components at the desired quality and the allocation of liability to the supplier for damages resulting from defective or inadequate material supplied. These fees can be tied to performance or flat fees (see Chapter 8). absent a proper structure. for shelf-space (“slots”).S. Joint Ventures Joint ventures can be formed for purposes of developing. safety requirements. depending on the type of intellectual property being licensed (patents. packaging company) should specify the labeling requirements and contain unambiguous instructions for handling and packaging the product. toll manufacturer. or non-U. Cooperation with U. the duty to maintain the information confidential. the owner of a trade or service mark can lose its right (or the value of its mark) if the registration is not renewed.. Joint ventures can be mere contractual arrangements among parties or take the form of legal entities operated for the common purpose of the joint venture.

Also. Chicago 10. Net Contents The principal display panel must also have a declaration of the net contents by weight. or a combination of these depending on the nature of the food: solid. excess levels of lead or mercury in foods have resulted in enforcement actions against the food or company. It regulates substances used in foods. in some instances. falls within the jurisdiction of various federal. For example. The format and content are spelled out in the regulations. There are three ways by which The U. However. Regulatory Jurisdiction The authority to regulate food in the U. or dietary supplement ingredient.S. The principal federal agencies are the Food and Drug Administration (FDA) which is a component of the Department of Health and Human Services and the Food Safety and Inspection Service (FSIS) and Animal Plant Health Inspection Service (APHIS). If a manufacturer wants to produce and distribute a food for which a standard of identity exists. These restrictions could be on the foods in which the ingredients may be used and/or their levels of use in a particular food. All of the ingredients of a food must either be generally recognized as safe under the law or otherwise specifically approved for use by the responsible governmental agency. it may not be used in a food. poultry and egg products and APHIS is responsible to ensure that imported products do not introduce pests or other threats to domestic plants and animals. prescribes aspects of its composition and ingredients and also includes some labeling requirements. All of the nuances to food labeling cannot be covered in this summary. some processing procedures such as irradiation are also subject to regulatory limits under food additive regulations.S. I: Categorization of a Food. The labeling of foods while appearing relatively straightforward can be quite complex depending on the food. Introduction. 10. ingredients. This would include food packaging materials and even such items as pottery and eating utensils. both of which are in the Department of Agriculture6.1. The scope of term food includes food contact articles if any substance migrates from the contact article to the food. 6 The Department of Treasury has jurisdiction over the labeling of most alcoholic beverages Health claims Health claims describe a relationship between a food. FDA has objected to the use in traditional foods of some herbs. A thorough review of each ingredient is required to ensure it is permitted. implements compliance programs for enforcement and develops regulations for virtually all aspects of FDA’s responsibilities for ensuring foods are safe and properly labeled. such as quality standards and special food categories. Chemical contaminants in an ingredient can cause a product to be in violation of the law. There are many other components of the FDA but CFSAN and the districts are the ones most involved in the implementation of FDA’s jurisdiction over foods. Reasoning being that there is a different regulatory standard used for determining the acceptability of ingredients used in traditional foods compared to the dietary ingredients used in dietary supplements. foods FDA has established pursuant to its statutory authority. they may not be legal in the U.. A standard of identity generally describes the food. the common or usual name for the food or a descriptive term which accurately describes the food’s basic character. While many herbs are widely used. Regulation of Food by the Food and Drug Administration (FDA). FDA has issued many regulations listing ingredients which may be used in foods and. viscous or liquid. Boyd & Lloyd. and any representations made about the food. Food Industry 55 54 The U. and reducing the risk of a disease or health-related condition.2. 10. For example. This is basic and may be self-evident but accurately identifying the category or type of food is important. Health. In addition. there are three types of health related claims permitted for foods under the FFDCA. Ingredient Declaration The general requirement is that each ingredient must be listed in its descending order of predominance by weight by its common or usual name. FDA has some jurisdiction over these foods but they are primarily regulated by FSIS. This appears straightforward but the interpretation of the definition by FDA and the courts has expanded this meaning beyond the usual understanding. Many ingredients which are recognized as safe may not have a specific rule identifying them. If an unapproved pesticide is used on a food. labeling or manufacturing requirements in addition to the generally applicable regulations.S. packaging. its ingredients. The name could be one established by regulation. The following section will discuss briefly the basic considerations which are involved in developing.4.S.10. i. the manufacturer must comply with the standard.S. Food Industry . The key to determining the content of the nutrition panel is the serving size. Unfortunately. FDA’s regulations and enforcement policies. FDA Organization The Center for Food Safety and Applied Nutrition (CFSAN) is the organization within FDA which is responsible for implementing the FDA’s authority over foods. The basic labeling components will be covered in this review. The Definition of Food under the Federal Food Drug and Cosmetic Act (FFDCA) Basically. every color added to a food must be used in accordance with a specific regulation. state and local agencies.. Purity of ingredients is important. labeling and importing a food for distribution in the U. Following is a discussion of these claims. Bringing a Food to Market in the U. The focus of this summary is with FDA regulatory authority which extends to all foods except for the authority given to FSIS over meat. Even though a food substance. Environmental Protection Agency establishes the tolerances for pesticide residues in or on food and FDA enforces those residue limitations. although their use in dietary supplements has been tolerated. manufacturing. The U. has placed restrictions on their use. An example is herbal products. Bringing a Food to Market in the U. count or volume. food component. Bell. color additive or pesticide residue may be authorized in other countries. poultry and egg products. as example.S. the term food includes all articles which are used as food by man or animals and includes the components of food. An important first step is to determine if the product is subject to any specific rules applicable to composition. standards of identity for various foods.S.e. Nutrient Content and Structure/Function Claims Generally.3. One major reason is that for many. There are detailed regulations on the placement and type-size of the declaration. It is an overview of the matters which need to be considered in manufacturing and labeling foods which are in compliance with the laws of the U. many cheeses have standards of identity. Pesticides present in foods are also specifically regulated. The initial determination is to identify the category of food into which the product belongs. it causes the food to be adulterated. Bringing a Food to Market in the U. By John Lemker. Statement of Identity The food label on the principal display panel must bear a statement of the food’s identity.S. FSIS regulates meat. Note that there are a number of exceptions and exemptions which may apply under given circumstances. The FDA’s district offices are the primary enforcement arm of the FDA. These are health. there are other regulations which apply to specific types of foods. usually FDA. Nutrition Labeling Virtually all packaged foods for retail sale must have nutrition labeling. chocolate products have standards.S. Flavor labeling may also be required as part of the food’s name should the nature of the food’s ingredients so require. The import officers who review all imported foods are assigned to the district offices. FDA regulations have extensive rules regarding how a food’s serving size is to be determined. infant formula and dietary supplements. 10. Each ingredient needs to be evaluated for its acceptability in a particular food. name. If there is no regulation for the color. II: Food Composition and Ingredients.S. All ingredients of foods and their components are “foods” and subject to the same legal requirements. not all ingredients permitted in foods are covered by a regulation. nutrient content and structure/function claims. III: Food Labelling. In addition to actual ingredients. LLC. Many exceptions exist so the regulations need to be referenced for specific requirements. but not all.

