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Biscuits are big business

24 November 2021 7:15 PM
Tags:
Digital technology
BusinessUnusual

There is a chance that Mondelez South Africa is looking to acquire some more SA brands

Food production is a mega business and while you may know dozens of food brands, they all come from just a handful of companies.

This is a short history of how a biscuit formed an empire.

Polly wants a cracker

When pirates had parrots they probably gave them the occasional biscuit that was made for long sea voyages. They were not especially tasty and you needed to soak them in something before you ate them but they would last, were light and good value until you made it to your destination. (You may enter the rabbit hole for where the phrase came from when you are ready, this appears to be the most authoritative but there are others)

As sugar became more popular it was added to everything including the biscuits and they became very popular.

Biscuit makers popped up everywhere. Two brothers had the idea of merging multiple bakeries to get better prices from producers and have a bigger market to sell to. These were the Loose brothers who went on to create the first big food processor bakery. Other bakeries not part of the group did the same until three large biscuits makers emerged.

Competition between the three drove prices down, but rather than this being great for biscuit lovers it resulted in the three companies merging to form the National Biscuit Company.

There was something else that was not so great about these merges. The brothers did not get treated the way they hoped and so left to start over.

At the time, despite biscuits being popular, they had become known for having all sorts of other things in them and so when the brothers started a new bakery, they opted to use just the purest ingredients and added chocolate and a soft filling to create a new biscuit which they called Hydrox.

The biscuit did well, well enough that the National Biscuit Company chose to make a version itself which it called Oreo.

Oreos marketing campaign which picked up on kids who liked to split and dunk the biscuit made it even more popular and over time it became the most popular biscuit in the world.

The empire grows

After having created a giant biscuit business that became known as Nabisco, it merged with the RJ Reynolds Tobacco company. It may seem an odd partnership, but big food companies have had quite a few partnerships with big tobacco.

The mass production and global distribution of both types of companies make them quite suitable.

Over time, the hundreds of much loved brands and snacks have come to be owned by just a few massive food companies. Below is a chart create by Oxfam from 2013 (some brands may have moved since this was made).

Behind the brands - Oxfam campaign to rate big food manufacturing practices

Local to global and back to local

As the cookie monster continued to grow it next was acquired by Philip Morris another tobacco maker in 2000 and merged with Kraft (itself a massive food producer with many well known brands)

In 2011 Kraft split into a grocery company and a snack company and the snack section was named Mondelez International, the name derived from delicious world - monde the French for world and delez a made up version of delicious.

It has continued to acquire other snack makers around the world which ties back to the history of Hydrox.

Its strange name was based on being pure like water which consists of hydrogen and oxygen which gets you Hydrox. It was chosen because the pressure to lower costs saw large bakeries add other filler materials or alternatives to make their cookies while Hydrox would be made with more traditional ingredients.

Despite the original lasting until 1999, it was resurrected in 2015 by Leaf Brands looking to make a biscuit free from all the flavourings and additives that have allowed mass production cookies to be created.

It is partially this trend that may be the reason Mondelez South Africa are looking to acquire more SA Brands. The US market is massive and mature with many brands unable to grow much more without taking share for possibly other brands owned by the same company. They are also seeing more competition from smaller, more artisanal bakeries. Emerging markets though still have much potential for growth, are open to new brands and favour price over ingredients.

It is fair to expect that the food giants of the US and Europe will be looking to make new profits from Africa’s young and growing consumers.

The Oreo bandwagon

At one point the bakery in Chicago was the largest in the world with 4 000 staff that produced billions of Oreos every year. That changed when the company was pressured to cut costs and moved production to Mexico in 2015. Thousands lost their jobs with production ending in 2016. In 2021 there was a strike as workers fought to negotiate a new contract that would protect them from lower wages, longer shifts and more outsourcing which they succeeded in achieving. It remains to be seen if it will be the last.

The US consumed a third of the global supply of over 30 billion cookies in 2011. It is estimated that half a trillion have been baked since their launch in 1912 and by 2017 the number consumed had exceeded 40 billion in over 100 countries.

Rather than just the main chocolate and crème filling their are a wide variety of limited edition flavours released that have the effect of driving up the sales of the regular editions too. From a wasabi and hot wings version to an Android version in response to Android naming its 8th edition operating system Oreo. The most recent promoted Lady Gaga’s 2020 album Chromatica and featured a Salmon-coloured cookie with malachite-green filling.

And because it is 2021 you can now create your own version of Oreos.

Officially they are not biscuits but rather a chocolate sandwich cookie.

When is a biscuit a biscuit and when is it a cake?

While cookies are biscuits, cakes are not. A well known option in the biscuit aisle is the Jaffa cake. It is not eaten as a cake and you don’t find it with the other cakes and so in 1991, the question about what it was became a multimillion pound question when British tax authorities determined that as a biscuit it was subject to VAT. The makers argued that it was in fact a cake and not a biscuit in part because cakes in the UK are not considered a luxury and so not subject to VAT.

If lawyers could convince the court that Jaffa cakes were indeed cakes they could save consumers the extra charge.

Moisture is a key element as most would guess and the word biscuit literally means twice cooked.

The tax team argued that it is eaten like a biscuit, bought like a biscuit and is the size of a biscuit.

The Jaffa Cake team argued that when a cake goes stale it will become dry and hard, while a biscuit will become soft and a bit more moist.

An oversize Jaffa cake was brought to court and over time showed that it became harder proving it was indeed a cake.

We will wait to see if Mondelez decides to add some more SA brands to its stable, but we can expect to see even more brands become available and tempt us to make them our favourite snack.


This article first appeared on 702 : Biscuits are big business




24 November 2021 7:15 PM
Tags:
Digital technology
BusinessUnusual

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