The Lempert Report LIVE
The Lempert Report LIVE
Unmasking Conflict and Theft in the Global Food Industry
You might be eating your dinner, but are you aware of the battles brewing in the food industry? This episode pulls you into the heart of the contentious issues plaguing the food world today. We tackle the tussle over food prices while the U.S. sees significant price hikes from big brands. Senator John Fettermann's proposed bill to support striking SNAP benefit-receiving workers is dissected, while a startling study by the Economic Roundtable lays bare the financial struggles of Disneyland's workforce.
Have you ever wondered what's driving the rise in theft within the food industry? We're peeling back the layers on this issue, analyzing how high food prices and self-checkouts are contributing to this trend. Listen in on how companies like Hagen Das and Tesco are innovatively battling this problem and get a glimpse into the potential future of theft prevention in supermarkets. We also take a deep-dive into the broader impact of theft on the industry, providing insights from the finance minister of France and exploring the effects of the shift to online shopping. This dynamic discussion is packed with insights, sending ripples through your understanding of the current challenges and future possibilities in the food industry. Don't miss out!
Welcome to the Lempert Report LIVE On today's broadcast. Those food prices are not coming down and the battle begins. Retailer vs brands vs USDA. Senator John Fettermann to the rescue. Dollar General's private label initiative continues and grows. How old are those food processing workers anyway? Is grocery theft the new normal? And on the bulls eye, yet another TV show wants to get on the supermarket shelves.
Phil:But first the results of our grocery leadership survey, in partnership with Stratovation. We ask grocery executives if current food prices are going to increase or decrease over the next quarter, and exactly half anticipate that food costs will stay the same. Next week we'll share what grocery executives had to say about their view of the impact of AI on the food value chain. Be sure to have your voice heard on our one-question surveys that can be found in our newsletters and on our social media channels. Let's get started.
Phil:So Sally, interesting story coming out of France and beyond, where the CEO of Carrefour, basically, is saying that suppliers are not negotiating in good faith. They're not doing what they should to bring prices back down and the French government last month ordered food producers, including folks like Danone and Kellogg, to cut prices. What they're doing is the French's finance minister is demanding price cuts from the country's 75 biggest food producers. Grocers are all for it. Obviously, the brands are not for it, and the problem that we see is here. In the US. Coke, Pepsi, Unilever have all reported raising prices significantly in the second quarter and we're just not seeing these companies responding to what consumers are looking to do.
Sally:Yes, Phil, it does seem to be a frustration for retailers that really seem to be wanting to lower those prices for shoppers but not getting the cooperation from the brands and companies like Coke and Pepsi and Unilever. They have very loyal following, so if they don't see much movement in people moving away from buying their products, then they're probably going to keep raising their prices until they see customers moving away from them. Unilever has raised their prices 8% and Pepsi and Coke, sorry about that, 15%. At Pepsi they have raised their prices, so these are very significant prices, while these companies are still making very large profits. We're seeing their profits grow, but our shoppers are struggling.
Phil:They are, and Coke said just last week that in the last quarter their profit rose 33% from a year earlier. That amounts to $2.5 billion profit in one quarter. So it just doesn't seem very fair, as people are struggling with prices, as retailers are pushing back, that they're just not doing anything. And I think the funniest quote is from the CEO of Pepsi was quoted on his investment call we've been able to raise prices and consumers stay within our brands.
Phil:So, to your point, they're just going to keep on raising prices until we get some pushback from consumers. But also we're seeing USDA coming up and trying to help consumers as well. They want to lower food prices. They want to boost competition. They've joined with 31 states in Washington DC to target price fixing and other anti-competitive behaviors in the food and ag system. Secretary Vilsack is coming out really strong against this and they're going to put in new rules to really prohibit these companies from price gouging. And that's what's going on.
Sally:Yes, and the farmers and the ranchers have complained about the unfair contracts that they are getting, and so expanding the possibility for more meat and poultry processing gives these ranchers more opportunity, and so this could really help them out, as well as the consumers.
