Food companies closely track pyramid update

/ Source: The Associated Press

Food manufacturers are on high alert as the federal government tweaks the food pyramid. The changes could produce winners and losers among food manufacturers.

Minnesota companies such as Hormel Foods Corp. could win and General Mills Inc. could lose if the new pyramid advises more protein and fewer grains. It's scheduled to be released in mid-2005.

"As an issue, there's few that's bigger," said Gene Grabowski, a former vice president of the Grocery Manufacturers of America, one of the industry's largest lobbying groups.

In an industry that lives and dies by labels, "it doesn't take much to suggest that a food type isn't the best food to be eaten," said Grabowski, now an executive with Levitt Strategic Communications, a Washington consulting firm that works closely with food companies.

Grain-based foodmakers such as General Mills, maker of Cheerios and Pillsbury refrigerated dough, and Kansas City-based Interstate Bakeries Corp., which owns Wonder Bread, stand to lose the most if the USDA weakens the importance of grain-based foods, including cereals, rice, bread, and pasta. As the base of the current pyramid, the government currently recommends that consumers eat six to 11 servings of grain foods a day, more than any other food group.

If advocates such as Atkins Nutritionals get their way, grain foods would be pushed to the top of the pyramid as the least-recommended food group. That would be another blow for grain-based companies, which have already lost sales because of the popularity of low-carbohydrate diets.

"That would be a devastating one-two punch," Grabowski said.

In contrast, Austin's Hormel Foods Corp. and poultry giant Tyson Foods Inc. would greatly benefit from such a change, because low-carb diets favor high protein foods such as beef, pork and chicken.

Product portfolios get diversified
Mindful of this, General Mills seems to have hedged its bets by diversifying its product portfolio over the past several years. Although cereals made up 27 percent of the $7.8 billion General Mills generated in U.S. retail sales last year, the company has branched out to dairy (Yoplait yogurt, 8th Continent soy milk), meat (Progresso soup, Hamburger Helper, Lloyd's Entrees), and vegetables (Green Giant, Cascadian Farm).

"We don't know exactly what changes in this new pyramid will be, but whatever they are, General Mills will be there, will be all over this pyramid," CEO Steve Sanger told investors during the Goldman Sachs Global Consumer Products conference in May.

Mark Hostetler, an attorney who represents food companies for Blackwell Sanders Peper Martin in St. Louis, says the pyramid has been long overdue for an overhaul.

"The idea is that this revised pyramid should correct the mistakes of the first," Hostetler said. "When you recommend six to eight servings of a food group, who should have six? Who should have eight? Children vs. adults? Obese vs. non-obese? There needs to be greater specific info for consumers."

With obesity dominating headlines, the revised pyramid might take a harder line on high-calorie, indulgent foods and snacks. Some groups want to push these foods, which already occupy the tip of the pyramid, the least recommended food group, off the structure altogether.

"I wouldn't say we are on the defensive, but we are in the spotlight more often than other foods," said Lisa Katic, a nutrition adviser to the Snack Food Association, a trade organization that represents companies such as Frito-Lay and Old Dutch Foods Inc. in St. Paul. "I know some people say you should never eat pretzels or potato chips. It's just not realistic to say you can never have these foods. It's not like we are asking to put potato chips in the fruits category, but snacks are part of a healthy diet."

Pyramid used for promotional purposes
In any case, the new pyramid could be an enormous marketing tool for some food companies, said Gus Valen, chief executive of the Valen Group, a strategy consulting firm in Cincinnati. Manufacturers such as General Mills will use the pyramid to justify health claims, especially when it comes to weight management, he said.

"If you can claim your product can help someone lose weight, that's huge," Valen said. "No matter what they do with the pyramid, there will be an implied benefit to someone."

Last week, a federal advisory panel working to revise the dietary guidelines urged Americans to eat more whole grains versus processed grains. General Mills quickly noted that Cheerios, along with Total and Wheaties cereals, are made from whole grains.

Sanger also has noted that sales of Cheerios and Honey Nut Cheerios jumped after the company promoted claims that the cereals could help consumers reduce cholesterol.