The hazards in manufacturing a food are identified and specific controls are developed to prevent their occurrence.. crab. acidified foods. tree nuts (e. Organic Claims The National Organic Program (NOP) is administered by the U. labeled. • Authorized Health Claims. bear or contain a major food allergen.5.S. Any remaining product ingredients must consist of nonagricultural substances approved on the National List or non-organically produced agricultural products that are not commercially available in organic form.g. (i. The FFDCA provides for health claims used on labels that characterize a relationship between a food.health claims may become eligible to be used on a label or in labeling for a food or dietary supplement: 1) FDA may issue regulations authorizing health claims for foods and dietary supplements after review of the scientific evidence submitted in health claim petitions if it meets the rigorous criteria for authorization. • Qualified Health Claims. Regulations for other foods are proposed or under consideration. Food Industry 57 . they influence the interpretation of what factors are important in processing these foods. Qualifying language is included as part of the claim to indicate that the evidence supporting the claim is limited. Major aspects of the new authorities include establishment registration.. the new amendments defined the term “major food allergens. farm and processing operations that grow and process organic foods must be certified by USDAaccredited certifying agents. or represented as organic have to be produced and processed in accordance with the NOP standards. They must be truthful and not misleading and supported by adequate substantiation. lobster or shrimp). In response to concerns about a potential terrorist attack on the food supply. Nutrient Content Claims The FFDCA and FDA’s regulations permit the use of label statements that characterize the level of a nutrient in a food (i. Another way to obtain approval for the use of a health claim on foods is through a successful notification to FDA of a health claim based on an “authoritative statement” from a scientific body of the U. Allergens The “Food Allergen Labeling and Consumer Protection Act of 2004” (the “Amendments”) amended the FFDCA to address specifically the labeling of certain allergens present in foods.’. Also. In these cases.” required their labeling. “fat free. Structure/Function Claims Structure/function claims describe the role of a nutrient or dietary ingredient intended to affect normal structure or function in humans. fish (e. Except for very small operations. processed. Food Industry The U. or walnuts). Basically. An important provision of the amendments which assist in understanding their scope is Section 203(a)(4). The qualified claims are available for use on any food or dietary supplement product meeting the conditions specified in the authorization letter. wheat. Labeling requirements are based on the percentage of organic ingredients in a product. Nutrient content claims describe the level of a nutrient in the product. requires that food be made in accordance with “Good Manufacturing Practices” (GMPs). and soybeans. as implemented by FDA. Products with less than 70 percent organic ingredients cannot use the term “organic” anywhere on the principal display panel.S. a food component. racterize the means by which a nutrient or dietary ingredient acts to maintain such structure or function. ‘(2) A food ingredient that contains protein derived from a food specified in paragraph (1). They may identify the specific ingredients that are organically produced on the ingredients statement. The HACCP (Hazard Analysis Critical Control Point) concept is important in the manufacturing of foods in the U. or that bears or contains. or dietary supplement and risk of a disease (for example. certain foods which are deemed to present a higher risk to health if not properly processed have specific regulations that apply to some or all aspects of their manufacture. The name and address of the certifying agent of the final product must be displayed on the information panel of the label. (i). if a food bears or contains a major food allergen at any level from direct or indirect addition. 30% fewer calories than our regular chocolate). or cod).. or (k). total fat and cholesterol may reduce risk of heart disease”). Any product labeled as organic must identify each organically produced ingredient in the ingredient statement.6.” In addition. Government or the National Academy of Sciences. Manufacturing Food. dietary ingredient. high in vitamin C) or they compare the level of a nutrient in a food to that of another food. fresh products and processed foods that contain organic ingredients.. except the following: ‘(A) Any highly refined oil derived from a food specified in paragraph (1) and any ingredient derived from such highly refined oil. “calcium builds strong bones. Generally.S.S. a flavoring. which provides: Notwithstanding subsection (g). Congress amended the FFDCA to increase the FDA’s ability to obtain information regarding persons engaged in the food business and products imported into the U. it needs to be noted on the label. pecans. Foods that are sold. vegetable and fruit juices.g. 2) health claims can be based on an authoritative statement of a scientific body of the U. infant formula and bottled water. or incidental additive that is. However. These new authorities will be briefly reviewed. Bioterrorism Law. The labeling requirements of the program apply to raw.S. colorings and incidental additives were rescinded by the amendments with respect to those which are. such as fresh produce. (i. Each is the subject of detailed regulations. and to take prompt enforcement action if products may present a serious health threat. although for dietary supplements they must be submitted to FDA. coloring. ‘(B) A food ingredient that is exempt under paragraph (6) or (7) of section 403 (w). Prior Notice is covered in the section concerning imported food and customs requirements. FDA has issued guidance documents regarding the production and processing of certain foods. 10. Although they are not regulations.e. or they may describe general wellbeing from consumption of a nutrient or dietary ingredient. bass. The USDA seal and the seal or mark of involved certifying agents may appear on product packages and in advertisements. 10. For example. provided procedures for exemptions and eliminated some labeling exemptions which existed in the FFDCA that manufacturers relied upon to avoid labeling certain ingredients. they may cha56 The U. they are not pre-approved by FDA. flounder. Products labeled “organic” must consist of at least 95 percent organically produced ingredients (excluding water and salt). peanuts. the evidence is not sufficient to meet the standard required for FDA to issue a health claim regulation. The law. The percentage of organic content and the certifying agent seal or mark may be used on the principal display panel.S.S. provided the claims are authorized by an FDA regulation and meet the requirements of that rule. government or the National Academy of Sciences.e. prior notice for imported foods.g. or dietary supplement and reduced risk of a disease or health-related condition. almonds. and 3) FDA.” “low cholesterol”) if they are made in accordance with the requirements of the regulations. “diets low in saturated fat. A certified operation may label its products or ingredients as organic and may use the “USDA Organic” seal. Under FDA’s enforcement discretion. a health claim notification to FDA is required prior to use. or any other law. Processed products that contain at least 70 percent organic ingredients can use the phrase “made with organic ingredients” and list up to three of the organic ingredients or food groups on the principal display panel. Products meeting the requirements for “100 percent organic” and “organic” may display these terms and the percentage of organic content on their principal display panel. FDA has regulations which describe in a general manner GMPs for food. and certified to consistent national organic standards. for example.e.. in response to court decisions has provided for qualified health claims where the level of the scientific evidence is not sufficient enough for FDA to issue a regulation. seafood products. Products labeled as “100 percent organic” must contain (excluding water and salt) only organically produced ingredients.. administrative detention and recordkeeping.. Department of Agriculture (USDA) and is intended to assure that organic foods are produced. The exemptions for flavor. food component. The manufacturer is responsible for ensuring the accuracy and truthfulness of these claims. A major food allergen is defined in the law as follows: ‘(qq) The term ‘major food allergen’ means any of the following: ‘(1) Milk. • Health Claims Based on Authoritative Statements. a major food allergen shall be subject to the labeling requirements of this subsection. Crustacean shellfish (e. it permits the use of qualified health claims when there is evidence for a relationship between a food. egg. specific regulations exist for low-acid foods. Only highly refined oils from the listed foods have been exempted under the amendments.

