The Lempert Report LIVE

Unpacking Food Regulations, Prices, and Environmental Impacts: Kellogg's Vs Mexico & the Intricacies of Instacart's IPO

August 28, 2023 Phil Lempert Episode 92
The Lempert Report LIVE
Unpacking Food Regulations, Prices, and Environmental Impacts: Kellogg's Vs Mexico & the Intricacies of Instacart's IPO
Show Notes Transcript Chapter Markers

Can you imagine the environmental footprint of that lime slice in your margarita? This week, we're serving up an enlightening journey through the maze of food regulations and the war that's erupting between Kellogg's and Mexico over new labeling requirements. As we approach Labor Day, expect to be shocked by the rise in food prices and discover the cunning strategies big corporations employ to circumvent these regulations. The implications for you, the consumer, could be enormous.

Our conversation doesn't stop at regulations and prices. We're squeezing out the juice on how certain food items can help combat anxiety and why Taylor Swift is in our spotlight this week. We're also counting down to National Food Not Phones Day on September 19th. But wait, there's more! We're lifting the lid on Instacart's IPO filing with a deep dive into its profits and the sneaky details hidden in fine print. So plug in, food enthusiasts, and get ready for a deliciously informative ride.

Phil:

Welcome to the Lempert Report LIVE. Late Friday afternoon Instacart finally filed for its IPO and reported $242 million in profits for the first half of 2022, as compared to a loss a year before of $74 million. Now there are two notable finds in the filing. First is that in 2022, a one-time tax benefit helped its 2022 results that number that I just shared. It would be interesting to see just how much of that there is and what the effect would be if we pulled that out. The other one is that PepsiCo agreed to purchase $175 million in preferred stock. Now that doesn't seem like great news for Coca-Cola and other snack food companies, I'm sure, but we'll have to wait to see just how that plays out. The other thing Instacart has not firmed up is a date. They have not firmed up the price for the stock offering yet, and also what they've been told is that employees can sell their stock in November after they go public, as long as the stock price is 20% higher than the IPO price. On today's broadcast prices are up Kellogg's versus the country of Mexico, the state of food delivery, one food that could change our environmental impact, the impact that that wedge of lime on your margarita really has. And on Food Not Phones, we look at foods that can reduce anxiety. On the bulls eye, it's all about Taylor Swift. I hope you'll check out FoodNotPhones. com and join us for National Food Not Phones Day on September 19th. A programming note next week The Lempert Report will air on Tuesday due to Labor Day holiday. Let's get started. So, Sally, as we talk about Labor Day, what's interesting, and we just got this from the e-commerce accelerator pattern, prices are up. And what's interesting, according to the Bureau of Labor Statistics, their most recent report is that inflation rose 3.2% for major categories of goods over the last year. But when we look at Labor Day, mayonnaise is up 16%, so maybe not so much, coleslaw and potato salad this year. Potato chips are up 12%, Soda is up 5%, Ketchup up 5%, there's up 4%, American cheese up 4% and lettuce is up 4%. So even though inflation 3.2%, we're starting to see a lot of increase in some of these numbers which, for a lot of people, might change what they're going to actually serve on Labor Day.

Sally:

Yes, and we know Americans love their grilling out and Labor Day is a really popular time for people to gather together and fire up their grills. But hot dogs have decreased by 2.6%, so maybe we'll see some more people switching from hamburgers to hot dogs. Tomatoes are down 1.75% and mustard is down 1.61%. Maybe that makes up for the increased cost in mayonnaise there, or maybe we see people go to other party food favorites like chicken wings or pizza.

Phil:

