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Issue Date: Vol. 49, No.2, February 2009, Posted On: 2/11/2009


VENDING NEWS: Peanut Product Sales Plummet; NAMA Advises On Federal Tobacco Excise Tax; Food Firms Disclose Financials

Peanut Product Purveyors Ponder Impact Of Recalls On Retail Sales

Retail sales of items containing peanuts have plummeted in the wake of the extensive product recalls initiated by Peanut Corp. of America (Lynchburg, VA). The Associated Press cited a four-week study by The Nielsen Co. (New York City), published on Jan. 24, which found that the sale of peanut butter in jars dropped 22% compared with the comparable prior-year period. Reuters reported on Feb. 9 that Information Resources (Chicago) has tracked a decrease of nearly 25% since the recall began in mid-January.

In response, major peanut butter producers ConAgra, which markets Peter Pan peanut butter, and J.M. Smucker Co., producer of Jif, have launched advertising campaigns to inform consumers that their products are not made with PCA product, and are safe and wholesome. They and Unilever, which makes Skippy, also have posted the message on their websites.

The New York Times, which reported on these initiatives on Feb. 9, cited Levick Strategic Communications senior vice-president Gene Grabowski as observing that it is uncommon for suppliers to run ads stating that their products are not contaminated. The new campaigns are indicative of the effect that the outbreak and continuing negative publicity has had on sales, he suggested.

The homepage of the U.S. Food & Drug Administration, fda.gov, provides a link to the agency’s regularly updated searchable database of peanut items that have been recalled.

The American Peanut Council maintains a list of products that do not contain product from Peanut Corp. of America, and so are not involved in the recall. A link to the list appears on the Council’s homepage, peanutsusa.com.

Even so, it appears that many consumers are not actively searching for this information. Reuters quoted Joe Hotchkiss, a professor of food science at Cornell University (Ithaca, NY), as pointing out that recalls tend to evoke a generalized public response that he likened to painting with a broad brush. “You can’t remember exactly which peanut butter it is, so the whole category of product gets a black eye,” he told the news service.

 

NAMA Advises Members Of April Hike In Federal Tobacco Excise Tax

CHICAGO — The National Automatic Merchandising Association has issued a legislative bulletin apprising operators that the federal excise tax on tobacco products will increase on April 1.

On Feb. 9, President Obama signed into law a bill reauthorizing and expanding a children’s health insurance program. The measure, which was vetoed twice by President Bush, funds the expansion by a 61¢ per-pack increase in the federal tax on cigarettes (presently 39¢). The tax increases for other tobacco products, too.

NAMA explained that the new law imposes this increased tax on floor stocks of tobacco products, reduced by a $500 tax credit. Payment of floor-stock taxes will be due on or before Aug. 1.

Information on the new law may be found online at waysandmeans.house.gov, the website of the House Committee on Ways and Means.

 

Kraft Q4, Full-Year ‘08 Revenues Rise; Restructuring Hurts Earnings

NORTHFIELD, IL — Kraft Foods reported that its fourth-quarter net revenues increased 6.2% to $10.77 billion, from $10.14 billion in the comparable 2007 period. Quarterly net earnings fell 72.1% to $163 million from $585 million year-over-year, which the company said primarily was the result of final costs related to its previously announced restructuring program.

For the full year, revenues climbed 16.8% to $42.20 billion from $36.13 billion. Net earnings dipped 2.1% from $2.90 billion in 2007 to $2.59 billion in 2008.

The food and beverage giant said volume fell 5.2% during the fourth quarter, reflecting the full impact of unprecedented cost-driven pricing actions taken throughout the year. Additionally, North American volumes were negatively impacted by retailer inventory reductions and Kraft’s pruning of less profitable items.

U.S. beverage revenues dipped 1.7%. Continued gains in Maxwell House coffee and Tassimo on-demand coffees were offset by declines in premium coffee brands. In U.S. Snacks, revenues declined 1.2%, with significant volume declines in Planters snack nuts. Oreo sales volume rose 20%.

