In a ruling on Tuesday, U.S. District Judge Steven Seeger in Chicago said the risk of unfair prejudice against the egg producers and marketers by showing the graphic videos was “extreme” and outweighed any minimal value in the antitrust litigation accusing them of curbing domestic supply in order to charge higher prices.

“After watching the videos, it would not take much for jurors to believe that the egg industry abuses chickens,” Seeger wrote.

Kraft and the other plaintiffs wanted to play the videos at the trial next month to bolster their claim that an industry-wide animal welfare initiative announced in 2002 was a “sham” and actually part of a broader scheme to restrain the supply of eggs.

Seeger’s ruling on the videos was among several orders he issued on Tuesday addressing the scope of what jurors will be allowed to see and hear at the five-week trial.

Kraft and the other plaintiffs, also including General Mills and Nestle, are seeking more than US$110 million in damages against United Egg Producers and other defendants, including two farms.

Lawyers for the defendants on Wednesday did not immediately respond to a request for comment.

Representatives for Kraft and the other companies either declined to comment or did not immediately respond to a request for comment.

Seeger is presiding over a case that was previously in Philadelphia federal court as part of a multidistrict litigation proceeding. Kraft’s case returned to the Northern District of Illinois in 2019.

Lawyers for Kraft and co-plaintiffs said they obtained the videos from the Humane Society of the United States. They purport to show “day-to-day operations within defendants’ facilities.”

In a court filing, attorneys for United Egg Producers and the other defendants said the videos were “surreptitiously” recorded by animal rights activists and include “highly edited footage.”

The attorneys also said the recordings were irrelevant to the plaintiffs’ claims.

Seeger said the plaintiffs’ lawyers do not need the videos to argue that the egg industry’s promotion of animal welfare was not genuine.

“After personally watching all of the videos, the court is convinced that the videos would undermine the truth-seeking function of the trial,” Seeger wrote.

— Mike Scarcella is a Reuters legal affairs reporter in Washington, D.C.

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Michigan-based Kellogg Co. said Tuesday its board has approved a plan to break into three yet-to-be-named independent publicly-traded companies by way of two spinoffs. One would be its ready-to-eat breakfast cereal business for the U.S., Canada and the Caribbean; the other, its plant-based foods business for the same regions.

The company’s remaining worldwide product lines — such as its global snack foods business, its North American frozen breakfast food lines and its international cereals and noodles businesses — would remain with the third company, which would be the biggest in terms of sales.

The global snacking company, which last year booked net sales of $11.4 billion, would include brands such as Pringles, Cheez-It, Eggo, Pop-Tarts and Nutri-Grain, among others (all figures US$).

That business, on its own, is expected to be a “higher-growth” company than today’s Kellogg, the company said, with a more “growth-oriented” portfolio, aided by “more focused resources and attention to brand building, innovation, and international expansion of world-class brands.”

The North American breakfast cereal business, which last year had net sales of $2.4 billion, would include Kellogg’s lone Canadian plant, at Belleville, Ont., where it makes the Mini-Wheats cereal line. Kellogg shut down its other major Canadian breakfast cereal plant at London, Ont. in 2014.

This business’ brand portfolio also includes Corn Flakes, Frosted Flakes, Froot Loops, Special K, Raisin Bran and Kashi, among others. The Rice Krispies cereal brand would remain with the cereal business, while the Rice Krispies Treats product line would go to the snack company.

As a stand-alone company, the North America cereal business would have “greater strategic focus and operational flexibility” and will direct capital and resources toward “unlocking growth, regaining category share and restoring and expanding profit margins.”

In the near term, Kellogg said, the North American cereal spinoff would focus on “the restoration of inventory, profit margins and share position following 2021 supply disruptions.”

The plant-based foods company, with 2021 net sales of about $340 million, would also be focused on the U.S., Canadian and Caribbean markets, as a “leading, profitable, pure-play” firm led by the MorningStar Farms brand of vegan and veggie plant-based foods.

