Sosland Publishing Centennial Archives

June 1, 2021April 29, 2022

The Past, Present, and Future of Milling

By Arvin Donley

June 2021

The Past, Present, and Future
of Milling

Innovation continues to drive one of the world’s oldest industries

World Grain

©photocrew – stock.adobe.com

It’s been said the first flour miller was the first person who chewed on a wheat kernel. While the details of that milestone will never be known, we do know the transition to using millstones instead of molars to extract flour occurred around 6000 BC, and it remained the primary flour-making method for many centuries. Then, in 1779, at the beginning of the industrial era, the first steam mill was erected in London, England. A century later, the first mechanical roller mill was developed in Europe using stone disks. Since then, steel rolls have replaced stone rolls, pneumatic conveyors have replaced mechanical conveyors, automatic bagging machines have replaced human baggers and a whole host of state-of-the-art technology has been developed for the milling industry.

The milling process itself hasn’t changed much over the last century. Occasionally an innovation is introduced, such as color sorting technology to remove foreign particles and damaged kernels from the mill flow, but for the most part the advances have been upgrades of equipment already used in the process.

“Nothing overtakes the milling industry in great shockwaves,” said Jeff Gwirtz, a milling consultant and president of JAG Services, Inc., who for many years taught milling science at Kansas State University. “The group as a whole doesn’t just one day flip a switch and all of a sudden everyone is doing something new.

It’s a slower evolution. For someone who doesn’t understand the milling industry or someone who is fairly new, I tell them you have to understand that in the milling industry the jury’s still out on leather belting or the electric motor. I’m being facetious, of course, but usually the milling industry isn’t the first to jump at new technology.”

When new technology is introduced, it will most likely get a test run in a European mill. For one thing, the industry’s largest equipment suppliers are based in Europe, but also the millers in that region are more apt to embrace new technology than in other parts of the world.

Troy Anderson, vice president of operations for Denver, Colorado, US-based Ardent Mills Inc., the largest milling company in the United States, described the North American milling industry as being “fast followers” when it came to adopting the latest technology.

“I think the industry in North America is somewhat reluctant to be that initial test lab,” Anderson said. “It’s really hard to drive innovation through an industry that’s thousands of years old. The industry is often reluctant to make those major step changes.”

However, it would be inaccurate to say there haven’t been significant technological advances in the global milling industry over the last 100 years. The sheer amount of automation introduced to the industry in the last 30 years has improved mill performance in every way imaginable.

“Thanks to its development, the milling world has changed completely as it has allowed manpower to be rationalized through a whole series of ‘aids’ that it is able to offer, resulting in less human error, for example,” said Marco Galli, technological manager at Cremona, Italy-based Ocrim, a milling equipment manufacturer. “This has led to greater productivity thanks to a more rational management of the production cycles, all increasingly based on the correct management of data and information. I personally believe in that aspect the best is yet to come.”

When reflecting on the last 100 years of flour milling, one could point to dozens of innovations that led to a safer, more efficient milling process. Among those was the adoption of pneumatic conveying in the mid-20th century to move product through the mill. The advantages included fewer product leakages, product recovery and re-entry into the production cycle, no product or environment contamination, and far less maintenance than is required with mechanical conveyors. Another important innovation from the 20th century was the double high roller mill, which provides two grinding passages without any intermediate sifting. Many flour mills introduced double high roller mills to reduce capital costs. With this milling concept there is less installation, energy and maintenance cost, with fewer sifters, pneumatic lifts, filters, number of roll stands, spouting and auxiliary components and less space requirements. More recently, color sorters have become a game-changing piece of equipment in the wheat cleaning section of flour mills. Color sorters are used to remove ergot wheat, black tip, fusarium, burnt, other discolored grains and other inner contaminants.

“If I had to put my finger on one of the more recent innovative solutions, it would be the color sorting technology that’s grown in the industry, especially over the last 5 or 10 years,” Anderson said. “It’s become widely adopted and helped from an energy conservation and effectiveness standpoint of doing what we need to do in the plant.”

Perhaps the most significant development has been the utilization of computer-based automation that in recent decades has aided millers in countless ways. One of the early examples of this was the first lights-out flour mill going online in the 1980s, and although it hasn’t become the industry standard to operate unmanned mills remotely, the option is available in many plants.

Much of the industry’s technical innovation, particularly in the past 30 years, has focused on improving mill performance in three areas: Product and employee safety, energy savings and increased milling efficiency.

Product and employee safety

bar regarding food safety standards, milling equipment manufacturers have responded by designing equipment that addresses this issue.

“Food safety has had a major impact on the design of modern cleaning houses,” said Stefan Birrer, head of milling solutions at Uzwil, Switzerland-based Buhler AG. “With efficient color sorting, the precision of sorting has increased a lot. This has not only increased food safety but has contributed greatly to saving energy and raw material in our plants.”
Anderson said ensuring a safe food product, whether it is flour or a byproduct derived from the milling process, has become the top priority for millers.

“When I started in the industry 30 years ago, we didn’t want rocks, metals or anything harmful in the flour and we did everything we could at that time with the technology we had to make safe flour,” he said. “There were audits but there wasn’t a day-to-day conversation about it, whereas today it is the first point of every conversation. We have to make sure our product is safe at every one of our mills for every customer.”

Virtually every piece of milling equipment has been redesigned in recent decades with safety in mind. Sieves, for example, no longer use wood frames that can splinter or backwire or staples that can fall into the mill stream. Wooden spouting has been replaced with more sanitary stainless-steel spouting. Equipment such as roller mills, sifters, and purifiers have been designed to eliminate harborages for dust, dirt and insects.

“Years ago, when we taught the IAOM milling short courses at Shellenberger Hall (at Kansas State), I used to take people over by an old purifier and bang on it and watch the dead insects fall out of it,” Gwirtz said. “That had to do with design issues. They still have to have a place for the air to flow but they no longer have big cavities where the dust and dirt can accumulate along with insects.”

Not only are the flour products safer for consumers, but the mills themselves are less dangerous places to work as milling equipment manufacturers have made great strides in developing operator-friendly machinery that requires less maintenance and is enclosed so moving parts aren’t exposed.

“Today, the fact that the operator has less direct contact with the machines is a benefit in itself in terms of safety,” Galli said. “But this is not enough if the machines are not designed with this aspect in mind. In fact, the logic is not that of the operator going to the machine to check its condition, but it is the machine that ‘calls’ the operator when necessary. This is possible through the ongoing exchange of information between the machine and management system.”

Energy savings

Flour milling is a business with a notoriously tight profit margin, so milling companies are always looking to reduce costs. One of the biggest expenses for a milling operation is energy consumption since the process involves so many pieces of equipment. In recent years, great strides have been made by equipment manufacturers in developing energy-efficient machinery.

“The application of energy-saving technology, whether it’s variable frequency drive compressors or pneumatic systems that run just to meet demand, or the use of energy-efficient equipment and automation systems, they have all made a difference in reducing the energy requirements within the flour milling operation,” said David Jansen, vice president of production for Siemer Milling Co., Teutopolis, Illinois, US.

Gwirtz said the soft-start motors, which gradually are brought up to full speed, operate in stark contrast to the motors that were in mills when his career began in the late 1970s.

“If you’ve ever watched an amp gauge on a hammermill when it starts up, at least on the older ones, the needle on the amp just flies forward,” he said. “The amp load on the motor was probably 200 horsepower but the initial rush was probably 7 to 9 times greater than the full load. It wasn’t just a slight overload, it was a major, major overload.”

Milling companies also have found savings by replacing fluorescent light bulbs with LED lighting and adding motion-detection sensors that automatically turns off lights in areas where employees aren’t working.

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Improvements in efficiency

Today’s mills run more efficiently than ever, and the driving force behind that is automation. It has boosted productivity by allowing mills to operate around the clock, seven days a week with minimal or no personnel inside the plant.

“A good automation system has become the most important companion of the miller,” Birrer said.

The use of sensor technology has revolutionized milling and enabled problems to be detected more quickly than they were years ago.
A part of the mill’s control system, sensors acquire information that produce data that can be used to analyze the overall mill performance and optimize the performance of a specific piece of equipment. They let millers know when bins are full or when bearings are overheating as well as measure product quality, enabling automatic adjustments to be made without shutting down the mill.

“The sheer amount of data and information we have available at our fingertips today is amazing,” Jansen said. “When I first entered the industry, I would hear people say that milling is an art, and I would say that today it’s evolved and is still evolving into a precise science. When you look at what we can monitor, compared to 30 years ago, it’s pretty remarkable.”

The benefits of automation to the milling industry have evolved and grown over time, Anderson said.

“In 1992, automation was about labor savings and energy savings,” he said. “Today, we talk about automation to drive food safety, such as being able to trace product through the entire process.”

The future of milling

Given some of the dramatic technological advances that have taken place in the last 100 years, many of which couldn’t have been forecast a century ago, it’s difficult to imagine what lies in store for the milling industry over the next 100 years. One thing that’s certain is there will continue to be an increase in data collection related to every aspect of the milling operation.

“Our vision leads us to imagine a milling industry where the collection and management of data will be increasingly more relevant, making it so that all decisions are based on data collection and subsequent processing,” Galli said. “The data will guide us through milling management and compliance with parameters. Today, we already have plants where it is possible to change the settings of the roller mills, or reposition the products inside the technological flow, fully automatically, based on information received from the field, and their relation to the filed data.

“The data will give us information on what raw materials to buy based on what finished products needs to be produced in the short and the long term, all with the possibility of integrating this information with strictly updated market prices. Basically, the data will guide us to make the best choice based on the situation that has developed, all in real time, because that will be another crucial aspect. These aspects are then linked to the use of new design tools, of both machines and plants, to optimize costs as well as production times, always guaranteeing the maximum quality over time.”

Birrer predicts that traceability and sustainability — issues that have recently become high priorities in the global milling industry — will remain “hot-button” issues in the future and solutions will continue to be developed to address mill performance in these areas.

“Blockchain technology may be used to track the product from farm to fork,” Birrer said. “Also, the CO2 footprint will become a key sustainability indicator of milling companies, putting pressure on the whole grain value chain including grain handlers, millers, bakers and the respective solution providers to make their processes as efficient as possible. Digitalization will play a major role in this transformation.”

Gwirtz believes an increasing number of customers will demand transparency when it comes to knowing details about every step in the flour production process, from where the wheat was grown and harvested to all the steps thereafter that are involved in creating the final product.
He believes milling companies are “going to get pressure to pay more attention than ever to what goes through their milling units” and that more milling wheat will be purchased directly from the farmer.

While Anderson agrees that in the short term the trend toward farmer-direct wheat purchases will continue to grow, he foresees technology revolutionizing how the wheat kernel’s journey from farm to fork is documented.

“With the right technology, we will be able to provide the same traceability and the same ability of knowing exactly where that kernel of wheat was grown, whether it comes to us directly from the farmer, from a terminal or a country elevator,” Anderson said. “That’s where the technology has to go. I still believe there will be a fundamental place for the grain elevator in the supply chain to be a part of our industry.”

Likewise, Jansen foresees great strides being made in reducing the microbial load in flour as demands from consumers and regulatory agencies increase.

“I think the expectation will be that all flour is food safe — ready to eat,” Jansen said. “The industry will continue to look for solutions to meet these demands, whether it’s treating wheat during the tempering process or treating flour after it’s milled. I think eventually all flour will be treated in some fashion to make it food safe. A lot of work is currently being done to come up with a solution.”

He noted that Siemer Milling has installed two heat treatment lines for flour, bran, and germ to produce both food safe and functional flour products.

In terms of grain storage improvements, Peter Marriott, sales manager for Satake Europe, a milling equipment manufacturer, foresees going beyond today’s ability to monitor ambient conditions during storage.

“In the next step, imagine if storage silos will be able to fully adapt themselves to the changing ambient conditions, with receiving real-time weather information from the internet,” he said. “This example can be extended to other processes in order to explain how we achieve optimization and food safety with technology implementation.”

Specialty milling

The current trend toward increased specialty milling will continue to gain momentum, Anderson predicted, as he sees a shift away from almost exclusively milling traditional “white fluffy flour.”

“I see the industry shifting toward organics, which has become a larger segment for us, as well as a shift to milling ancient grains, legumes and other alternative proteins,” Anderson said. “As flour millers we can be too wrapped around a kernel of wheat. Wheat will always be a core and fundamental aspect of our industry. However, we have to continue to look at other products that are nutritious and provide a good alternative protein. At the end of the day, it’s about what consumers want and we need to explore how we can partner with customers to supply those.”

