| Liz Claiborne Diversifies Portfolio with Kate Spade Purchase Liz Claiborne Inc. agrees to purchase all of the equity interest in Kate Spade LLC for a purchase price of approximately $124 million, including the retirement of debt at closing. Based in New York City, Kate Spade is a designer, marketer, wholesaler and retailer of fashion accessories for women and men through its kate spade and JACK SPADE brands. Kate Spade generated net sales of approximately $84 million for the fiscal year ended July 30, 2006. "With its accessible luxury positioning, Kate Spade further diversifies our portfolio and provides considerable opportunity for organic growth," says Trudy Sullivan, president, Liz Claiborne Inc. "Our core competencies in both non-apparel and retail will enable us to uniquely capitalize on this compelling brand. We believe the potential for Kate Spade in the direct-to-consumer channel, both domestically and internationally, is sizeable. We also feel there are substantial growth prospects in both domestic and international wholesale accounts, as we optimize the penetration in upscale department and specialty stores. Brand extensions into apparel categories, fragrance and licensing offer additional avenues for expansion." The transaction is expected to close in the fourth quarter of 2006 and be slightly dilutive to fiscal 2007 earnings per share. Coca-Cola, Campbell, Tyson and Ventura Partner with CIA
The Culinary Institute of America (CIA) announced the establishment of a new program "The Menu R&D and Flavor Discovery Initiative" -- dedicated to the science of food research and development for the foodservice industry. The initiative will begin with four founding partners, The Coca-Cola Company, Campbell Soup Company, Tyson Foods and Ventura Foods. Each pledged $250,000 to support applied research, student scholarships and curriculum development. Applied research is the key element of the initiative and will generate studies for publication via trade and technical journals. Areas of research will include flavor discovery, consumer preference in the foodservice environment and evaluation and application of emerging foodservice technologies. Newell Rubbermaid Completes Sale of Global Little Tikes Business Newell Rubbermaid Inc. completes the previously announced sale of its Little Tikes business unit to MGA Entertainment Inc., a global consumer entertainment products company. This transaction is consistent with the company's intention to narrow its portfolio to focus on businesses that are best aligned with its strategies of differentiated product, best cost and consumer branding. Little Tikes contributed approximately $250 million in revenue in 2005, reported in the company's Other segment. In connection with this transaction, the company continues to expect to record a net gain of $15 million to $25 million in the fourth quarter of 2006. |
| Tackling the Top Track and Trace Myths By Bill Gillmor, Global Consumer Products Industry Leader, IBM As I write this article at least one person has died and more than 60 have been hospitalized as a result of consuming E. coli contaminated spinach. The FDA, state regulators, retailers, farmers and spinach processors are all struggling to locate the source of the contamination and to identify the affected lots. Their efforts to save lives and minimize costs are being hindered by the lack of an effective Track and Trace ("T&T") system. In this article we address the four primary myths commonly associated with T&T and that currently restrict investment in this essential capability. T&T systems vary in complexity but all consist of two separate, but linked, capabilities. All supply chain members need the ability to track traded items as they move through the supply chain and to trace the ownership of all ingredients, raw materials, packaging and the finished product all the way to the consumer. The phrase 'farm to fork' is sometimes to describe a comprehensive T&T system. Myth 1: Track and Trace is regulation and mandate driven. Many of the current discussion around T&T focus on government regulations, and to a lesser extent retailer mandates. While these regulations and mandates will likely expand and increase, ultimately it is consumers that are driving T&T activity. Today's consumers are demanding detailed information about who made a product, where it came from, and what is in it. In parallel consumer preferences and segments are changing at a frenzied pace. The expanding number of consumer segments is a leading driver behind the exponential increase in consumer driven product information demands. In addition to wanting to know a product's caloric content, health conscious consumers now demand data on its trans-fat, sodium, cholesterol, fiber, calcium and whole wheat content. Organic consumers demand information on hormones, pesticides, antibiotics, GMO's and the sustainability of crops and farms. Further fueling the demand for product information is the growing list of food safety issues such as E. Coli, salmonella, mad cow, bird flu and potential allergens. Consumer demands for information are very real, are here today and their impact can be dramatic. Sales of both Coke and Pepsi in India, a $1.6 billion market for these two companies, plummeted in August of this year when consumer concerns about pesticide levels prompted widespread protests and outright bans. Cadbury was impacted when a salmonella contamination prompted the June recall of over a million candy bars at a cost of more than $37 million. In addition to the financial impact Cadbury was subjected to severe UK government criticism for being slow to inform authorities about the contamination. T&T can play a critical role mitigating the impact of such situations - helping consumer products (CP) companies communicate critical information about their products and effecting targeted responses. The core issue is that of trust. If consumers don't trust a product they won't buy it. In today's uncertain world, trust is more fragile than ever. However, by leveraging the information in a T&T system a forward thinking CP company can establish and reinforce trust, and thereby encourage consumers to buy their products. Myth 2: T&T is only relevant to a narrow assortment of products. Most T&T activity is currently focused on highly perishable products such as raw meat, fish, eggs and dairy products. However, T&T systems can also accommodate complex, multi-ingredient end products and the same concerns driving consumers to demand information about raw meat apply to other products and ingredients. Indeed, the extension of T&T from chicken thighs sold in the refrigerated case to the chicken meat in chicken noodle soup is necessary and inevitable. As a growing number of seemingly benign products are impacted by contamination and other issues the case for investment in T&T increases. The current E. Coli driven recall of spinach across the U.S. is but one recent, tragic example. Earlier this year major European food manufacturers and retailers, including Unilever, McDonalds and