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December 06, 2010

Scam? The Rapidly Expanding World Of Kosher Food

OU logo While 90 percent of OU's funding comes from kosher certification fees, profits are funneled back into community organizations. "Kosher agencies aren't making billions," says the OU's COO Rabbi Moshe Elefant, holding up the lapels of his rumpled suit. "If we were making billions, I wouldn't look the way I look.

The Rapidly Expanding World of Kosher Food
Ed Hardy tequila, Glenmorangie Scotch, as well as Big Food outfits such as Pillsbury have helped expand the kosher retail market to $13 billion
By David Sax • Businessweek

Kosher symbols 2 The throng inside the Meadowlands Exposition Center—Israeli women in long skirts, Hasidim in floor-length coats, Wal-Mart (WMT) buyers in Dockers—might have struck some as the casting call for a Mel Brooks movie. However, the crowd had come to Secaucus, N.J., in late October for the annual extravaganza known as Kosherfest, a two-day trade show connecting kosher food buyers and sellers from across the globe. Though the event is still dominated by marquee brands of High Holidays past—Empire Kosher chicken, Streit's matzos, Gold's horseradish—a swarm of rabbis mobbed booths featuring the latest converts to the rapidly expanding world of kosher food: frozen spring rolls, Canadian hemp oil, Glenmorangie Scotch, and Ed Hardy tequila in an ornately decorated bottle with a skull stopper.

Kosher was once a set of rules that Jews observed primarily in the home. Meat was ritually slaughtered by local rabbis, bread was bought from kosher bakeries, and everything was cooked according to the Biblical laws of kashrut. As processed and packaged foods replaced homemade matzo balls, though, kosher consumers began to demand more variety. Starting in the 1930s, brands such as Coca-Cola (KO) have increasingly obliged by pursuing kosher certification agencies to bestow their products with a hechsher, or stamp of approval. Now the kosher retail market, which represents upwards of $13 billion in annual sales, according to Brooklyn (N.Y.) marketing firm Lubicom, even includes certain foods—such as chocolate Easter bunnies—that many Jews might never eat. Says Sue Fishkoff, author of Kosher Nation: "Today, one-third to one-half of the food in a typical American supermarket is kosher."

The business of becoming kosher remains tightly regulated by certification agencies. Such groups are built around the work of a mashgiach—a hybrid of a Talmudic scholar and a Food and Drug Administration inspector who supervises food production to ensure everything is kosher. That means overseeing the slaughter and cooking processes of meat and fish, ascertaining that each ingredient entering a plant is inscribed with the hechsher, and keeping kosher food production separate from that of non-kosher food.

As the desire for kosher products has grown, so has the mashgiach business. "The number of certification agencies has exploded," says Rabbi Yosef Wikler, editor of Brooklyn-based Kashrus Magazine, which tracks the kosher certification industry. "Thirty years ago there were 18, but now there are 1,063 kosher certification organizations around the world. In America alone there are 600." Wikler estimates the U.S. kosher certification business is now a $200 million-a-year industry.

At the top of the kosher food chain is Manhattan-based OU Kosher, a division of the Orthodox Union, a kashrut powerhouse that supervises and certifies production in more than 6,000 plants in 77 countries. It employs 75 full-time mashgichim and a small army of advising rabbis. While the OU's stamp appears on everything from AriZona Iced Tea drinks to Nabisco (KFT) cookies and Tootsie Roll candies, its real growth comes from the phenomenon of trickle-down koshernomics. An ingredient supplier hoping for a contract with a kosher-certified Big Food outfit must first submit to the strictures of kashrut. "It's a domino effect," says Rabbi Moshe Elefant, OU's executive rabbinic coordinator and chief operating officer. "When you have Pillsbury or General Mills (GIS) going kosher, you're talking about thousands of ingredients made by hundreds of companies in thousands of plants, each of which needs to be certified."

Kosher-symbols The process doesn't come cheap. Companies that make a single product with an approved list of kosher-certified ingredients require only a few inspections per year. Factories that make both kosher and nonkosher products in the same plant—or those that develop new products from numerous ingredients—require extra supervision. This can involve weekly or even daily inspections that drive annual costs into the hundreds of thousands. Brooklyn's OK Kosher, OU's fiercest competitor, certifies 20 new companies each week, many of which are ingredient producers. Rabbi Chaim Fogelman, a spokesman for OK Kosher, estimates the agency is growing at around 15 percent annually.