Anderson said Ardent Mills was positioned to be a provider of plant-based protein solutions through dry milling of various pulses and legumes.
“We’ve learned during the last several years that there are a lot of similar technologies in play, and it requires a lot of the same expertise that we already have with wheat milling,” he said. “We feel very good about our capabilities and our ability to serve those demands.”

Milling equipment manufacturers agreed that the mill of the future would likely be smaller.

“We definitely expect to see more compact milling systems in the future,” Marriott said. “With an efficient plant design, combined functions of machines, and simplified processes, we will develop smaller plants with optimal usage of the area, and a lower energy consumption advantage as well.”

Galli said he envisioned mills being shorter in height than many of today’s 6- or 7-story buildings thanks to alternative plant engineering concepts, the type that Ocrim began working on more than 50 years ago. He noted that some of these concepts are “already applied today, that make it possible to eliminate at least two floors in comparison to a traditional mill.”
While the square footage is likely to decline, production capacities at individual plants will continue to increase as it becomes harder for smaller flour mills to compete.

“There’s certain fixed costs, whether it’s a 5,000- or 10,000-cwt mill, that are always going to be there,” Jansen said. “So, the economics of it are going to continue to drive larger milling units and/or larger mills with multiple milling units within them just to capture those efficiencies of scale.”

Anderson also sees a future with fewer but larger-capacity flour mills.
“It’s hard to spend the millions of dollars needed to continually upgrade a 5,000-cwt mill versus the economy of scale you get with the bigger mills,” he said. “That’s the fundamental shift we keep seeing. Whether it’s within a given company or with mergers, I do think that’s probably a trend that’s going to continue.”

The future of milling: art versus science

Over the years but especially in recent decades as technological advances in the milling industry have accelerated, a common topic of debate among millers has centered on the question: To what degree is milling an art as opposed to being a science?

And as milling plants become more automated with huge volumes of real-time data available to analyze every conceivable aspect of the operation, is flour milling becoming less of an art?

“Absolutely, it has become less of an art,” said Merzad Jamshidi, chief executive officer and managing director of KFF Mills, Tehran, Iran.

“The only part where it still remains a bit of an art is how millers mix and match their raw material to produce the ideal product,” he said. “Milling is like any other business. You look at the aviation industry where the emphasis is more dependent on automation and less on pilots’ input and performance — I believe the mills are also heading the same direction.”

Still, many millers are adamant that despite mills being equipped with state-of-the-art automation technology, the human senses of millers still have a major impact on how successfully a mill operates.

“It is absolutely still an art,” said Troy Anderson, vice president of operations at Ardent Mills. “The technology provides quicker validation that the art is on target. We still need our millers, and they still need their sense of touch, sight, smell and sound to set up our mills and to know when we have an issue. At the same time, we have a lot of great technology that is getting better at beating those senses to solve the problem.”

Milling industry consultant Jeff Gwirtz, president of JAG Services Inc., and a former milling science professor at Kansas State University, said he feels strongly that even though computer-controlled systems have enabled millers to start a mill with the push of one control-room button rather than a series of buttons located on different floors of the plant, it is still important for the milling operative to understand the logic behind the series of events that unfold when a mill ramps up.

“Even though you push a button to start the systems, you should be able to sit in the control room and say, ‘I know this system is starting because I pushed the button and not only do all the lights turn green along the way, but I can hear it start up,” Gwirtz said.

“Sometimes you need to tie the pushing of the button to a series of events that should have to occur that have a practical and physically observable evidence of happening other than just the green light going on.”
The same goes for when a problem is occurring in the mill.

“If you have to wait until an alarm goes off and a red light flashes to understand you’re having a problem, then you weren’t running the system, the system was running you,” Gwirtz said.

David Jansen, vice president of production for Siemer Milling, said the advances in automation, particularly regarding data collection, have helped millers spend more time on the parts of the job they enjoy most.

“I don’t think the art is gone and I absolutely believe the need for the miller is still there,” he said. “I’d like to think that the advanced technology is helping millers today do more milling and less of the mundane tasks.”

Perhaps someday Artificial Intelligence (AI) will progress to the point where the human touch of a miller is no longer of value. But most agree it will probably take many years for such a scenario to play out, if ever.

“Every wheat kernel is different, just like every person is unique, and we have to have people who are good at responding to that,” said Anderson, a 30-year milling industry veteran. “To a degree, AI someday may be able to do that but we’re nowhere close to that today, so being good at marrying the art with the science around technology — we feel that’s the sweet spot of being really effective at what we do.”

Even the manufacturers of the increasingly automated equipment used in today’s mills foresee trained millers remaining as a valuable part of the milling operation in the years to come.

“The concept of the art of milling will certainly change and therefore also the way today’s millers are used to working,” said Marco Galli, technological manager at Ocrim. “There will be an increasing comparison of numbers because the data will be what guides and supports millers in their choices every day.

“Imagine the potential that could be achieved by combining the experience of a miller with data collection and the relative analysis of this data, for example, in managing the energy consumption of milling based on the wheat mixing. What I see in the future of the miller is the capacity to optimize the processes using supporting information made available through the collection and processing data from the field.”

May 1, 2021April 29, 2022

Around the World

By Charlotte Atchley

May 2021

Around the
World

Globalization expands both consumer experience and business opportunities for the baking industry.

Baking & Snack

Europastry

Technology has grown by leaps and bounds; just a look at the past 10 years proves how much has changed. As technology has leapt forward, it has shrunk the world for consumers but expanded it for business, and the baking and snack industry is no different.

“Globalization has had a huge impact on consumption trends in bakery and snack,” said Carolina Moré, marketing director, Europastry USA, Long Island, NY. “There are products that doubtless become global such as baguettes, donuts and croissants, products one can find in almost every part of the world.”

While certain bakery and snack products are ubiquitous, each is tweaked to target specific regions’ preferences in flavors, textures and health concerns.

“Innovation and scientific research, especially when focused on improving production and nutrition, have also intensified, becoming requirements for companies with international scope to respond to global demands while remaining competitive,” said Rafael Juan, chief executive officer of Vicky Foods, a global company based in Valencia, Spain, that owns the Dulcesol brand.

And as globalization impacts consumer trends, it also has become a major part of doing business. From supply chain optimization to expanding in emerging markets, baking and snack companies are looking worldwide for growth opportunities.

Doing business globally

As the baking industry has grown, companies have looked beyond their home country’s borders for expansion opportunities.

Today’s multinational companies like Europastry, headquartered in Barcelona, Spain, and Vicky Foods span the globe with their bakery and snack brands.

“In our case, internationalization has been a key aspect of our business strategy,” Ms. Moré said. “It has allowed us to grow in countries such as the United States and the Netherlands through our different acquisitions.”

This has become a business strategy for many larger food manufacturing companies. Grupo Bimbo, Mexico City, the largest baking company in the world, has a presence in 33 countries, a far cry from its humble beginnings as a family-owned bakery 75 years ago. And it continues to grow through acquisitions around the world, most recently acquiring a production plant in Medina del Campo, Spain, from Cerealto Siro Foods and Modern Foods in India. In a call with investment analysts, Daniel Servitje, chief executive officer and chairman of Grupo Bimbo, said the acquisition in Spain would enable the company to enter that region’s sweet baked goods private label market. The company also expects growth to come from Brazil, Russia, India and China, as it reported to investors in the fourth quarter of 2020.

Other major players are also finding opportunities around the world. At the Consumer Analyst Group of New York conference earlier this year, Mondelez International, Deerfield, Ill., reported record share gains in chocolate in the United Kingdom and cookies in the US and China. The company’s Oreo brand most notably has room to grow in other markets, said Dirk Van de Put, chairman and chief executive officer.

“We are leaders in the US and China, but in other markets, we are under-indexed with significant opportunities,” he explained in a call with investors.

For Gruma, the Monterrey, Mexico-based company, which owns Irving, Texas-based Mission Foods, reported seeing future demand in Europe and growth for its pizza business in Asia and Australia.

“We are producing not only for the retail, which is growing, but also in a very important way, we are providing pizza bases for most of the pizza, let’s say, restaurant chains in that area,” Raul Cavazos Morales, chief financial officer, told analysts during a Feb. 25 conference call about the company’s pizza bases business. “Now we are introducing these products in the US. We will start to also offer to the market the pizza bases as well in Europe.”

Much of the room for growth in baking and snack categories is found in emerging countries, Mr. Juan explained.

“Generally speaking, emerging countries currently represent the greatest business opportunity for the snack industry for two reasons: their demographic growth and their increasing income and purchasing power,” he observed.

Many expect the Asia region to dominate sales in the coming years, specifically China.

“We all understand that certainly the Chinese market is still a growing market and expect there to be a real growth opportunity,” said Chuck Metzger, chief executive officer, Hearthside Food Solutions, Downers Grove, Ill. “We are seeing multinational companies building plants there, especially in the baking sector.”

In its 2020 bakery report of the Asia Pacific region, Euromonitor showed that baked good sales experienced healthy growth from 2015-2020, largely thanks to China. The research firm expects the category to expand in China in 2021 as well as the entire region.

During a virtual presentation at the Consumer Analyst Group of New York conference, General Mills, Minneapolis, reported it saw opportunity in core markets such as France, the UK, Australia, China, Brazil, India and North America.

Globalization certainly provides these major players with plenty of new markets to play in and sell their products, but it also offers new suppliers for ingredients and other raw materials. The opening up of the global supply chain over the past few decades has helped companies cut costs.

“One positive aspect is the ability to boost competitiveness now that raw materials can be bought from every corner of the globe,” Mr. Juan said.

This opens the door to cheaper raw materials and labor costs by moving production capacity internationally. This global supply chain, however, doesn’t come without risk and trade-offs. Transparency and traceability become paramount as countries put in place more food safety regulations, such as the US’s Food Safety Modernization Act. Bakers must vet international suppliers and create a paper trail to prove food safety standards are being met.

“We’ve had to shift more company resources to keep up with those regulations and vet suppliers against the regulations,” Mr. Metzger said of the challenge.

And the coronavirus (COVID-19) pandemic frayed the edges of this interconnected supply chain. While a globalized supply chain would seem insulated against world events that are isolated, a pandemic impacts every part of the world, from the source of the ingredients to processing and shipping. As baking companies reevaluate the vulnerabilities revealed by the pandemic, Mr. Metzger believes the industry will move to a hybrid supply chain approach.

“It’s going to be a healthy balance between domestic and global suppliers; I don’t think there will be a full pivot back to domestic,” he said. “Companies will split their supply chain between domestic and low-cost, global models. Companies will become more strategic in terms of how they think about their supply in critical areas.”

This can also look like partnering with suppliers who are local to the area of a specific production facility. Europastry operates with a business model of “think global, act local.”

“Although we are a large company, we work with local suppliers and strive to make the entire value chain a more sustainable process,” Ms. Moré said.

Catering to a global consumer base

As baking companies reach more international consumers with their products, they must tailor them to each region’s tastes. While some trends have gotten global traction — clean label and health and wellness — the specifics can change from place to place.

“Clean label and organic have been on the rise in consumer trends and are even more important now,” Ms. Moré said, referencing the pandemic. “Health and wellness are important to today’s consumers. Whole grain, vegan and fiber-rich products are on the rise as consumers are changing their diets as they become more health conscious.”

In Grupo Bimbo’s fourth quarter presentation to investors, the company reported that it sees growth for the US market in organic and gluten-free claims on baked goods, while Western Europe gravitated toward claims like whole grain and high fiber breads. Reduced fat and sugar claims are also popular in Western Europe, according to a report on 2020 bakery by Euromonitor. Euromonitor also reported that health and wellness grew in the minds of Greek consumers as more consumers in that country are becoming interested in veganism.

While these universal trends may be on the rise, how they play out in specific products differs, depending on the country.

“Our products must adapt to each country’s consumption habits,” Mr. Juan said. “At Vicky Foods, we do this by adjusting our recipes, either by adding or removing ingredients or changing the flavors of the existing products accepted in those countries. We also test and launch new products that reflect local trends with the collaboration and expertise of our partners in those markets.”

Europastry accomplishes this with its four innovation centers, or Cereal Centers, which are located strategically around the world with two in Spain and one in both the Netherlands and the United States. Teams of food scientists, nutritionists, chefs and bakers work independently on products that will suit their markets.

