The world’s largest food maker said it uses about 20 million pounds of eggs annually in products such as Toll House cookie dough, Haagen-Dazs ice cream and Stouffer’s breakfast items. Currently, none of Nestle’s U.S. egg supply is cage-free, Paul Bakus, president of U.S. corporate affairs, said in an interview.

The decision comes at a time when the food industry is under pressure from groups including the Humane Society of the United States, Mercy for Animals and World Animal Protection, which have successfully lobbied many companies to adopt animal welfare practices.

Companies have also said consumers are paying more attention to how the food they buy is made, prompting industry to change its sourcing of ingredients.

Bakus said the transition to cage-free eggs is backed by Nestle’s current suppliers and the change is not expected to significantly increase the cost of eggs for Nestle. The U.S. is Nestle’s biggest market.

“At this point, we’re not planning on passing through any costs associated with this to our consumers because we’re hopeful the costs will be minimal,” he said.

Both General Mills and Kellogg said earlier this year they will source 100 per cent cage-free eggs by 2025.

Fast-food companies have made similar announcements. McDonald’s said in September its 16,000 U.S. and Canadian restaurants will serve only eggs laid by cage-free chickens within 10 years while rival Burger King has committed to using only cage-free eggs by 2017.

“When the world’s largest food company speaks, their suppliers listen,” said Matthew Prescott, senior food policy director of the Humane Society of the United States, of Nestle’s announcement. “In the short term, any egg producer would have to be out of their right mind to build a facility with cages.”

He added, “What we hope Nestle will do is extend the timeline to the rest of its supply chain worldwide.”

Bakus said Nestle had prioritized making the transition to cage-free eggs in the U.S. International markets have separate supply chains, making it harder for them to commit to the same timeline, he said.

— Anjali Athavaley reports on the U.S. food and beverage sectors for Reuters from New York City.

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Lamb Weston will hold ConAgra’s frozen potato, sweet potato, appetizers and other vegetable products businesses.

The remaining businesses, to be renamed Conagra Brands Inc., will include brands such as Orville Redenbacher’s popcorn and Healthy Choice frozen dinners, in addition to several units that are currently a part of ConAgra’s commercial foods segment, which serves restaurants and grocers.

The tax-free spinoff is expected to be completed in autumn 2016, the company said.

ConAgra, which has reported flat or falling sales in four of the past six quarters, is struggling like others in the industry to increase sales and profit margins as consumers in search of healthier options shift from packaged products to fresh foods. The company faced investor pressure this year from Jana Partners and agreed to a board settlement with the activist hedge fund in July.

Earlier this month, ConAgra said it will sell its private-label unit to TreeHouse Foods for US$2.7 billion so that it could focus more on its portfolio of branded products.

And in October, the company said it will cut about 1,500 jobs as part of a plan to save at least $300 million in three years.

In an interview, the company’s CEO Sean Connolly, who will head Conagra Brands, said the company had explored various strategic options for Lamb Weston before deciding on the spinoff. He said the move would give the resulting two companies more focus and individual management attention.

“You don’t have each business competing for the same resources if you’re a stand-alone,” he said.

JP Morgan analyst Ken Goldman said in a note that the spinoff may not be the end of the breakup process for ConAgra and that future divestitures could include the commercial foods segment or the company’s share in Ardent Mills, the flour-milling joint venture it has with Cargill and CHS Inc.

— Reporting for Reuters by Anjali Athavaley in New York and Ramkumar Iyer in Bangalore.

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The company said Monday it was recalling the original and honey nut-flavoured varieties of Cheerios produced on certain days at its Lodi, California facility, saying wheat flour may have been accidentally added to its gluten-free oat flour system at the facility.

The incident occurred when the facility lost rail service and the company’s gluten-free oat flour was being offloaded from rail cars to trucks for delivery, said Jim Murphy, president of the company’s cereal business, in a blog post on General Mills’ website. He said it was an isolated event and a result of human error.

“We sincerely apologize to the gluten-free community and to anyone who may have been impacted,” Murphy said.

Ingestion of gluten, a protein found in wheat, barley and rye, by individuals with celiac disease causes an autoimmune response that attacks the small intestine, damaging the body’s ability to properly absorb nutrients.

General Mills, like others in the industry, has been changing its brands to appeal to consumers who are increasingly seeking less-processed, healthier food. In particular, the cereal business has proven problematic as some U.S. consumers have shifted to other breakfast alternatives.

Gluten-free cereal is one way General Mills is trying to bring people back to the category and take market share from competitors. The company is transitioning five varieties of Cheerios to gluten-free and investing significantly in promoting the new products.