Yeah, and I don't know if you've ever made a pizza on a grill, but I have. No, no, I have, and it's great, it's absolutely fabulous. So that's a great idea. Kellogg's is going to war with Mexico. For those of you that might not be aware, in 2020, Mexico instituted their new labeling requirements their black hexagons that showcase the foods are high in sodium or high in sugar, and it looks like Kellogg's is really trying to keep Tony the Tiger and Toucan Sam on their packages. Part of these regulations from Mexico dictate that if products are high in sugar, they contain more than 37 grams of added sugar in 100 grams serving. They can't use cartoon characters on the package, so Kellogg's is suing the Mexican government over the labeling. One of the reasons for it is not just about Mexico, but clearly what we're seeing here in the US is again more movement to try to get a healthy label out there. So I think this is a precursor to it. But what's interesting to me is what Kellogg's has done is they have replaced sugar in their breakfast cereals with alulose. Alulose is actually a naturally occurring sugar. It's found usually in figs, raisins, wheat, maple syrup and molasses. So that it does fall under that threshold, they use it in the ingredients as alulose, so they're not even using the word sugar in it. But it's interesting because now what they're doing is putting Tony the Tiger on TV sports shows. He has a Spotify playlist. They're trying to get Tony the Tiger and Tucan Sam as many places as they can, because what we know is when you have those kinds of characters, kids obviously love them and they buy more.

Sally:

Yes, it's obvious that they are going for a younger audience with a Spotify playlist. I did look at the Spotify playlist. Number two is Eye of the Tiger from the Rocky Movies.

Phil:

Of course it is.

Sally:

Yes, so they're clearly going for that younger audience with this kind of outreach. We have talked about this ban on mascots on sugary foods in Mexico and the taxes that they've placed on junk food there, and we've applauded this effort because this is a nutritional intervention in a country that has a high rate of obesity and illnesses. So it's going to probably take some time to see how that's working. But what we're hearing from experts, from these companies that really are fighting back against these laws, like Kellogg's, is that we're gonna see a lot more lawsuits and we're gonna see a lot more companies looking for loopholes in the system. One example, Coca-Cola and Kraft have been designing their products with the exact same design on the front and the back, putting the warning label on one side being the only difference. So the strategy there is that they will be shelved, with the front side and the backside looks exactly the same, but it has the label and is facing towards the back, so no one really sees it.

Phil:

Yeah, and just to give you some idea, this was published in the International Journal of Behavioral Nutrition and Physical Activity in June of 2021. And what they did is they analyzed the products in Mexico. They looked at 17,264 products. 33.8% displayed nutrition claims. Only 3.4% had health claims on them. In total, 80.8% of all the products in the Mexican market were classified as "less healthy, 48.2% of products had excess calories, 44.6% had excess sodium and 40.7% excess free sugars. Also from Tufts talking about the results of food labeling, now the study that they looked at, or as a bunch of studies combined food labeling on menus, product packaging, point of purchase materials on supermarket shelves. And what they found is, when you have these labels, consumers intake of calories was reduced 6.6%, total fat was reduced 10.6%, other unhealthy food options by 13% and also, on the positive note, vegetable consumption, when again, it was labeled went up 13.5%. So clearly you know this labeling works. Clearly consumers want this labeling To your point. You know part of it is, you know there's this dual labeling, so you don't see it, and the retailers, including Walmart, are instructed to put that on the back side, so people don't see it. But I give Bimbo Brands an A for creativity, Probably an F for execution, but what they did on their Entenmans and their Takis, they removed the mascot from the packaging as they had to by law, but instead they actually printed the mascot on the actual food itself, which was a ready-to-eat pancake, and then they made the packaging clear, so the mascot is still visible to consumers. But, wow, you know, lawsuits galore are gonna happen with this, and what we really want is we really want people to have better education, be able to read labels, make better choices, reduce diabetes, heart disease, cancers, obesity. That's our objective. Our objective should not be putting Tony the tiger wherever they can. I'm talking about Instacart again. Instacart's IPO might be perfect timing and the reason for that is there is just a study that came out from Bloomberg that delivery is too expensive. Once you factor in the delivery fees, service fees and tips, plus the generally higher price of food due to inflation, delivery is down. Chipotle, Kava and Sweet Green have all reported significant declines in delivery sales. We don't have any number for Supermarkets, except one from Instacart. In their filing, they said that the growth of its core delivery business slowed in the first half of 2023. So they're even doing it. Chipotle's delivery decreased almost 16 percent. Red Robin is showing 12 percent. Delivery check value is down. Domino's, their delivery and they're known for delivery, declined 3.5 percent. So you know, Instacart might be really smart getting their IPO before this whole market blows up. But the question is, with all these delivery services, with all these gig workers working in delivery, what's gonna happen?

