Monthly Archives: March 2010

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The FDA and Food Fraud

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In our April issue (which will be available online tomorrow available now), we feature an article about how the Consumer Product Safety Commission (CPSC) is ramping up its enforcement efforts of late. Our May issue will discuss how OSHA is doing the same. And this post last week talks about how the EPA is planning to re-new its mission to safeguarding the nation’s drinking water.

Will the FDA be the next watchdog to flex its muscle?

Some think it should, specifically when it comes to “food fraud.”

Increasingly, companies, retailers and consumers are pressuring the U.S. Food and Drug Administration (FDA) to act on the rising incidence of food fraud, the Washington Post reports.

Examples of food being mislabeled abound: “sheep’s milk” cheese really being made from cow’s milk; “Sturgeon caviar” being Mississippi paddlefish; grouper, red snapper and flounder actually catfish fillets from Vietnam; and honey diluted with sugar beets or corn syrup sold as 100 percent pure.

This type of “food fraud” has been found in fish, fruit juice, maple syrup, olive oil, spices, spirits, vinegar and wine. Those affected by the fraud include consumers and companies such as E&J Gallo and Heinz USA.

Rhetorically, the FDA definitely wants to increase its ability to monitor such violations, but the past few years have seen so many incidents of rampant — and at times deadly — food quality issues that the regulator has instead focused on that side of things.

And rightly so. I mean, look at this list of recalls in just November 2009 alone.

Still, one issue being more troubling doesn’t mean that the other one isn’t also a threat.

“We put so much emphasis on food and purity of ingredients and where they come from,” said Mark Stoeckle, a physician and DNA expert at Rockefeller University. “But then there are things selling that are not what they say on the label. There’s an important issue here in terms of economics and consumer safety.”

The CPSC and OSHA have both needed more funding and resources to expand their mission. Does the FDA deserve the same? In a vacuum, of course. And food fraud has the potential to cause some very serious health and safety problems.

But in a still-shaky economy and with a new, historic commitment to health care, can every agency in Washington really expect to get a higher budget?

maple syrup tootbrush

Brushing your teeth has never been so delicious … Hey! Wait! That’s not tooth paste.

Grasshoppers a Major Risk for Western Farmers

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grasshopper

Officials throughout the West are claiming that grasshoppers will likely hatch in bigger numbers than any year since 1985 — a year that saw “hundreds of millions of dollars in damage when [the grasshoppers] devoured corn, barley, alfalfa, beets — even fence posts and the paint off the sides of barns.”

The article in the Wall Street Journal cites a federal survey of 17 states taken last fall that found dangerously high numbers of adult grasshoppers in farming states throughout the West. Taking into account the fact that the female grasshopper lays hundreds of eggs — the spawning of these insects could be catastrophic.

A rancher near Buffalo, Wyo., Mr. Fieldgrove was enjoying a banner year last summer when, seemingly out of nowhere, crawling carpets of hoppers marched onto his rangeland — a harbinger of this year’s infestation. In three weeks, they had eaten every blade of tender, nutritious grass on his 10,000 acres. They also ate his wife’s lilac bushes. “They took it all,” Mr. Fieldgrove said.
Unable to find enough grass, Mr. Fieldgrove’s 200 young calves began to lose weight. He ended up selling them at auction several weeks earlier — and 60 pounds per calf lighter — than planned. And he had to import hay to feed the mother cows he kept on his ranch for the winter.
The grasshoppers cost Mr. Fieldgrove about $30,000 in profit, he said — and local agricultural officials are warning him it could be worse this year.

A rancher near Buffalo, Wyo., Mr. Fieldgrove was enjoying a banner year last summer when, seemingly out of nowhere, crawling carpets of hoppers marched onto his rangeland — a harbinger of this year’s infestation. In three weeks, they had eaten every blade of tender, nutritious grass on his 10,000 acres. They also ate his wife’s lilac bushes. “They took it all,” Mr. Fieldgrove said.

Unable to find enough grass, Mr. Fieldgrove’s 200 young calves began to lose weight. He ended up selling them at auction several weeks earlier — and 60 pounds per calf lighter — than planned. And he had to import hay to feed the mother cows he kept on his ranch for the winter.

The grasshoppers cost Mr. Fieldgrove about $30,000 in profit, he said — and local agricultural officials are warning him it could be worse this year.

Wyoming is one state that refuses to lay in wait for the pesky critters. The cowboy state has allocated $2.7 million towards suppression efforts, including aerial spraying of pesticides. But if Wyoming, along with other western states such as Idaho, Montana, Nebraska and South Dakota, do not receive additional funding for grasshopper suppression, results could be disastrous.

Picture 4 2010 may, unfortunately, become the year of the grasshopper, just as 2005 was the year of the locust. In that year, locusts devastated farms and agricultural businesses from western Africa to eastern Australia, a topic Risk Management covered with an in-depth feature.