On its last earnings call in September, the company said that gluten-free Cheerios would be “one of the largest merchandising events in our cereal business’s history.”

In a research note, JP Morgan analyst Ken Goldman estimated that the recall accounted for one per cent of annual Cheerios production, an amount he called “not insignificant.”

“We are not sure how costly the recall will be,” he said. “Our biggest concern is over reputational risk, because the new gluten-free Cheerios just launched.”

A company spokeswoman said General Mills did not yet have a cost estimate for the recall.

— Reporting for Reuters by Anjali Athavaley in New York and Ramkumar Iyer in Bangalore.

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The maker of Chef Boyardee pasta and Healthy Choice dinners is under pressure to cut costs and accelerate growth as consumers shift from packaged food to options they consider fresher, healthier alternatives. In July, the company added two directors to its board as part of an agreement with Jana Partners after the activist hedge fund took a stake in the company.

The job cuts mark the latest changes implemented by ConAgra CEO Sean Connolly, who joined in April. The company also announced in June that it would divest its struggling private-label business.

“While we believe that we can create a lot of value with ConAgra Foods, that’s only going to happen if we make bold change, and we’re going to continue to push for change,” Connolly said in an interview. He added that the move to Chicago allowed the company to consolidate its consumer foods business in one location.

The job cuts, which exclude the private label business, represent about 30 per cent of ConAgra’s office-based workforce. Overall, ConAgra had about 32,900 employees as of May.

About 1,200 employees will be left in Omaha following the cuts, down from roughly 2,400, excluding ConAgra’s private brands workers, Connolly said.

Nebraska Governor Pete Ricketts said in a statement that he regretted ConAgra’s decision, and that the government would be ready to assist Nebraskans seeking reemployment due to the restructuring.

Beginning summer of 2016, about 700 employees, including the company’s senior leadership, will be located at the new Chicago headquarters.

The workforce reductions, in addition to the company’s adoption of zero-based budgeting, which requires managers to justify each year’s costs from scratch, will account for $200 million in savings (all figures US$). The other $100 million will come from more efficient spending on promoting products within stores, ConAgra said.

“While we view these efforts as prudent, we don’t believe ConAgra is poised to post operating margins on par with the midteens generated by industry peers, given its lagging brand set,” said Morningstar analyst Erin Lash, noting that increased investments in marketing and innovation would partly offset savings.

ConAgra estimated restructuring-related cash charges of about $345 million over the next two to three years.

Shares of ConAgra were little changed at $40.54 on Wednesday.

— Reporting for Reuters by Anjali Athavaley in New York and Sruthi Ramakrishnan in Bangalore.

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ConAgra CEO Sean Connolly, who joined in April, said on the company’s earnings call on Tuesday it was clear trying to turn around the private label business was draining resources and that the segment would likely attract significant interest from potential buyers.

ConAgra bought Ralcorp in 2013 to become the biggest maker of U.S. private label foods. The business has been plagued with problems ranging from customer service issues to pricing concessions, with sales falling nearly six per cent in two years.

“We know that the inconsistency of our past performance is totally unacceptable,” Connolly said.

ConAgra, like others in the industry, is under pressure to cut costs and accelerate growth as consumers shift away from packaged food to options they consider to be fresher, healthier alternatives.

Earlier this month, activist hedge fund Jana Partners took a 7.2 per cent stake in ConAgra, becoming its second-largest shareholder, and said it was prepared to nominate directors to the company’s board to help address “persistent underperformance” since the $5 billion Ralcorp acquisition (all figures US$).

“Today ConAgra acknowledged the need to pursue a new strategic direction,” Barry Rosenstein, Jana Partners managing partner, said in an emailed statement on Tuesday. “We look forward to our ongoing discussions with the company and its advisers.”

KeyBanc Capital Markets analyst Akshay Jagdale wrote in a note that TreeHouse Foods and Post Holdings could be buyers for the private label business. Both companies did not respond immediately to requests for comment.

On the call, Connolly said the company would implement zero based budgeting, where expenses must be justified for each new period. He also left the door open to future divestitures.

“There may be brands that over time can find better homes elsewhere,” he said. “We will actively consider monetizing those assets to fuel other investments when appropriate.”

ConAgra’s net sales for the fiscal fourth quarter ended May 31 rose 3.7 per cent to $4.1 billion, but came in below analysts’ average estimate.

Net profit attributable to ConAgra was $209.2 million from a loss of $324.2 million a year earlier. ConAgra’s profit of 59 cents per share, excluding items, was in line with analysts’ estimates.