Food Industry 59 10. If the response is not satisfactory. and through. Sonnenberg & Anderson 11. and be physically present in the U. However.S. FDA can detain it and require the importer to demonstrate the food complies 58 The U. A domestic facility must register whether or not food from the facility enters interstate commerce. to Customs Headquarters or to the National Import Specialist in New York City. Many issues may arise which require fine technical distinctions or fall within grey areas of the law. Much of the focus in terms of CBP resources since September 11.S. has oversight of security procedures. Informed Compliance and Reasonable Care The Customs Modernization and Informed Compliance Act (“Mod” Act) was signed into law in 1993 and introduced the concept of “informed compliance” whereby Customs and the importing community would share the responsibility of administering the U. Also.7. The importation of products into the U. for purposes of registration. Also. check documents for accuracy and completeness. re-export the product. any foreign facility that packs or holds food after the last foreign manufacturer/processor of the foods must register. or hold food for human or animal consumption in the U.S. The following comprises a brief synopsis only and is designed to provide a basic knowledge of importing requirements. In addition. Oral advice from an import specialist is not binding on Customs and generally can be changed at any time. By Paul S. usually entitled as a “Warning Letter. Enforcement. Current Regulatory Environment Compliance with the Customs laws is of utmost importance in today’s environment where security considerations are paramount. Rather. Import specialists request information so that they can properly examine the classification and value of imported merchandise. An importer must exercise reasonable care in all facets of the importing process. hold or import food and persons that transport food in the U. Therefore. For imports. A foreign facility must designate a U. General Background. such as a putting on a label. the U. process. agent (for example a facility’s importer or broker). are required to register with the FDA. Importing into the USA. transport. FDA has a wide range of enforcement action’s it can use to prevent violations or remove violative product from distribution. along with a sample of the merchandise.S. Detained product may be held for up to 30 days pending the resolution of the allegations upon which the detention order was issued or further enforcement action. Food Industry . Importers typically do not have much contact with inspectors unless a problem arises with the clearance of the merchandise. foreign establishments are exempt. Voluntary corrective action. with the law. is regulated by.S.. enjoin the manufacturer or criminally prosecute the responsible company and individuals. who must live or maintain a place of business in the U. including the manner in which it describes. correct the violation. for imports. both facilities would be required to register.Registration Domestic and foreign facilities that manufacture. and the numerous local ports throughout the country where the merchandise actually is presented to Customs for clearance. The concepts of informed compliance and reasonable care permeate all aspects of Customs administration and enforcement. the people and companies subject to the requirement are those domestic persons that manufacturer. The records that must be kept are those that are needed to permit the FDA to identify the immediate previous sources and immediate subsequent recipients of food. Generally.1.S. checks for country of origin markings. pack. CBP has several levels of personnel with which an importer should be familiar. or destroy it. “Reasonable care” means that an importer will act reasonably.S. if a product appears to be in violation of the law. 11. Importers may obtain a binding ruling from Customs by submitting a request in writing. and perform many other similar day-to-day tasks. pack. including recalls. a telephone call or visit from a special agent is a serious matter and an importer should immediately contact Customs counsel if such an event occurs. Greater detail concerning the ruling process is set forth later in this chapter. Customs laws. Headquarters sets policy.S. if the second foreign facility performs only a minor activity.S.S. and with knowledge of the facts and its legal obligations. Even then. This “informed compliance” concept places an affirmative burden on importers to exercise reasonable care in the discharge of their responsibilities relating to the importation of merchandise. make determinations on country of origin markings. Although there are many new security initiatives. Registration is not required if a foreign facility manufactures/processes.S. The Customs regulations change quite rapidly and it is important to keep abreast of all new developments. FDA could seek to seize the product. and CBP has promulgated many new programs designed to make compliance more efficient yet also meet heightened security considerations. including its packaging. distribute. Recordkeeping FDA has issued a rule requiring the establishment of records which will permit it to track the distribution of foods for the purpose of removing them form sale or use in the event they pose a risk of serious adverse health consequences to humans or animals. packs. receive. only the second foreign facility is required to register.S. special agents almost always work on suspected Customs law violations. Anderson. The purpose of this chapter is to briefly describe the structure of CBP and its operations. the program currently in the forefront is the Customs and Trade The U. 2001 has focused in the area of security generally.. and issues rulings and decisions through the Office of Regulations and Rulings (OR&R). is the most frequently used form of enforcement action. Port Directors are in charge of the local ports and this is where the day-today importing activity occurs. It is highly recommended that an importer take the time to obtain expert advice prior to the importation of any product so as to minimize potential problems and to make its importation program as cost effective as possible. These include administrative and formal measures.S.” seeking voluntary corrective action including a recall. Special agents are not involved in routine Customs matters. Department of Homeland Security. and otherwise examines the merchandise to ensure that it is in compliance. is physically examined by an inspector. Administrative Detention FDA may detain an article of food it if poses a serious hazard. classifies and values imported merchandise.S. the problem more than likely would be brought to the importer’s attention through the import specialist. It should be noted that only a small percentage of all merchandise imported into the U.S. An inspector ensures that merchandise that is presented for entry matches that described in the commercial invoices. The NIS’s in New York provide supervisory guidance with respect to classification decisions at the outlying local ports so as to ensure consistency throughout the country. the National Import Specialist Division (NIS) in New York. Bureau of Customs and Border Protection (“Customs” or “CBP”). Partner. or holds food and sends it to another foreign facility for further manufacturing/processing or packaging before the food is exported to the U. Inspectors are Customs personnel who actually examine the merchandise prior to release into the Customs territory of the U. If a product is admitted into the country prior to FDA detecting a violation. Except for those foreign persons who transport food in the U. Customs and Border Protection Structure Customs’ basic structure involves CBP Headquarters in Washington DC. import specialists administer quotas.. FDA may place product on the automatic detention list which can prevent or substantially disrupt a person’s ability to import the food. The most frequent point of contact will be the local import specialists who are Customs officials responsible for monitoring merchandise imported into the U. There are a number of exceptions listed in the regulations. and to identify the most common issues of interest to food importers. FDA can issue regulatory correspondence.

