Top Food and Beverage Companies for 2010: Less Is More

After preparing for the worst, most food & beverage companies saw decreases in sales but increases in profits in 2009.

By Dave Fusaro, Editor in Chief

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– Dexter Manning, Grant Thornton, LLP

Back to the subject of bankruptcy, Chapter 11 created a new name on our table. After four-plus years under court protection, Interstate Bakeries Corp. emerged from bankruptcy reorganization in February 2009 as a private company. Half owned by Ripplewood Holdings and with large equity stakes by its unions, the company changed its name at the end of the year to Hostess Brands … and its address from Kansas City, Mo., to Irving, Texas.

"Everyone's sales were down 1, 2, 4 percent in 2009, but they were prepared for it," says Dexter Manning, national food & beverage practice leader for Grant Thornton LLP and a member of our Editorial Advisory Board. "In order to survive 2008, they had to cut costs and waste.

"In addition, most benefited from lower commodity ingredient and energy prices in 2009, after record-high prices in mid-2008." However, Manning notes, input costs in 2009 remained above traditional levels.

Another factor: "Some of those companies saw sales increase for their private label and economy products," although those would carry lower prices, Manning continues. "So top line pricing may have been lower [in 2009] but throughput may not have been down that much, if at all."

Manning says all those factors lay out a positive scenario going forward. "I think in 2008 the fear factor came into play big time. Things were bad, but maybe not as bad as some of these companies feared. They exacerbated the problem by overreacting in 2009, by underspending more than they needed to. No one knew where they floor was – they were all waiting for the other shoe to drop.

"Well it didn't," he continues. "While consumer confidence has been bouncing around, overall it's up over where it was a year ago. Companies now believe they have hit the bottom and the only way is up, whether that's here already or coming early next year. And they may not be ready for the recovery. They need to invest, increase capacity and hire back some people."

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