Food Makers Scrimp on Ingredients In an Effort to Fatten Their Profits

By JULIE JARGON
Wall Street Journal

Major food makers are quietly altering their recipes on candy, dairy products and other top-selling lines, adding fillers and substituting cheaper ingredients to cut costs amid the commodities boom.

Hershey Co. is substituting vegetable oil for a portion of the cocoa butter traditionally used in some of its chocolates. Spice maker McCormick & Co. is now supplying food companies with cheaper spices and new flavor blends, such as Mexican oregano instead of pricier Mediterranean oregano, and garlic concentrate instead of heavier (and costlier to ship) garlic cloves.

General Mills Inc. says that by reducing the number of spice and ingredient pouches in boxes of Hamburger Helper -- and by halving the number of pasta shapes used in the product line -- the company has trimmed manufacturing costs 10%. The company is also replacing pecans with less expensive walnuts in its Pillsbury Turtle cookies.

Soy protein, a low-cost meat filler long used in school-cafeteria hamburgers, is making its way into more packaged foods, says Michael Considine, an executive at Minnesota grain company CHS Inc. In the past two years, he has seen a 10% increase in the volume of soy protein the group sells to major food companies, he says.

Most of the tweaked products still cost the same for consumers, if not more. Recently, Hershey announced a price increase across most of its lines.

It's happening as food companies face pressure to raise prices to cover their own fast-rising costs. On Friday, new data showed that food companies raised prices across 35 key product categories by 7.3% over the 12-week period ending Aug. 9, according AC Nielsen. The increases are "unprecedented," Sanford Bernstein analyst Alexia Howard wrote in a note to investors.

This month, McDonald's Corp. said it's testing less expensive ways to make its $1 double cheeseburger; already, some restaurants are selling the burger with one slice of cheese instead of two. And in a Thursday interview, Burger King Holdings Inc. CEO John Chidsey said the chain is testing a smaller Whopper Jr. hamburger as it tries to overcome high ingredient costs.

Bonnie - another reason to always read labels to look for ingredient changes. in addition, stick with foods with very short labels and real ingredients.