Washington Insider-- Wednesday

By DTN's Washington Insider

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Senate Finance Committee Takes Up Trade Promotion Authority Today

The Senate Finance Committee has scheduled a markup session today for legislation that would renew the president's trade promotion authority (TPA), widely seen as a necessary step toward concluding two major free trade agreements. The bill would set forth congressional trade negotiating objectives as well as consultation requirements between the White House and Capitol Hill.

"This markup will give members of the committee the opportunity to consider bipartisan TPA legislation that will help deliver high-quality trade deals, as well as a number of other bills that will help improve our economy by lowering trade barriers for American exports in markets around the world," said Finance Committee Chairman Orrin Hatch, R-Utah.

The Obama administration has been working with Congress to arrive at legislation that both sides can live with. White House Press Secretary Josh Earnest said the president believes the TPA detailed in the bill represents a commonsense bipartisan compromise. "This is the most progressive, far-reaching trade promotion authority bill in history, and the reason that it is so progressive is because it includes enforceable labor provisions, it includes enforceable environmental provisions, and it includes some provisions that are related to human rights," Earnest said.

As has been noted before, the main obstacle to a congressional grant of trade promotion authority is opposition by the Democratic Party in Congress. The strength of that opposition will be more clearly evident by the number of committee Democrats who vote against the measure later today.

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Environmental Groups Charge that EPA Broke Promise on Feedlot Pollution Reporting Requirements

A coalition of environmental groups is seeking to restart a lawsuit against the Environmental Protection Agency over pollution reporting requirements covering animal feeding operations. The groups say the agency broke a promise it made to a federal court four years ago to reexamine those rules. The plaintiffs include the Waterkeeper Alliance, Sierra Club, Humane Society of the U.S., Environmental Integrity Project and Center for Food Safety

The coalition initially sued EPA in 2009, calling on a federal appeals court to invalidate an EPA rule which exempted farms from reporting requirements for air pollution from animal waste. EPA responded to the lawsuit by saying that it was considering repealing part or all of the Exemption Rule, which would make the litigation moot. As a result, the judge in the case put the lawsuit on hold without issuing a ruling. Now, four years later, the plaintiffs argue that EPA is nowhere close to repealing the Exemption Rule.

EPA says it is developing a new method for estimating air pollution emissions and that it would revise the Exemption Rule only after it has finished work on its new emission estimating methodology. However, the plaintiffs aren't waiting and are asking the appeals court to either restart the original case or to require EPA to finalize the Exemption Rule revision within nine months.

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Washington Insider: The New Organic Foods

The Wall Street Journal recently raised the question of whether organic and other specialty foods taste as virtuous if they are "mass marketed." As an example, it describes Plum Organics concept of an archetypical organics consumer that would not be expected to ever open a can of soup for a kid's lunch.

However, the current question is whether the marketing group can tempt her toward new pouches of organic tomato meatball soup with kale and spinach, a product Plum got help making from its owner Campbell Soup Co.

Plum used Campbell research to find that children's favorites are chicken noodle and tomato and then reworked recipes "in a Plum way," adding more vegetables, says Neil Grimmer, co-founder and chief executive of Plum. The eight-year-old company's research and development team in California built on classic Campbell's formulas from more than 100 years of selling soup. For tomato meatball soup, Plum chopped kale and spinach finely so children aren't scared away by the "huge leafy greens," Grimmer says.

The Journal focused on the Plum shopper and others like her who it calls the darlings of the food industry these days. Food giants such as Coca-Cola, General Mills and Kellogg are looking to tweak some of their smaller food brands such as Honest Tea, Annie's Inc. and Kashi, and market them as healthy or even labeled as organic. Their objective is find ways to convince this desirable, loyal consumer group to continue to pay higher prices in the name of organic or natural products as sales of existing soup, sodas and cereals stagnate.

These are tough customers who are easily offended, the WSJ says. They notice things like too much sugar, too little taste, or the inclusion of artificial ingredients of genetically modified ingredients or artificial dyes. In the age of social media, perceived missteps can be quickly damaging so big companies tread carefully to try to attract shoppers without alienating the base.

An example is seen in one of Coca-Cola's units called Honest Tea with its organic, fair-trade, low-sugar drinks — although the company's $134 million in sales last year was seen as anemic. So were its growth plans and the company wanted them tripled. The article describes in some detail how it tinkered with the level of sweetness in its drinks and the new products it added.

In 1998 most Honest Tea drinks had 9 grams of sugar, or about 35 calories a bottle and sold well in natural and specialty grocers. In 2003, before being acquired by Coke, the company added another teaspoon of sugar to some varieties, labeling them "Just a tad sweet." At 60 calories a bottle, "we started to get traction," the company noted. Today, Peach Tea, Raspberry Tea and other flavors are 100 calories a bottle.

Sweeter drinks, mostly in plastic bottles have sold best overall, WSJ says, while its unsweetened and low-sugar drinks, in glass bottles sell well in natural and specialty stores. Just Green Tea, without any sugar, is the company's best seller at natural grocers like Whole Foods.

Hoping to appeal to lapsed soda drinkers, Honest moved to zero-calorie carbonated Honest Fizz drinks with certified organic ingredients earlier this year. To partially make up for the higher cost of the organic sweeteners stevia and erythritol, a sugar alcohol, Honest switched from pricey tall cans that give the drink a premium look to the same shorter cans as Coke — a shift that nearly halved the cans' cost, the company says. However, the company moves carefully with such changes that have the potential to change product images — a potential marketing problem that Coke has encountered before, observers note.

For many consumers there are limits to their healthy shopping. Children reject food that veers too far toward a dull, healthy taste, officials of Annies told the Journal. Annie's started selling frozen pizza made with organic ingredients in 2013, but shoppers balked at about $9 a pie since most frozen pizza sells for a few dollars less. So last fall, Annie's started selling frozen mini pizza bagels and poppers for about $4 a box, a price that has sharply boosted sales, the company says..

So, as expected the high margins for specialty foods are increasingly attracting the big players, as well as many, many others who want to be big and may be willing stretch a point or cut a corner to achieve that goal. Examples, abound and include "mostly organic foods", natural products and products in super-jazzy packages intended to cut costs and continue to attract foodies — but may be vulnerable to exposes on social media.

Certainly, if there are new markets for these foods to be had, these and many other highly competitive firms will smoke them out. Right now, the key question is how far and how long that fight can continue before the real product differences begin to take over — and price competition reasserts itself, a trend producers should watch carefully as it proceeds, Washington Insider believes.

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(GH/CZ)

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