We’ll be keeping an eye on this potential agricultural catastrophe — check back for updates.

State Farm Partners with Indie Rockers for Rube Goldberg-Styled Marketing in “This Too Shall Pass”

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State Farm has been branching out into nontraditional avenues to promote its products, services and brands for a while now — but never as extravagantly as its collaboration with the indie rock group OK Go.

The band, which hails from Chicago, gained internet fame in 2006 when its foray into treadmill choreography for the video of the song “Here It Goes Again” created a YouTube viral sensation. And when State Farm, which has been active on social media sites including Twitter, Facebook, Flickr and Youtube, saw an opportunity to help the band create its next viral vision, it jumped at the chance.

The result is a four-minute, Rube Goldberg journey through a warehouse, during which TVs are smashed, umbrellas are launched, dominoes fall and paint goes everywhere. Even if the song “This Too Shall Pass” wasn’t any good — which it is — the video would still be captivating to almost any audience. And by keeping its presence minimal and not obtrusively over-involving its brand in the production, the insurance company has helped create something that people will legitimately want to see. All of this helps increase its reputation, particularly among the younger, hipper audience who will most enjoy the video.

I had actually seen “This Too Shall Pass” twice before reading about the insurer’s involvement and didn’t even realize State Farm had anything to do with it. As you may or may not notice on your own, the red truck at the beginning that starts the dominoes and a State Farm logo after the video ends are the only evidence that the company was ever involved.

In the near-term, that may seem to trivialize State Farm’s reputational benefits. But as more and more people notice — and talk about — its involvement in a cool project, the brand becomes a little cooler. And it will likely become see as an innovative company that other creative types will want to partner with.

Essentially, rather than being a stuffy insurance company that awkwardly tries to convince people it is cool, State Farm is just sitting back and underwriting a project done by some guys who already are cool. And since underwriting is its specialty, that just makes sense.

Let’s face it, most insurance companies aren’t going to become hip on their own.

Check it out below. (video via Insurance Marketing HQ)

Insurers Turning to Outside Help for Investments

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It seems more and more insurers are choosing to stick with writing policies and collecting premiums while leaving the management of their assets to others.

This is good news for Wall Street since its money managers have watched their asset bases dwindle during the downturn. According to industry estimates stated in The Wall Street Journal, insurers last year outsourced management of more than $1.1 trillion, up from about $980 billion in 2008.

Last year, the company chose BlackRock Inc. to look after $23 billion of bond securities of its nearly $160 billion portfolio. Allstate Corp. got out of the stock-picking business by hiring Goldman Sachs Group Inc. to manage a $5 billion equity portfolio out of its overall $100 billion investment pool.
Other big winners include Conning & Co., of Hartford, Conn.; State Street Global Advisors, part of State Street Corp.; and General Re-New England Asset Management, owned by Warren Buffett’s Berkshire Hathaway Inc.
Deutsche Bank AG and BlackRock are the two biggest money managers for insurers, controlling about $200 billion in insurance assets each, according to data from the money-management firms and Patpatia & Associates, a Berkeley, Calif., consulting firm that tracks insurers’ outside investments and advises them on outsourcing

Last year, the company chose BlackRock Inc. to look after $23 billion of bond securities of its nearly $160 billion portfolio. Allstate Corp. got out of the stock-picking business by hiring Goldman Sachs Group Inc. to manage a $5 billion equity portfolio out of its overall $100 billion investment pool.

Other big winners include Conning & Co., of Hartford, Conn.; State Street Global Advisors, part of State Street Corp.; and General Re-New England Asset Management, owned by Warren Buffett’s Berkshire Hathaway Inc.

Deutsche Bank AG and BlackRock are the two biggest money managers for insurers, controlling about $200 billion in insurance assets each, according to data from the money-management firms and Patpatia & Associates, a Berkeley, Calif., consulting firm that tracks insurers’ outside investments and advises them on outsourcing.

Both Deutsche Bank and BlackRock claim that 2009 was a record year for them in terms of new insurer assets. Goldman Sachs has seen their asset base increase 50% in just a few years. In 2007 Goldman had “five people on the team managing $32 billion of assets; it now has a staff of 38 managing $66 billion.” We can clearly see the increase in insurer assets under management with the following chart:

Picture 3

But not all insurers feel the need to outsource their asset management. Prudential Financial is one example. The company employes a staff of 3,000 to manage it’s $260 billion investment portfolio, along with billions of dollars in assets from other companies. Prudential is a unique exception however, as it considers asset management one of its core business units.

It remains to be seen if 2010 will surpass last year in terms of insurers turning to others to manage their investment portfolio, but all signs are point to yes as most insurers realize outsourcing is more economical.