The plant-based business, Kellogg said, marks “a significant opportunity to capitalize on strong long-term category prospects by investing further in North America penetration and future international expansion.”

That said, while it “intends” to spin off the plant-based business, Kellogg added it will consider other alternatives for that business — “including a possible sale.”

Reuters on Tuesday quoted market observers as saying the plant-based business, while profitable, faces a “tough environment” without Kellogg’s support.

Gary Stibel of New England Consulting Group told Reuters “the rate of growth in plant-based is slowing and will continue to slow.” Kellogg CEO Steve Cahillane was quoted as saying last month on a call with analysts that the meat alternatives sector generally was in a state of “irrational exuberance” up until lately.

Kellogg’s two proposed spinoffs would involve tax-free distributions of shares to Kellogg Co. shareholders, who’d get shares in the two spun-off entities on a pro-rata basis relative to their Kellogg holdings.

The North America cereals spinoff is expected to happen before the plant-based spinoff, Kellogg said. The company expects both to be completed by the end of 2023 pending the usual closing conditions and regulatory approvals.

The North America cereals and plant-based spinoffs would both remain headquartered at Kellogg’s current home base at Battle Creek, about 150 km west of Detroit; the global snacking business would be headquartered at Chicago, with a campus at Battle Creek. — Glacier FarmMedia Network

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The five-year contract ends the stalemate between the Froot Loops maker and its factory workers in Michigan, Nebraska, Pennsylvania and Tennessee that had prompted the company to warn of permanently replacing striking employees, drawing criticism from U.S. President Joe Biden.

The union said the highlights of the new agreement included no permanent two-tier system, in which lower-tier workers make less than longer-tenured workers.

“This agreement makes gains and does not include any concessions,” said Anthony Shelton, president of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union.

Around 1,400 workers went on a strike since Oct. 5 after their contracts expired, as negotiations over payment and benefits stalled amid a tightening labour market.

“It will be difficult to go back. There is a lot of tarnished relationships that we will work diligently to repair,” said Dan Osborn, president of the local union in Omaha, adding the employees would return to work on Dec. 27.

The strike saw U.S. Senator Bernie Sanders rally with the striking workers in Michigan, while it also triggered calls for a boycott of Kellogg’s products by consumers on social media platforms Twitter and Reddit.

“Well deserved, Kellogg’s workers! Also happy I can buy Cheez-its (sic) again,” a Twitter user said on Tuesday, while another tweeted: “Froot Loops party!”

The strike did not affect Kellogg’s sole Canadian plant, at Belleville, Ont., which mainly makes the Mini-Wheats cereal line.

Shares of the breakfast foods maker — whose cereal brands also include Corn Flakes, Rice Krispies, Special K, Corn Pops, Frosted Flakes and Raisin Bran — declined three in late-morning trade.

— Reporting for Reuters by Praveen Paramasivam in Bangalore.

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Like other packaged food makers, Kellogg has struggled to boost sales as consumers shift toward healthier alternatives, while competition from Amazon and other online retailers has resulted in intense pricing pressure.

The announcement comes less than two weeks after Kellogg cut its full-year profit outlook, citing increased spending on advertising and higher distribution costs.

“We need to make strategic choices about our business and these brands have had difficulty competing for resources and investments within our portfolio,” CEO Steve Cahillane said in a statement.

The company said it would consolidate its U.S. morning foods, snacks and frozen foods businesses into one unit, beginning next year. This unit will account for 80 per cent of the company’s North America revenue.

Cahillane told analysts in October that Kellogg was investing to stabilize the brands in its U.S. morning foods business, but acknowledged that the unit wouldn’t be a growth engine.

Analysts have long voiced their concerns that the “carb-centric” brands in Kellogg’s U.S morning foods business — which houses Corn Flakes and Froot Loops — are out of step with health-conscious consumers.

Other packaged foodmakers have been trying to offload some of their businesses. Kraft Heinz last week announced a deal to sell its Canadian cheese business to Parmalat and also announced the sale of part of its Indian business this year.