Those that are perfected can find new markets around the world when appropriate.

“Our distribution structure allows us to get to know these products in other countries so we can innovate internationally and remain at the forefront of bakery innovation,” Ms. Moré said.

To address the ever-changing, vague definition of natural and clean label, Europastry keeps its eyes on three key pillars to guide its innovation in this space: heeding traditional baking recipes, respecting the preparation procedures of our master bakers and preserving the best flavors.

While health and wellness might be at the forefront of consumers’ minds around the world, both Europastry and Vicky Foods also see a movement toward supporting local businesses and supply chains.

“In recent months, consumers have been very vocal about advocating for local products,” Mr. Juan said. “Also, nostalgia, which has facilitated the revival of products that were successful in the past.”

This has also been reflected in the fact that Mr. Juan said they have noticed local companies gaining more market share in recent years as more mature markets see a surge of local brands.

Despite this interest in nostalgia, health and wellness and supporting local brands, Europastry noted there is room for innovation.

“People still want to try new things; they are open to indulgences and innovation,” Ms. Moré said. “All-time classic products such as brioche or indulgent products like anything filled with chocolate or our range of more rustic artisanal breads made with sourdough and long fermentation times, all of these are guaranteed successes.”

While the pandemic may have shifted the global baking industry around, its global strength cannot be denied.

“It’s a multi-billion-dollar business that’s growing around the world,” Mr. Metzger said. “It’s not a flat or declining business, especially in the US, and globally there’s more potential. The potential to expand into developing markets is very high.”

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World Grain

Electronic trading technology ended 150-plus years of open outcry buying and selling and has potential to transform the grain elevator’s role.

Leading the Pack

Baking & Snack

Whether increasing production line capacity or reducing plastic waste, sealing in freshness remains at the heart of packaging.

Playin’ it Safe

Meat+Poultry

Legislation, science and culture have all been variables in the evolution of food and worker safety.

Added value becomes nonnegotiable for global companies

Consumers around the world are demanding one thing more and more from food manufacturers: sustainably and ethically produced food.

Sustainability programs, transparency across supply chain and using buying power to improve agriculture practices have increasingly shown up in corporate mission statements. Grupo Bimbo, for example, is well-known for its commitment to be a “sustainable, highly productive and deeply humane company.”

The Mexico City-based company sets lofty sustainability goals—100% renewable electric power, 100% recyclable, biodegradable or compostable packaging by 2025 — and creates programs to support employees. In its 2020 Q4 investor presentation, Grupo Bimbo reported that 100% of its facilities in the United States and 85% of facilities in Mexico are powered by renewable energy while it has also reduced packaging by more than 3.3 million kgs in the past 10 years.

Europastry, Barcelona, Spain, has created the Responsible Wheat label to identify best practices in wheat farming. This means supporting local farmers, using certified seeds, reducing fertilizers, implementing crop rotation practices and traceability from farm to table. The company has currently dedicated 5,300 hectares to Responsible Wheat and aims to increase that number to 20,000 by 2025.

“Our quest for sustainability is a given,” said Carolina Moré, marketing director, Europastry. “We are increasingly committed to drastically reducing not just the carbon footprint of our activity but also that of the entire value chain.”

April 6, 2021April 29, 2022

HFCS history shows challenges, perseverance

By Ron Sterk

April 6, 2021

HFCS history shows challenges, perseverance

Corn derivative remains second most popular caloric sweetener

Milling & Baking News

©MAKSYMOWICZ – STOCK.ADOBE.COM

High-fructose corn syrup came on the market in the late 1960s as a low-cost alternative to sugar and experienced tremendous growth for the next 30 years. Then came controversial research and biased news reports that turned the public’s perception negative and sent consumption into a decades-long slide that continues today, with the added challenge of overall caloric sweetener reduction. Is there a long-term future for HFCS? Based on its history, it’s a bit early to count it out.

This centennial article will examine the history, challenges and future of HFCS, a product that has been an important ingredient for the grain-based foods industry for half a century. First, the ground rules defining HFCS in a hopefully simplified explanation.

Chemists Richard O. Marshall and Earl R. Kooi first produced HFCS in 1957 when they created the enzyme glucose isomerase, which rearranged the composition of glucose in corn syrup, with the first patent granted in 1960 to the Corn Products Refining Co. (which later became CPC and then Ingredion Inc.). Little did they know what a firestorm they had created — one that would include corporate intrigue, questionable science, bad journalism and lawsuits as the result of their discovery proliferated the food processing industry. Despite that, 50 years later HFCS remains the second-most-used caloric sweetener after sugar in the United States.

Several types of HFCS are available in the marketplace, with HFCS55 produced in the greatest volume, used predominantly in soft drinks, and HFCS42, used in processed foods, including baked foods, cereals, dairy products and other applications. HFCS with fructose content as high as 95% is available but not widely used in food applications. HFCS is naturally liquid, although crystalized forms are available.

HFCS is derived from the starch of field corn, which makes up about 80% of the kernel. In the corn wet milling process, the starch is broken down into individual glucose molecules, first becoming regular corn syrup (glucose). Then, a series of enzymatic processes (including the key isomerization) convert some of the glucose to fructose. HFCS55 consists of 55% fructose and about 45% glucose and HFCS42 consists of 42% fructose and 58% glucose. HFCS55 is made by combining HFCS42 and HFCS90 in the right amounts to get 55% fructose.

The amounts of fructose in HFCS are not that different from regular sugar (sucrose), derived from crystalizing juice of sugarcane or sugar beets, which is 50% fructose and 50% glucose and has been around for centuries. Invert sugar, made from sucrose, is 45% fructose, 45% glucose and 10% unhydrolized sucrose. Honey is about 48% fructose and 52% glucose. “Regular” corn syrup is 100% glucose. Concentrations of fructose over 50% make HFCS sweeter than sugar, but not as sweet as many expect. The word “high” in high-fructose corn syrup is somewhat of a misnomer, especially in the case of HFCS42, which is only about 92% as sweet as sugar.

The main differences between sucrose and HFCS, according to the Food and Drug Administration, is that HFCS contains water. Both glucose and fructose are monosaccharides. In sucrose a chemical bond joins glucose and fructose molecules that are broken down rapidly by stomach acids. HFCS has no such chemical bond joining glucose and fructose, thus it’s a disaccharide. That difference, and how the body subsequently processes sucrose, glucose and fructose has fueled much of the debate surrounding HFCS. Adding to the debate is the fact that HFCS is “manufactured” rather than occurring naturally in the corn kernel, unlike sugar that occurs naturally in beets and cane. The “natural” debate continues today, in part because the FDA has never defined what constitutes a “natural” food. Most agree that once broken down, the human body processes the basic molecules in the same way whether from sugar or HFCS.

Also important is that nearly all caloric sweeteners have about four calories per gram, whether HFCS, sugar, honey, agave or other sweeteners.

The early years: Growth

HFCS jumped in popularity in the late 1970s when sugar prices skyrocketed to more than 70¢ a lb. The Coca-Cola Co.’s use of HFCS to replace sugar in the 1980s to cut costs while it was battling No. 2 Pepsi-Cola was dramatized in The History Channel’s “Cola Wars” segment of “The Food That Built America” series, which aired as recently as March.

“Beverage manufacturers were looking for alternatives to high sugar prices,” said Craig Ruffolo, vice president, McKeany-Flavell Co.

Coca-Cola was locked in a battle with the Pepsi-Cola Co. in the 1970s. Pepsi’s famous “Pepsi Challenge” that showed consumers preferred the sweeter, slightly more syrupy taste of Pepsi over Coke in blind taste tests allowed Pepsi to begin taking market share from Coke, although Coca-Cola always has led in sales. Coca-Cola then embarked on several changes in the 1980s, including the release of Diet Coke in 1982, still the most popular diet soda. Then chief executive officer Roberto Gouzueta led Coca-Cola to switch from sugar to HFCS55 for cost savings.

“HFCS had been around for five or six years but had not received that much attention,” said Kyd Brenner, an agricultural trade consultant who was an employee and vice president of the Corn Refiners Association from 1975 to 2000. “High sugar prices spurred the interest of big food companies.”

Coca-Cola first used HFCS in some minor brands in the 1970s, but then phased in use in its flagship brand in the 1980s.

The History Channel also noted that “the switch to corn syrup opened the door for bigger changes to the original Coke’s recipe.” What followed was the famously disastrous release of reformulated “New Coke” in 1985, which included a new formulation in addition to HFCS. A consumer “uprising” prompted Coca-Cola to bring back the old formula as “Coca-Cola Classic” just three months after the release of New Coke, but the classic remained sweetened by HFCS.

“HFCS production capacity had built up and the food industry knew how to use it by the early 1980s,” Mr. Brenner said.

In addition to lower price, Mr. Ruffolo noted that HFCS offered other key benefits — adequate supply and uniformity. The product was derived from field corn, the most widely grown crop in the United States, and the manufacturing process ensured a uniform final product no matter the supplier.

Domestic deliveries of HFCS for food and beverage use, based on data from the US Department of Agriculture, went from zero in 1967 to a high of 63.8 lbs per person in 1999, compared to sugar at 98.5 lbs per person in 1967 (reaching an all-time high of 102.3 lbs in 1972) falling to 66.4 lbs in 1999, less than a pound more than HFCS. Total per capita deliveries of caloric sweeteners were 114.2 lbs in 1967 and peaked at 151.6 lbs in 1999.

Sosland Publishing Co. began reporting HFCS prices in the mid-1980s.

The mid-years: Controversy, maturity

“Success breeds contempt,” actor Samuel L. Jackson said in 2016, referring to rivals Marvel and DC Comics in adapting comics to movies, a statement not unlike “familiarity breeds contempt,” stated by Mark Twain and others throughout the years.

HFCS certainly had become successful and familiar, at least in the food industry from 1967 to 1999.

While HFCS use was growing rapidly, obesity rates also were shooting skyward. As the two trends were occurring nearly simultaneously, some were quick to point a finger at HFCS as the reason Americans were getting fatter. Several early scientific studies initially “confirmed” the connection, while others subsequently showed no causal effect.

“HFCS was a disruptive technology,” Mr. Brenner said. “There was a fear of the unknown. Sucrose had been ‘the’ sweetener for hundreds of years.”

There were some early challenges to HFCS that never gained traction, he pointed out, but those challenges “returned with a vengeance” in the early 2000s.

The attacks on HFCS especially gained attention in 2004 when George A. Bray, MD, a professor of medicine at the Pennington Biomedical Research Center in Baton Rouge, La., and Barry M. Popkin, PhD, a nutrition professor at the University of North Carolina at Chapel Hill, published a hypothesis that HFCS was a direct causative factor in obesity, based on the relation between the growth of HFCS consumption and increased obesity rates between 1960 and 2000.

“Even the two scientists who first propagated the idea of a unique link between high-fructose corn syrup and America’s soaring obesity rates have gently backed off from their initial theories,” The New York Times said in a significant article titled “A Sweetener With a Bad Rap” in 2006.

“It was a theory meant to spur science, but it’s quite possible that it may be found out not to be true,” Dr. Popkin was quoted as saying in The Times’ story.

The New York Times also noted that Michael F. Jacobson, director of the Center for Science in the Public Interest, and a common critic of the food industry, “never supported the notion that high-fructose corn syrup was a unique contributor to obesity,” although he said HFCS was artificial because it was created by a change in molecular structure rather than occurring naturally.

But the “cat was out of the bag” with the Bray/Popkin paper, and what followed was a “feeding frenzy” of activists, journalists and even parts of the sugar industry portraying the evils of HFCS. Some detractors went beyond blaming corn refiners to blame “cheap corn” that they claimed was heavily subsidized by the US government. Numerous studies would follow discounting the initial theory from Dr. Bray and Dr. Popkin, but none reversed the negative perception of HFCS.

Despite the “warning” signs against HFCS in the 1980s, “the industry had to scramble to assemble good and factual information,” said Mr. Brenner, who was a consultant for the CRA during the 2000s.

Further complicating matters for HFCS was a slowdown in use after years of sustained rapid growth.

“With or without the attacks, HFCS use was going to hit a peak,” Mr. Brenner said. “HFCS has been a mature product since 2000.”

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“It was a theory meant to spur science, but it’s quite possible that it may be found out not to be true,” Dr. Popkin was quoted as saying in The Times’ story.

Further complicating matters for HFCS was a slowdown in use after years of sustained rapid growth.