Phil:We really need to readjust our food system, because people can't. These brands just can't keep on pointing to the pandemic and labor shortage and stuff like that, when these CEOs are making hundreds of millions of dollars personally as compensation, as well as the record profits. It's just not fair. But talking about being fair, Senator John Fetterman has introduced a new food stamps bill for workers who are on strike and the interesting thing about this, it's called the Food Secure Strikers Act of 2023. It would repeal a restriction on striking workers who receive SNAP benefits, protect food stamp eligibility for public sector workers fired for striking and clarify that any income eligible household can receive SNAP benefits even if a member of that household is on strike. I give Fetterman a lot of credit for doing this and in fact, it's important to note that Fetterman now is on the cover of Time Magazine this week, not because of this story, but because of his battle with depression. Thank you, you know good for him for standing up for these people, because there's a lot of people out there who just can't make ends meet, not only because of food prices. But there was a study by the economic roundtable, which is a California nonprofit, that looked at Disney's 30,000 workers and they found that three-quarters of Disneyland employees can't afford rent, food and gas. Among Disneyland resort employees with kids who pay for childcare, 80% say they cannot make ends meet at the end of the month. 79% are food insecure. 25% say they are unlikely to be able to pay for housing.
Phil:That month, Bob Iger, their CEO, signed a new contract for two years $27 million per year. Again personally. And you know when you look at Disneyland, this morning I went on Disneyland's website to see what it would cost me to go to Disneyland. So, for a two-day ticket, which would only give me one park - one park - as an adult, $285, and as a kid, $270. If I want to go to more than one park and that category is called Park Hopper it raises to $345 for an adult and $330 for kids. Whether it be food prices, whether it's the price of going to Disneyland, this is absolutely absurd, as these CEOs, and this is what Fetterman said, as the CEOs of some of the biggest Hollywood companies, are raking in hundreds of millions of dollars per year, they have the nerve to say that workers who are standing up for better pay and conditions aren't being realistic. Something's got to break here. Food prices, labor strikes, the writer's strike. You know all of this. We're really at which end here?
Sally:Yes, and you know this is a very important topic. SNAP benefits are very much in the news right now because many Americans have recently or are going to lose their SNAP benefits as some of those pandemic era considerations now roll back to pre-pandemic SNAP requirements. But he's making a good point here about you know that unions to many Americans are very important institutions and that when people want to go on strike and ask for better working conditions, that they should still be able to put food on their table when they do that.
Phil:Absolutely. And if you look at what's gone on with Starbucks firing people for you know, trying to organize and get better pay and you look at, again, the wages that so many of these people are getting, you know we never really talk about the average actor salary, and that's $27,000 a year. It's not the Tom Cruise's of the world who's making hundreds of millions of dollars. That's not the average. The average is just $27,000 a year. And now when we talk about AI getting involved and the working conditions and so on, it's an important story and again, you know, kudos to Fetterman for stepping up and trying to support this. Dollar General has now expanded their store brands to over 600 different products. They are installing more refrigerated cases in their stores, more than 65,000 refrigerated cases that they added more produce to their stores. But at the same time, what's really interesting to me is they're not making as much money, because they made more money off of non-food products and now about 80% of what Dollar General sells is food products.
Sally:Yes, and I think it's really interesting in their announcement that they say that they are not a grocer, even though they are interested in becoming more of a grocer, adding all of these different products. What I'm wondering is what products will be sacrificed in the store to make room for all of these coolers and 65,000 cooler doors that they are hoping to install for their fresh initiative and, you know, all of these other expanded food products that they're adding to their private label.
Phil:Yes, something's got to come off the shelves, no question about it. And also, when we look at store brands in general, the unit sales, and that's important to note unit sales versus dollar sales because prices have gone up. So you know, you can always say, oh yeah, prices are up about 18%, but unit sales for store brands are up to 20.5% share, which is the highest that it's ever been, and I think we're going to continue to see that. You found a really interesting story that I never really thought about. Here in the US, 62% of all of our food is being produced under forced food labor. I thought that only happened in third world countries.