As a result, supermarket shelves now groan under the weight of kosher offerings. A recent addition, James Tea, a maker of tea concentrates in Painesville, Ohio, converted this fall after being courted by a kosher-certified whiskey brand to make an alcoholic tea. Faced with the choice to certify his own product or risk losing the business, James Tea owner James Kekelis paid Cleveland Kosher just over $2,000 for a hechsher and rushed to open a booth at Kosherfest.

As the food industry's supply lines have spread globally, the business of kosher certification has followed the diaspora. Kosher agencies currently compete to certify artificial flavors in Thailand, canned tuna in the Philippines, packaged olives in Egypt, and a staggering number of additives in China. "Picture the sight of one of our rabbis riding up a Tibetan mountainside on a donkey," says Rabbi Menachem Genack, OU's chief executive officer. "Why's he there? Because there was a shortage of casein—a milk-derived protein used in processed foods. Someone was extracting the protein from yak milk in Tibet, and we had to be there to certify it!"

Those in charge of kosher certification point out that, despite the industry's growth, most organizations remain nonprofit. While 90 percent of OU's funding comes from kosher certification fees, profits are funneled back into community organizations. "Kosher agencies aren't making billions," says Rabbi Elefant, holding up the lapels of his rumpled suit. "If we were making billions, I wouldn't look the way I look."

The reality is that the OU and many other kosher supervising agencies hide behind the church exception to IRS filing rules. This means that, despite Rabbi Elefant's claims, we do not know how much the OU really makes let alone where the OU's money really goes.

The OU is taking in hundreds of millions of dollars each year, according to estimates I've seen.

Yet day schools are still in crisis, tuition is skyrocketing and many Jewish families are worse off financially than they have been since the Great Depression.

And this is beyond that fact that most items certified as kosher do not need kosher certification at all, and that many of the "necessities" of kashrut we take for granted are only humrot, stringencies, pushed on us over the past four or five decades by the kosher food industry.

The OU should have an independent third-party-certified audit done and published so its constituency can see where the money really goes.

Of course, it won't do that.

[Hat Tip: Nachos.]

Comments

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What organizations is the OU supporting? From their total budgets you can get an idea of how much the OU is really donating. Its not quite an audit, but you could have some confidence in your numbers.

trickle down koshernomics = shakedown. As posted a couple of years ago, the Neo-Nazis and anti-semites have been having a field day with this and it seems not unreasonable to expect more of the same on youtube et al.

Time for an OU (or ka$h - R- u$) button on the menu/link bar.

someone i know works in the OU corporate headquarters. a huge amount of resources goes into expanding NCSY. basically the OU is trying to get heavily invested in the outreach business and eventually crowd out chabad on campus. they are already sending out "shluchim". this is also why we have seen ncsy music videos appearing online recently.

Well - there is a partial solution. We COULD stop buying processed foods altogether. Wouldn't eliminate the need for certification, but it would reduce it a bit.

Saw an unheckshered raspberry soda water at the store the other day. All the other flavors carried an OU, but not this one. Ingredients looked benign, but later discovered that the "natural flavoring" was rendered from the contents of a cat's anal gland. (seriously)

Have to say that I like fact fact that the 'market' is getting crowded. Perhaps fees for certification will drop as different certification groups vie for the same business. For those of us who genuinely believe there are no 'bad' heckshers (save perhaps just the letter K), greater competion is good.

All that said, my iPad keeps changing 'huckster' to read 'huckster', so perhaps it knows something I do not.

Make that 'hecksher' to read 'huckster'.

Caught them all but the punchline - dammit.

I remember being in a book store on the lower East Side, having a conversation with my late friend,(Jack,Z"tl) when this grubby looking man walked in in a rumpled up suit, and wanted to purchase a Sefar. I looked at Jack and told him I would pay for trhe volume this man had chosen. He just looked at me and shook his head.
The gentlemen reached in his podcket and pulled out a WAD of $100.00 DOLLAR BILLS.
Then I understood what Jack meant when he shook his head. I never volunteered again. The man was a Rosh Ha Yeshiva. I learned my lesson real fast.
Don't judge the man by his rumpled ssuit, and don't trust the man in a rumpled suit.