the currency in which the transaction is made. easily found and read without difficulty. importer. Tariff rate quotas allow a specific quantity of merchandise to be imported at a lower duty rate. stored. However. amounts for freight and insurance are non-dutiable items and should be broken out separately if included in the invoice price to ensure that they are not included in dutiable value. on a consignment basis and is not sold to a purchaser in the U. The duty rate to be applied to imported merchandise is determined by its tariff classification and country of origin. The Customs marking requirements in Section 304 of the Tariff Act of 1930 are as follows: Every article of foreign origin (or its container) imported into the U. Absolute quotas are quantitative amounts that are set for a specific period of time (usually one year) wherein imported products may be brought into the U. rather than prohibiting any further importations during that year the products in excess of the quota amount will be assessed a higher duty rate for imports made The U. These methods may require the importer to provide costs. value and related information. but may not be processed or manufactured in a bonded warehouse and then brought into the U. expenses and detailed accounting information in order to satisfy Customs as to the correct appraised value of the imported merchandise. Basic Customs Considerations. but is not licensed to transact Customs business with CBP or file entry documentation. In general. appropriate information is electronically transmitted by the broker. The ultimate purchaser is generally the last person in the U. goods imported into the U. An entry summary must be filed within 10 business days from the date of entry.Partnership Against Terrorism (CTPAT) program wherein importers receive certain benefits including reduced cargo inspections when they are certified as a C-TPAT participant. also the North American Free Trade Agreement (NAFTA) which involves duty-free treatment for qualifying articles between Mexico. CBP enforces the regulations of many other governmental agencies and acts as the primary enforcement arm for the application of such regulations to imported products. and all charges itemized by name and amount including freight. and also the payment of duties. it is generally recommended that a Customhouse broker be utilized.S. as the case may be. but it is possible to manufacture products within these countries and qualify for duty-free treatment upon importation into the U.S. the grade or quality. Tariff Classification and Duty Rates There are over 12. U.S. and similar treatment.S. Many of the programs involve imports from developing countries such as the Generalized System of Preferences (GSP). asserted tariff classification items and related information. no more imports of those products will be allowed in the U.S. Special rules also apply where merchandise is brought into the U. However. Entering Merchandise into the U.S. Department of Agriculture (USDA) and the Federal Trade Commission (FTC). An importer is free to structure a transaction to take advantage of the Customs laws. In order for the marking to be considered conspicuous. In fact. A Customhouse broker is distinguished from a freight forwarder in that a freight forwarder performs the service of arranging for the transportation of merchandise from point A to point B. There are also many bilateral agreements providing for duty-free treatment such as the U. and there are also allocations for “all other countries” not receiving the specific allocation.e. With respect to food products. Customs duties are generally determined on an ad valorem basis.S. A Customhouse broker is licensed by CBP and files the appropriate documentation with Customs to obtain release of the merchandise and to effect payment of duties.2. – Israel Free Trade Agreement. CBP will then issue a release of the merchandise or indicate that there is a problem and that additional information is needed. it must be legible. in English.S. such a product must be exported. the purchase price of each item. the principal use of an item. so an answer to any country of origin marking question must take into account the particular product involved and the manner in which the good is imported and used. In order to determine the proper classification of imported merchandise within the HTSUS. In many instances. or may be a compound rate of ad valorem and specific duties. if the technical requirements are met. In the event that the imported merchandise is not granted a “May Proceed” notice by FDA. whether a particular tariff item is more specific than another. once the quantitative limitation has been reached. There are also many special programs allowing for reduced duties or importation free of duty. Switzerland is not a party to any of these free trade agreements.S. The C-TPAT program and its impact upon food importations is discussed later in this chapter.S. and others. Once the limitations have been reached for the particular time period in question. Goods must be marked in such a manner as to indicate the country of origin to the ultimate purchaser in the U. the merchandise may be subject to detention procedures as set forth below.S. (HTSUS) under which imported merchandise may be classified.. Factors affecting tariff classification include whether the product is specifically defined in the Section or Chapter Notes. A CF 7501 will then be filed by the broker which is known as an “Entry Summary” and which provides all information concerning the calculation of duties. im- Quotas Numerous types of quotas on imported merchandise are administered through CBP. and Canada. and accompanying liquidated damages. who will receive the article in the form in which it is imported. Allocations are generally made by specific country.S. or the price actually paid for the merchandise by the importer. Quotas are generally of two types. 11. indelibly. must be marked with the country of origin. U. . including the name by which each item is known. coverings. or other penalties. and the component make-up of the item. Merchandise can also be brought into a Foreign Trade Zone. costs of packing. whether the item is provided for specifically in a particular tariff item. A common mistake made by importers is believing that imported merchandise always will be valued (appraised) at the transaction price. Customs may use other methods of valuing imported merchandise such as deductive value or computed value. and one which can have a major effect on Customs duties. Alternative methods of appraisement generally apply in related party transactions or consignment situations. Customs Valuation of Imported Merchandise Customs valuation can be a very complicated area. There are many exceptions to the above rule. and again. must be marked in a conspicuous manner with the English name of the country of origin. i. 10¢ each. a detailed description of the merchandise. Again. repacked. The commercial invoice should show the port of entry to which the merchandise is destined. Food Industry 11. Invoicing Invoices presented to Customs must be properly prepared and meet regulatory requirements. type of merchandise. and related expenses.S. shall be marked in a conspicuous place as legibly. which may qualify for dutyfree treatment under such a program. Merchandise may be inspected. The entry process begins with the Customhouse broker submitting a Customs Form (CF) 3461 to Customs which indicates the basic information concerning the merchandise including the shipper. marks. demands for redelivery to Customs. Failure to properly mark an imported article to indicate its country or origin can result in a special 10% ad valorem marking duty. yet entry is made at the first sale (price to the middleman) level. Some importers employ buying agents whose commissions are non-dutiable items.000 separate subheadings in the Harmonized Tariff Schedules of the U. Duties on the merchandise will not be deposited until the product is withdrawn from warehouse for consumption into the U. duties are not paid until merchandise is withdrawn for entry into the U. an article may seem to fit exactly within a tariff provision and yet not be properly classified under that tariff provision. Merchandise may be entered into a Customs Bonded Warehouse upon the filing of an appropriate warehouse entry.S. There is 60 The U. – Chile Free Trade Agreement. Customs duties may also be specific. The information is submitted electronically through the ABI (Automated Broker Interface) system. commissions. FDA will then notify the broker whether the merchandise may proceed or not. it should be noted that although most appraisements are made based upon the invoice price on the commercial invoice to the importer. only up to those specific limits. however. CBP enforces the regulations of the Food and Drug Administration (FDA). meaning that the amount of duties owed will depend upon the duty rate applied and the value placed upon the imported merchandise. porter. most appraisements are made based upon transaction values. Other favorable structures involve the utilization of the “first sale rule” which involves sales through a middleman.3. Food Industry 61 Country of Origin Marking All merchandise of foreign origin imported into the U.S. Certain legal requirements must be met in order to utilize these structures and they are not automatically available. Quotas cover a wide range of products and have traditionally been evident in the importation of food products and textiles. The GRI’s are to be consulted in all cases and are applied in sequential order. and other programs.S. Caribbean Basin Initiative (CBI).S. It is also possible to utilize a Customs Bonded Warehouse or Foreign Trade Zone (FTZ) regarding entry of merchandise. Of course Switzerland does not qualify as a developing country.S. tariff classification. an importer must be familiar with the General Rules of Interpretation (GRI) of the HTSUS.S. the name of the party to which the merchandise is sold and the place from where shipped. production or manipulation. who in turn sells to a U. the common meaning of a tariff item. until a later time. Finally. 1) absolute quotas and 2) tariff rate quotas. It is possible for an importer to file entry documentation himself.S. In the case of processing or manufacturing.S. the English name of the country of origin or the article. but Swiss companies may produce products in developing countries and ship them directly to the U. A Foreign Trade Zone requires special permission but allows for greater flexibility and freedom of manufacture. numbers and symbols under which they are sold by the seller. For shipments of products subject to FDA requirements. U. Importers typically utilize licensed Customhouse brokers to assist in the entry of merchandise into the U.S.S.S. and permanently as the nature of the article (or container) will permit in such manner as to indicate to an ultimate purchaser in the U. Many companies frequently are both Customhouse brokers and freight forwarders. the quantity of merchandise.S. insurance.