Sally:Yes, and I think that a lot of people have the same thought as you feel. They don't really realize that it happens in the United States, but a study was published in the journal Nature about this and they found that 62% of the food that was produced using forced labor came from the United States. Now this forced labor is described basically as workers being intimidated. They're using accumulated debt, retention of identity papers or threats of denunciation to immigration authorities to keep them there working and not letting them make their own decisions about that.
Phil:And most of them being underpaid. So for us in the US it's a major problem. Again, number one source. Number two source is China and Mexico, but they're only at 13% and 8% of the risk as compared to our 62%. And the other thing that's so interesting that was a number that I forgot until I was reading this study is that most of the apple juice Concentrate in the US comes from China, and that's under forced labor as well. So it's important next time you get some apple juice to see the country of origin of it to make sure that you're getting the safest product possible and hopefully at good wages for for workers. What we also find as a major problem, as I've been talking to different CEOs and different retailers over the past few weeks, is that theft is getting worse and worse by the day as it relates to supermarkets.
Phil:When I was in New York, what Hagen Das has started to do is they are now shipping their pints of ice cream with plastic devices on top that if somebody steals a pint of ice cream, an alarm goes off, similar to what you know you used to see on expensive bottles of alcohol or wine.
Phil:Each one of those devices costs about $3. 30, so that plastic device costs more than the whole ice cream manufacturing in it, and and I just think that we're really, you know, in a bad way. You know Amazon is rolling out their payment for palm. You know San Francisco stores have to lock up. They're frozen food because of shoplifting, their closing stores left and right throughout the entire country. Safeway had one worker quit because he was having the added stress of unlocking items and carrying them to the checkout for customers.
Phil:Rite Aid has closed stores. There was a woman who wanted to buy Tide pods and she had to wait 10 minutes for somebody to unlock a case so she could get her Tide pods. Here in Venice, California, there was a crime a couple weeks ago, biggest wine theft ever, where there was a group of people who went on the top of the store, cut a hole in the ceiling of it and stole $600,000 worth of wine. We are really at wits end here on how we're gonna deal with theft, and I think that what's gonna happen, in my opinion, is we're gonna need new technology in order to stop this theft, because I don't think people are gonna stop stealing.
Sally:Yes. Well, we have to think about the reason they're stealing and we've been talking about throughout this episode, the high price of food and how people are food secure insecure more than ever in America, and so I have to imagine that this is why there is so much theft going on, along with the fact that we are now checking out our own groceries and not having to go through a line and work with a store clerk to bring up all of our groceries. But it is becoming very frustrating for the people that work in these stores having to go and unlock cases and be on walkie-talkies communicating. I need you over here to open up the Tide pods or the ice cream. It could be very frustrating. And also, I think, some of these workers, particularly the young ones, putting them in a position where they are security, where they're playing security to catch shoplifters is not a position that these workers should be in, especially with what they're being paid.
Phil:Absolutely, and what I really think is gonna happen is something that Tesco had tried in Korea a number of years ago in a subway station. Basically, they put images of different products when people were waiting for their subway trains and what you would do is you would order from your phone and then by the time you got off the train and home, it would be delivered. So I think what we're gonna see is I think we're gonna see, instead of these locked cabinets which still is very labor intensive for all the reasons you described, as well as still having to unpack the boxes I think we're gonna go into a supermarket and it's just gonna be pictures of food and we're just gonna take our phone, take pictures of what we want, and then what's gonna happen is, as we're going through the store, the back room again has that micro fulfillment center. It's putting together our package. It is a sealed package and I've checked out on my phone, I've paid on my phone and that container is just gonna be sitting waiting for me and it's probably gonna reduce the store enormously.
Phil:I don't have to have 10 pints of vanilla ice cream there, I can just have one pint. So the store size is gonna shrink. I can have less employees in the store, and I think that's gonna be our only solution, because I don't think we've come up with an idea on how to secure this theft problem. I think that the crooks are gonna continue to get smarter. Supermarkets are now hiring armed guards. That doesn't help. That doesn't eliminate the problem. It can exacerbate the problem. So I really think that we need a whole new way of thinking from a technology standpoint and it's not self scan, to your point, because I was talking to one CEO of one Midwestern chain who said since the pandemic, and they don't have cashiers, their theft at self scan is now about five times what it was pre- pandemic.
