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Special Report > Top 100: Succeeding in a Difficult Year

By Dave Fusaro, Editor in Chief

FoodProcessing.com

Tyson returns to the top, PepsiCo, Nestle turn in stellar years in our annual ranking of the largest food and beverage companies in the U.S. and Canada.

In a testament to management and to the hard work of thousands of employees, most of our Top 100^© food companies turned in respectable years in 2007. Despite all the grousing over how tough the past year was, all of our Top 10 companies saw sales increases, and seven out of the 10 improved profits as well.

Much as we try not to turn this into a footrace each year, it’s difficult not to acknowledge the shuffling of the top three finishers on our list and the remarkable sprint of the North American operations of No. 4 Nestle.

Tyson Foods returned to the No. 1 position, which it held in our 2005 and 2006 reports. More importantly, the big animal protein company erased a $196 million loss in its fiscal 2006. PepsiCo had such a good 2007 (sales up 10.4 percent) that it leapfrogged Kraft into the No. 2 spot.

While the U.S. and Canadian operations of Nestle remained in fourth, the position those divisions have held for several years, the North American chunk of the world’s biggest food company recorded a 12.6 percent sales increase.

Kraft in various incarnations had been the U.S. and Canada’s biggest food and beverage company for the first 30 years of this annual report. In its first full year of independence from Philip Morris Cos., the Northfield, Ill.-based packaged foods company performed admirably. Despite some divestitures, Kraft’s U.S. and Canadian-based sales rose 3.5 percent in 2007, and overall, global sales rose 8.4 percent. Net earnings were down 15.4 percent, however.

After a disappointing fiscal 2006, in which it suffered a $196 million loss, Tyson came back strong in its fiscal 2007. “Tyson had an outstanding turnaround in 2007,” with sales up 9.5 percent, President/CEO Richard Bond wrote in the company’s annual report. “Following one of the most challenging years in the company’s history, we are back on solid footing and on track to achieve our long-term goals.”

At PepsiCo, “What makes me particularly proud is that our 2007 performance was strong — not just measured by these short-term metrics — but also with the long-term equally in mind,” wrote Chairman/CEO Indra Nooyi. “We increased capital expenditures in plant and equipment worldwide … We added several tuck-in acquisitions in key markets and segments … We created the chief scientific officer position to ensure our technical capabilities … We funded incremental investment to explore breakthrough R&D opportunities … We maintained focus on building next-generation IT capabilities.”

Nestle, especially in North America but also worldwide, was aided by the 2007 acquisition of baby-food company Gerber, bought from Novartis AG. But it wasn’t all based on acquisitions. “The Food, Beverages and Nutrition business, with … an increase of 9.2 percent, was the main contributor to growth,” said the company’s annual report. “It achieved organic growth of 7.1 percent, with real internal growth of 4 percent and pricing of 3.1 percent. This relatively high level of pricing, compared with recent years, reflects our success in passing on raw material cost pressures and is a testament to the strength of our brands.”

The biggest growth (17.1 percent) of any of our top 10 companies belongs to Dean Foods. The Dallas-based company became the biggest fluid milk supplier in the world by acquisitions, and it made a big one in early 2007: Friendship Dairies, one of the largest dairies in the northeastern U.S. But raw milk prices rose faster than sales, and every consumer knows what happened to milk prices. Raw milk prices in the second half of 2007 averaged more than 80 percent higher than in the prior year, so it was no surprise that Dean’s sales soared even as profits dipped -- for the second year in a row.

But the biggest sales increase on our chart belongs to Pilgrim’s Pride. Its $1.2 billion purchase of Gold Kist Inc. in December 2006 created the world’s largest chicken company and aided its 45 percent sales growth. More importantly, after losing money in 2006, Pilgrim's Pride returned to profitability in 2007.

Trends for the current year

The past year saw the beginning of two main trends that had huge impacts on the sales and the bottom lines of our Top 100 companies: changes in consumer spending patterns and soaring agricultural commodity prices. Those trends are continuing into 2008 unabated.

First, consumer spending is changing as a result of a stumbling economy and rising energy prices. Unemployment is high and mortgages are dicey, but people are not giving up their homes or their cars. What they are doing is eating out less often and being a little more careful how they spend their money, yes, even their food dollars.