Keeping Employees Happy & Healthy
September 20, 2010
Keeping employees happy and healthy is essential to running a productive, successful company. Recently, we spoke with Billie Harris at Banner Pharmacaps about the extensive wellness program that they have developed for their employees. She informed us that their program focuses on three specific areas of wellness: nutrition, physical activity, and tobacco cessation. They provide learning opportunities for employees in these three focus areas to help them learn about and develop healthier habits. These learning opportunities include a health fair, chronic disease and nicotine replacement/cessation classes, and nutrition and exercise classes with dieticians, exercise physiologists, and health educators. Banner is also offering free labwork and testing for employees, as well as 30-minute exercise classes once a week and walking programs.
Gallins Foods is helping Banner with their healthy initiatives by offering our Heart Smart items in snack and drink machines, and our To Your Health items in the cold food machine. To encourage people to choose these healthier items in the machines, Banner is absorbing some of the cost so that employees can receive a discount on the healthier items. To continue to help them reach their health goals, Banner will also be one of our first accounts to have their machines fitted with the MIND technology which will better inform employees about the nutritional value of the foods they eat.
Banner Pharmacaps has certainly taken many steps to improve the health and wellness of their employees, but by no means are they stopping there. They are working toward being a tobacco-free campus by January of 2011, they now have Weight Watchers on site, and they are looking into constructing an exercise facility for employees. For their efforts, Banner received The Business Journal's Healthy Heroes Award for 2010 (pictured above), they are on their way to becoming a North Carolina Prevention Partner by offering nutritional info and healthy choices at meals, and they are working toward becoming an American Heart Association Fit Friendly Company. In order to achieve that goal, they must have health and fitness programs for all employees, and they must hit the three focal points of nutrition, physical activity, and tobacco cessation. In just the first year of Banner's comprehensive wellness program, Billie has seen 25% participation by employees, and she is expecting further improvement of that percentage as the program evolves and develops to engage more employees.
To see how Gallins Foods can contribute to or help develop a health and wellness program for your company and employees contact us today.
The Latest on Coffee Supply & Pricing
September 17, 2010
Here is the latest report on coffee supply, pricing, and predictions for the months ahead, courtesy of our coffee supplier. Coffee prices are likely to stay up for the next few months, with a predicted decline in the early part of next year. Of course, this all depends on weather, stockpiling, and plant-threatening fungi. The details on all of these are included in the report below:
Sept. 13 (Bloomberg) -- The biggest rally in coffee in five years may be ending as the prospect of larger harvests spurs hedge funds to pare bets on higher prices, potentially cutting costs for J.M. Smucker Co., Kraft Foods Inc. and Starbucks Corp.
Supplies of arabica, the world’s most-grown coffee, will exceed demand by 6.67 million 60-kilogram (132-pound) bags in the year ending in September 2011, according to ABN Amro Bank NV and VM Group. That’s the most in nine years and more than six times this season’s expected surplus. Speculators including hedge funds cut their net-long position, or bets on higher prices, by 8.4 percent since Aug. 17, regulatory data show.
The rise in coffee coincided with surging food prices as flooding in Canada and drought across Russia and Europe ruined crops. Wheat as much as doubled since June, contributing to riots over bread costs in Mozambique, and a United Nations price-index of 55 foods advanced to its highest since September 2008 last month. No such shortages in arabica are forecast, with ABN Amro and VM Group anticipating a 7.4 percent increase in output to almost 86 million bags, the most since at least the season ended in 2001.
“You cannot justify the spike on the upside if you look at the supply situation,” said Christoph Eibl, co-founder of Zug, Switzerland-based Tiberius Group, which manages more than $2 billion in assets. “People who have been betting on coffee may lose. In the long run, fundamentals always overrule.”
Arabica Gains
Arabica rose as much as 50 percent since June 7 in New York trading, reaching a 13-year high of $1.9865 a pound on Sept. 8, partly on speculation that rainfall in Colombia, the second- biggest producer after Brazil, would damage crops. Colombian coffee output gained 55 percent to 615,000 bags in August, the Bogota-based National Federation of Coffee Growers said this month.