In such an instance the appropriate mechanism is referred to as a “Request for Internal Advice”.4. Should a food shipment be detained. this same information must be provided for an immediate non-transporter’s subsequent recipients of all foods released. Records Maintenance The BTA also requires the maintenance of records to allow for the identification of immediate previous sources and immediate subsequent recipients of food to help the FDA track food quickly and more efficiently should a potentially hazardous shipment be released. 2004 are now subject to a 180 day limitation period.C. that manufactures. and the address and location of where the article of food is to be detained. to receive a refund of any excess Customs duties paid. must register with the FDA. Allocations of quota are subject to negotiation and change on a regular basis. Depending upon the type of product involved. port of arrival. other sugar containing products. and country of origin determinations. domestic or international. Adulteration. and name and contact information are required to be submitted in the registration. hold or import food. processes. Switzerland generally falls into an “all other” allocation on most quotas as opposed to receiving a specific amount. Records that must be maintained by non-transporters of food relate to the identity of the immediate non-transporter’s previous sources. in effect will also act as a binding ruling as to the issue. Further. It is also possible to obtain decisions from Customs on matters contested administratively. receive. quantity and type of packaging and immediate transporter source. Most of the methods employed depend upon whether or not an entry has been “liquidated”. packed and held. Detention The BTA gives authority to the FDA to detain any shipment if it has “credible evidence or information indicating that the article of food presents a threat of serious adverse health consequences or death to humans or animals”. Food Industry The U. Products that are exempted from prior notice requirements are personal food or gifts accompanying an individual. for the sole purpose of transporting the food. Rulings from the NIS in New York are limited to simple classification issues. As a result. D. dairy products including milk and cheese. It should be noted that foreign persons who do not transport food in the U. foods normally subject to the Bioterrorism Act that are included in shipments of household goods. a detention under Section 801(a) focuses on whether the article of food 1) appears to have been safely produced. FDA has stated that it will primarily use Section 304(h) for domestic shipments and not as a tool to stop imports. more complex classification issues. and 3) is properly labeled. It is also possible to request a ruling from Headquarters where entry has been made but the entry has not yet been liquidated. It is critical that any potential quota applicability be determined well ahead of time as many quotas fill quickly and it may be extremely difficult to obtain a quota allocation and appropriate documentation. An article of food may be detained regardless of the size and value of the item. These rulings take longer to process and can be secured within 120 days. merchandise that is exclusively subject to U. The rationale behind this requirement is to ensure that the FDA can quickly locate and neutralize faulty food processors in the case of delivered or accidental contamination of food. route of movement during the time the food was transported. Persons that must establish and maintain records include domestic persons in the U. An importer has a right to contest a determination by Customs regarding an entry and 7 Ninety days has been the traditional statute of limitation for filing an administrative protest but the law has recently been changed so that entries made after December 18. a U. Section 304(h) gives the FDA authority to detain food where it has credible evidence or information that the article of food presents a threat of serious adverse health consequence or death to humans or animals. country from which the article is shipped. identification of the detained article of food. regardless of value. detention period involved. method of valuation.S. a detention order may be appealed as to the reason for the detainment.S. or country of origin marking methodology is correct in the form of a binding ruling from Customs. The final accounting for Customs duties occurs at liquidation of an entry which may occur months or even years after goods are released by Customs. but often take longer. must meet the prior notice requirements unless exempted. a ruling may be obtained from CBP Headquarters in Washington. custody or control for the sole purpose of transporting it.. type of food. and nonconsumption samples for testing only. the detention order is deemed terminated.S. The detention order may require the detained food to be marked and labeled that in fact it has been detained Also. the name of the authorized FDA representative who approved the order. For other issues including valuation. a general statement of reasoning behind why the food is being detained. The passage of the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (“Bioterrorism Act” or BTA) has particular relevance with regard to imports. Importantly. Detained food may be transferred to a secure area as determined by the FDA. transport. and persons who place food directly in contact with its finished container. A ruling may be revoked or modified but such an occurrence is relatively infrequent and generally would not apply on a retroactive basis. The detention order must be approved by the FDA district director at the local port and all relevant parties will be notified. and mixed condiments and seasonings. CBP acts as the first level of scrutiny with regard to imported products and their compliance with FDA regulations. number of packages. An exception to this involves the importation of certain Swiss and other types of cheese.7 A protest contesting a decision by Customs is filed at the local port where entry was made and generally the decision is also made there. for foreign facilities that have no physical presence in the U. Binding rulings are prospective in nature and provide a written decision from Customs as to any of those issues noted above. statement that the article of food identified is detained for the period shown. Prior notice of imported foods must be received electronically by FDA through the Automated Broker Interface (ABI) or via the Prior Notice System Interface (PNSI) no more than five days before arrival in the U. Food Industry 63 . further review of the protest by Customs Headquarters may be requested. and the registration number and standard carrier abbreviation code. The basic elements of the Bioterrorism Act are as noted below. custody. all carriers involved in transporting the article. distribute. foreign persons that transport food.through the balance of the calendar year. hour and date of the order. labeling and other traditional FDA issues are discussed in the chapter involving FDA requirements. the firm name and address in each instance. homemade goods shipped as gifts. process. address. Department of Agricultural jurisdiction such as meat. certain types of mixes and doughs. Food and Drug Administration (FDA) Requirements Enforced by Customs / The Bioterrorism Act of 2002. regardless of whether a foreign person has possession. with Section 304 detentions requiring “credible evidence of serious adverse health consequences or death. The records must be retained depending on the type of food and whether the record keeper is a transporter or non-transporter. In order to do so the importer must file a protest with Customs within 180 days from the date of liquidation of the entry7. In each case. A ruling may be obtained from the National Import Specialist in New York and these rulings frequently may be secured within 30 days. In some cases. or control of an article of food in the U. A distinction must be drawn between Administrative Detention under Section 304(h) and Section 801(a) of the Federal Food Drug and Cosmetic Act. The term “transporter” includes persons who have possession.S. poultry and egg products. it must be received no fewer than two hours before arrival by land via road. animal feed. referred to as an AFR (Application for Further Review). description of freight.S. various types of chocolate. four hours before arrival by air or land via rail. address.S.S. Certain requirements are present as regards the entry procedures so that Customs can adequately account for all products subject to quota. packs or holds food for animal or human consumption in the U. food product categories. If the FDA terminates a detention order or if the detention period expires. The data that must be included in the prior notice provided is the country from which the article originates. anywhere from six months to two years.S. there may be different documentary requirements. a detention order will be issued by FDA. Also. Records to be kept in this regard include those with names of the transporter’s immediate previous source and the transporter’s immediate subsequent recipient.S. A detention order is valid for a maximum period of 30 days. port of entry must be provided to Customs and FDA. based agent must be designated. Rulings by Customs and Administrative Contest As previously mentioned. 