The Kosher Advantage

September 7, 2004

It’s one of those classic radio and television ads. A group of sheepish executives are huddled around a large corporate table. The CEO storms into the room and pounds on the table. “Sales are down, and we’re on the verge of bankruptcy. Can’t go on like this much longer. Jim, Nancy, Bill, Theresa…we need new innovative strategies. Well, what have you come up with?” While everyone looks sheepishly at their fingernails, in the back of the room, a young man with a broad smile and an air of confidence raises his hand. “Sir, if I may be so bold as to suggest…” Here is where the advertiser makes his pitch. “Let’s change over to Mozart’s Symphonic Staplers, which play concerts while attaching papers. We can save money by improving efficiency, and boost morale at the same time.” The CEO is impressed. “That’s brilliant! I think you could use a larger office. Whose room do you want?”

What you have never heard in the course of these commercials is a simple suggestion to enter into a kosher certification program. This won’t enhance mailroom efficiency, but a well-recognized kosher logo, such as the OU will significantly boost sales and dramatically increase company revenues.

The Growth of the Kosher Market

Kosher is a niche market that continues to grow in leaps and bounds. One clear indication of this is the pattern of growth that we have experienced within our kosher certifying agency, the Orthodox Union.

OU Certified Companies

Year: 1960 1970 1980 1990 2000
Companies: 100 300 500 1300 2200

For the past 40 years, the number of OU certified companies has approximately doubled every decade. Currently, the OU logo appears on more than 275,000 different labels. With the globalization of food production, our fastest growing market is now foreign companies, particularly in the Far East. All told, the OU provides certification to more than 2,500 companies in 68 countries around the world. These statistics are even more remarkable when one considers that the OU, a non-profit organization, does not actively solicit new business; rather, manufacturers seek OU, supervision on their own. Of further interest, the OU has continued to expand even during periods of economic depression. When companies are struggling to survive, they recognize the value of the kosher logo as an extremely important tool to enhance their products’ marketability.

What Exactly is Kosher?

· “Kosher” in Hebrew means fit or proper, and is generally used to describe foods that are prepared in accordance with special Jewish dietary laws. The Jewish people have observed kosher law for over 3,000 years. The source of all kosher dietary laws is the Bible, in the Five Books of Moses (the Pentateuch). The Bible states that certain forms of meat, fowl, fish and insects are not kosher. Some examples of non-kosher foods are animals, such as pig, rabbit and horse meat, fowl, such as owl and stork, and fish, such as catfish, eels, shellfish, shrimp and octopus. In addition a specially trained expert must slaughter meat and fowl in a painless ritual fashion in order to render it acceptable. Dairy and meat products, which commingle, are not kosher. There are also special laws relating to cheese, grape juice and wine production.

· Jewish scholars have studied, interpreted and applied kosher law for many centuries. Thousands of volumes have been written about these topics. Many of these books date back as far as two thousand years. This vast array of Biblical and Rabbinic literature comprises the body of kosher law.

· Can a processed food like soda, cookies or potato chips be non-kosher? Yes. This is because all ingredients and subunits in a product must conform to the dietary laws in order for the food item to be considered kosher. Even one non-kosher ingredient can render the entire product unsuitable. For example, soda may contain castorium, a flavor enhancer, which is extracted from beavers. Cookies may contain non-kosher emulsifiers derived from animal fat, and potato chips may be fried in animal oil. In addition, kosher food must be processed on kosher equipment. Equipment used for non-kosher production with heat, is rendered non-kosher and must be kosherized (through a special cleaning process of hot water or intense heat) to be fit for kosher service and use.

Kosher Certification in a Nutshell

Kosher supervision means that a qualified Rabbi or Rabbinic organization supervises the production of a food item to insure that the product is kosher (prepared in accordance with Jewish dietary law).

In general, supervision focuses on two areas:

a) Ingredients – All ingredients and sub-ingredients used in a product must be kosher.
b) Equipment – Equipment must have a kosher status and cannot be used for both kosher and non-kosher production.

Supervision is established by creating a written list of kosher ingredients that may be used in the plant and by approving the production process. A trained rabbinic field representative visits the plant unannounced on a regular basis to verify that there have been no changes that would compromise the kosher status.

What Drives the Kosher Market?

The dynamics of the kosher market are poorly understood. No doubt, the initial demand for kosher products comes from committed kosher consumers. As reflected in the famous ad of the 70’s, “You don’t have to be Jewish to eat Levy’s rye,” the kosher market extends far beyond the Jewish population, and includes Moslems, Seventh day Adventists and vegetarians who purchase kosher products for religious or moral reasons. Add to this people with milk related allergies, health conscious individuals and discerning consumers who view the OU and other reliable kosher symbols as signs of health, quality and integrity, and you have a very large pool of devoted consumers.