Sally:Yes, well, personally, I think a lot of shoppers would appreciate what you're talking about being able to walk through a store and just snap photos and to fill up your cart, for someone to fill that up for you and then you to go pick it up and pay for it. That sounds like an amazing service. Because I gotta tell you, Phil, self checkout is very frustrating for me and goes very slow, and I still have to stand in line to get in the self checkout.
Phil:Well, hopefully we can come up with a big solve for this problem. Thanks, Sally. On today's bullseye, have you watched Yellowstone yet? Well, this award-winning series, now in its fifth season set in 1923, follows the conflicts along the shared borders of the Yellowstone Cattle Ranch, the Broken Rock Indian Reservation, yellowstone National Park and, of course, land developers. Kevin Costner plays John Dutton, the leader of the family that owns the largest ranch in Montana, the Yellowstone Dutton Ranch. Now, due to the writer strike and SAG Aftra Strike, the filming had been put on hold, but not so much for the branding.
Phil:Food Story Brands and Paramount Consumer Products have joined forces to produce the Yellowstone line of elevated, what they say elevated, Western cuisine, which they also say will embody the rustic, authentic experience of the Yellowstone universe. There's been a long history of TV shows and celebrities that have tried to get their brands on supermarket sales. Some have made it like the Flintstones, Teenage Mutant Ninja Turtles and, of course, the world-infamous Jimmy Dean in the Western-like world of sausages and breakfast foods, even though he died decades ago. Once at the time, the TV or movie brands issued limited editions of foods, especially in the breakfast cereal aisle, but for the most part, most have failed. Do you remember Three's Company's Suzanne Summers Do-It-Yourself franchise prep back in 2006? Or Hulk Hogan's Pastam ania fast food restaurant. Or who could forget Trump Steaks with the tagline 'the World's Greatest Steaks', which was discontinued after just two months of being on the shelf? Then there was Hannah Montana brand of red cherries. Even Cosmopolitan Magazine gave it a try back in 1999 with their brand of Cosmopolitan yogurt.
Phil:Having a food brand isn't easy by any means, but with the rash of celebrities that are getting into the wine and distilled spirits business and enjoying major success, the likes of Paramount seem to want to get in on the big bucks. But I think they're making a mistake. Their cowboy cuisine is going to span the aisles across multiple categories including coffee pods and ground coffee. They're already on Kroger shelves. Angus beef chili, with or without beans, and the Yellowstone rubs and seasonings can already be found at Walmart as well as some H-E-B, Jewel Osco's, Safeway, Albertsons and Kroger stores. So what's coming down the pike from them? Well, Angus Beef sticks, American Wagyu beef sticks, hunter sausage original and bacon breakfast sausage lengths and thick cut bacon will be lining the shelves this fall.
Phil:The questions are if these products can start a cowboy cuisine trend and if they will be around in a year from now. Food Story Brand says that Yellowstone has the potential to be the first entertainment property to transcend TV and become a major cross category food and beverage brand for years to come. I have to question that. They've certainly gained major retail distribution but, as we've seen time and time again, the question is whether shoppers will buy the products. Bing Crosby had vanilla ice cream, Phyllis Diller had chili and Frank Sinatra had pasta sauce. Sally, Do we have any questions?
Sally:Well, we have a comment from John Pandol today that I wanted to share, Ihil. This is regarding the theft story. No question, theft, shoplifting in stores and porch pirates in home delivery is adding to the margin compression. We didn't talk about porch pirates.
Phil:Right, that's a good point, John, and you know, even a lot of the commercials that we're seeing on TV now, you know are focused on these porch devices. You know where you can see if somebody's going to steal and you could talk to them, and things like that. But I really think it's a reflective of our society right now that people are just feeling so stressed whether it's because of the pandemic, whether it's because of prices, whether it's because of losing their jobs or not wanting to be at a job that we're at a breaking point and our job for the food industry is to not let that happen and keep it all together. So, John, thanks for adding your comment, as always very insightful and very intuitive.
Sally:Be sure to visit Supermarket Guru. 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.