11. raw sugars.S. the Customs entry type and date. On the other hand. whether foreign or domestic. that manufacture. A detention under Section 801 will result in a document referred to as “Notice of Detention and Hearing”. the standards of detention differ. Records must be readily available and accessible. trade names. and eight hours before arrival by water. a ruling will give predictability to an importer as to dutiable consequences of its transactions. There are currently quotas on a wide range of products including beef. If the FDA does not issue a detention termination notice and the detention period expires. As noted. Prior Notice This section of the BTA requires that prior notice of the arrival of merchandise at the first U. It also includes foreign persons that transport food in the U. the date shipment received and date released. the anticipated U. ice cream. The detention order must have a detention order number. telephone and fax numbers. pack.S. and transfer points. Customs records must be kept for five years. illegal additives or residues. date received. are excluded from these regulations.S. an importer may obtain protection and assurance that its tariff classification. address. the origin and destination points. including the name of the firm. All shipments. the email 62 The U. an authorized FDA representative will issue a detention termination notice releasing the article of food to any person who received the detention order. Basic information such as company name. The decision by Headquarters in such a case. food items shipped by a diplomatic pouch. An importer should note that money paid to Customs at the time of shipment clearance is only a deposit of estimated duties. for Registration The Bioterrorism Act requires that any facility. telephone number. 2) contains no contaminants.S.

S. D. government officials and others providing information to consumers. IL 60607 Phone: (312) 782-8424 www. 20005 Phone: (202) 639-5900 www. gross negligence. Food Industry The U. VA 22101 Phone: (703) 761-2600 www. Suite 1000. packaging.S. Washington. McLean. Not all the criteria will apply in all cases and Customs personnel have indicated that each submission is evaluated on a case-by-case basis taking into consideration specific risk factors such as the country of origin or transshipment. leads efforts to increase productivity. Elmwood Park. FT publishes various resources for the food industry. Private Label Manufacturers Association 369 Lexington Ave. and information technology security. and major ports throughout the world. beverage and agricultural industries. Washington. 12. The Food Marketing Institute (FMI) 655 15th Street NW. and eligibility for account-based process with CBP.gmabrands. Food Industry 65 . security training and threat awareness. The program has received increasing acceptance and all importers should at least consider the possibility of participating in the program. Customs offers incentives to the importer such as reduced cargo inspections.org The Food Marketing Institute is a nonprofit organization which provides education. importer. 11.org FPSA is the largest U. Its members include food retailers.ota. D. Many programs relate to developing greater security at ports in the U. whether by fraud. If Customs determines that an importer fraudulently evaded duties. and related professions in industry.beveragemarketing. D. The Customs – Trade Partnership Against Terrorism (C-TPAT) is the major initiative by CBP in strengthening security considerations as regards importers. NW. When a violation of the Customs laws has occurred.C. Food Products Association 1350 I (Eye) Street.S. ingredients and services to the global food.5.org IFIC’s mission is to communicate science-based information on food safety and nutrition to health and nutrition professionals. Greenfield. The Food Institute American Institute of Food Distribution One Broadway. it may impose a penalty of up to four times the loss of Customs duties and up to two times the loss of Customs duties for ordinary negligence.O. 20037 Phone: (202) 337-9400 www. federal. If Customs determines that an importer violated Customs laws because of gross negligence. NW. an assigned account manager. Security considerations have been at the forefront of the CBP agenda since the September 11. A prior disclosure is a detailed explanation of the circumstances and factors resulting in a false statement or material omission which is filed by an importer before an investigation commenced. wholesalers and their customers internationally.. 12. or without knowledge of an investigation. efficiency. freight forwarders and ocean transportation intermediaries.1. beverage and consumer products industries.org The Institute of Food Technologists is a non-profit scientific society with 22. Institute of Food Technologists 525 W. The following measures are mandatory: Written procedures for selecting business partners. journalists. Chicago. physical access controls. 2) electronic submission of the profile and 3) assessment and verification of the importer’s actual processes.plma. scientific research.S. CBP has mandated specific security criteria. Its members range from seed companies to grocery chains. Suite 200. Washington. and modes of transportation along the supply chain. and international levels on legislative and regulatory issues. entry filer.ific. by means of a material false statement or omission. An importer must conduct an assessment of its international supply chain. Customs has compiled a list of records which must be maintained for five years (the “(A)(1)(A)” list). who do business with other C-TPAT certified businesses. education. or negligence. container security. introduce or attempt to enter or introduce any merchandise into the U. 3rd Fl.C. consignee.S. Trade Associations. educators. in return for an importer’s participation and demonstration that it meets or exceeds certain minimum security requirements. procedures regarding documentation processing. The amount of penalty imposed depends upon the level of culpability. International Food Information Council (IFIC) International Food Information Council (IFIC) and the IFIC Foundation 1100 Connecticut Ave.C. 2001. academia and government. Inside U. Food Processing Suppliers Association 1451 Dolley Madison Blvd.Penalties Under the U. Customs brokers. New York. Potential participants should consult with knowledgeable experts as to future changes in the program and the advisability of participation.com Business association for the organic industry in North America to encourage global sustainability through promoting and protecting the growth of diverse organic trade.S. technical assistance. beverage and pharmaceutical processing industries. Customs laws it is unlawful to enter. Beverage Marketing Corporation 850 Third Ave. Van Buren. Washington. the food industry has relied on FPA for government and regulatory affairs representation.000 individuals working in food science. (800) 275-4630 www.foodinstitute. the duty to maintain Customs records is extended to any owner. access to the C-TPAT membership list. or any other party who is involved in such import related activity.org The Food Products Association (FPA) is