“With or without the attacks, HFCS use was going to hit a peak,” Mr. Brenner said. “HFCS has been a mature product since 2000.”

After peaking at 63.8 lbs per capita in 1999, deliveries of HFCS tumbled nearly 25% to 48.4 lbs by 2010. Sugar deliveries, meanwhile, dipped to a 17-year low of 61 lbs in 2003 and then climbed to 66 lbs in 2010. Amid the public’s growing negative perception of HFCS, the food processing industry began to reformulate HFCS out of foods (and thus off labels) and switch back to sugar or some other “natural” sweetener.

The story of HFCS may not be told without the role of the Corn Refiners Association (CRA), the Washington trade group representing and defending the industry. Leading the CRA during the most challenging years was Audrae Erickson, who was president from 2002 until 2012. She led efforts on trade and rebuffed numerous challenges accusing HFCS of being the cause of rising obesity rates in America.

The CRA has six member companies: Archer Daniels Midland Co., Cargill, Grain Processing Corp., Ingredion Inc., Roquette America, Inc., and Tate & Lyle Americas. All of those make HFCS except Grain Processing, which focuses on starch and maltodextrins. They all also produce fuel ethanol and numerous other products.

Despite its numerous challenges and victories for the industry, the CRA also had a couple missteps along the way. One was an attempt to change the name from high-fructose corn syrup to corn sugar at the height of the negative press era. The FDA rejected that attempt.

Also controversial was a print and television advertising campaign by the CRA in 2008 extolling the benefits of HFCS, or at least noting its similarities to sugar. The effect of the campaign on consumers was questionable at a cost some estimated between $20 million and $30 million.

A 2012 meta-analysis published in the Annals of Internal Medicine noted that weight gain resulted when HFCS was consumed in addition to existing daily caloric intake but not when it was consumed in place of other sugars. Thus, the key was total calories consumed, not necessarily the type of calories, and Americans were consuming lots more calories during the final decades of the 20th century and into the 2000s (while also becoming more sedentary), especially caloric-sweetened beverages, which to some, pointed the finger back at HFCS.

Whether from work by the CRA or the numerous studies countering the initial anti-HFCS research, “the effort just ran out of steam,” in the late 2000s, Mr. Brenner said. “People lost interest.”

Then there were lawsuits and counter lawsuits between the corn sweetener and sugar industries (initiated by sugar) that started around 2011, part of which focused on accusations of false advertising in the 2008 HFCS public relations campaign. The sugar industry sought $1.5 billion in damages. The CRA countered with accusations that the sugar industry was running a “spin-and-smear conspiracy” against the HFCS industry, seeking $530 million in damages. Those cases finally were settled out of court in 2015.

“The sweetener industry realized that ‘inter-sweetener warfare’ wasn’t doing anyone any good,” Mr. Brenner said.

Exports to Mexico surge with NAFTA

Producers of HFCS got a reprieve of sorts with the North American Free Trade agreement in 2008. US refiners had exported between 150,000 and nearly 200,000 tonnes, dry weight basis, of total fructose (mainly HFCS55 but also some HFCS42 and crystalline fructose) to Mexico annually from 1997 through 2000 (calendar year), but those shipments plunged to a low of about 5,700 tonnes in 2003 amid challenges from Mexico’s sugar industry unhappy with the displacement of sugar used by Mexican bottlers and others. US exports recovered to about 330,000 tonnes by 2007. As in the United States, HFCS was an economical alternative to sugar in Mexico.

NAFTA opened unlimited, duty-free trade in sweeteners (mainly sugar and HFCS) between the two countries. Mexican bottlers imported HFCS to replace the large amount of sugar being exported to the United States, a far more lucrative destination for Mexico’s excess sugar than other world markets. Shipments of HFCS to Mexico jumped by 36% in 2008, the first year of the agreement respective to sweeteners, finally peaking at 1,138,750 tonnes in 2012, nearly three-and-a-half times the 2007 amount.

But it was an uneasy period for HFCS exports because sugar trade between the two countries grew more contentious over the next several years, with Mexico threatening to suspend or limit imports of US HFCS in retaliation for US sugar producers’ challenges to its large sugar exports to the United States. With unlimited, duty-free exports to the US market, Mexico boosted its sugar production, rising to a record 6,975,000 tonnes, actual weight, in 2012-13, up 37% from the prior five-year average. The influx of sugar from Mexico contributed to eight-year low prices for US sugar and culminated in US sugar producers filing anti-dumping and countervailing duty complaints against Mexico. US sugar producers prevailed in 2014, anti-dumping and countervailing duties were imposed and subsequently suspended per agreements to limit Mexico’s exports of sugar to the United States.

US exports of HFCS to Mexico took a hit as a result, but not as severely as some had feared as Mexico quickly trimmed sugar production to an average just over 6 million tonnes annually over the next five years, down 16% from the 2012-13 peak. US shipments of HFCS to Mexico dropped to 900,967 tonnes in 2014 and would build back to a recent high of 1,052,748 tonnes in 2017, when other factors began to affect both sugar and HFCS consumption in Mexico — namely sweetener taxes and a major government push to reduce consumption of added sugars.
Mexico remains by far the largest export market for US HFCS.

The latter years and beyond: Decline?

While cooler heads prevailed in the sweetener industry after the lawsuits were settled in 2015, problems for HFCS are far from over.

Deliveries of HFCS in the United States dropped another 25% from 48.4 lbs per person in 2010 to 36.7 lbs in 2019 (the most recent data available), according to the USDA. That’s the lowest since 31.2 lbs in 1983, when the sweetener was in the early stages of a 30-year upswing. From its peak of 63.8 lbs in 1999, per capita deliveries of HFCS in the United States declined 42% over the next 20 years, while sugar deliveries edged up 3.2% to 68.5 lbs in 2019, although it should be noted that per capita sugar deliveries have eased from a recent high of 69.8 lbs in 2016.

Cost advantages over sugar, dependable supply and other functional benefits of HFCS have helped HFCS maintain a foothold in the US and Mexican food and beverage markets. But those benefits haven’t slowed the decline in use as some food manufacturers continue to formulate away from HFCS, in part amid the clean label movement of recent years but also because of general sugar reduction. HFCS, along with sugar and soybean oil, all avoided the GMO label despite coming mostly from GMO crops, because any traits are eliminated during the refining processes.

“In the 1970s beverage manufacturers were looking for alternatives to high sugar prices,” Mr. Ruffolo said. “It’s no different today. Food manufacturers will continue to look for alternatives for price and functionality.”

Mr. Brenner agreed, noting that while HFCS is used globally, it is most widely used in the United States and Mexico, and “there remain opportunities around the world.”

And consumers are changing.

“The lines have blurred,” Mr. Ruffolo said, referring to generational changes in consumer food and beverage preferences and demands, and the “lumping of caloric sweeteners together” as total added sugars rather than HFCS or sugar. The younger generation has grown up only knowing the taste of soda sweetened with HFCS, he noted.

Meanwhile, the corn wet milling industry will adapt, he said, just as it did in the past two decades reducing HFCS production capacity to match declining demand, thus maintaining price levels because there was limited excess supply. The industry also has adjusted its marketing technique in recent years, now working mostly with buyers rather than depending as much on distributors, and pricing supply based on individual customers rather than issuing blanket pricing “letters” announcing increases.

So what lies ahead? Will the sharply declining demand picture be accelerated by the overall push to reduce added sugars? Will soda taxes, which talk about sugar but in reality mostly affect HFCS, increase and gnaw away at HFCS consumption? Despite a colorful 50-year history, HFCS remains second only to its longtime rival sugar as the caloric sweetener of preference in the United States. HFCS now may well be locked in a battle with sugar to maintain caloric sweeteners in food and beverages rather than fighting against sugar for market share.

April 1, 2021April 29, 2022

Passing the Test of Time

By Dan Malovany

April 2021

Passing the
Test of Time

For a legendary family business, embracing change while respecting its heritage remains the secret to longevity and ongoing success.

Baking & Snack

Sometimes it takes an unwavering hand for family bakeries to persevere through the best and worst of times.

In 1920 during the Spanish flu, German immigrant Herman Seekamp purchased a little Chicago bakery called Clyde’s Delicious Donuts. Fast forward to last year, when the Addison, Ill.-based company and one of the nation’s leading donut producers celebrated its centennial, this time again in the middle of another pandemic.

Now Kim Bickford, chief executive officer and third generation owner, took his turn to guide the bakery through another tough patch in the company’s storied history. He thought of his grandfather, who led the bakery through the Great Depression by maintaining an optimistic attitude and a cautious approach to the business. That’s a proven formula that’s worked so well over the years.

“When the pandemic hit last year, one of the important things that I said to the organization was, ‘This company has been through a lot in the past 100 years, and we’re going to get through this as well.’ That’s a steady message that I tried to share with our team,” noted Mr. Bickford, who’s been with the company for 44 years.

“I’m not patting myself on the back, but that’s the thing you have to do when you’re in a position of a family business where you care about the people who helped make you successful, and you have to reassure them that you’re going to be successful going forward,” he added.

“We’re conservative in our business, and we take care of our customers and our employees. Those are the things that help a family-owned business survive.”

Maintaining a sense of history and addressing new challenges allow family-owned bakeries like Clyde’s Delicious Donuts to focus on tomorrow, noted Josh Bickford, executive vice president, strategic initiatives and fourth generation family member.

“Even though we’re a family business, what’s best for the business comes first,” he explained.

“Having a lot of mutual respect in the family has made that conversation easier at any given point. We have never been afraid to pivot or change with industry trends.”

Breaking the rules

Too many legacy businesses, however, get stuck in the past.

“You’ve heard of the 100-year rule that says, ‘We have always done it that way.’ We try to get away from that type of thinking,” Josh Bickford said. “We have to have new ideas.”

This mindset is one of the many reasons why some family bakeries succeed and others do not, especially when faced with one of those many watershed moments in a company’s history. For Clyde’s, the latest turning point came just a few years ago, when the donut producer pivoted from fresh to frozen distribution to serve the shifts in the in-store bakery channel.

“That’s allowed us to grow dramatically because we reached new markets,” Kim Bickford said.

Pivoting is not a catchy phrase that suddenly became popular for Neri’s Bakery Products. Anthony M. Neri, general manager for the Port Chester, NY-based bakery, said it has been a key for survival for this family business that was founded in 1910. He’s a member of the fourth generation involved in the family business with Brett Neri-Ferraro, head of human resources; Anthony Frank Neri, plant manager, and Salvatore Neri Jr., manager of the sweet goods department.

“You always have to keep evolving and keep up with the industry,” Anthony Neri observed. “With everything that’s going on, we shifted to a lot of individually wrapped items, which weren’t as big in demand five years ago as they are today.”

One of the company’s pivotal moments came in the early 2000s, when his father Dominick, now president, and uncle Paul Neri, vice president, shifted the business to contract manufacturing for major food companies from fresh independent deliveries to delis, diners and pizza joints at night.

“We never stopped providing those normal route jobbers at night,” Anthony Neri recalled. “We diversified. We no longer had all of our eggs in one basket.”

That decision paid off in a huge way during last year’s pandemic-driven shifts in the market.

“There are a lot of smaller family-owned players that might not be around now,” he said. “If you are solely surviving on those pizza places and diners, you may be in trouble today.”

For Flowers Foods, which celebrated its centennial in 2019, the transformational moment came in 1968 when the family’s second-generation owners took then-called Flowers Baking Co. public.

“It gave Flowers a way to finance growth and acquisitions as well as make capital investments needed to stay competitive,” said Brad Alexander, chief operating officer of the Thomasville, Ga.-based company. “Looking back, going public was the one action Bill and Langdon Flowers took that all but ensured the company would survive the coming consolidation in the baking industry.”

As a publicly held company, Mr. Alexander added, Flowers became answerable to its shareholders, resulting in a renewed emphasis on accountability and professionalism. It began to actively mentor and promote younger employees into management positions and hire people with a business education and experience.

“Talking to people who worked for Flowers at that time, you will hear that the ‘Flowers family’ culture created by Bill and Langdon did not change when the company went public,” Mr. Alexander said.

“Fortunately, they were able to keep that strong sense of teamwork, commitment to hard work and the values of integrity and respect. Employees were offered the opportunity to purchase stock and many of them did.”

During the flurry of industry consolidations through the next few decades, Flowers made more than 60 acquisitions. Several factors came into play during this period.

