Supply Scan

News and Trends From Across the Food Supply Chain

“While this was a difficult decision due to the impact on our associates and the Utah community, the sale of these stores will allow the company to focus on our greatest growth opportunities while at the same time monetize non-strategic assets for debt paydown,” says Craig Herkert, Supervalu CEO.

“Albertsons has a long history of serving the Utah marketplace and the decision to sell these stores was made only after careful analysis and deliberation,” he adds.
Founded in 1939, Albertsons was acquired by Supervalu in 2006.

PepsiCo has entered into merger agreements with The Pepsi Bottling Group Inc. and PepsiAmericas Inc. under which PepsiCo will acquire all of the outstanding shares of common stock it does not already own in its two largest anchor bottlers.

This transaction is expected to create annual pre-tax synergies of $300 million by 2012 due to greater cost efficiency and improved revenue opportunities. The acquisitions are expected to be accretive to PepsiCo’s earnings by about 15 cents per share when synergies are realized in 2012.

Purchase, NY-based PepsiCo cited a number of specific benefits it expects to realize by consolidating its two largest bottlers:

• Consolidation of 80 percent of the North American beverage volume will speed the decision-making process and eliminate friction points;
• Offering more compelling bundles across food and beverage and providing enhanced customer service nationally, taking the “Power of One” to the next level;
• Consolidation of manufacturing networks will provide cost benefits and also optimize investments in growth and innovation;
• Greater flexibility in deploying multiple go-to-market systems to tailor distribution by channel;
• Elimination of redundant costs to leverage scale efficiencies.

“PepsiCo has had a constructive partnership with PBG and PAS over the past 10 years,” says Indra Nooyi, PepsiCo chairman and CEO. “While the existing model has served the system very well, it is clear that the changing dynamics of the North American liquid refreshment beverage business demand that we create a more flexible, efficient and competitive system that can drive growth across the full range of PepsiCo beverage brands.”


The House version of food safety regulations—HR 2749 “Food Safety Enhancement Act of 2009”—is causing concern among a few segments of the food supply chain. While not one organization is against the intent of the bill—food safety—the proposed implementation worries some because it assumes equal responsibility for everyone along the food supply chain, particularly food warehousing companies and 3PLs, whose sole responsibility is to store the finished products.

The IWLA (International Warehouse Logistics Association) agrees HR 2749 is comprehensive food safety legislation. However, the legislation does not distinguish what a third-party logistics provider does, states Joel Anderson, president and CEO of the Washington, organization. Manufacturers, processors and packers have a far greater impact on food safety than a warehouse storing food products.

“This bill states that if there is a recall, we would be held as responsible as if we had knowledge of the product and the ingredients within and we cannot withstand this liability standard,” states Anderson. “This could terminate our business model.”

The goal, says Anderson, is to help legislators understand the chain of custody involved in tracing back to the source of a contaminated product. “To hold everyone who touches the product to the same standards as the grower, producer, or processor is just not the proper approach and could wipe out the 3PL food warehousing industry because of the implied liability,” he warns.

Both GMA and FMI have issued endorsements of the bill, citing the bill’s ability to strengthen food safety while providing the FDA with the required resources to achieve its food safety mission. No one disputes this mission, but IWLA is concerned that the bill ignores the role and limited responsibilities of warehouses and 3PLs, a vital segment of the food supply chain.

Other concerns in the industry point to the House bill’s overly broad traceability requirements and the introduction of civil monetary penalties for things like recordkeeping errors that could carry fines up to $250,000 for each violation. Furthermore, new fees include a registration fee of $500 per facility and another $175,000 per company, which is significant for companies with a number of facilities.

This is the largest overhaul of the food safety law for some time. The industry is also monitoring the Senate version—S. 510 “FDA Food Safety Modernization Act” —which many groups feel offers a more sensible approach.

The industry will continue to be part of the discussions so that when both versions of the bill go before the Conference Committee in late September or early October, members of the Senate and the House will have the information they need to produce a fair food safety bill that addresses and quells these concerns. —April Terreri

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