Tesco, announced they would not deal with soybean suppliers unless they could "prove" the legality of the soy sources. Behind this decision were allegations that a significant portion of Europe's soy product is sourced from illegal farms being carved out of the rainforest. Users of soybean oil are also now facing traceability requirements. This oil, sourced from around the world, can be blended several times prior to its sale either as an ingredient or end product. Of the two processes used to blend soybean oil, one results in the inclusion of a highly allergenic protein, the other does not. For a product as benign as soybeans the farmers and processors, as well as food manufacturers and retailers are now expected to be able to track the sources of their product and trace its ownership to ensure they are obeying the law and not endangering people's health. Circumstances such as these are arising with greater frequency and rapidity, and can impact any CP industry segment or product. Myth 3: T&T implementation is a long-term project requiring major investment. A comprehensive T&T system requires that all supply chain participants have the ability to track the movement of traded items and to trace the owners of all ingredients, raw materials, packaging and the finished products. The complexity of the required T&T system will be driven in large part by the complexity of the product and its supply chain. Today, as a result of Enterprise Resource Planning ("ERP"), data management, EDI and other IT investments, in conjunction with SOX, ISO- and HACCP-driven process improvements, many CP companies already have the core elements of a T&T system in place. Fact is, CP companies are already capturing, storing and analyzing T&T related information. The major barrier to realization of the a comprehensive T&T system, the "EPC Network" referenced in the GMA's 2004 'EPC/RFID Implementation in the CPG Industry' study, is intra-company communication of the information. It is here that middleware technologies, such as WebSphere, play a major role. By cost-effectively and efficiently linking disparate systems middleware provides a safe, secure means of facilitating the communication of critical data. To further facilitate necessary sharing of information there needs to be a standard for the items being referenced. For the CP industry EPCglobal is the principle organization developing such standards, and defining identifiers such as Global Location Numbers ("GLNs") and Global Trade Item Numbers ("GTINs"). Despite some challenges the CP industry continues to make strides in this area, 94 percent of respondents to the 2006 GMA IT Study had allocated GTINs to at least some of their consumer units, and 89 percent had allocated GTINs at the case/carton level. However these efforts are focused on finished products, and work remains to develop similar industry standards for raw materials and ingredients. So while some incremental investment will be necessary, the core T&T elements are already in place. Indeed a functioning T&T system can be created relatively quickly with some investments in middleware, standards and data management. Realization of a fully automated, open, standards-based system based on a distributed architecture is the longer term proposition.
Myth 4: RFID is critical to T&T. By definition the tracking component of T&T requires that movements of ingredients, materials, packaging and products be captured and recorded. While full automation of this process using RFID could deliver incremental benefits, in most situations existing barcode technologies deliver sufficient functionality. Where necessary, manual recording is even okay. The value of tracking information is enhanced when supply chain participants agree on what is being moved, and where. Industry adoption of unique identifiers such as GLNs and GTINs help create this shared understanding. Barcodes can store GTIN and GLN information, and product movements can be captured via automated or manual barcode scanning. RFID tags can accelerate this process; however they are best suited for certain higher value, finished goods items. When it comes to tracing item ownership existing ERP applications, such as SAP R/3, currently support many of the key activities. This includes batch tracing, lot management, quality management and compliance, as well as data synchronization. Some work may be necessary to ensure information is captured and stored for sufficient length of time but the core functionality already exists in SAP. The other critical piece of the T&T system is the ability of each supply chain participant to access the T&T information of the others. Middleware applications, such as IBM's WebSphere, facilitate exactly this type of information sharing. Together a combination of barcodes, standards, SAP and middleware can deliver the core of a T&T system. For some products RFID is currently not practical or cost effective, for T&T RFID is a nice to have but not a requirement at this point. One unique adaptation of barcode technology, developed by EggFusion, allows egg producers to 'laser-etch' bar codes directly onto individual eggs. Consumers entering this code into the MyFreshEgg.com Web site can learn exactly where and when each egg was packaged, what distribution center it was shipped through and its expiry date. Although this technology does not currently allow for tracking of egg shipments, it does provide clear traceability benefits, and is currently in deployment by A&P. Similar technology is being used to apply barcodes to individual pieces of fruit.
Summary With events such as the deadly spinach contamination in the United States, the recall of millions of Cadbury candy bars in the U.K. and the ban on Coke and Pepsi products in India becoming more frequent and costly, the need for T&T has never been more urgent. And with the relatively small initial investment required to implement a functional T&T system the business case has never been stronger. By committing to and investing in T&T a CP company can becomes a trusted provider, in the minds of both consumers and retailers. In today's uncertain, rapidly changing world what CP company wouldn't want that? Bill Gilmour is a partner in IBM Global Business Services and Global leader for Consulting Services to the Consumer Products Industry. His consulting work has focused on strategy and performance improvement and the related systems support in the Retail and Consumer Products industries including strategy development, customer relationship management, supply chain management and the development of systems strategies to support business improvement opportunities. He has worked in Europe, North America and Asia. His work with CPG companies includes implementation of global ERP systems, development of customer relationship management systems and restructuring supply chain processes to maximize revenue generation and improve cost management. He has worked for a wide range of retail operations including hypermarkets, supermarkets, electric, variety and clothing retailers. |