the principal scientific and technical trade association representing the food products industry. consulting and financial services to the global beverage industry.com PLMA is an international trade association of store-brand food and non-food products manufacturers and suppliers. food technology.C. Because the program is voluntary. Annexes. Under this law.S. NY 10017 Phone: (212) 972-3131 www. Customs – Trade Partnership Against Terrorism(C-TPAT) and Related Security Compliance Issues. The “supply chain” for C-TPAT purposes is defined as from point of origin (manufacturer/supplier/vendor) through the point of distribution in the U. The C-TPAT program continues to progress and be subject to additional revisions.S. C-TPAT is a voluntary partnership between Customs and members of the importing community. The program provides incentives to join C-TPAT and encourages applications from those importers 64 The U. Importers also need to be aware of the additional sizable penalties which may be imposed for failing to keep and present proper records.. association of suppliers of equipment. Since 1907.com The Food Institute is a nonprofit organization that provides research and information to the entire food distribution system. MA 01302 Phone: (413) 774-7511 www. but can be quite severe.ift.com Leading supplier of information. 20005 Phone: (202) 452-8444 www. The Organic Trade Association P. IFIC is supported primarily by the broad-based food. an importer may avoid the imposition of the harsh penalties described above by filing a prior disclosure or a petition to mitigate penalties. Box 547. and other programs pertain to container security and supply chain security considerations. research and public relations services. but importers should also take care to keep related business documents for the same period of time. Suite 430.fpa-food. physical security. Grocery Manufacturers of America (GMA) 2401 Pennsylvania Ave NW.iafis. it may assess a penalty up to the amount of the U. and growth in the food. Suite 700. Customs states that the C-TPAT program recognizes the complexity of international supply chains and endorses the application and implementation of security measures based upon “risk analysis”.fmi. domestic value of the merchandise. importer of record.com GMA represents food and beverage and consumer product companies at the state. New York. 20036 Phone: (202) 296-6540 www. communications and crisis management.S. Suite 300. NY 10022 Phone: (212) 688-7640. The application process requires 1) preparation of the C-TPAT Supply Chain Security Profile. NJ 07407 Phone: (201) 791-5570 www. D.

independent restaurants. U. FL 33134 Phone: (305) 446-3388 www. 20036 Phone: (202) 331-5900 www. 27th Floor New York.com Food Marketing Institute Show FMI The Power of Five .. BLS is the principal factfinding agency for the federal government in the field of labor economics and statistics. Washington. New Hope Natural Media also provides integrated marketing solutions that help companies reach their markets. Ithaca. Its mission is to ensure and enhance economic opportunity by working with businesses and communities to promote economic growth. NY Phone: (212) 482-6440 www. 2007 in Chicago. Articles on specialty foods and special reports on the specialty food industry.usda. Food and Drug Administration (FDA) 5600 Fishers Lane Rockville.S. or in the preparation of food and drink. Food Export Showcase.fancyfoodshows.gov FDA is a division of the U. Restaurants and Institutions Magazine Reed Business Information 360 Park Avenue South. agricultural industry. 12.fda. Coral Gables.com Weekly coverage of general supermarket industry trends.C.stats.S. packaged foods and beverage industries. Ste 200.McCormick Place May 6-8. educate and promote a rapidly growing industry. Together with the National Restaurant Association Educational Foundation. trade shows and business perspectives.S.S.org This is the largest event of its kind on a worldwide basis and the premier show for supermarket retailers and wholesalers now offering five shows in one location: FMI Show.mannlib. Natural Food Network. beverage industry on a monthly basis.com Publication that covers trends and issues pertaining to the U.allcandyexpo.org The National Restaurant Association is the leading business association for the restaurant industry. Department of Commerce 1401 Constitution Avenue NW Washington. CO 80302 Phone: (303) 939-8440 www. 2006 in Rosemont.plma.com IACP is a not-for-profit professional association which provides continuing education. U. 1050 IL Route 83. communication.S.com 66 The U. New York. Natural Grocery Buyer. USDA Economics and Statistics System Albert R. covering chains. New York.com/grocerynetwork/index. 155 Pfingsten Road.specialtyfoodmagazine. U.restaurant. 20212 Phone: (202) 691-5200 www. NY 10014 www.edu The USDA Economics and Statistics System includes nearly 200 data sets published by the USDA’s Economic Research Service. Progressive Grocer VNU Business Publications USA 770 Broadway. 12.grocerynetwork. Department of Labor.com Their trade and consumer publications are respected for their high quality of content.gov Cabinet level department providing key statistics on the U. Department of Agriculture (USDA) 1400 Independence Avenue SW Washington. D. NW. IL (2007 dates not known at time of printing) Phone: (703) 790-5750 www. IL 60106 Phone: (630) 694-4344 www. 7 West 34th Street. National Association for the Specialty Food Trade NASFT Summer Fancy Food Show Jacobs K. U.com National Association for the Specialty Food Trade Moscone Center NASFT Winter Fancy Food Show January 21-23.com Published monthly.gov A division of the U. KY 40202 Phone: (502) 581-9786 www. Beverage Industry Stagnito Communications Inc. agricultural economics. 2006 in Chicago.com PLMA Private Label Trade Show Rosemont Convention Center November 12-14.2. United Produce Expo and All Things Organic.com Monthly publication that covers trends in the U.rimag. Organizer of various shows including Natural Products Expo West (Anaheim. U. D. hotels and institutions.S.bevindustry. Functional Foods & Nutraceuticals New Hope Natural Media 1401 Pearl St.preparedfoods.International Association of Culinary Professionals 304 West Liberty Street. national Agricultural Statistics Service and the World Agricultural Outlook Board. trends. The data describes all aspects of domestic and international agriculture. Suite 201. 2007 in Anaheim. CA Phone: (212) 482-6440 www. both in print and online.supermarketnews. 20230 Phone: (202) 482-2000 www. products and trends.S.com NCA All Candy Expo McCormick Place June 6-8. whether around the corner or around the world. industry. IL 60015 Phone: (847) 205-5660 www. CA). 2007 in San Francisco.newhope. NY 10003 Phone: (646) 654-7561 www. Specialty Food Magazine 120 Wall Street.fmishow. Louisville.commerce. Ste 205.cornell. Trade Fairs. D. MD 20857 Phone: (888) 463-6332 www. trends in the grocery industry and on companies.S. includes financial highlights. CA Phone: (866) 458-4935 www. Department of Health and Human Services and responsible for the supervision of the food and pharmaceutical industries. Natural Products Expo West Anaheim Convention Center March 9-11. NY 10001 Phone: (212) 630-4000 www.bls.iacp. the Association’s mission is to represent. Food Industry The U.fancyfoodshows.C: 20250 Phone: (202) 720-2791 www. Periodicals. IL Phone: (202) 452-8444 www. New York. Bensenville..S.. Government Agencies.com 12.3.4. NY 10005 Phone: (212) 482-6440 www.gov Government agency in charge of providing key statistics on the U. National Restaurant Association 1200 17th St.S. Boulder. Ste 300. and rural affairs. Javits Center July 9-11. 2006 in New York City. NY 14853-4301 Phone: (607) 255-5406 www. Supermarket News Fairchild Publications Inc. Fancy Food Show. Prepared Foods Business News Publishing Co.S.com Restaurants and Institutions (R&I) is the leading source of vital information for the entire food service industry. Deerfield.gourmetretailer.S. Food Industry 67 . D. U. Mann Library Cornell University.expowest.S.C. The Gourmet Retailer 3301 Ponce de Leon Blvd.jsp Monthly articles featuring statistics. IL Phone: (212) 972-3131 www. Monthly publication with focus on the industry.C.usda. Bureau of Labor Statistics (BLS) 2 Massachusetts Avenue NE Washington.S.

