Food Companies Cautious About Sales Performance at CAGNY
Food companies are optimistic, but cautious about sales performance.
On the new product front, Kellogg launched savory cracker products tied to its Special K brand and Eggo waffles with flax and blueberries.
Innovative products, coupled with price increases on some products, helped push Kraft Foods Inc.’s annual revenue up 17 percent in 2008 to $42.2 billion. But in the past year, Kraft’s stock dropped 15 percent, slightly more than the 12 percent drop in the Standard & Poor’s packaged-food stock index, but a lot better than the 40 percent loss in the S&P 500.
Kraft expects volume to fall as much as 5 percent in the current first quarter, but volume should improve significantly later on. Company execs stood by their 2009 earnings forecast, which they cut early in February.
In its most recent fiscal year, Sara Lee Corp. posted a 10 percent increase in revenue, to $13.2 billion, but the share price was down 34 percent. “Our objective is to become more streamlined, more focused, more efficient and more effective in the marketplace,” said Chairman/CEO Brenda Barnes. Project Accelerate, the company’s cost-cutting plan, is expected to save $200-250 million in about two years.
“Our marketing will place greater emphasis on the value proposition of products,” Barnes said. “We’re focused on affordable innovation delivering new versions of products at lower price points.” Barnes said that given where commodities currently are, she doesn’t expect major price increases for the rest of the fiscal year.
ConAgra Foods Inc. expects 2009 earnings to top analysts’ expectations, and is emphasizing value with its Banquet brand, which includes frozen meals priced at $1 for bargain-hunting consumers. CEO Gary Rodkin said the company also is launching a marketing campaign on March 30 to support its Healthy Choice brand.
Rodkin claimed Healthy Choice Cafe Steamers were the best-selling new food product in the industry in the first half of 2008. The new steaming technology has been transferred to Marie Callender’s meals, with an Italian-style Pasta Al Dente that scored the highest of any ConAgra product in home testing for taste and uniqueness.
Andre Hawaii, president of consumer foods, said ConAgra’s focus in snacks is on popcorn, seeds and meat sticks, and the company would like to grow its grain bar and fruit snack business.
PepsiCo, which counts on North America for the bulk of its sales (some 60 percent compared to 30 percent for Coca-Cola) had declining volumes in the region – but its business model is more diversified than its rival’s. John Compton, CEO of PepsiCo Americas Foods, said Frito-Lay in March will roll out the company first snack targeted at women: 100-calorie individual bags of Smartfood popcorn clusters. They “will be the right combination of sweet and salty and will be an excellent source of fiber and calcium.” Compton said the company estimates $650 million in additional sales by targeting women.
Meanwhile, Coca-Cola reported better-than-expected earnings, driven by double-digit volume growth in emerging markets, which helped offset declining volumes in North America. And it raised its quarterly dividend by 3 cents a share, to 41 cents. That marks the company’s 47th consecutive annual dividend increase.
Unilever’s global sales in 2008 totaled $59 billion, divided into sales of $21 billion (36 percent) in Asia/Africa, $19 billion (32 percent) in the Americas, and $19 billion (32 percent) in Western Europe. CFO Jim Lawrence said the company focus in 2009 is on strengthening its value brands; protecting cash flow and margins; taking advantage of strategic growth in personal care, developing and emerging markets and vitality; and considering smaller packages as it tries to sell more food and household items.
The integration of Folgers helped drive an 84 percent gain in earnings at J.M. Smucker Co. in the third quarter ended Dec. 31. The company said the acquisitions of Folgers, Carnation, Europe’s Best and Knott’s Berry Farm contributed approximately $492 million in net sales during the quarter.
Smucker officials claim the company is well positioned with nine No. 1 brands in the U.S and eight in Canada. Plans are to launch Jif Natural.
Along with fewer new products, more line extensions, and fewer giveaways for attendees, the recession hurt attendance at the conference, as well. Registration fell to 485 this year from 600 a year ago.