Failed Messiah,

Your article starts with the ridiculous phrase,that OU profits "are funneled back into community organizations." You use the word "funnel" in order to denoite something nefarious but the reality could just as well be that money is being "funneled" to children in need and Israel. It sounds like you have very little substance in this aimless gripe. Your article begins by bashing community organizations for gettign OU money but ends with a plea that "day schools are still in crisis, tuition is skyrocketing and many Jewish families are worse off financially than they have been since the Great Depression." Did it ever occur to you that the community organization are dedicated to these problems. Though I generally enjoy your posts, this one could have used a little mor time in the oven. Do some research on what OU actually does and maybe we could take your gripes a little more seriously. This article, however, just sounds like uninformed research-less rant overheard during shalosh seudos. I expected better from you.

CashMoney,
Shmarya's use of vernacular is not the point. The point is the certification industry is a racket - it's a shakedown, pure and simple. Or I could put it as the neo-Nazis do, The Kosher Tax. That is the point. What the parasites do with the gelt is beside the point. The point is they take it off the top from the git go. Do you get the fucking point?

Furthermore, Mr. CashMoney,
The non-observant un-koshser world, should not have to pay for these absurd and corrupt stampels on the products they buy. Because in the end the common person is paying for them and sooner of later it will backfire on us Jews as it always does.

Your article starts with the ridiculous phrase,that OU profits "are funneled back into community organizations." You use the word "funnel" in order to denoite something nefarious but the reality could just as well be that money is being "funneled" to children in need and Israel. It sounds like you have very little substance in this aimless gripe…Posted by: CashMoney | December 06, 2010 at 11:11 AM

Please.

Are you really this dense?

The article whose quote you dislike is from Businessweek, and it is an article that is very favorable to the OU and to the kashrut supervision industry.

Past those obvious facts, the reality is the OU takes in hundreds of millions of dollars each year, and no one outside of a small handful of people knows where that money really goes.

After Baruch Lanner, transparency is in order.

Process that.

"The non-observant un-koshser world, should not have to pay for these absurd and corrupt stampels on the products they buy."

Who says they do? How is certification any worse than a celebrity endorsement? If certification brings in ten of thousands of new customers, than the cost is made up by profit, and no cost is passed to the consumer.
You have no proof, or even the slightest justification for your allegations, and you obviously have no sense of how business and markets work.

yidandahalf - no one has to pay the 'kosher tax' as there are non- heckshered options readily available. Companies have determined that it money well spent to be certified, and while I do find the fees a tad over the top at times the fact is that the companies paying them apparently see a cost benefit.

Or they would'nt pay them.

Shmarya - why is transparency in order?

Who do you think pays for the shtempels? Of course the consumer pays. Tens of thousands of new customers? That is a drop in a bucket. The vast majority of consumers don't even notice the hechshers they are paying for. It is becoming increasingly difficult to buy any product without a hechsher on it.

Here's a scam for you, Shmarya ... watch until the end for the surprise judgment!

http://www.youtube.com/watch?v=Oc9Ef0OYOwA

jack-- that was funny. what a kiddush hashem.

It looks as if they planted the wig in the laundry just to go through with this scam. It is quite sickening. A shanda vor de goyim on national TV.

Saw an unheckshered raspberry soda water at the store the other day. All the other flavors carried an OU, but not this one. Ingredients looked benign, but later discovered that the "natural flavoring" was rendered from the contents of a cat's anal gland. (seriously)

Would you mind posting the details of that product? I've heard such stories for a long time but haven't had the opportunity to investigate a specific product. It may well be an issue of a product derived in such a manner that it no longer has resemblance to the original forbidden product. In that case, it might become a question of which legal position you prefer. Some classic examples of that argued situation would be red dye derived from insects or gelatin derived from animals.

says Sue Fishkoff, author of Kosher Nation: "Today, one-third to one-half of the food in a typical American supermarket is kosher."