However, the kosher consumers do not fully account for the remarkable growth pattern that we have witnessed in recent years in the kosher industry. Four other major factors have contributed to this expansion, which continues at a rapid pace.

1. The competitive edge. Companies can ill-afford to allow their competitors a significant marketing advantage. We have often received applications from companies whose competitors have chosen to be kosher certified. This dynamic is so powerful that many areas such as baking and snack foods have extremely high concentrations of kosher supervision, and some staple industries such as vinegar, flavors and vegetable oil have kosher programs in almost every facility in the United States.

2. The Domino effect. As more companies become kosher, the suppliers of raw materials must become kosher as well. Consider the following scenario. A large pastry manufacturer, which uses hundreds of different ingredients, applies for kosher supervision. Ten suppliers lack adequate kosher supervision. The pastry company gives notice – either go kosher or we can no longer use you as a supplier. A domino effect has been set into motion. Each time another manufacturer becomes kosher, the demand for additional kosher supervision is created and the kosher food market is expanded.

3. Private labels. Private labeling is a big business, and manufacturers fiercely compete for the private label trade. When a private label company chooses a manufacturer, the availability of kosher certification plays a significant role in the decision making process. Even if the kosher logo will provide only a slight marketing advantage, it may be enough of a factor to tip the scales in favor of the kosher manufacturer. Interestingly, we attribute much of the growth of the OU in recent years to the private label companies who have insisted on OU certification.

The significance of this factor was powerfully demonstrated to me a few years ago. I had notified an ice cream manufacturer that we could no longer continue our kosher certification program because of a lack of cooperation. The day the letter arrived, the owner of the company called our office in a state of panic. “Rabbi, I just purchased this company for $30,000,000, but without the OU, the company won’t be worth two cents. Almost all our business is private label supermarket brands, and if we lose your symbol, we also will lose most of these accounts.”

4. The shelf space battle. Manufacturers battle to have their products sold in stores and supermarkets. Not only is it critical to get the product on the shelf, but also the amount of allotted shelf space and the location of that space is of the utmost importance. Which cookie will have greater sales? The one at eye level in a large display, or the one tucked away in a small area on the bottom shelf? The answer is self-evident. When deciding whether or not to carry a product, or what level shelf space to allocate coveted shelf space, supermarkets consider various criteria and the kosher symbol may be the deciding factor.

The New Health Factor

With the recent attention about animal diseases being transmitted to humans through food products, a kosher status takes on a new appeal. In the opinion of the author, in the current climate of heightened health concern, consumers will become increasingly more aware of the possibility of meat derivatives making their way into common foods. Dough conditioners, mono and diglycerides, polysorbates, glycerine and stearates, just to name a few, are all made from oils which may be either animal or vegetable in their source. Even a simple flavor may contain civet, a flavor enhancer that is derived from the civet cat. (The Chinese now suspect civet as being the source of the SARS virus.) All of the above listed animal based ingredients are not available in kosher form, and a kosher symbol testifies to the absence of such materials.

What’s the Downside?

If kosher certification enhances marketability so significantly, then one must consider what reasons might there be not to go with a kosher program. I will address what I believe are the three main reasons why CEOs might resist kosher certification. In reality, none is a serious concern.

So What Will It Cost?

Obviously, the first issue is the bottom line. If kosher certification costs more than the revenue it generates, it would illogical to pursue a kosher program.

The reality is that the cost of supervision is very modest, and is negligible in comparison to advertising expenses that are spent to increase sales. While each kosher agency has its own price structure, one factor that always plays a significant role in determining a fee structure is the out-of-pocket expenses that will be incurred during the inspection process. This expense is a function of a number of variables, such as location, the mode of transportation used by the inspector (car, air, etc.), the frequency of visitation and the duration of an average inspection. In addition, the administrative time necessary to oversee the program is considered as well.

In the final analysis, kosher certification offers a strong return for a minimal investment.

What About My Suppliers?

Becoming kosher certified might at times require changing sources of supply. However, as the kosher market continues to expand, the transition to kosher becomes increasingly easier. Often the majority of ingredients in use in a plant are kosher even before the certification process begins, and alternate kosher sources are readily available and easy to find. Because the OU certifies a wide range of companies, we are generally able to effectively recommend alternative sources to our clients.

Psychological Resentment

It is human nature to resent inspection and oversight, which is part and parcel of the certification process. However, as kashrus agencies become more sophisticated, they have learned to respond to such concerns.

