Food Processing Top 100 for 2009: Licking the Recession

N-E-S-T-L-E-S … Nestle make the very most … food sales.

Food Processing Top 100© Report for 2009

We've attached a PDF of the Food Processing Top 100© Report for 2009 to the online version of this article; however, stay tuned to www.foodprocessing.com/top100 in the next few weeks. We'll be debuting an interactive chart that will allow you access to the most comprehensive chart in the food and beverage industry.

For those of you old enough to remember that jingle, Nestle a few decades ago was largely a chocolate company. (The jingle ended “Nestle makes the very best … chocolate.”) Chocolate and candies remain, but they’re a shrinking part of the giant Swiss company which, at about $104 billion, claims to be the world’s largest food company.

The official corporate emphasis the past few years has been on nutrition, health and wellness. “Since Henri Nestlé [a pharmacist] developed the first milk food for infants in 1867, and saved the life of a neighbor’s child, the Nestlé Co. has aimed to build a business as the world’s leading nutrition, health and wellness company based on sound human values and principles,” the corporate web site states.

“I attribute our strong 2008 performance to two key things: Nestle employees, which give us our competitive advantage, and our relentless focus on the consumer,” says Brad Alford, chairman & CEO of Nestlé USA. “We are focused on anticipating and responding to consumers’ needs, including making more nutritional choices.”

The strategy is working. With sales up nearly 14 percent in the past year (we combined U.S. and Canadian sales), Nestle USA & Canada completes its multi-year climb to the top of our Top 100© list.

The Swiss parent also did well. More important than the 2 percent rise in sales (to 109.9 billion Swiss francs) was a 69 percent leap in profit (to 18 billion Swiss francs).

If 2008 was the start of the current recession, you can’t tell it from at least the sales activity of the leading food & beverage companies. In what was undeniably a year full of challenges, the industry did fairly well. Only one of the 27 largest companies on the Food Processing Top 100© reported a decrease in sales, and 16 reported increases in net income, as well. Which, of course, means 11 were flat or worse off than they were in 2007.

Whether you take that as good news or bad news, the undeniably bad news is that five of those companies recorded net losses for 2007, the most we’ve seen in at least six years.

It’s difficult to figure how much the severe global recession affected the food & beverage industry in 2008, because technically the “perfect storm” did not hit until the fourth quarter of that year. But it seems everybody felt the recession coming, even before it was announced. Skyrocketing commodity and energy costs and then the sudden tightening of credit contributed to the general malaise. While the food & beverage industry weathered the storm better than most, the recession undeniably took its toll.

““I attribute our strong 2008 performance to two key things: Nestle employees, which give us our competitive advantage, and our relentless focus on the consumer. We are focused on anticipating and responding to consumers’ needs, including making more nutritional choices.””

- Brad Alford, chairman & CEO of Nestlé USA

All the headline financial troubles of the past year came together to undo Pilgrim’s Pride (No. 12). The company filed for court protection under Chapter 11 of the bankruptcy code just days before unveiling a $999 million loss for its fiscal 2008, which ended Sept. 27, 2008 – and that despite increasing sales by nearly a billion dollars.

It was not a good year to be one of the largest chicken companies in the U.S. and Mexico. First of all, it got so big with an aggressive purchase (in January 2007) of its chief rival, Gold Kist, for $1.1 billion, following a year in which both companies recorded net losses. Some of the debt for that transaction got caught up in the credit crunch that coincided with the start of the current recession.

Plus, “Over the past year, Pilgrim’s Pride has faced a number of significant challenges including high feed-ingredient costs, an oversupply of chicken, weak market pricing and softening demand,” said President/CEO Clint Rivers, who was forced to resign days after the bankruptcy filing. “After careful consideration of all available alternatives, the company’s board of directors determined that a Chapter 11 filing was a necessary and prudent step.”

Days later, Don Jackson, president of another competitor, Foster Farms’ poultry division, took over the combined duties of Rivers and COO Robert Wright.

The story was much the same at No. 8 Smithfield Foods. “Fiscal 2009 was a year of unprecedented challenges,” President/CEO C. Larry Pope wrote in the annual report. “The combination of record input costs, an oversupply of hogs, a worldwide recession and A(H1N1) influenza led to our first annual loss in more than three decades.”

The other top companies recording losses for 2008 all had different reasons: Sara Lee (No. 16) was still reorganizing. Sophomore Dr Pepper Snapple Group (No. 20) was still getting started. Maple Leaf Foods (No. 23) was devastated by a food recall.

On the other hand, No. 37 Interstate Bakeries Corp. emerged from four years of bankruptcy protection on Feb. 3 of this year. Despite its $144 million loss in its fiscal 2008 (which ended June 2, 2008), the baker of Wonder Bread and Hostess Twinkies got concessions from its unions (in return for some stock) and a buyout by private equity firm Ripplewood Holdings and possibly other investors. On next year’s Top 100© it will show up as a private firm.

There are some new names on this list. Anheuser-Busch adds InBev to the end of its name, the result of the biggest merger/acquisition of 2008. SAB Miller and Molson Coors combined their U.S. operations into No. 27 MillerCoors. Because of its large Canadian component, Molson Coors remains on our table, but SAB Miller is gone.