The company now expects 2009 organic net-revenue growth of approximately 3%, down from a previous expectation of at least 4%.

Kraft continues to expect cumulative annualized savings from its three-year restructuring program to reach approximately $1.4 billion for the total program. To date, cumulative annualized savings have totaled approximately $1.1 billion, up from approximately $0.8 billion at the end of 2007.

 

Kellogg Posts Strong ‘08 Results Despite Costs Related To Recalls

BATTLE CREEK, MI — Kellogg Co. reported strong 2008 sales and earnings growth for the fourth quarter of fiscal 2008 and the full year, despite costs related to the ongoing peanut product recall. Earnings were $179 million, an increase over $176 million in the fourth quarter of 2007. Net sales rose to $2.93 billion during the quarter from $2.79 billion a year earlier.

Net earnings for the full year 2008 were $1.15 billion, a 4% increase over last year’s $1.1 billion. Net sales climbed 9% to $12.8 billion from $11.78 billion in 2007.

The maker of Austin, Keebler and Famous Amos snacks recalled several products last month made with ingredients sourced from the Peanut Corp. of America, identified as the source of a nationwide Salmonella outbreak. The recall resulted in a $34 million expense in 2008, which was when the products were sold. Recall-related costs reduced Kellogg’s earnings by 6¢ per share during the fourth quarter and the company expects another 6¢ adverse earnings-per-share impact for the full 2009 year.

Kellogg narrowed its sales guidance for 2009 to 3% to 4% from its earlier mid-single-digit projection.

 

Economy Takes Its Toll On Pepsi Bottling Group ‘08 Performance

SOMERS, NY — Pepsi Bottling Group, the world’s largest manufacturer and distributor of Pepsi-Cola beverages, reported a net loss of $271 million in the fourth quarter, compared with net income of $81 million a year earlier. Net revenue dipped to $3.81 billion from $4.04 billion.

Net revenue rose 2% in 2008 to $13.8 billion from $13.59 billion in 2007. Net income for the year was $162 million, down from $532 million a year earlier.

Total worldwide physical case volume for the fourth quarter declined 7%, which the bottler attributed to the continued deceleration in consumer spending that has resulted from the global economic slowdown. In the U.S. and Canada, physical case volume was down 7%. Volume also decreased 7% in Mexico and 6% in Europe. For all of 2008, worldwide case volume declined 4%.

In 2009, PBG said it expects to achieve top-line growth in the low-single digits.

 

Flowers Foods Posts Solid Results In 4th Quarter And Full-Year 2008

THOMASVILLE, GA — Flowers Foods sales increased 31.2% to $621.6 million during the fourth quarter of the company’s fiscal year, ended Jan. 3, 2009. This is up from the $473.7 million reported during the same period last year. Net income was $32.1 million, a 49.7% increase from the $21.4 million reported a year earlier.

In fiscal 2008, sales increased 18.6% to $2.41 billion from $2.04 billion in 2007. Net income rose 26% to $119.2 million from $94.6 million last year.

For fiscal 2009, the company anticipates sales growth of 12.6% to 14.5%, targeting $2.72 billion to $2.76 billion. For 2009, net income is expected to be 4.7% to 5% of sales, or $127.8 million to $138.3 million.

Flowers Foods is a leading producer of packaged bakery foods for retail and foodservice. Its Mrs. Freshley’s pastry brand is a vending favorite.

 

Casino’s Video Surveillance Captures New Jersey Vender Thieves

ATLANTIC CITY, NJ — New Jersey State Police have arrested two people they believe are responsible for stealing nearly $15,000 from vending machines in the Trump Taj Mahal casino, according to the Associated Press. The location’s surveillance video system recorded the suspects using a master key to open the vending machines.

Police said a Coca-Cola district manager had reported numerous thefts from, and vandalism of, approximately 60 vending machines on the guest floors of the hotel and casino.


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