Sally:

Yes, it is interesting to see this data that people are moving away from it and I think we became so reliant on delivery during the shutdown and a lot of people were ordering food from the grocery store and from all these restaurants. But it just has gotten really expensive and, like you said, with all those fees and with tips and all of that added on it can be. I know my kids really love Jimmy John's and they love for me to order them tuna salad sandwich combos from Jimmy John's and just for two sandwiches for my kids and a drink and a bag of chips it comes to a little over $40 to get that. Well then that's just for two people. So you think about ordering from a fast casual a family meal and what that could end up costing, and that just isn't realistic for most Americans.

Phil:

Absolutely right. $40 for two tuna sandwiches, okay. New research by an Oxford University professor found that reducing consumption of just one food item is equivalent to taking eight million cars off the road. What's that food item and what's this research?

Sally:

Well, coming from Oxford University, we're looking at a study here that surveyed 55,000 people on their meat eating or non-meat eating behaviors, and what they found is that someone with a high meat diet accounted for about 22.58 pounds worth of carbon dioxide production per day. The low meat diet they account for 11.84 pounds worth and a vegan would account for 5.45 pounds on average. So there is a huge amount of our carbon dioxide production that is coming from our meat consumption and this is something that I think we need to realize that a vast majority of scientists agree on. NASA says that the majority of scientists, 97%, agree that humans are causing global warming and climate change. So looking at our meat eating habits is important. Now, this doesn't mean that we have to completely stop eating meat. That's not a realistic goal and we have to meet people where they are in the food industry. Some really love meat and some don't. But we can encourage lower meat consumption and finding alternative ways to satisfy those cravings. Retailers can really help with that.

Phil:

Absolutely. And talking about helping the environment, there is something that I never thought about. An article in Food and Wine talks about the fact that the garnishes that are on cocktails not only can be not helping the cocktail from a taste standpoint, but also doesn't help the environment. Just to give you an idea, a lot of that goes into food waste. A lot of people don't use those garnishes. I know you like Bloody Mary's and once in a while I'll have a Bloody Mary and they put a celery in it, they put olives in it, they put I don't know whatever. I don't eat anything except the celery, matter of fact. So there's a big waste. And just to give you some idea, what they found out is one kilo of waste from lemon garnishes, that's the equivalent of juice from eight lemons or 32 lemon wedges, contribute more than their fair share of food waste and it's about the same carbon emissions as a 20 minute journey in a car. So are we going to start to see these garnishes disappear from our drinks? Get rid of the umbrellas, get rid of the lemons, the limes, the celery, all of that stuff, because we've got these two diametrically opposed forces. One says eliminate food waste and we have a lot of bartenders. Cody Pruitt is one. He's the owner of Libertine, a new French bistro in New York City's West Village, where he doesn't want to put any of it on, because what he says is he's a mixologist and when he puts together a drink, it is perfect the way it should be served and adding another lime to it or something else, is just basically screwing it up.

Sally:

I think about, Phil, how I used to wait tables when I was younger and how we always put the lemon on the glass of water without even asking if they wanted it. And if you notice, when you go to restaurants now, most times they will ask you if you want the lemon or if you don't want the lemon. We've also gotten into that habit with straws, like they don't immediately bring the straw to the table. You are asked if you want that. So there's definitely more consciousness when it comes to using these garnishes and thinking about waste. I do think that there are some very innovative ways out there to divert this waste and turn it into other ingredients, which is what some of these great chefs and mixologists are coming up with. Ways to take the lemon peels and turn it into salt for the rim on the glass is one of the things we're hearing about, and I'm sure that composting those lemons and limes and all those bloody Mary things that you add to your bloody Mary that are compostable, that that is one way of taking care of that waste. But we are definitely looking at not only these chefs and these creators of these drinks, but also Americans are just more concerned about waste too. So I think they appreciate going into a restaurant and seeing a restaurant really doing their part in that.