“One is that many family-owned bakeries did not have the capital to modernize their operations, improve efficiencies or grow their businesses,” Mr. Alexander explained. “Another is that some owners had no viable succession plan, no one to take over the running of their companies.”

Additionally, he noted, consumer food preferences began changing more rapidly, and family-owned bakeries often didn’t have the money to invest in developing and launching new products. The retail food business also started consolidating at this time. As grocery chains expanded, bakers were forced to serve larger geographic areas, which was difficult for some with limited direct-store-delivery systems.

“For many family-owned bakeries looking to sell their businesses, Flowers Industries was the company of choice,” Mr. Alexander said. “While Flowers’ growth, culture and experienced management were attractive, the real draw was the company’s stock, which was performing very well. Many of the acquisitions at this time were either all or partial stock transactions.”

For some companies, long-term survival relies more on managing the family than operating the business.

“There is an expression that I heard a long time ago that the first generation starts the business, the second generation grows the business, and third generation either sells the business or blows it,” Kim Bickford said. “I’ve been here long enough. I guess we haven’t blown it.”

History is littered with dozens of reasons why family businesses fail, including family squabbles, sibling shareholders who want to cash out or heirs apparent searching for more exciting careers. Industry veteran Bill Zimmerman Sr. comes from a family of bakers where his father, part of the third generation, didn’t want to run the Colorado Springs, Colo., business.

Today, he noted, some companies face unfunded pension liabilities, which make it difficult, if not impossible, to sell. Inheritance taxes have ended bakery dynasties. Regional family bakeries have gotten squeezed by the demands that national, big box retailers put on their suppliers. And then once-in-a-lifetime events like the pandemic have forced bakeries to sell or to fold.

Perhaps the main issue involves the lack of skilled labor coupled with an aging workforce.

“From an operations perspective, we continue to kick the can down the street about educating our workforce to understand what manufacturing is about,” Mr. Zimmerman said. “We are in dire straits, in my opinion, about educating people and replenishing the vast amount of knowledge that we’re losing because people leave the industry. It’s not so much about the family but finding people who can support the company as it goes forward.”

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Passing the Test of Time

Baking & Snack

Sometimes it takes an unwavering hand for family bakeries to persevere through the best and worst of times.

Making the transition

At Neri’s Bakery, third generation Dominick and Paul Neri made a commitment to hand over the family business in better condition than when they received it.

“I can’t tell you how many times my father has been asked, ‘Why do we work so hard?’ and his answer every time is, ‘I do it for my kids and my grandchildren and nephews,’ ” Ms. Neri-Ferraro noted. “That’s a big part of why we’re standing strong as opposed to other businesses in our industry.”

Ms. Neri-Ferraro recalled how she would wake up some mornings and her father and uncles still hadn’t returned home from the bakery.

“They were always at work,” she said. “They’ve groomed us and shown us what it’s like to experience failure, and that’s a big part of why we’re so successful.”

Today, Neri’s fourth generation takes an active role in the bakery’s operation.

“We’re all here every day,” Anthony Neri said.

That doesn’t mean the older third generation doesn’t have a say in the business.

“The key to our success is letting them think that they still are in control and that they’re still holding the torch. No, I’m just joking around,” Anthony Neri said.

“They’re very much involved here. We try to walk in the footsteps of our father and uncles. They’ve clearly been doing something right for this business to be successful after all these years.”

At Clyde’s, Kim Bickford and his brother, Kent, who is retired, learned the ropes from their father, Bill Bickford, and from on-the-job training. Josh Bickford, however, was recruited back into the bakery for his IT and administration expertise after attaining a finance degree from the University of Illinois. Over the years, he’s received informal training in other parts of the operation as well as in marketing and sales. That’s something his father appreciates.

“The next generation always brings a questioning attitude,” Kim Bickford said. “Is there a better way of doing something? They come in with fresh eyes and fresh ideas. So that’s a key to success when the next generation joins the business.”

Among the changes included a new image and rebranding that leverages the fun of donuts with the “smiles all around” campaign.

“We have this wonderful legacy business of donuts, but there is not a more fun product to be making than donuts,” Josh Bickford said. “We have an opportunity to take that to the next level and be industry experts.”

Kim Bickford pointed to another key to long-term success: bringing in outside managers to support the family business.

“In my career we have hired some very good team members and leaders,” he said. “We have been very blessed to have had good businesspeople contributing to our success in the last three decades or more.”

At Flowers Foods, Mr. Alexander said, turning the century mark serves as a reminder that the 100-year rule is meant to be broken.

“One thing 100 years in business will teach you is that the only constant is change,” he said. “Everything is evolving and today faster than ever. If you don’t adapt, you won’t be around for another 100.”

During the past five years or so, he added, Flowers has taken a deep dive into all areas of its business and even established a transformation office to manage the success of its key initiatives that will shape the future of the company.

“Our digital projects are particularly exciting,” Mr. Alexander said. “When implemented, they will bring us even closer to the consumer, increase our operational efficiency and deliver real-time insights that will allow us to make faster and smarter business decisions. The three initial digital areas or domains we’re working on are e-commerce, autonomous planning and what we’re calling ‘bakery of the future.’ Our team is at the heart of this work. We’re committed to its ongoing development and building capabilities as one of our strategic priorities.”

At Clyde’s, Josh Bickford sees the potential future in his seven-year-old daughter and four-year-old son and the excitement in their eyes knowing that their father is the “cool dad” who makes donuts. And besides, who knows what the fifth generation will bring to the bakery?
“I think there are still plenty of donuts to be made,” he said.

That’s how a business keeps it a family affair.

April 1, 2021April 29, 2022

Leaving Legacies

By Joel Crews

April 2021

Leaving
Legacies

Looking back at a century of icons, innovations and industry giants

Meat+Poultry

Denver Post/Contributor via Getty Images

Sosland Publishing Company’s coverage of the food industry started out focusing on the grain, flour milling and baking industries for the first 50 years after its founding in 1922. During that same era, the meat-processing industry began a government-mandated transition away from being dominated by a handful of companies that developed an integrated infrastructure that made it almost impossible for outside cattle producers, feedlot operators, livestock transporters or processors to survive unless they were part of what was then, an insurmountable machine. There has always been an important link between the grain industries and commercial livestock production as feed quality and availability determines price, which is passed on to meat processors and the quality, availability and price they could demand for products on the market. A century ago, and still today, the constant has been the meat and poultry processing system’s reliance on grain-based feed to finish and sustain the herds and flocks needed to produce food for a dynamic, growing and migrating population. What has changed and continues evolving are the names in the game today versus 100 years ago.

Few if any of the pioneering companies, brands or descendants of the industry’s legendary leaders of 100 years ago are relevant or involved in today’s industry, evidence of the constant evolution and change that has made meat and poultry processing’s history a long and winding road dotted with plenty of peaks and valleys. Volatility has been a constant challenge for the meat processing industry as it has been for all segments of the food supply chain. Factors ranging from weather to labor issues to regulatory compliance to economic instability to international relations can have profound impacts on the degree of business success or failure any segment might experience.

Since Sosland’s founding, the company has expanded its portfolio of publications and websites to include a wider swath of food and beverage industries, including commercial and retail baking, global grain, meat and poultry, pet food, dairy and the supermarket perimeter. Looking closer at some of the names and companies that were prominent in the meat industry from a century ago sheds light on how the pieces complete the puzzle that is today’s industry.

Gimme’ Five

When considering the iconic meat companies and legendary leaders of a century ago, most historians would agree the five most famous names would include Philip Armour (Armour and Co.), Gustavus Swift (Swift & Co.), Thomas Wilson (Wilson & Co.) Edward Morris (Morris & Co.) and Patrick Cudahy (Cudahy Packing Co.).

Maureen Ogle literally wrote the book on the history of the meat industry. Her book, “In Meat We Trust,” published in 2013, documented how the dominating influence of these and other companies and icons for much of the late 19th century was all but snuffed out in the early 1920s. It was then that a US Federal Trade Commission investigation concluded that the vast majority of all livestock was slaughtered by one of the “Big Five” firms. The companies’ stakeholders were forced to surrender the control they previously had over the transportation infrastructure they relied on to achieve domination of the meat industry for decades by agreeing to sign the FTC’s Meat Packers Consent Decree of 1920. This muted the integrated system of stockyards (established in Chicago initially and later in Kansas City, Texas and westward); cold storage facilities; and the vast network of strategically routed railroads serving the country’s population centers the companies had relied on for many years of success. The decree was a result of an antitrust investigation ordered by then-President Woodrow Wilson. Congress went on with the passage of the Packers and Stockyards Act of 1921, to prevent consolidation and avert the threat posed by a meat monopoly. That power of consolidation was epitomized in the early 1900s by the “Beef Trust,” also known as the National Packing Co. that was formed in 1902 by Armour, Morris and Swift and was broken up about 10 years later. During its reign, the Beef Trust gobbled up scores of stockyards and slaughtering plants in the United States and grew its fleet of refrigerated railcars to thousands in route to controlling the lion’s share of US meat production.

When asked how the “Big Five” forged the path for future meat companies and laid the groundwork for today’s dominant companies and industry leaders, Ogle’s answer is simple.

“They didn’t,” she said.

That was because the consent decree and the Packers and Stockyards Act reshuffled the deck.

“Federal oversight was added to both the stockyard operations and the packing operations,” Ogle said. “All of those old companies really took a serious beating because in effect they had to dismantle a huge part of their corporate infrastructure and kind of start over again.”

The situation was made more challenging because World War I
had just ended and the United States was reeling from almost a half-decade of turmoil resulting from a boomeranging transition from peacetime to war and then back to a focus on domestic civilian life, all between 1914 and 1918.

New Blood

One post-war casualty that resulted was a collapse of agriculture as demand for grain diminished along with Americans’ appetite for beef. The 1920s was also the decade when refrigerated trucks challenged railroad shippers as a means for transporting meat to the growing population bases of the United States. This opened doors of opportunities for many smaller meat companies to break into the meat trade without being hamstrung by the new regulations facing the former industry behemoths.

Additionally, the new packers in the industry also held an advantage over the old guard because they were not bound by labor unions or old ideas that hindered the previous regime. Newcomers to the processing industry boldly forged completely different relationships with cattle feeders and ranchers who would sell directly to them and not be dependent on stockyards.

“Those big packers never again had the lock hold that they once did,” Ogle said. “So, for them, everything was scrambled and by the 1940s, what kept them going was really just the sheer demand (for meat) of another war,” thanks in part to canned meat being used to feed US troops overseas.

But after World War II, a new generation of investors and pioneers, like Warren Monfort and his son Kenneth, created a new model of feeding commercial cattle on a large scale for packers, who would contract directly with Monfort’s company and challenge the Corn Belt in/out feeders. For years, those feeders thrived by specializing in producing grains and when corn prices were low, purchasing and finishing range cattle with corn-heavy diets, cashing in on beef when it was worth more than corn. Monfort’s approach took the seasonality out of feeding and eliminated stockyards from the equation, which hit the Corn Belt hard.

“The stockyards just kind of fell to pieces in the 30s and 40s because there just wasn’t a place for them anymore in the system,” Ogle said.

Feeding Frenzy

Kenneth Monfort would grow his operations to eventually include processing facilities for lamb and beef as well as adding a distribution and transportation company. Monfort was also a pioneer in the industry for first introducing the concept of shipping boxed beef to customers, another departure from the previous era of meat processing. Monfort Beef ultimately became publicly traded and was renamed Monfort of Colorado Inc. ConAgra would go on to acquire Monfort in 1987.

In the post-WWI period feeding operations, like Monfort’s and others, the packing operators were doing business directly with each other, eliminating the once crucial role of the stockyards. Reliance on the railroads was replaced by trucking, which was unregulated for shipping of agricultural products at the time. The former heavyweights that once ruled the industry, no longer were factors and even asked to have the consent decree lifted because they could no longer compete in the new business.

“All of this had a big impact on the Corn Belt and the way people raised livestock and how they calculated the value of grain,” Ogle said.

Most of the legacy companies went through numerous ownership changes in hopes of finding their way back in the industry like the good ol’ days, to no avail.

“They were these big entities that were built for another time and place,” Ogle said. “They were really out of date especially because they had built so much of their infrastructure around railroads and stockyards and by the 1950s, they were just begging to be released from this consent decree.”

Some of the former giants, like Swift and Armour, attempted to survive other ways, including becoming poultry feeders when the broiler industry became a growing segment.

