EDITOR's BLOG: Food companies brace for 2017
Jan. 17, 2017
by Joel Crews
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Looking ahead to 2017, it behooves the meat and poultry processing community to take an extended look in its collective rear-view mirror at the news and trends that defined 2016 while plans and forecasts for 2017 are being made. History often provides lessons for the future.
It was a year that signaled significant shifts in how livestock production and meat and poultry processing practices continue to be in a fishbowl with a growing gallery of information-seeking consumers crowding around it. Several years removed from the media microscope that trained the public’s unwarranted attention on Beef Products Inc.’s proven safe and established practice of treating ground beef with small amounts of ammonium, nobody should have been overly surprised when Chipotle’s food safety crisis of 2015 became very public and overlapped into 2016. Double-digit decreases in sales and even larger losses in its stock price and subsequent appointment of food-safety guru, Jim Marsden, Ph.D., as executive director of food safety have been part of the solution search. Employee retraining and supplier scrutinizing have also been a part of a public image makeover that is still a work in progress.
Corporate reorganization was another theme that will have an impact on various companies’ operations in the coming year. Tyson Foods’ announcement of Donnie Smith stepping down as CEO at the end of 2016 made headlines in November, as did the announcement that Mike Andres would step down as president of McDonald’s USA, effective Jan. 1. Meanwhile Hormel Foods’ longtime CEO, Jeffrey Ettinger, retired Oct. 30.
Hormel also made headlines as part of one of the industry’s more notable acquisition deals late in the year when it agreed to sell Clougherty Packing LLC to Smithfield Foods Inc. for what seemed like a bargain at $145 million. Pilgrim’s Pride Corp.’s acquisition of GNP Co. from The Maschhoffs LLC, as part of a $350 million deal, provided more evidence that merger and acquisition activity is alive and well in the meat industry.
As they’ve come to expect, the largest companies tend to face the most scrutiny among regulators, stakeholders and special interest groups. São Paulo, Brazil-based JBS SA officials could vouch for the impact of being in the fishbowl. This past summer, after a fraud investigation saw the company’s offices raided by Brazilian police, a federal judge temporarily suspended the roles of its top executives, Joesley and Wesley Batista, but were reinstated within a matter of days.
An investment by another one of the industry’s biggest companies in what was once considered a competing segment during 2016, signaled a surrendering of sorts. In October, Tyson Foods raised many eyebrows with the announcement that it had acquired a 5 percent stake in Beyond Meat, a manufacturer of plant-based meat alternatives based in El Segundo, California.
Meanwhile, companies including Tyson and many others in the food industry boarded the food-kit bandwagon. Demand for convenience shows no signs of relenting as home-delivery of meal components, not to mention delivery and pick-up options offered by retail grocery chains, changes the mindset of customers who are trading in shoppping carts for mouse clicking.
Another landslide-like movement in 2016, at all segments of the industry, focused on product claims and production practices. Following a similar trend in 2015 that saw gestation housing shunned, retailers, foodservice chains and processors announcing plans to phase out antibiotics in their supply chain was a theme in 2016 as consumers demanded more information about the live production side of the industry. Don’t look for this trend to be a flash in the pan as consumers seek more information about production practices, including animal welfare policies and technologies such as controlled atmosphere stunning.
If reflections on the top news and trends of 2016 are a glimpse into the future, opportunistic processors and food companies will continue working together to deliver the safest, tastiest, most diverse, affordable and convenient options to provide food to a customer base that is as sophisticated, scrutinizing and demanding as ever. That’s a tall order for 2017 and well beyond.