Phil:

And also with food inflation, it costs for that lemon, that lime, all those other things. So it's a great way to reduce your operating expenses, as well as being helpful to the environment and to those mixologists who have done this. One says he stays up at night, after midnight coming up with all these drinks and he doesn't want us to screw them up. So don't ask for that extra lime next time. You have that margarita. Everyone knows how today's world is full of anxiety and stress. Dr Uma Naidoo writes in prevention that one solution is what foods are that we eat. Naidoo is a nutritional psychiatrist and she writes that it's about our gut- brain connection and how the health of one directly affects the health of the other, and that the microbiome is a determinant of our anxious systems. The goal simply is to keep our gut healthy and to keep inflammation at bay. So Sally on Food Not Phones today, let's talk about what some of the foods are that Dr Naidoo recommends.

Sally:

I absolutely love this list. At the top of the list is prebiotic fiber. Great additions to your diet. Some of those foods can include asparagus, garlic, onions, leafy greens, artichokes, mushrooms which we know that we're experiencing a huge trend in mushrooms, adding mushrooms to so many things and apples as well. We're also hearing about berries, and we've been hearing about berries for a really long time in all of the wonderful benefits in raspberries and strawberries and blackberries and blueberries. So adding those fruits to your diet can potentially help with anxiety. Another one that we've been hearing about for a while Omega-3 fatty acids. I don't know if you like to eat sardines or if that many people do out there. I personally love sardines, but if you don't like sardines, that's okay, because salmon is also on the list and anchovies, tuna, mackerel, and also you're gonna get it from your nuts and seeds walnuts, almonds, chia seeds, those kinds. And then we're also looking at spices. Spices are an important part of helping us with our mental wellness. Cinnamon, ginger, rosemary. Turmeric can be a great one. And then, last on the list, we're looking at fermented foods, which we have also been hearing a great deal of research about in the last several years about how we can get so many benefits from fermented foods. One of my favorites is kimchi. I don't know if you like kimchi, Phil.

Phil:

I love kimchi. Love it. I didn't ever have it until I had actually gone to China and became addicted to it. And to this day, some 30 years later, I always have a jar of kimchi in my refrigerator. Love it.

Sally:

Same.

Phil:

So just a reminder you can always join in on our newest initiative, Food Not Phones, where we all commit to putting down our phones during meal times, especially on September 19th. Join us, along with industry leaders like the FMI Foundation's Family Meals Movement, Acosta Group, Hy-Vee, Fresh Direct, That's It and the Association of Retail and Consumer Professionals. Please check us out at FoodNotPhones. com. On today's bullseye, Taylor Swift is one of the most important people. Last month she surprised her entire crew, from backup singers and dancers to truck drivers, on her Eras Tour, with huge cast bonuses. Now CNN reports that in the cities that she performs during the tour, she's giving back to the food banks in those cities. For example, in Arizona Swift's donation in March allowed that Arizona Food Bank Network to send several tractor trailers filled with 40,000 pounds of fresh produce to its member food banks. That, according to Terry Shoemaker, a spokesperson at the nonprofit organization. Plus, she says it bolstered funding for programs that are aimed at combating hunger, including helping eligible kids gain access to free and reduced price school meals, and senior citizens to actually obtain food stamps. Seattle-based Food Lifeline, which received a donation from Swift, which she played in the city in late July, will use those funds to purchase fresh fruits and vegetables, as well as to be able to distribute foods that are popular in their ethnic communities. Swift donated to Second Harvest of Silicon Valley. That organization works with more than 400 partners to feed 500,000 people every month. Ahead of her stop in Santa Clara, California, a flurry of other contributions followed over the next week, jumping 43% from the same period a year earlier, according to Shobana Gubbi, the food bank's chief philanthropy officer. Call it the Taylor Swift Effect. When these food banks across the nation announce her donations, it seems that others open up their checkbooks as well to help food banks that, since the pandemic, have seen donations of foods, volunteerism and monies plummet. Food banks across the nation are dealing with increased demand and higher costs. As consumer package good company's shore up their supply chains, their donations have decreased. Now you don't have to like her music, but you have to love what she's doing and her heart. She's a role model, not just for other singers and celebrities, but for us all. Just a reminder, next week The Lempert Report LIVE will air on Tuesday due to the Labor Day holiday. Have a great week and we'll see you then.

Sally:

Be sure to visit SupermarketGuru. com for the latest marketing analysis issues and trends, and don't forget to join us back here next Monday at 2.30 pm Eastern for more.

Instacart IPO and Food Labeling Lawsuits
Food's Impact on Environment and Mental Health