Coffee will average $1.52 a pound in the fourth quarter, or 20 percent less than now, according to the median in a Bloomberg survey of seven analysts. Arabica for December delivery rose 0.5 percent to $1.908 as of 6 a.m. in New York.
Speculators accumulated a net-long position of 44,505 contracts by Aug. 17, Commodity Futures Trading Commission data show. That’s almost three times the five-year average and equal to 1.67 billion pounds of coffee. They cut that in two of the last three weeks, to 40,757 contracts by Sept. 7.
The last time prices rose this fast, in a rally ending in March 2005, arabica slumped 38 percent in the next six months. Futures traded on the ICE Futures U.S. exchange are anticipating a decline next year. Contracts from March 2011 are in backwardation, meaning that nearby contracts are trading at a premium to longer-dated ones, a sign investors may be more concerned about near-term supply.
Cutting Costs
Cheaper beans could help cut costs for companies including Northfield, Illinois-based Kraft, which raised U.S. prices twice since May on some types of Maxwell House and Yuban coffee. Starbucks, the world’s largest coffee-shop chain, said Aug. 17 that more spending on commodities, mostly coffee, would add about 4 cents a share to expenses in the year ending in September 2011.
Smucker, based in Orrville, Ohio, said Aug. 3 that it raised prices by an average of 9 percent for most of its Folgers and Dunkin’ Donuts coffee products. In a conference call with investors on June 17, Vince Byrd, president of Smucker’s coffee business, said the rally was being driven more by funds than supply issues. Arabica had already climbed about 20 percent by then. The company declined to comment further.
Shares of Seattle-based Starbucks are 10 percent higher this year in New York trading, while Kraft gained 13 percent and Smucker dropped 0.7 percent.
Commodity Demand
Higher prices for commodities including coffee, oil and natural gas helped strengthen the Colombian peso and Brazilian real against the dollar in the last 12 months. The peso rallied 11 percent against the U.S. currency, and the real is up 5 percent, trimming returns from dollar-denominated exports.
“The stronger peso takes a little of the shine off,” said Rupert Stebbings, head of the Medellin-based unit of Chilean brokerage Celfin Capital SA. “It’s eroding some of the gains, but this is a coffee price level they couldn’t have imagined.”
While harvests may expand, supply now is still tight, said Nestor Osorio, the outgoing executive director of the London- based International Coffee Organization. Declining inventory “makes the markets much more nervous and much more vulnerable,” he said.
Stockpiles in warehouses monitored by ICE Futures U.S. fell 35 percent this year to 2.01 million bags, the lowest level in more than a decade. This season’s arabica surplus will be 1.01 million bags, the smallest amount since the 2007-2008 season, according to ABN Amro and London-based VM Group.
Coffee Fungus
Problems with crops may also spill over into next season. Colombia’s harvest could decline next year after wet weather caused the worst outbreak of a plant-damaging fungus in a quarter century, Jose Sierra, who represents Antioquia, the nation’s largest coffee-growing province, said Sept. 1.
Speculators added 3,058 contracts to their net-long position in the week ended Sept. 7, the day before futures reached a 13-year high. Prices fell for two consecutive days after that, retreating 2.4 percent.
Prices may keep rising as supplies increase because demand will also climb, said Judith-Ganes Chase, a former Merrill Lynch & Co. analyst who runs a consulting firm in Katonah, New York. Global demand for arabica will expand 0.4 percent to 79.32 million bags in the 2010-11 season, the highest since at least the 2000-2001 season, ABN Amro and VM Group estimate.
Staple Foods
Unlike staple foods such as grains, coffee drinkers may not be willing to pay higher prices, said Raymond Keane, a coffee trader for Balzac Bros. & Co. in Charleston, South Carolina, which supplies the commodity to Kraft and Starbucks.
“There will be a point when consumers say: ‘This is it,’” Keane said. “Coffee is not an important ingredient of our diet. It is not wheat or rice. It’s dispensable.”