— Anjali Athavaley and Sruthi Ramakrishnan cover the U.S. food and beverage sectors from New York and the U.S. consumer and retail sectors from Bangalore respectively. Additional reporting for Reuters by Siddharth Cavale in Bangalore.

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Sysco is the biggest U.S. food distributor, whose clients include restaurants, hotels and hospitals. The company is discussing options with its customers, including creating alternative menu items during the period, a Sysco spokesman said in an email.

It is too soon to tell whether the supply squeeze will have a material impact on financial results, spokesman Charley Wilson said. Poultry accounted for 10 per cent of Sysco’s revenue in 2014, according to filings.

The U.S. poultry and egg industry is grappling with the country’s biggest outbreak on record of avian influenza, which has proven highly infectious and deadly for poultry. Governors in Nebraska, Wisconsin, Minnesota and Iowa have declared a state of emergency, and the outbreak has shown few signs of waning.

Earlier this week, Cargill said it has implemented increased biosecurity measures at its facilities receiving liquid egg tankers and shell eggs from impacted states and that it is working with egg suppliers to ensure they are employing measures to prevent spread of the flu.

Meanwhile, on Thursday, Post Holdings, calling the flu a “force majeure event,” said it now estimates that 25 per cent of its egg supply has been affected. Sysco is a major customer for Post’s Michael Foods business, which sells egg products, according to filings.

Stifel Nicolaus analyst Christopher Growe expects Post’s previous estimate of a US$20 million financial impact in 2015 to at least double, according to a research note.

Growe said that Post’s contracts require the company to go to the open market and to third parties to replace the lost supply at high prices. “We believe that by declaring force majeure, the company will be able to either pass higher prices onto customers or be relieved from the mandatory supply requirements,” he wrote.

— Anjali Athavaley reports on the food and beverage sectors for Reuters from New York. Additional reporting for Reuters by P.J. Huffstutter in Chicago.

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The regulator alleged that Kraft and Mondelez bought $90 million of wheat futures, or a six-month supply, but never intended to take delivery of the grain (all figures US$).

The two then earned more than $5.4 million in profits as a result of market shifts in reaction to the enormous position, the CFTC said in its complaint.

“A market participant who is not happy with cash prices available to it may not resort to manipulative trading strategies in an attempt to artificially lower that price,” CFTC enforcement head Aitan Goelman said in a statement.

The regulator said it was seeking a permanent injunction from future violations by the two companies, as well as disgorgement and civil monetary penalties.

Kraft said it did not expect the matter to have a financially material impact and that Mondelez International would predominantly bear the costs of the matter.

The complaint focused primarily on trading that occurred before the two companies split in 2012, Kraft said.

Mondelez declined to comment. It has said in a previous regulatory filing that it was being investigated by the CFTC, and that it would seek to resolve the matter prior to any formal action being taken. It said at the time it expected to predominantly bear the cost of the probe, but that this would not have a material effect on results.

The CFTC said that the companies had also violated speculative position limits, and that they had engaged in numerous noncompetitive trades in wheat.

— Reporting for Reuters by Douwe Miedema and Anjali Athavaley in Washington, D.C. and New York City.

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Shares of Kraft — which operates 35 plants in Canada, the U.S. and Puerto Rico — were up more than 38 per cent near $85 in morning trading (all figures US$).

The deal would provide Heinz with access to Kraft brands, which it says are in 98 per cent of North American households and include well-known names like Oscar Mayer and Jell-O.

The international presence of Heinz, whose Canadian holdings include two processing plants in Ontario, provides an opportunity to sell Kraft’s brands overseas.

Kraft stockholders would get one share in the combined company, to be called the Kraft Heinz Co., and a special cash dividend of $16.50 for every share held.

Heinz shareholders will own 51 per cent of the combined company and Kraft shareholders the rest.

Packaged-food makers such as Kraft are battling sluggish demand as consumers shift to products perceived to be healthier.

Kraft has overhauled its senior management over the past few months and has said it will develop products to meet changing consumer preferences.

However, “the board saw the 3G opportunity as more compelling,” Kraft CEO John Cahill, who will be vice-chairman of the combined company, said on a conference call.

The combined publicly traded company is expected to save about $1.5 billion in annual costs by the end of 2017. It will have eight brands worth over $1 billion each, the companies said.

Kraft Heinz will be led by Heinz CEO Bernardo Hees and have revenue of about $28 billion, about half that of market leader PepsiCo in 2014.