Campbell Soup has said it plans to sell its international and fresh refrigerated-foods units and left open the possibility of putting the whole company up for sale.

Kellogg, which said the restructuring is one of the final initiatives under its Project K program, will provide further details at the company’s investor day on Tuesday.

The Project K program, launched five years ago, aimed to slash costs through job cuts and supply chain optimization, among other things.

–– Reporting for Reuters by Soundarya J in Bangalore and Richa Naidu in Chicago.

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At a campaign rally ahead of Sunday’s presidential election, which Maduro is expected to win, the president called Kellogg’s move illegal and told cheering supporters that Venezuelans’ favourite cereal would continue to be produced.

“We’ve begun judicial proceedings against the business leaders of Kellogg’s because their exit is unconstitutional,” Maduro said.

“I’ve taken the decision to deliver the company to the workers in order that they can continue producing for the people.”

Kellogg announced its retreat earlier on Tuesday, making it the latest multinational to exit the oil-rich country, which is heaving under hyperinflation and strict price controls.

“In December of 2016, Kellogg deconsolidated its Venezuela business from the company’s results. The current economic and social deterioration in the country has now prompted the company to discontinue operations,” Kellogg said in a statement.

Kellogg did not specify the difficulties it was facing in Venezuela, but companies have typically been struggling to find raw materials due to product shortages and currency controls that crimp imports.

Kellogg did not immediately respond to a request for comment on Maduro’s plans to hand its local unit over to workers.

The company in its statement warned against sales of its products or brands in Venezuela “without the expressed authorization of the Kellogg Company,” adding that it would like to return to Venezuela in the future.

Maduro’s government also stops companies from raising prices to keep up with hyperinflation, denting profits and sometimes rendering operations unsustainable.

The closure is not expected to significantly worsen food shortages in Venezuela, but it was a further blow to morale for many Venezuelans as Kellogg’s is the most popular and available cereal in the country.

Stunned workers were barred from entering Kellogg’s plant in the central city of Maracay and massed outside, seeking information, local business sources said.

Other multinational companies that have given up on the OPEC country, abandoning assets or selling them cheap, include Clorox, Kimberly-Clark, General Mills, General Motors and Harvest Natural Resources.

Venezuelans are struggling under quintuple-digit annual inflation and millions suffer food and medicine shortages. Even so, Maduro is expected to win re-election on Sunday in a vote the main opposition coalition says is a sham.

Maduro blames Venezuela’s crisis on an “economic war” he says is waged by Washington, greedy businessmen and coup-mongers.

— Reporting for Reuters by Corina Pons and Tibisay Romero; writing by Alexandra Ulmer and Girish Gupta.

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Amazon’s $13.7 billion purchase of Whole Foods, which won antitrust approval from U.S. regulators on Wednesday, has been a shadow hanging over an ailing brick-and-mortar retail sector unsure of how to respond to the world’s biggest online retailer (all figures US$).

Shares in Kroger Co. and Sprouts Farmers Market each shed around seven per cent of their value in after-hours trade, while Wal-Mart Stores stock was down almost two per cent.

The price cut on selected in-store goods will start Monday.

Amazon also said that it will start selling Whole Foods brand products on its website, a move that sent down shares of packaged food sellers such as Kellogg and General Mills down roughly three per cent.

“There was never any doubt that Amazon would lower prices, and even offer further discounts in-store to Prime members,” Baird Equity Research analyst Colin Sebastian said.

Amazon said starting Monday it will cut prices on Whole Trade bananas, organic avocados, organic large brown eggs, organic farmed salmon and tilapia, organic baby kale and baby lettuce, some apples, butter, and other products.

“They will lower prices on consequential items to drive traffic and sales but not do a whole store price reduction which could really damage gross margin and potentially wipe out operating margin,” said Roger Davidson, a former executive at Wal-Mart, Whole Foods and Supervalu and current president of consultancy firm Oakton Advisory Group LLC.

“It does not look like they will go kamikaze on pricing,” said Davidson.