As an example, the OU has hosted many seminars to sensitize our staff to the psychological dimension of supervision. We wish to be perceived as partners in a kosher program, rather than inspectors or detectives who comb the facility with a large magnifying glass in search of hidden and secret ingredients. The role of the inspecting Rabbi is not to catch infractions, but to assist company personnel to comply with kosher requirements. In the final analysis, kosher supervision works best when there is a sense of partnership. The Rabbinic coordinators in our office are expected to be friendly and service-oriented, and to maintain a friendly relationship with company personnel. The OU recognizes the paramount value of a cooperative effort, and we invest a great deal of effort to promote this type of environment. The OU provides 2 kosher videos which explain the meaning of kosher and the certification process, and we publish a quarterly magazine – “Behind the Union Symbol”, to communicate better with our certified companies. We have run numerous Kosher seminars in plants and in our office, for company personnel. People buy into requirements that they understand, and we therefore consider education to be an integral part of our certification process.

The Morale Booster

It is interesting to note that a kosher program will often boost company moral. We have found that plant personnel take pride in being supervised because it means that they have met a standard of excellence. They also understand that the kosher symbol makes their product available to a market of people who otherwise would not purchase the item, and therefore many plant workers approach kosher requirements with a certain sense of idealism.

The Baking Industry

Each industry has unique issues that have to be addressed by kosher certifying agencies. While the baking industry has its own special needs, each issue can be dealt with effectively with the proper planning and foresight.

Thousands of Ingredients

Perhaps the most difficult aspect of supervision of a bakery is the management and tracking of ingredients. The first step in certification is the preparation of a schedule of ingredients (at the OU this document is known as a “Schedule A” ), which are acceptable for kosher use. This schedule becomes the baseline for ingredients, and new ingredients require advance approval before they can be introduced into a kosher plant. What makes this task daunting in a bakery is the sheer magnitude of ingredients in use. We find that the “Schedule A” of a typical bakery is larger than the average in other industries and may contain well over 1,000 ingredients. Moreover, because the business is not static, these ingredients are in a constant state of flux. In a Kosher bakery, purchasing must base its orders on Schedule A specifications, and receiving must diligently inspect deliveries to ensure that only Schedule A approved ingredients enter the plant. It is not uncommon to order one ingredient and receive another, and special vigilance is required. Nonetheless, with effective management techniques and proper education of the purchasing and receiving personnel, protocols can be established that allow for the smooth functioning of the kosher program.

To D or Not to D

A second area of particular concern for the baking industry is the issue of dairy and non-dairy production. Jewish dietary law prohibits the consumption of milk and meat together. Even if only one ingredient in a product is dairy, or if an item is processed on equipment previously used for dairy production, the product has a dairy status. To identify the status of a product to consumers, common convention is to use a D suffix after the kosher symbol to reflect dairy (such as OU-D), while no suffix (OU) or the Hebrew word pareve indicates a neutral status.

In general, a product has a greater marketability if it is pareve. A Kosher consumer would not serve a dairy pie after a meat meal, nor would someone with dairy allergies purchase an OU-D product. Nonetheless, the dairy ingredient often adds value in terms of taste and texture. Manufacturers must weigh these two factors against each other and make a decision that is right for them. This issue was highlighted recently by a well-known cookie manufacturer who decided to convert from pareve to dairy. It was felt that the introduction of a dairy component was necessary to remain competitive with other manufacturers of similar products. However within a year’s time, the company reverted back to pareve formulations. The cookies were extremely popular with kosher consumers, and the company received an avalanche of communication expressing disappointment that the cookies were no longer pareve. To D or not to D is a question that each company must consider on an individual basis.

Mixed Plants

Not uncommon in the bakery industry are facilities that produce dairy and pareve product. From a Kosher perspective, it is far easier to supervise bakeries that are totally pareve or completely dairy. A mixed plant introduces the challenge of segregation of equipment. Kosher law does not allow pareve product to be baked on equipment previously used for dairy production, unless a special cleaning procedure, known as Kosherization, is implemented. Kosherization is time consuming and expensive, and the preferred route in a mixed plant is to dedicate equipment for dairy and pareve status so that Kosherization is not necessary. However, even with dedicated systems in place, the concern exists that accidental misuse of equipment may occur. Every facility is unique, and a solution to control a mixed plant must be customized to meet the needs of the individual bakery. A general approach is to use equipment that is easily identifiable as dairy or pareve. For example, if a bakery has two sets of identical sheet pans, one for dairy and one for pareve use, it is very hard to avoid confusion. A solution might be to have each set of pans a different color, which makes it easy for the workers to distinguish between the two. However even with a color-coding, the potential for error exists. A better control would be to have pans of two different sizes, and adapt the ovens so that the pareve pans only fit in the pareve oven, while the dairy pans are only compatible wit the dairy oven.

In some instances, the segregation of dairy and pareve equipment becomes too complicated, and we opt to label all products as dairy, even though some may not contain dairy ingredients.

In Conclusion

No doubt, becoming kosher requires an investment of time and recourses, and some obstacles must be overcome. However, when a cooperative spirit prevails, most problems are easily addressed. When the commitment is in place, the effort is richly rewarding and mutually beneficial, for both the manufacturer and kosher consumer alike.


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