Cains Foods asking for safety, quality certifications from food-ingredients suppliers
by Tom Stundza -- Purchasing, 8/17/2007 1:42:00 PM EDT
A combination of farm product inflation and questionable quality of Chinese ingredients is making life miserable for buyers at such commercial food product firms as Cains Foods in Ayer, Mass.
“We are in sourcing hell right now,” says Phil Ferraguto, director of purchasing at Cains. “First, the wholesale price of commodities has doubled in recent weeks. And, now, all of our customers are demanding letters of origin of our ingredients. Some even want the ingredients of the products we make for them sourced in the U.S.”
Cains Foods makes and distributes mayonnaise, dressings, soups and condiments to retail, commercial and industrial customers throughout the six New England states and a large portion of New York. To be able to make 700 separate products sold under the Cains and several private labels, Ferraguto and buyer Andrea Geanacopoulos annually source $18 million in such key ingredients as soybeans, canola and olive oil; eggs and egg yolks, vinegar, lemon juice, sweeteners (corn syrup and cane sugar), salt, pepper, paprika, mustards, other spices and pickles.
What’s really got his supply chain under attack, Ferraguto says in an interview, is the decision by such retail food chains as Trader Joe’s, Stop & Shop and Whole Foods to demand letters of origin and quality and safety certifications of the ingredients used to make the products distributed by Cains Foods. And that filters all the way back to the spices from Asia, India and South America, which typically are processed in the U.S.
“In a nutshell, our customers want to be assured that the food product they buy is safe— and many are equating domestic with safe,” says Ferraguto. He adds that this attitude isn’t such a surprise “since retailers, especially, are being pushed toward this position by the buying public.” The ingredient-labeling demand from foodstuffs retailers comes after months of end-to-end export-safety problems involving such products from China as tainted pet food, poisonous pufferfish labeled as innocuous monkfish, toothpaste containing controversial chemicals, and other products
So, “our customers now are forcing us to reevaluate the sources of our ingredients and spices, to develop certificates of origin all the way down the line to what makes up the processed products we buy to make our final food products,” Ferraguto says. For example, he buys commercial quantities of Worcestershire sauce and now must have certificates of origin used by the producer for the condiment’s malt vinegar, molasses, sugar, salt, anchovies, taramind, onions, garlic and spices.
The big problem is that many commercial vegetables, spices, ingredients and fish products are available only from foreign sources. “Eighty percent of all garlic and garlic byproducts sold in the U.S. comes from China, for example,” he says. And Chinese authorities say they’re taking steps to address food safety questions. Among them: Starting in September, all Chinese food exports will carry inspection labels.
And, looking ahead, Ferraguto suggests “it could just be a matter of time before some retail chains start banning products with ingredients from China.” And that will really cause commercial costs and retail prices of foodstuffs to explode.
Meanwhile, the cost of such key products as soybean oil, canola oil, corn syrup and eggs have already exploded in recent weeks because of the growth of the corn ethanol industry, which has reduced the amount of domestic fresh fruits and vegetables available for food processing purposes. And, because so much corn for feed is being diverted to ethanol production, the higher costs of feeding cows, wholesale prices of whole and powdered milk also has exploded.
Ferraguto points out that with so much corn going into ethanol production, his wholesale price for eggs—which is 75% based on the cost of corn feed—has risen from 50¢/lb to $1 in the past three months. And with more soybeans also being used to make ethanol, soybean oil costs have risen 74% since June. That hurts, since 40% of his purchasing budget is soybean oil.
“We’re just starting to see the spiraling cost of food because of the government subsidization of corn, soy and other agricultural products to make ethanol and biodiesel products,” says the purchasing director. “And the cost escalation we’re seeing at the commercial level already probably won’t show up at the retail level for about six months.”
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