Speculation about Colombia’s crop is probably too bearish, said Abah Ofon, a Dubai-based commodity analyst at Standard Chartered Plc, the most accurate arabica forecaster tracked by Bloomberg in the first quarter. Ofon is forecasting a 1.5 million-bag increase in the country’s harvest, for a gain of 19 percent, and fourth-quarter prices of $1.45.
Brazilian production will rise to a bigger-than-expected 47.2 million bags this year, from 39.5 million last year, the Agriculture Ministry’s crop-forecasting agency said Sept. 9.
Arabica Prices
Roasters may also seek to substitute some arabica with robusta, used in instant coffee and espresso blends, said Keane of Balzac Bros. Arabica is trading at 2.6 times the price of robusta, compared with a two-year average of twice as expensive, data compiled by Bloomberg show.
“We’ve seen some international companies ask for more robusta than they used to,” said Bui Hung Manh, head of the business department at Tay Nguyen Coffee Investment, Import and Export Co. in Buon Ma Thuot, Vietnam. “If arabica prices stay as high as they are now, more people will switch to robusta.”
The company is the biggest exporter in Vietnam, the world’s largest producer of robusta. The country will produce 20 million bags of robusta next season, a gain of about 8 percent, ABN Amro and VM Group estimate.
Robusta traded on the NYSE Liffe exchange in London rose to a 21-month peak of $1,838 a metric ton on Aug. 23, before slumping 14 percent.
“When the price trend reaches a crescendo, there are clear signs that an imbalance has built up,” said Peter Sorrentino, who helps oversee $13.3 billion at Huntington Asset Advisors in Cincinnati and correctly predicted the collapse in commodity prices in 2008. “Financial buyers are finally becoming wiser.”
Coffee Pricing Update
September 02, 2010
We recently received a report from our roaster indicating that increasing demand, combined with lower production from farms in South America, will result in price increases on coffee across the board. We want to keep consumers informed, so here is a letter we received from our supplier detailing the causes of this increase:
THE FOLLOWING REPORT WAS IN RESPONSE TO A CUSTOMER’S REQUEST FOR A MARKET AND SUPPLY/DEMAND FORECAST OVER THE NEXT 18 MONTHS…
There is no debate that Brazil is the prime mover of the worldwide supply/demand equation, but unlike the analysis of an annual crop, the large differences between on-year and off-year harvests mean that a more accurate way to view it would be a two year span. Brazil is not only the largest producer of coffee, they are the second largest consumer of coffee (19 million bags/year) as well, trailing only the U.S. (22 million). Brazil has also committed to an aggressive commodity export policy that has seen her coffee shipments rise to, and persist at, 30 million bags/year. As a result, Brazil needs 98 million bags every two years simply to meet current needs. The 2009/10 harvest of 43 million bags, coupled with the 2010/11 projection of 55 million bags, if accurate, totals 98 million bags.
By focusing only on the 2010/11 crop projection, the coffee trade universally believed that the record 55 million bags would prove to be an anchor on prices throughout the second half of 2010. We either forgot, or neglected to focus on the demand side of the equation as well. Over the last several years, worldwide demand has grown to 131 million bags at the same time that washed Arabica production was declining in the Western Hemisphere. Chronic low prices during the first half of this decade caused many coffee farmers to uproot their trees and plant annual crops such as corn and sugar, partly as a response to the expected demand for ethanol raw material. Only Brazil has consistently increased productive capacity, and she has benefited most directly from the consecutive years of low Colombian production. No one would willingly make the argument that Brazils are a substitute for Colombians, but that is what the export statistics show.
Even if we assume that world consumption will not grow due to the poor economic situation, we have not yet seen proof of any decline either. There is some anecdotal evidence that disappointing yields from this Brazil harvest may cause the total to fall below 55 million. Today is First Notice Day for Sep Bolsa (the Brazilian coffee exchange) and there is a $12/bag premium for Sep over Dec, indicating shortage! The Co-ops oversold the September and their yields are not allowing them to make physical delivery in time. If the new total for 2010/11 is only 50 million bags as many now believe, the two year equation falls into deficit (93 i/o 98 million) and the following year will of necessity be a smaller crop again.
