Food Industry Business: A Bumper Crop of New CEOs

Jackson to JBS USA, Lovette to Pilgrim's Pride

Two of the biggest animal protein companies in the U.S. were bought by Brazilian firm JBS S.A. in recent years. First was meat packer Swift & Co. in 2007. When Pilgrim's Pride Corp., at one time the continent's largest poultry company, sunk into bankruptcy at the end of 2008, JBS bailed it out a year later by acquiring 64 percent of its stock (now 67 percent) and edging out much of the Pilgrim family ownership.

Maybe it was too much for a Brazilian national to handle. While Wesley Batista, son of the Brazilian firm's chairman/CEO, remains chairman of both American units, he picked Don Jackson, CEO of Pilgrim's Pride, to be CEO of JBS USA, Greeley, Colo., effective last month. To fill Jackson's role at the poultry firm, William Lovette was hired away from Case Foods Inc., another poultry processor.

Jackson, who received his B.S. from Arizona State University and his master's and doctorate from Colorado State University, just became Pilgrim's Pride's CEO two years earlier as it began the Chapter 11 process. Before that, he spent 22 years at Seaboard Farms of Athens, Ga., and four years as CEO of Foster Farms' poultry division in Livingston, Calif.

Jackson should re-establish an American tone at a company that's had much South American influence over the past three-plus years. "He's led an incredible turnaround at Pilgrim's," says Gary Rhodes, Pilgrim's Pride's vice president of corporate communications and investor relations "He joined us weeks after we filed bankruptcy and … he helped direct the successful reorganization of Pilgrim's and helped reposition the company as a leaner, stronger competitor in the chicken business."

With more than 27 years of poultry industry experience, Lovette looks like a good replacement for keeping Pilgrim's Pride (www.pilgrims.com) in the black. He had been president and COO of Winesburg, Ohio-based Case Foods. He previously spent 25 years with Tyson Foods in various management positions, including president of its international business unit, president of its foodservice business unit and senior group vice president of poultry and prepared foods.

"He has a deep knowledge of the poultry business and the market environment, and we believe he will lead Pilgrim's to continued growth and profitability," says Jackson, to whom Lovette will report.

Defensive food stocks

In June, Zacks Investment Investment Research Inc., chose four food stocks in a position to gain share and provide steady revenue and earnings, even if industry conditions remain difficult and the economic backdrop remains choppy. They include:

• Del Monte Foods [which has since announced plans to go private], which produces, distributes, and markets branded food and pet products for the retail market in the U.S. Its Consumer Products segment sells branded and private label shelf-stable products, including fruit, vegetables and tuna products. The Pet Products segment offers branded and private label dry and wet pet food, as well as pet snacks. The company's plan to boost sales and earnings growth is on track. Del Monte's reorganization efforts included a shift in its sales mix to higher growth and higher profit margin products: snacks and pet food. Those efforts also produced impressive productivity gains. In addition, the company showed investors that it will be returning value to shareholders. It recently announced that it was going to increase its dividend by 80 percent and buy back up to $350 million of its shares over the next three years.In the last three quarters, Del Monte beat the Zacks Consensus (of analysts) by an average of 58.1 percent.
• Hormel Foods, which produces and markets meat and food products in the U.S. and internationally, offers meat products, including fresh, frozen, cured, smoked, cooked and canned. The company provides perishable meat products, which include fresh meats, sausages, hams, wieners and bacon; and shelf-stable products such as lunch meats, chili, hash and stews. It has a balanced portfolio of grocery products, refrigerated foods and Jennie-O Turkey. By not relying on one product line, the company is able to better manage its business. Hormel's refrigerated foods and Jennie-O Turkey sales are performing well, with Jennie-O's operating profits climbing 93 percent year-over-year. Growth in those segments more than offsets Hormel's grocery business, where its Spam and Bacon Bits products are dealing with higher input costs. In the last five quarters, the company has beaten the Zacks Consensus by an average of 14.3 percent.
• J&J Snack Foods, which manufactures nutritional snack foods and distributes frozen beverages to food service companies and retail supermarkets in North America. The company primarily offers soft pretzels, frozen juice treats, desserts, churros and baked goods to snack bars and food stands. JJSF's frozen carbonated beverages (FCB) and soft pretzels are driving the company's solid growth. FCB is a high margin business that is experiencing solid momentum. Meanwhile, soft pretzels, which suffered in recent quarters because of price increases, appears to have stabilized, and there has been an uptick in its sales to malls, theme parks and sporting events. In the last five quarters, JJSF has beaten the Zacks Consensus estimates by an average of 25.6 percent. 
• Treehouse Foods (our Processor of the Year) which operates as a private-label food manufacturer serving the retail grocery and foodservice channels in the U.S. and Canada. The company's products include non-dairy powdered creamer, soups, broths, infant feeding products, salad dressings and jams. Its brands include Peter Piper, Hoffman House and Nature's Goodness. Private-label is a large but fragmented industry, generating over $60 billion in annual sales, and over 80 percent of the companies in the business are small, privately-held firms. This gives Treehouse, which has been a consolidator in this space, the opportunity to produce solid and consistent earnings growth for the next several years. In the last five years, THS has acquired four companies and plans to continue its growth-by-acquisition strategy in the future. In the last five quarters, Treehouse has beaten the Zacks Consensus estimates by an average of 18.9 percent.