Scott Mushkin, who covers grocery stores at Wolfe Research, recently said Whole Foods, on average, can be 15 per cent to 20 per cent higher than some rival grocers and is as much as 25 per cent more expensive at the extreme.

Lowering prices could help the companies stem the defections by price-sensitive Whole Foods shoppers and bring in new consumers who can then be urged to visit Amazon. “It’s ultimately a nice land grab” as well as a way to get those customers “thinking about buying healthy food from Amazon,” said Bill Bishop of retail consultancy Brick Meets Click.

But the move could come with a high price tag.

“In some cases grocery retailers have had to invest between $500 million to $1 billion in order to reduce prices to a level that retained customers and resulted in a net increase in customers,” said Brittain Ladd, who until earlier this year was a senior manager working to roll out AmazonFresh, Amazon’s grocery delivery service, globally.

“Amazon is more focused on driving volume and improving service at the expense of profit margins. Long-term, this strategy works because the absolute profit dollars can still be significant,” Sebastian said.

Amazon said its Prime members will eventually become part of Whole Foods Market’s customer rewards program.

Whole Foods, which operates about 470 stores, including 13 in Canada, already has rolled out a loyalty program at its smaller, lower-priced 365 by Whole Foods chain, which offers members 10 per cent off more than 100 items in the store.

Amazon said John Mackey will remain chief executive of Whole Foods and the company will operate as a subsidiary and continue to be headquartered in Austin, Texas.

— Reporting for Reuters by David Shepardson in Washington and Lisa Baertlein in Los Angeles; additional reporting by Jeffrey Dastin in San Francisco.

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Kellogg also said a strong dollar was expected to hurt sales this year more than it had anticipated, mainly due to a sharp fall in the pound after Britain voted to exit the European Union and a collapse of the Venezuelan bolivar.

The Cheez-It crackers and Pringles chips maker said it now expected 2016 adjusted sales, excluding the impact of its Venezuela operations, to stay flat or rise slightly. It had earlier forecast a growth of up to two per cent.

Kellogg’s sales have fallen for six straight quarters as the company, like other processed foods makers, struggles to adapt to the shift in consumer preference to fresh foods and items perceived as healthier.

Sales in Kellogg’s U.S. morning foods business, which sells cereals and other breakfast items, fell two per cent in the second quarter. In its U.S. snacks business, its biggest, sales fell 3.8 per cent.

However, net income attributable to the company rose more than a quarter to $280 million, or 79 cents per share, in the three months ended July 2 (all figures US$).

Excluding items, Kellogg earned 91 cents per share, in line with the average analyst estimate, according to Thomson Reuters I/B/E/S.

Net sales slumped to $3.27 billion, missing the average estimate of $3.36 billion.

— Reporting for Reuters by Sruthi Ramakrishnan in Bangalore.

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ConAgra and other food companies such as Campbell Soup and General Mills have decided to use such labels nationwide, finding it to be the easiest way to comply with a Vermont law.

In 2014, Vermont became the first U.S. state to pass a law requiring food companies to label GMOs on their products. The legislation will come into effect in July.

ConAgra said while it believed consumers should be informed as to what is in their food, addressing labeling requirements separately, just for the state of Vermont would be a costly affair.

“With a multitude of other states currently considering different GMO labeling requirements, the need for a national, uniform approach in this area is as critical as ever. That’s why we continue to urge Congress to pass a national solution as quickly as possible,” the company said in a statement.

Paul Norman, president for Kellogg North America, said this week on the company’s website that the breakfast-cereal giant will begin labelling “some” of its products nationwide for presence of GMOs, starting in mid- to late April.

Snack and pet food maker Mars, Inc. also said this week it is introducing “clear, on-pack labeling on our products that contain GM ingredients nationwide,” with the Vermont legislation in mind.

The U.S. Senate, last week, blocked a bill that would nullify state and local efforts requiring food makers to label products made with genetically modified organisms, or GMOs, as the industry races to stop the Vermont law from taking effect July 1.

— Reporting for Reuters by Amrutha Penumudi in Bangalore. Includes files from AGCanada.com Network staff.

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