When you add in the facts that world producer stocks continue to be at all-time lows (ever since USDA began tracking such data 47 years ago), U.S. Green stocks are at a 10 year low (4.4 million bags), certified stocks worldwide of washed Arabica have fallen over 56% in less than two years (from 4.6 million to barely 2 million today), back-to-back crop failures in Colombia (down 20% or more each year), the impending inversion of the futures market, and a 75,000 lot imbalance of price-fixations (producers have fixed/roasters have not), it is small wonder that any sell-off meets aggressive buying.
We see no immediate solution to the above problems. Yes, the market fire was lit by speculative funds and they have pushed it higher and faster than it could have happened without them. But they could not have maintained this direction for almost 3 months if the fundamental under-pinning was not present. As an industry, we have preached the gospel of drinking better coffee, but we clearly do not have enough of it. Colombia needs to have at least an 11 million bag harvest this year, but that now seems unlikely. As a result, it is hard to envision any significant, long term relief in either futures prices or differentials. If Colombia surprises us with an 11 or 12 million bag harvest, we will be among the happiest beneficiaries. That would portend a noticeable drop in differentials, if not the futures market as well.
A $2.00 market seems inevitable, and I fear higher than that is likely as we move into 2011. Only a significant rebound in Colombia’s production coupled with good harvests in Mexico and Central America can cause differentials to weaken. The problem is that heavy rains have been prevalent in these areas and a developing La Nina means there is more to come. I believe that the high differentials are the companion of the strong market, and neither shows any sign of weakness. It is a grim forecast, but only a drop in worldwide consumption can significantly alter the supply/demand equation, and no one wants to see that. The dollar will occasionally rally, chasing out speculators and providing corrections along the way, and you are wise to jump on them as opportunities. If we have a roaring bull market in equities, or some other investment vehicle, that could siphon off some fund money too.
For more information, or to discuss options for cost-effective programs that still provide premium coffee and supplies for you and your employees, contact David Prongay, our Coffee Service Manager.
One way to distinguish between average companies and great companies is to look at the tenure of employees. The average length of employment in the food service industry is right around 6 months. Gallins Foods is proud to say that many of its employees have been with the company longer than that, and we have 5 employees who have shattered that industry average. At our recent company dinner, these employees were given special recognition, as all of them have worked for Gallins Foods for over 25 years. Pictured above, from left to right, are John Fourqurean (President, Gallins Foods), Mike Lawson (35 years of service), Ronnie Deitz (25 years of service), Gilda Watson (35 years of service), David Linville (30 years of service), Ed Oliver (40 years of service), and Matthew Gallins (Owner, Gallins Foods). Thank you again to all of our valuable employees for another good year at Gallins Foods.
Matthew Gallins made the cover of the August 2010 issue of Vending Times! The magazine, which contains news, updates, and editorials concerning the vending industry, wrote the August featured article about the benefits and challenges involved in selling milk in vending machines, and how milk sales have improved now that consumers are more health-conscious. Our own Randy Peak is quoted in the article, and the photograph we sent in of Matthew Gallins next to a Shamrock Farms milk vending machine was chosen for the cover of the magazine. To read the article, visit their 
Gallins Gourmet Coffee is currently offering two specially priced items. As coffee prices have risen, we have been seeking more ways to keep costs down for customers. We are able to manage the prices of our Gallins coffees better than national brand coffees, which is why we are able to offer Gallins Good Stuff Rich for $25.95 per case, a savings of $3 per case. 
We would like to thank Vickie Hartle for 26 years of service to Gallins Foods and our customers. On Friday, September 10, she retired after serving Gallins Foods in various capacities throughout the years. During her career, Vickie worked in both the vending and food service divisions of our Company, most recently taking care of our customers at the Golden Leaf Cafe. Thanks again, Vickie, for your many years of service, and for helping meet the needs of our valuable customers for 26 years. Happy Retirement!