Top 100 for 2005: This chicken comes first

FoodProcessing.com

Keywords: Food Processing, Grant Thornton, Tyson, Kraft, Smithfield Foods, Sara Lee, Dean Foods, Archer Daniels Midland, Cargill, Nestle, Unilever, Pepsico, Anheuser-Busch, White Wave, Horizon Organic, Cumberland Gap and Farmland Foods

Tyson unseats Kraft as king of the U.S.-Canada food & beverage industry; plus exclusive results of the first Grant Thornton-Food Processing Survey of Food & Beverage Companies.

To access the Top 100 table (PDF format), click the Download Now button below. For an alphabetical list, see Table 1: Top 100 Processors (listed alphabetically) at the end of this article.

By Dave Fusaro, Editor in Chief

We don’t mean to make this annual ranking into a horse race. As the theme of last year’s story indicated, bigger is not necessarily better. Nevertheless, a torch has been passed. After 30 years as the largest food processor in the U.S. and Canada, Kraft Foods Inc. has been unseated by Tyson Foods Inc.

Tyson increased overall 2004 sales 8 percent, by nearly $1.9 billion, and did so without a major acquisition, a favorite tactic of the past (it did, however, end up with a 53-week fiscal year). The Springdale, Ark., protein company did it the old-fashioned way, via 400 new product introductions and double-digit sales increases in its chicken and pork segments, the latter up 29 percent. Tyson was, by our figuring, just $13 million behind Kraft in last year’s ranking (using 2003 sales). Overall, counting sales from overseas operations, Kraft remains much larger.

“By our figuring” is an important phrase. Because every company does things a little differently, we impose our own subjectivity to achieve objectivity. We want our table to show the 100 largest value-added food and beverage processors in the U.S. and Canada, the top producers (not necessarily marketers) of grocery store-ready packaged food products.

Tyson edged out Kraft for the top spot in our ranking by introducing 400 new products and logging double-digit sales increases in its chicken and pork segments in 2004.

That means not counting the simple collection or transportation of agricultural commodities – which greatly reduces the figures of dairy cooperatives and agrifood giants like Cargill. That’s why you won’t even find Archer Daniels Midland on this chart. It also means focusing only on North American operations of multinationals – thus only the U.S. and Canadian operations of Nestle and Unilever are included. That’s also why PepsiCo’s figure has been significantly cut. Anheuser-Busch’s amusement parks and canning operations are not included. Nor is Procter & Gamble’s laundry detergent. Sara Lee’s been stripped of its underwear and bras.

We use the most recent fiscal years available. In all cases that was at least calendar 2004, although we were able to squeeze in some 2005 FYs before our deadline.

Despite its No. 2 ranking, Kraft did not stand still. In 2004, the Northfield, Ill., company grew its sales by $153 million. But that may be its last year of overall growth, as the behemoth began shedding extraneous businesses and creating a focused portfolio.

Other companies also had notable increases. Dean Foods grew by $1.6 billion, due in part to the completion of gradual acquisitions of specialty-milk companies White Wave and Horizon Organic as well as the soaring price of milk (which didn’t help profits, however). Sara Lee (unfortunately, the most recent available figures were from June 28, 2004) added nearly a billion dollars in its fiscal year 2004, thanks to double-digit increases in its meats and beverages units. Smithfield Foods fully realized sales from 2003 acquisitions Cumberland Gap and Farmland Foods to add $1.3 billion in sales.

In the bad news department, the same number of companies (four) had net losses in 2004 as did in 2003.

The Grant Thornton-Food Processing survey

For what’s going on behind the numbers, in most cases driving the numbers, we partnered with Grant Thornton LLP, the global accounting, tax and business advisory organization, for a survey of food and beverage executives.

What’s uppermost on the minds of these executives? The development of more healthful products, as well as higher quality products, competition with larger companies and gains in employment and capacity. Those are some of the top issues identified in the Grant Thornton 2005 Survey of U.S. Food & Beverage Companies, sponsored by Food Processing.

“Nearly two-thirds of respondents plan to increase hiring in 2005 and then again in 2006. This certainly implies that business is improving,” says Jim Maurer, managing partner of Grant Thornton’s Consumer & Industrial Products Practice.

Grant Thornton cites 2003 U.S. Bureau of Economic Analysis figures to size the U.S. food and beverage industry at $497 billion. The firm says healthful foods is the primary growth market, although it also notes respondents cite a continuing interest in ethnic cuisine.

Nearly two-thirds of survey respondents (64 percent) indicate their company’s greatest growth in the next year will come via products identified as better-for-you (see chart at right). “Consumers continue to focus on healthier foods and eating habits, and the food and beverage industry continues to chase this attractive market via products identified as better-for-you, organic, obesity-addressing and nutraceutical (foods that provide medical or health benefits),” the report states. Respondents also say people are willing to pay more for higher quality food.