Inside the Box

After the 1950s, newcomers to the meat and poultry processing industry benefitted from the extinction of the top-heavy structure and big names that dominated 40 years earlier. They were not limited by the consent decree and didn’t have to operate under the scrutiny of labor unions, which wielded significant influence in meat plants starting as early as the 1880s and for most of the next 30 years. Add to the equation that well after World War II and especially starting in the 1950s, the US Department of Agriculture was charged with the mission of pushing beef production as much as possible, peaking when cattle production topped 132 million head in 1975. US per-capita consumption of beef would peak the following year.

One example of the next era of meat industry giants was Iowa Beef Processors (IBP), which was founded in 1960 by Andy Anderson, a pork processor, and Currier Holman, a cattle buyer. The duo opened a beef plant in Denison, Iowa, in 1961, with a modest operation that processed about 800 cattle per day. Their philosophy of building plants in rural areas where livestock already were being produced was an attempt at making the system more efficient by cutting transportation costs, securing cheaper, initially non-union labor and processing carcasses into smaller cuts, making boxed beef its focus.

With an industry background working in California and Idaho during the ‘20s and ‘30s, Anderson established IBP using a new and different lens, which didn’t include accommodating labor unions. That first plant was evidence of the new approach and was based on a single-story facility design to be as simple as possible and use as little physical labor as possible without union oversight. Like Monfort, IBP purchased livestock directly from feeders, pushing feedlots further into obsoletism.

“There was no way he was going to build according to the old model,” Ogle said. “He wanted to do exactly the opposite of the old model because that’s the kind of business he’d grown up in, on the West Coast. And so, Denison, Iowa, got this very state of the art and very different kind of operation than Armour and Swift had started.”

IBP’s model of building new-school, non-union processing plants and utilizing an unregulated trucking industry to ship its fresh products paved the way for others.
“Anybody who was a new packer by then, was trying to build a plant that didn’t involve union labor,” Ogle said. “It didn’t mean the union wasn’t going to show up and try to organize the workers, but the unions just didn’t play a part in the mindset of anybody who was thinking about opening a packing plant from say 1930 on, whereas Swift and Armour and Wilson were just stuck with them; they couldn’t get rid of them.”

After several rounds of corporate reorganizations, ownership changes and numerous lawsuits brought by the old guard, they were finally allowed to run some operations without union labor by the 1970s. By then, Swift had built a new beef plant in Grand Island, Neb., that started up in 1965 while investment companies were buying up the fledgling remaining properties of Swift, Armour and Wilson and terminating union contracts as part of many of those deals through the 1970s.

“And of course, by then, they’re still saddled with all those old facilities,” Ogle said, many of which were multi-level operations that were labor intensive and lacking efficiency.

With Anderson’s sole focus on operating packing plants, companies like Swift and Armour were forced to diversify and shift ownership with strategies focusing on a variety of foods, which put them at a disadvantage.

“I think the industry just kind of started over again,” Ogle said. “The business [by then] was so hyper-efficient by comparison. Many people have criticized current packers because their success was predicated on the idea that there would be no union constraints.”

She said what could be considered the “new era” of packers becoming prominent by the middle of the 20th century were located almost exclusively west of the Mississippi River and proudly operated as mavericks compared to the juggernauts that had dominated the industry before them. Monfort led the charge in that regard.
“Those guys saw themselves as breaking all the rules,” Ogle said. “They understood exactly how different their operations were from Swift and Armour. Monfort was pretty blunt about it.”

Part of the success of the newer generation of packing operations was due in part to the emergence of grocery store chains.

“I cannot overstress how important chain grocery stores were to the packing and feeding industry for livestock in the 20th century,” Ogle said. “Andy Anderson, for example wanted to deal with a big chain store with one central buyer.”

Meanwhile, for most of the new plants that didn’t ship across state lines, food safety wasn’t highly scrutinized by USDA inspectors, who were only required to inspect slaughter operations that were doing interstate shipping of products.

Poultry Minded

While pork and beef were king for most of the second half of the 19th century and the first few decades of the 20th century, poultry processing was steadily emerging as a protein competitor. Jesse Jewell, who was credited with making Gainesville, Ga., the “poultry capital of the world,” was a pioneer in the industry for introducing vertical integration to poultry producers. He joined his family’s feed business in 1922 and in 1930 he took the helm, just in time for the Great Depression. Jewell pivoted by supplying economically challenged producer-customers with chicks and the feed needed to raise them at his expense. After the birds were grown to market weight, he bought them back at a price that reflected his feed costs plus a predetermined profit for the effort of those early contract growers.

His family business, J.D. Jewell Inc., expanded its integration efforts in the late 1930s with the addition of a hatchery in 1940 and a processing plant the following year, just in time to reap the benefits from demand spikes related to World War II. Jewell then added a company-owned feed mill and rendering facility in 1954, completing its vertical integration, which served as a business model for future poultry companies. The company, which was known as the world’s largest integrated chicken producer of its time, was recognized for its signature frozen chicken and for being one of the region’s first employers to hire Black workers to staff its plants. Like its red-meat counterparts, J.D. Jewell resisted efforts of the unions to represent its workers in the early 1950s and violent protests to the unions squashed the organization effort. Jesse Jewell was an active poultry industry leader throughout the 1950s and sold the company to an investment group in the early ‘60s.

Ogle said Jewell learned quickly that the road to profitability in the poultry business was not in selling whole birds, but instead selling chicken meat as a value-added item and an ingredient in products such as frozen pot pies.

“Poultry was more of a processed food from the beginning,” she said.

Ogle said chicken, beef and pork peacefully coexisted in the 1950s and ‘60s, largely because steak and pork were abundant and especially after the war, when steak was no longer an aspiration for consumers and became affordable for the masses. In fact, poultry was for a time, viewed as a loss leader used by chain grocery stores to lure bargain shoppers with low-priced chicken to the meat department, where they would be tempted by higher-priced red meat items. Beef was, indeed, king until the 1970s, when rising prices and new questions about the healthiness of red meat began circulating. Soon, fast-food chains began to take notice and started marketing chicken as a healthier option that happened to be less expensive. Between the peak of 1976, per-capita beef consumption bottomed out for the next four years, dropping from 94 lbs per year to 77 lbs per year, the lowest point in a decade. Chicken’s competition didn’t affect the red meat producers until the late ‘70s and ‘80s when production practices like the use of hormones and antibiotics were called into question and consumers looked to poultry as a more wholesome alternative. It was just another in a series of challenges the meat industry has negotiated.

“The beef industry in particular has had kind of a tortured history,” Ogle said.

Leaders with legacies

Some longtime industry leaders from decades past recalled some of the shifting tides in the meat industry. Rosemary Mucklow, the 88-year-old director emeritus of the North American Meat Institute (NAMI), spent most of the second half of the 20th century leading industry trade organizations and lobbying for its stakeholders. When the industry began to make the transition to boxed beef after its introduction in the 1960s, Mucklow recalled the symbolic significance of Miller Packing Co., then based in Oakland, Calif., removing its rail system used to move carcasses. She estimated it was in the 1980s when its owner, Frank deBenedetti realized meat shipments would soon be exclusively made via vacuum-packed primal cuts, making carcass deliveries obsolete. She credits deBenedetti for his vision.

“He took the rails out of Miller Packing before other people were recognizing the change [to vacuum packaging] was coming,” she said.

Mucklow also said the company that pioneered vacuum-packaging technology, Cryovac, the food packaging division of Sealed Air, deserved more credit for the shift to boxed beef.

“Because of Cryovac, we were able to ship vacuum-packaged meat, which has a longer shelf life, and that development drove enormous change in this industry,” Mucklow said.

Barry Carpenter, the retired chief executive officer and president of NAMI who also served as Deputy Secretary of the US Department of Agriculture’s Agricultural Marketing Service, dedicated his 45-plus year career to agriculture.

In the early 1970s, Carpenter supervised meat graders in the Northeast, for processors in Boston, New York and Philadelphia, where railcars and trucks delivered “swinging beef.” However, when boxed beef became the norm in the early ‘80s, graders were cut drastically.

“The whole industry changed,” Carpenter said. “They no longer could come close to competing,” as more cattle were sent to big processing plants. “Since the early ‘80s, I think the percentage of the ‘big four’ was somewhere in the high 70s and it’s probably still there right now, it really hasn’t changed,” he said.

March 1, 2021April 29, 2022

A Century of Grain Trade

By Susan Reidy

March 2021

A century of
grain trade

Volume changes have been seismic, while origins and destinations have fluctuated and will continue to do so as new disruptors emerge

World Grain

S ince man began producing grain many centuries ago, there has been a need to trade it — with a neighbor, a neighboring village or a nearby region. As technology improved, infrastructure built, communication refined and crops burgeoned beyond demand, nations started looking beyond their borders for trade partners.

While there was global trade here and there a century ago, significant amounts of trade started in the 1960s and have continued to ramp up into the billions of dollars and millions of tonnes that move about the globe in today’s marketplace.

“Trade, in general, has moved from a regional relationship to a much more global intercontinental relationship that’s been facilitated by technology and transportation,” said Gary McGuigan, president of Archer Daniels Midland’s Global Trade group. “It’s just the globalization of what we do; it really is interconnected fully. While the formal tariff-free agreements have increased as well in those 100 years, we’ve also seen governments wanting to get involved either to limit exports or to buy imports into government reserves.”

The global trade of grain has increased exponentially from 1921 to an estimated 576 million tonnes in 2021, according to data from the Foreign Agricultural Trade of the United States (FATUS).

“We’ve had strong growth in trade, particularly for the last 20 years,” said Stefan Vogel, head of commodities for Rabobank, UK. “That trend will continue because production of all crops is increasing in regions that have land but not the most population. Other regions in the world where the population is growing, land and water resources are scarce.”

Along with the amount of global trade, the flow of commodities in and out of countries has fluctuated. Technological advances, along with protectionist policies and domestic subsidies starting before World War II and accelerating in the early 1970s after food price spikes, changed the geographic distribution of trade flows. Population growth in developing countries and the availability of cheap food encouraged reliance on imports, according to a Food and Agriculture Organization report on global trends and challenges.

Brazil emerged as a major exporter in the 1970s and continues to play a significant role in today’s global marketplace, one that likely will continue in decades to come. While the United States remains a key exporter, its No. 1 position has been supplanted by Russia in wheat exports and by Brazil with soybeans, most of which are destined for China.

China has become a major grain importer as it tries to feed 22% of the world’s population with only 7% of its arable land. Imports first surged in the 1970s, following economic reforms, and continued in the 1980s and 1990s as the nation emerged from isolation. In the first decade following its 2001 accession into the World Trade Organization, China’s imports were led by soybeans and sorghum.

Now, as it looks to rebuild its hog sector following an African swine fever outbreak and supplement tight domestic corn supplies, the nation is expected to import 24 million tonnes of corn, 10 million tonnes of wheat and 100 million tonnes of soybeans in 2020-21.

Looking ahead, while some factors that influenced changing global trade patterns over the last 100 years will remain, such as trade policies and population growth, several new disruptors are on the horizon that could permanently alter the flow of agricultural commodities. These include climate change, an increasing focus on sustainable production, the rising popularity of plant-based protein and a push for electric over fossil fuel use in vehicles.

China, Brazil soybean trends

(in 1,000 tonnes)

Globalization

Following the first wave of globalization, led by steam and the telegraph, world market prices started to drop in the 1920s. At that time, nearly 90% of the world’s wheat trade came from four countries — the United States, Canada, Argentina and Australia. But only 18% of global wheat production entered international trade. Nations started pushing for increased tariff protection and world trade plunged, according to the 20th Century Transformation of US Agriculture and Farm Policy report by the USDA’s Economic Research Service.

In the United States, agricultural exports fell by more than 20% from the previous decade. Agricultural exports remained flat until the 1960s and began to rise dramatically in the 1970s, fueled by adjustments in exchange rates and demand from the Soviet Union for imported grains and oilseeds, the ERS said.

Following World War II and into the 1990s, the United States was the world’s grain superpower, the ERS said, by leading in corn and wheat production as well as exports. Before the start of the 21st century, the United States annually exported one-third of the globally traded wheat and 70% of corn.

Two major disruptions in the 1970s led to lasting changes in global trade patterns: the Russian grain “robbery” and the US embargo on soybeans, said Dan Basse, president of AgResource Company.