Berkshire Hathaway will own more than 320 million shares in the combined company, which will have about 1.22 billion shares outstanding, Buffett told CNBC.

“We will be in the stock forever,” he said.

Brazilian private equity firm 3G Capital and Berkshire Hathaway acquired Heinz for $23.2 billion in 2013.

The Kraft deal is unlikely to face antitrust hurdles as there is little overlap in products, analysts said.

Kraft’s products include cheese, processed meats, packaged meals and Maxwell House coffee, while Heinz makes ketchup, sauces and frozen foods.

Kraft is 3G Capital’s fifth major deal in the food and beverage industry since 2008, when it engineered a takeover of Anheuser-Busch by brewer InBev.

3G Capital also controls Restaurant Brands International, formed when its Burger King business bought Canadian coffee and donut chain Tim Hortons.

— Sruthi Ramakrishnan and Anjali Athavaley report for Reuters from Bangalore and New York City respectively. Writing for Reuters by Lisa Von Ahn.

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A key part of Shake Shack’s growth strategy involves expanding its locations beyond its New York base, and investors and analysts are bullish on its prospects.

They say there is room for more “fast casual” restaurants that offer higher quality burgers, a variety of toppings and in some cases, beer and wine. Shake Shack’s burgers are described in its preliminary prospectus as all-natural and hormone- and antibiotic-free.

To be sure, there are skeptics who say the excitement over Shake Shack is overblown.

“Consumers love it and it will be well greeted in the market — and then probably fizzle out,” said Doug Kass, president of Seabreeze Partners Management in Palm Beach, and a noted short-seller.

“That a company of such a small size can get a valuation is symptomatic of the silliness… that develops in a period of zero interest rates,” he said.

A Shake Shack spokeswoman declined to comment.

Still, several factors appear to be working in Shake Shack’s favour. First, 2014 was a solid year for restaurant IPOs, particularly of the fast casual variety.

Burger chain Habit Restaurants Inc.’s shares have risen three per cent since its $30 Nasdaq debut on Nov. 20, based on Friday’s prices, and Zoe’s Kitchen was up 12 per cent from its April market debut at $28.72 on Friday. Shares of El Pollo Loco, another fast casual company, were up 5.5 per cent Friday from their $19 market debut in July.

Second, premium burger chains are outperforming the burger category as a whole, thanks to demand from younger, more affluent consumers. Sales at such chains including Five Guys and Smashburger rose nine per cent in 2013, according to restaurant consultancy Technomic Inc., while overall sales at all burger chains including fast food restaurants such as McDonald’s Corp were down one per cent.

“The better burger space has been a pretty disruptive force for McDonald’s and other players,” said Darren Tristano, executive vice president at Technomic.

New York and beyond

Shake Shack has developed a fervent following since it was founded by restaurateur Danny Meyer in 2001, but the challenge will be to replicate the success it has found in New York in the rest of the U.S. and overseas. The company has 31 company-operated and five licensed locations in 10 states and Washington, D.C., and 27 locations abroad.

The chain believes it has the potential to increase the number of domestic company-operated Shacks to at least 450 and analysts say that finding new locations with affluent consumers is critical.

Consumers such as Leticia Garza, 33, a middle school teacher in Austin, Tex., help illustrate the brand’s potential in other parts of the country, but also the challenges. Garza said she is excited to hear that Shake Shack planned to expand to Austin.

Still, she noted she has many similar options. “There’s definitely going to be some competition because we have recently gotten an In-N-Out, and a couple of local versions that are similar to In-N-Out: P. Terry’s and Mighty Fine.” She adds: “We have Smashburger, too.”

Indeed, the market may be just a few years away from being saturated with too many fancy burger places, some analysts say. Furthermore, premium burger chains are not the only ones offering more personalized options: McDonald’s is rolling out a new “Create Your Taste” program this year that will give customers a choice of sandwich toppings.

In December, the world’s biggest fast food chain, which has not had a monthly gain in sales at its established U.S. restaurants since October 2013, said it also planned to cut the number of items on its U.S. menus. It also plans to use fewer ingredients in food, in an effort to reach consumers who want simpler, more natural choices.

McDonald’s is cheaper than Shack Shack and competes for a less affluent consumer. Still, industry watchers say such efforts could put pressure on premium burgers.

“We’re always looking for the latest version,” said Harry Balzer, an analyst at NPD Group, a market research company. But, he said, “there’s a limit to the burgers we’re going to eat.”

— Anjali Athavaley reports on the food and beverage industries for Reuters from New York. Additional reporting for Reuters by Sinead Carew.

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