Ms. Swiss Business Hub New York Office. Switzerland (1988-1990). and Personal Advisor to the Swiss Minister of Justice and Police and to the Swiss President. Mr. Swiss Business Hub USA. Gallen. degree at the Georgetown University Law Center.com. Tel 312 915 0061 or Fax 312 915 0388 12. the Manhattan Chamber of Commerce and the Manhattan International Development Corporation awarded her the “International Service Award”. District Court for the Northern District of Illinois. The Authors of the Study. and the U.mintel. Bea. an international boutique firm with 15 lawyers in New York. Gunduz is a native New Yorker. He is President of the Swiss Society of New York and a member of the Chapter Board “Doing Business in USA” of the Swiss American Chamber of Commerce. Frank.org The Organic Trade Association: http://www. Mr. Contact psa@sonnander. He is an Adjunct Professor of Law at Northwestern University School of Law. He concentrates his practice in regulatory law relating to food. and Swiss corporate and contract law and the law of the European Union.com The Food Marketing Institute: http//:www. Tel 312 915 0061 or Fax 312 915 0388 John F.S.S. Switzerland and the London School of Economics. He has counseled firms in the food and healthcare industries regarding compliance with regulatory requirements.org. Tel 312 807 4413 Frank Ustar is Deputy Director of Swiss Business Hub USA and Trade Commissioner for Los Angeles. Contact Ally@SwissBusinessHub. Haeni received her BA with honors from DePaul University in Chicago and also does cross-cultural training for executives.com Prepared Foods: http://www.S. European Programs (graduate program in international legal studies based in Salzburg. JD from Illinois Institute of Technology/Chicago-Kent College of Law and attended the University of the Pacific. Before joining the Swiss government in 1984.com The National Association for the Specialty Food Trade: http://www. and J. In 2000 he was appointed Honorary Consul General for Norway to Chicago and the State of Illinois. mergers & acquisitions. Court of Appeals for the Seventh Circuit. the Series 7 Securities License. Haeni. is a native of Basel. Ally A.ota. Austria).acnielsen.12. Court of International Trade. the USDA. Food Industry 69 . Tel 212 599 5700 ext.M. The Swiss Government conferred on him the title of Minister on September 21. Contact Martin@SwissBusinessHub. iur.packagedfacts. Lemker has represented clients before the FDA. as well as Homburger / Baker & McKenzie in Zurich. Mr. He is admitted to the bar in New York and Zurich. Anderson is also Honorary Chair of the Chicago Chapter of the NorwegianAmerican Chamber of Commerce where he served as President from 1985 to 1987. Headquarters. She also owned and operated a small business near the United Nations in New York for nine years helping international clients enter the American market. Washington. Her professional background includes assignments with the Swiss government and over 15 years of experience in the finance industry. and holds a B.org. Anderson. corporate finance and strategic partnerships and marketing agreements.S. Mr. She previously worked for American Express Financial Services. Illinois.5. C. Wuersch is a frequent speaker on legal issues involving business activities of foreign companies in the U.A in International Relations from Boston University and a Masters in International Business Management.S. Chicago. Mr.org. drug and medical industries and transportation and automotive industry. He is admitted to the Bar in Illinois. he obtained an LL.com Tel 212-509-4722 The U. Court of Appeals for the Federal Circuit. degree at the University of Zurich Switzerland in 1989. Links to Sources.usda. Colorado. Ms. Tel 312 899 1100 Ally A. in the firm’s Food. the U. Ustar worked as a Research Associate for Ohio State University.com Packaged Facts: http://www.com U. Gunduz is also the founder and executive director of the Swiss American Council for Women Inc. 1032 68 The U.com. Mr. Food. Ms. Department of Agriculture (USDA): http://www. he practiced international corporate and securities law with Morgan Lewis & Bockius (1996-1997) and Fried. Harris. His practice focuses on corporate law. D. von Walterskirchen is a graduate (honors) of the University of St.fmi. Contact daniel. Gunduz. he attended graduate and post-graduate courses in international law and EU law at the University of Lausanne. Lemker is the former chair of the Chicago Bar Association.S. Mr.preparedfoods. In 1991. Prior to co-founding Wuersch & Gering LLP in 1997. Swiss Chief Negotiator for Services (GATS) during the Uruguay Round of the GATT. Drug and Device Group. specialtyfood. Switzerland. at Northwestern University. Prior he held various positions in the private sector. the U. Food Industry Daniel A. and served as Chairman of the Customs and US.gov Claudine M. 2001. He has written and co-authored books and articles on U. Boyd & Lloyd. He is also currently President of the International Trade Association of Greater Chicago. Mr.S.D.wuersch@wg-law. Standard & Poor’s http://www. McGeorge School of Law. Tel 310 575 1145 or Fax 310 575 1982 Martin von Walterskirchen is Director of Swiss Business Hub USA. Chicago. Ustar holds a BA in Economics and a MA in Marketing. the U.6. He acquired his Dr. avid angler. General Secretary of the Swiss Federal Office for Foreign Economic Affairs.org.C. His previous activities for the Swiss government include Councilor of the Swiss Embassy in Moscow. the FTC and State Regulatory Agencies. published poet. is a Partner of the law firm of Sonnenberg & Anderson. and Customs and International Trade Bar Associations. Trade Law Committee of the Chicago Bar Association. Drug and Consumer Products. and is a member of the International Financial Planning Association. and holds the internationally recognized Certified Financial Planner® Professional Education Certificate from the College of Financial Planning in Denver. He is a member of the American.com Mintel http://www. Swiss Trade Commissioner for New York. Wuersch is the Managing Partner of Wuersch & Gering LLP. In 2004. She started her first business at the age of 18 with her sister and late mother. Lemker is a member of Bell. Contact Claudine@SwissBusinessHub. In addition. Contact jlemker@bellboyd.S. Shriver & Jacobson (1991-1996) in New York. Anderson obtained his BA from Wake Forest University. He received both his B.standardandpoors. Switzerland.com ACNielsen: http:// www. Paul S.C.A.S. Contact Frank@SwissBusinessHub.

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