“We’ve become a global agriculture market and it started with Russia (Soviet Union),” he said. “They were massive buyers because of the failure of the collective farming system. It really changed the landscape in the 1970s and it lasted until the Berlin Wall came down (in 1989).”

Prior to that, the Soviet Union had purchased some wheat from the United States in 1963 and in the 1970s implemented a policy of importing grain every year to feed its increasing livestock herds. In 1971, the Soviet Union bought some feed grains and the following year, faced with shortages, it quietly bought one-fourth of the US wheat crop in what has become known as the Great Grain Robbery. The United States subsidized the purchases, causing domestic prices to rise, and lost revenue while spending $300 million in public funds.

Top possible future trade disruptors:

- Plant-based protein
- Climate change
- Sustainability concerns
- Drop in biofuels usage in favor
  of electric

The shortage in the Soviet Union turned out to be part of an overall grain production shortage. As a result, wheat prices sky-rocketed and stocks were decimated. Global food prices in 1973 increased as much as 30%. But a new trade flow was created, and the Soviets would continue for decades to be a major importer of grain.

Over the next 20 years, the Soviet Union continued to import large amounts of grain, growing from 27 million tonnes in 1975 to a record-high of 47 million tonnes in 1985.

As food prices continued to rise in the United States, then-President Richard Nixon announced in June 1973 an export embargo on grains, including soybeans. This led to a huge surplus in the United States and dropped the price of soybeans by almost half. Farmers were not pleased and by October, the restrictions were gone. But the market already had responded.

Japan, which relied heavily on the United States for its soybeans for feed as well as use in tofu, was shocked by the embargo and realized it needed to diversify its supply to insulate against any future events. It turned to Brazil, which at the time had a small soybean industry.

Introduced to Brazil in 1882, soy was mainly used as feed for pigs. By the end of the 1940s, it started to be used as a feedstock and for cooking oil, according to the Land journal article, “Soy Expansion and Socioeconomic Development in Municipalities of Brazil.” In the 1960s, soy was cultivated in two states and the harvested area was 300,000 hectares.

As buyers sought out Brazil for their soybean needs, production expanded so that by the end of the 1970s, it had reached 8.5 million hectares.
In 1980, Japan and Brazil initiated the Japanese-Brazilian Cooperation Program for the Development of the Cerrados. During the 21-year program, Japan financed the expansion of farming into the cerrados, the tropical savanna region, while Brazil covered the cost of infrastructure improvements. Japan also helped finance the development of soybean varieties and pest management. Brazil, now the world’s leading soybean exporter, is expected to harvest 38.6 million hectares of soybeans in 2020-21.

Starting in the 1990s, a second wave of globalization was in full swing and the agriculture market was seeing significant increases in imports and exports. New competitors were emerging as nations reformed policies and adopted new technologies that lowered the cost of production and increased yields.

International attention turned to China’s demand for agricultural imports as the country emerged from isolation and allowed economic forces to allocate resources, said the ERS in its report, “China’s Growing Demand for Agricultural Imports.”

China’s accession to the WTO also generated additional projections, based on the principle of comparative advantage, that China would import more land-intensive crops and export labor-intensive products, the ERS said. Rising income and living standards, increasing urbanization and food safety concerns fueled China’s imports. It has been a major source of growth in world demand for soybeans since the 1990s, the ERS said, but the nation also brings significant volatility to the market.

“Sudden and dramatic policy shifts, and their subsequent effect on China’s international trade profile, make the country a relatively volatile player,” the ERS said. For example, in 1994 and 1995, China abruptly increased its grain imports and cut off corn exports as concerns about grain shortages and inflation became widespread. Then, from 1997 to 2003, China stopped importing wheat and boosted grain exports.

Overall, the value of agricultural goods traded tripled from 1995 to 2014 and the estimated inflation-adjusted value roughly doubled, said the ERS in its report, “The Global Landscape of Agricultural Trade, 1995-2014.” Trade grew to accommodate an increase of more than 25% in global population and a 75% increase in real gross domestic product.

In that 20-year timeframe, developing countries started participating more in global agricultural trade, particularly imports. The share of import value by developing countries increased from 28% in 1995-99 to 42% in 2010-14, the ERS said. Vietnam, India and the United Arab Emirates became more substantial importers during that time, as did Saudi Arabia and Iran.
The sources and destinations of agricultural trade also became more diverse in that 20 years, with the top five countries accounting for 63% of total imports in 1995 but only 48% in 2012-14.

The top five exporting countries — the EU, the United States, China, Russia and Japan — shifted positions slightly in the 20-year span but they remained at the top of the list. The share of the top five exporters fell from 85% in 1995 to 75% in 2012-14, the ERS said.

With new low-cost producers and exporters, the global grain trade was set again for transformation. Traditional importers now had excess product to move and nations started looking for new trading partners, resulting in the global grain trade flows of today.

Russian wheat imports/exports

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Today’s trade flows

Perhaps one of the biggest transformations in the recent past and into today is Russia’s, and to a lesser extent Ukraine’s, move from major grain importer to exporter. Russian grain output started increasing in 2000, creating substantial surpluses for export. The nation moved from a net grain importer of 3 million tonnes per year on average from 1996-2000 to a net exporter of an estimated 49 million tonnes of wheat and coarse grains in 2020-21.

In the last 30 years, grain production in Russia and Ukraine has increased 66%. While new land was brought into production, it was higher yields that fueled the increase. Average yield in the two nations increased by 76% over 30 years.

After the Soviet Union broke up, new technologies were available and production incentives changed. When meat production subsidies stopped, output dropped significantly and therefore so did the amount of grain fed to livestock.

Russia is now the world’s largest wheat exporter and is expected to produce 85.3 million tonnes in 2020-21. While its recently announced wheat export tax and grain export quota is expected to temper exports later in the marketing year, the USDA is still expecting Russia to export 39 million tonnes of wheat.

“The Black Sea will continue to be significant exporters for the foreseeable future,” Basse said. “They’re having problems with domestic food inflation, but they will continue to produce crops of 90 million tonnes or more. We’re still looking at a substantial ramp up in production. They’ll accomplish this through the weak ruble. Plus, there’s still another 27 million acres of the collective farming system that can be brought into production.”

All eyes are on Russia given its massive crop, Vogel said. But an export duty on wheat means farmers and grain handlers will not be able to participate much in global wheat price advantages.

“It opens up ways for other regions to take some more market share in the future away from Russia, if prices would remain really high,” he said. “Russia’s on a level playing field if prices are low. With prices above $200, Russia is at a disadvantage in the future.”

Ukraine is replacing barley with corn and is not only increasing the area of grains, but also the yield per hectare, Vogel said. It made the change after the government liberalized the export market for corn. In the last 10 years, exports have increased from about 5 million tonnes to 25 million tonnes today.

Throughout the last century, and particularly in modern times, government policies have had a siginificant impact on the the flow of grain around the world.

“Trade policies, protectionism, tariffs or barriers to trade, whatever you want to call it, ultimately they have caused disruptions in the trade flows,” McGuigan said.

Government policies in China, and the continued volatility of how and when they are applied, has swayed the market for decades. The United States continues to feel the strain from its trade war with China that dropped soybean exports by 70% in 2018 and now Australia is reeling from an 80.5% tariff on its barley exports to the nation. In the 2018-19 marketing year, more than half of Australia’s barley went to China.

“Disruptions like these are opportunities for bigger players,” McGuigan said. “Ultimately the grain will flow, the traditional route may change, but the grain will flow. So, China will buy more from the US, Ukraine, Argentina and less from Australia. Australia is still producing the same grain so it will have to ship it somewhere else, to Africa, other places in Asia.

“It just comes back to the global connectivity of all these trade flows. I don’t think anybody can really manage those trade flows 100% anymore. They may have been able to do it 100 years ago, but not anymore.”

While China did increase its imports of US soybeans as part of the phase one trade agreement, it did not reach the first target, which called for the purchase of $36.5 million in farm goods. Estimates showed China would have had to import 40 million tonnes of soybeans to reach that target, but only imported 25.89 million tonnes. That was still higher than 2019, when it imported 16.94 million tonnes of soybeans from the United States. Brazil stepped in as China’s top supplier, exporting 64.28 million tonnes of soybeans to China in 2020, up from 2019 and will export an estimated 57.67 million tonnes in the current market year.

In addition to soybeans, China likely will remain an importer of corn for a few years and has the potential to be the No. 1 corn importer in the world very soon, Vogel said. In fact, the February World Agricultural Supply and Demand Estimates showed import demand from the EU at 19 million tonnes, Mexico at 16.5 million tonnes, Japan at 16 million tonnes, and China at 24 million tonnes.

“That’s not driven by politicians,” Vogel said. “They’re having to supply those corn needs for the livestock sector. At the same time, it has reduced corn stocks over the last five years, so there’s not much they can easily bring on to calm down the market. China needs a high number of corn imports, and the US is a good supplier. South America will always play a role in that also.

“It will take a few more years for it to recover from African swine fever. It’s a positive sign for the future that the country will have very strong import numbers going forward.”

Along with losing a major share of soybean exports to Brazil, the United States has felt pressure from other regions in corn and wheat exports. Competition from Russia, Ukraine and Australia has weighed down wheat exports, while Brazil, Argentina and Ukraine are driving down its corn export share. The trade war with China boosted Brazil into the No. 1 export spot for soybeans.

The emergence of new low-cost producers and exporters in global, wheat and soybean markets are transforming global grain trade, the ERS said.

For example, Indian wheat exports are returning to the global market in a significant way for the first time in several years, the FAS said in its February “Grain: World Markets and Trade” report.

“India’s ample supplies are poised to reach additional markets as stocks tighten among many of the top exporters,” the FAS said. “India’s domestic support programs have a history of periodically expanding wheat production and burgeoning government-held stocks.”

Even with record consumption, stocks are at record levels. Several years ago, when stocks reached a high level, relatively high Russian export prices opened opportunities for India to supply Asia and Middle East markets, the FAS said. In recent months, Indian export prices have eased while prices for major suppliers have risen,
“This will afford India the opportunity to seize greater market share in Bangladesh and expand to additional markets,” the FAS said. “However, the scale of exports from India is not likely to match that of several years ago, since a larger Australian crop will provide formidable competition in Southeast Asian markets.”

McGuigan agrees India will be more present in global trade flows, which likely will include pulses of which India accounts for 25% of global production. As people’s diets change toward more vegan or plant-based protein, he said pulses will be more present in global trade flows.
“I do think India will be very important in those trade flows,” he said. “There is a big potential for much increased trade in pulses globally. The industry is set up for it. They use the same transportation, both across the sea and going in and out of ports.”

Africa could also become a bright beacon for trade in the years ahead, Basse said. Some believe Africa is moving toward self-sufficiency while others say because of a failed political system, the region will be importing more.

“Africa agriculture could improve; they have potential,” he said. “Somewhere there is an opportunity on the demand side, looking at 2025 and beyond.”

North Africa is a big importer of grain and oilseeds and will continue to be, McGuigan said, while sub-Saharan Africa has the potential to be a huge producer of grains.

“For whatever reason, they’ve not been able to harness that potential,” he said. “Fifty years ago, Zimbabwe was the breadbasket of the continent and now it’s not. The land is still there, the soil is still some of the best in the world but unfortunately it hasn’t been harnessed and I don’t see that happening anytime soon.”

Future disruptors

History has shown that grain flows can shift, sometimes rather quickly, and impact global trade for years and even decades to come. While it’s not possible to precisely identify what the next disruptors may be and how flows may shift, analysts see a few potential issues on the horizon.

One factor that Vogel said grain and oilseed producers should be worried about is the uptick of alternative proteins. Much innovation is happening in that field, whether it’s plant-based or through a fermentation process or cell cultured meat, and there is significant investment.

“If it got to the point where those proteins are accepted by the population, are considered safe and are price competitive, it could be a big disruption,” Vogel said. “We would still have protein isolating concentrates and capacity expansion of pulses and so on, but that is a scary picture if we can produce meat without using a lot of grains. It’s going to get very challenging for those producers of soy and corn. But who knows if and when, and to what extent that occurs?”

McGuigan said alternative proteins may displace wheat and corn because of less demand for feed, but growers could pivot to growing more soybeans and pulses.

“It’s still agriculture,” he said. “The overall demand for protein would continue to increase, the mix will just change.”