This is an example of the poor use of terminology by many religious Jews that causes a problem. What Ms. Fishkoff should have written was "...is certified kosher". By using "certified kosher" and "kosher" interchangeably, such people have been able to define a new reality, one not based on halakhah, but rather mistaken perceptions. Many products certified as kosher do not require supervision, didn't have supervision for decades and were eaten freely, or exist outside of the USA and are consider kosher without supervision - but the existence of that supervision then serves as a wedge to create the impression that products without supervision may be somehow less kosher.

The non-observant un-koshser world, should not have to pay for these absurd and corrupt stampels on the products they buy.

The companies wouldn't be getting hechshers if it wasn't increasing their clientele. Certification is usually covered by their advertising budgets and isn't usually passed onto the consumers.

If they are increasing their clientele because of worthless hechshers, it is because of a well orchestrated effort on the part of certification agencies to propagandize the goyim as to the "wholesomeness, cleanlinesss, healthfulness, and superiority" of products carrying hechshers. You cannot convince me, or anyother sane individual, that the costs incurred by certification are not passed on to the consumer. They may not be passed on in their entirety, but certainly they are in part. That is business. A kid selling lemonade on a hot day on the corner knows that.

As a Jew, I resent them. They are a fucking embarassment. I avoid going into a long spiel explaining these sorts of things when asked by a non-Jew, neverthelsee they need to be clairfied. I feel like Paul Mooney doing Negroedamus.

>> The companies wouldn't be getting hechshers if it wasn't increasing their clientele. Certification is usually covered by their advertising budgets and isn't usually passed onto the consumers.

All of a company's costs is ultimately paid for by customers. Way to insult the intelligence of the public, Bubba.

Usually though the costs for certification for a large firm are minimal and the amount of cost for certification is a fraction of a cent on each product for the total amount produced. So the certification isn't adding anything significant to the cost for consumers, but it does increase revenue for the firms that choose to get certified.

>> Usually though the costs for certification for a large firm are minimal and the amount of cost for certification is a fraction of a cent on each product for the total amount produced

Then how come at a kosher pizza store I got pizza from, a can of coke is $1.25 and at the Italian pizza store and at Chinese food stores a can of coke is just a buck?

The ka$h-R-u$ industry needs more transparency as well as the whole religious establishment in general.

A can of coke has the same hechsher on it regardless of where you buy it. I've seen soda sold at different prices at different places. A restaurant being kosher doesn't have anything to do with the price that they sell soda.

It's well known that kosher meat is more expensive than nonkosher meat.

Kosher meat is a specialty product that involves a great deal of additional effort compared to non-kosher meat production, unlike the previous example of soda that you offered.

Why should such an everyday product be "specialty?"

Because of the extra work involved in the process of slaughter and treatment of the meat compared to non-kosher meat production.

>> Because of the extra work involved

And we need it why exactly?

It is unfair to refer to a hechsher as a "tax". Unlike a tax, the transactions are private business: no one is forcing any company to enter intro contracts with a kashrut agency. Taxes always imply or insinuate coercion. No one has a choice about paying a governmental "tax".

Yoel, I did not invent the term "kosher tax". It comes from some anti-semitic material I found on the web.
But just who do these hechshers serve? Since this faction considers the hechshers of another faction unreliable and verging on treif, it is doubtful the orthodox rely on them. The rest of the Jews have been doing without them nicely since forever. That leaves the gentiles. So do the gentiles require them? Or more to the point, are they beginning to think they do? And if so, why? No one is benefitting from them but the certifiers who are operating a racket. There is no more and no less to this issue.

>> Because of the extra work involved

And we need it why exactly?


If you mean why do we need to eat meat, that's a personal preference. I eat a small amount of meat compared to most Americans. If you mean why kosher meat, let's not waste each others time.

> I did not invent the term "kosher tax". It comes from some anti-semitic material I found on the web

It probably started with the Liberty Lobby around the 1960's along with their campaign to boycott kosher food. It was also peddled in National Vanguard and other similar neo-nazi publications. It is natural that these groups continue to use the term on their various websites. All this further serves to illustrate more reasons to avoid the term, in addition to the basic reason: the term is simply not a true representation of reality, and therefore unfair.

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