Falling demand for biofuels in the future, as governments push electric vehicles over fossil fuel, could also cause a major shift in corn and soybean markets. In the United States, California has banned the sale of new gasoline-powered vehicles by 2035 and other states have legislation pending. Other countries have their own initiatives, such as Sweden, which has pledged to stop using fossil fuels by 2050 and Norway, which plans to ban the sale of fossil fuel cars by 2025.

“It will be a transition,” McGuigan said. “It depends on how quickly we ramp up on the electric side. The market share will grow over the next 10 years, and that will lead to a reduction in the demand for fuel. But you may see governments then mandating for more ethanol and biodiesel. So, you may have less fossil fuel going in and more ethanol and biodiesel, to keep the demand for those products the same overall.

“From the political point of view, the farm lobby from North and South America is pretty strong and they won’t want the mandate of biofuels to go away.”

Climate change could push soybean production northward, opening up further opportunities for regions such as Canada and the Black Sea, Basse said. Shorter variety soybeans are already making it possible to grow soybeans in Canada and encouraging construction of crush facilities in the Black Sea.

“Those kinds of things will keep happening,” Basse said. “Climate variability is something that will be with us. We’re only understanding a little bit of it today.”

Data has shown that severe climate events, whether it’s flooding, drought, or something else, seem more robust than the world has experienced in the last three or four decades, he said.

Hand-in-hand with climate change is the increasing focus on sustainability. Countries and regions are setting targets, as are individual companies, so it’s not a one-size-fits-all policy, Vogel said.

“Sustainability will remain a very important piece of global agriculture in the future,” he said. “It will have an impact on certain regions in the world.”
ADM has made serious commitments around responsible land use, no deforestation and no employee exploitation, said McGuigan, noting that the company launched its Strive 35 plan to reduce greenhouse gas emissions by 25%, energy intensity by 15%, water intensity by 10% and achieve 90% landfill diversion rate by 2035.

“We’ve already committed to not buying from deforested areas,” he said. “I do think that will have an impact on the land use in areas like South America where potentially people think there may be further expansion.”
Increased production will have to come from increased yields from the land already in use. Yields, in general, over the last 100 years are off the chart in terms of efficiency, McGuigan said.

“We’ve got to continue to look at that in an agronomic way to improve yields going forward,” he said.

March 1, 2021April 29, 2022

The Rise of Fresh

By Andy Nelson

March 2021

The rise
of fresh

Where the grocery perimeter’s been, where it is now,
and where it’s headed

Supermarket Perimeter

ClassicStock / Alamy Stock Photo

In the 1970s, when Rick Stein was in the early years of his career in retail grocery, perimeter sales made up about a third of total sales for the East Coast chain he worked for.

Meat and produce were big. But many stores didn’t even have what we would consider retail foodservice today. And the instore bakery was still a gleam in most retailers’ eyes, if that. Deli prepared? Sure, but it might be fried chicken (but no rotisserie), a few sides, maybe livers and gizzards, and not much else. And forget about grab ‘n go.

When Stein left the company in 2013, perimeter’s one-third share had risen to more than half.

“Not only has fresh expanded its contribution to the total, it’s also expanded the footprint,” said Stein, vice president of fresh for Arlington, Va.-based FMI – The Food Industry Association. “In our annual Food Industry Speaks report, members tell us what’s going on. And what’s happening is stores are differentiating themselves in the perimeter. It’s a part of their key strategy.”

And there’s no reason to think that, once the pandemic is in the rearview mirror, it won’t continue to rise.

“I believe the fresh perimeter will continue to thrive, for a number of reasons,” Stein said. “For one, many items in the perimeter are key ingredients to making meals.”

Even if people don’t cook an entire meal from scratch, Stein said, chances are they’re getting a good number of those ingredients from the perimeter. Maybe they buy the steak from the meat case, then add a salad kit from produce and a prepared side from deli/prepared.
Another reason is health.

“Health and wellbeing have never been more in the forefront,” Stein said. “The virus is hurting people with underlying conditions. When you’re cooking at home, you’re thinking about the foods you eat day after day, and health is often affiliated with the fresh departments.”

Building the perimeter
of the future

A to-do list for retailers from IDDBA’s Eric Richard

Cater to specific dietary needs
Engage, engage, engage: find ways to turn visits to the perimeter into experiences
Get cooking: hire chefs and have them on the floor educating consumers
Diversify: find new ways to combine brick-and-mortar with surging ecommerce

Are you experienced?

Several years ago, Eric Richard and several of his colleagues at the Madison, Wis.-based International Dairy Deli Bakery Association read an article about the “experience economy” and the ever-greater role it would play in luring consumers into retail stores and keeping them there.

That emphasis on consumer experiences went on to inform IDDBA’s What’s in Store Live displays at its annual conventions, and it’s one of the first things Richard, IDDBA’s industry relations coordinator, thinks about when the topic of the evolution of the grocery fresh perimeter over the decades comes up.

“The importance of experience in the fresh perimeter is especially important, with all of the new channels competing with grocery,” he said. “When I was growing up, people shopped at ShopRite, or Pathmark. They didn’t shop for groceries at the convenience store or a club store.”

With so much more competition in the market now, creating experiences consumers will remember is more important than ever, Richard said. And supermarkets, while facing intense competition, still have built-in advantages the other channels can’t hope to match.

“You’re not going to smell fresh bread being baked, you’re not going to see sandwiches or pizza being made, or the variety of cheeses, or sampling,” he said. “Fresh departments have greater roles now than they had decades ago.”

Produce butchers preparing just-purchased whole fruits and vegetables for consumers is one of the many types of experiential upgrades likely to be seen more frequently in the new normal, Stein said.

In retail fresh seafood, which has exploded during the pandemic, expect seafood mongers to play an ever-greater role, helping consumers with cooking and pairing advice.

The same goes for butchers in the meat department. And technology will continue to play a big role. Stein said some retailers now have screens in their departments with videos showing how to prepare and cook certain cuts. Sales for those cuts have soared accordingly.

There’s no denying the explosion of ecommerce in the retail grocery space, particularly in the wake of COVID. But at the end of the day, Richard said, shopping online is not the same as shopping in the store, particular in the store’s fresh perimeter departments.

Ecommerce’s growth will obviously continue apace even after the pandemic has finally passed, but Richard is optimistic about brick-and-mortar’s future, particularly when it comes to the perimeter.

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Volume changes have been seismic, while origins and destinations have fluctuated and will continue to do so as new disruptors emerge.

Even some of the hardest-hit categories are expected to pick up where they left off pre-pandemic.

“Prepared foods has taken a big hit in the past year, but going into the pandemic it was doing very well, and it’s an area that going forward can really help supermarkets evolve and compete more with quick-serve and other foodservice channels,” Richard said. “More and more people look to supermarkets as an option for prepared foods.”

Past evolutions of the perimeter that will continue in the future, he added, will include more food halls, food courts and grocerants that will plant more and more grocery stores firmly in the foodservice world.

“I think we’ll get back there,” he said. “Statistics show that the trend of people eating away from home will continue. The supermarket is going from mainly a place where you get your ingredients to a prepared food destination.”

In the know

Hand-in-hand with that, Richard said, is supermarkets’ growing role as a hub of information for shoppers — something else that evolved in recent decades. IDDBA, for instance, is currently working on implementing a charcuterie certification program that will help retailers explain a complex industry to a consumer base that is ravenous for information on the topic.

The same goes for cheese, for entertaining in general and for countless other aspects of the perimeter experience where education could open a world of opportunity to grocery retailers.

“Trending flavors, foods consumers haven’t tried but want to try — the supermarket can educate people about what they’re selling and tell those stories – the grocery store becomes the storyteller,” Richard said.

Another huge change that has affected the perimeter, and grocery stores in general, over the decades has been demographics-based, Richard said. Namely: households, on average, aren’t nearly as big as they used to be.

“Forty to 50 years ago you’d be shopping for a family of four or five. Now it’s a single person, or someone and their partner. The size, the quantity, how it’s packaged has all changed.”

That’s definitely true in the instore bakery, Richard said. Not everyone is looking to buy an entire loaf of bread these days. Maybe they want half a loaf, or even just a few slices.

“Demographics have impacted how products are merchandised,” he said. “It’s true in the deli, too. Not everyone wants a pound or a half pound of turkey. Maybe they want a quarter-pound instead.”

“When we get back to normal we’ll see all these trends that were emerging before the pandemic, plus new innovations. There will definitely be continued growth on the fresh perimeter. At the end of the day, when it comes to supermarkets, the fresh perimeter is really the draw.”

Looking ahead

One change in the perimeter that is more recent, Stein said, is the emphasis on locally grown and sourced foods and on assortment.

“Think of a produce department in, say, 1979, or 1983. In the mid-Atlantic, where I grew up, if it was January, you’d see a lot of hard goods —apples, pears, onions and potatoes —but not soft fruit. You’d have to go to frozen for that.”

Now, with imports, it’s easy to find almost whatever you could possibly want in the way of a fresh fruit or vegetable, year-round.

Stein also expects retail foodservice to continue making the huge strides it was pre-pandemic.

“Stores’ culinary capability has really blossomed in the last 10 years,” he said. “They’re competing with restaurants.”

Some things could permanently change due to COVID, however. Donuts from the instore bakery are more likely to be marketed packaged. Hot bars will return, but for now, instead of consumers serving themselves, a clerk will dish up their foods to avoid too many hands touching the same serving spoons and ladles.

Salad bars may be repurposed as grab ‘n go premade salad areas. (Repurposing could be a necessity for many retailers who have invested in expensive equipment, some of which isn’t easily moved.)

Retailers can look to capitalize on that repurposing by adding other cold grab and go deli prepared items. Some, for instance, have already seen success marketing cold chicken wings in repurposed bars, Stein said. Retailers may worry about the added labor expense, but Stein said volume can make up for that if consumers see value in it.

“One retailer put their wing bar into full-service, and they sold through the roof,” he said.

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Hy-Vee: What’s changed, what’s stayed the same

We asked Dawn Buzynski, director of strategic communications for West Des Moines, Iowa-based Hy-Vee, to share her thoughts on how the fresh perimeter has evolved for the retailer.

Supermarket Perimeter: Looking at the perimeter as a whole, what have been some of the big changes over the years?

Dawn Buzynski: For Hy-Vee, the perimeter has evolved from your more traditional offerings – meat, dairy and produce – to the very best selection of those items, plus things like artisan breads, prepared meals, fast-casual dining options, charcuterie, cheeses and more. While much has changed with what we offer our customers over the years, our commitment to quality produce, fresh-baked breads and a variety of meat and meal options in our perimeter is still a focus.

SP: What about produce?

Buzynski: Hy-Vee’s produce section has always been a colorful point of entry greeting for customers. It’s changed over the years in both quality and offerings, and the selection has evolved with the availability of specialty items to offer our customers. Over the years we have added organic and specialty items, adding to a much wider selection. Country of Origin Labeling (COOL) is important for customers because they want to know where their produce is coming from. Advancements in shipping and technology allows us to procure quality produce across the global as well as locally. When we are not able to source items locally, we have invested in technology – from the warehouse, to transportation and in-store, to keep produce from around the world – such as bananas – fresh. We’re proud of our Hy-Vee Homegrown initiative, where we partner with local family farmers within a 200-mile radius of a particular store to provide customers with local options. This not only supports local communities, but it provides our customers with the freshest produce from farm to store.

SP: What other perimeter departments have seen big changes over the years?

Buzynski: Over time, we’ve incorporated coolers into the perimeter at the front of the store for quick grab-and-go options, including take-and-bake prepared foods. As we move forward, we remain committed to staying on the forefront of trends and offering our customers the best experience in fresh. We offer a large selection of artisan breads, charcuterie, a world-class meat and cheese selection, and many prepared food options. Prepared foods include our Hy-Vee Mealtime-To-Go selections, which are made fresh in-store and allow customers to take pre-made meals home to feed their families. Fast-casual departments, such as Hy-Vee Chinese, Nori Sushi, Hickory House, and Italian round out the prepared meal options with something for every palette.

SP: What role has technology played in the evolution of the perimeter at Hy-Vee?

Buzynski: Data has been a critical factor in changing the offerings, variety and price points of fresh foods offered throughout the perimeter. By using consumer purchase behavior data, along with focus groups and secondary research, we’ve been able to continuously evolve our perimeter to meet the needs of our diverse shopping population. As we’ve seen the interest in fresh food increase, we’ve also had the data to support growing the footprint of the fresh perimeter, to allow for greater product selection and variety.