As I write this, retailers and economists are totaling Christmas season retail sales and breathing a sigh of relief. Without counting the important week-after-Christmas sales, the National Retail Federation predicts spending this holiday season will reach $451.5 billion, up 3.3 percent over last year. That would be the biggest total since a record $452.8 billion in 2007 and the largest increase since 2006.
The Commerce Dept. says the economy grew slightly faster than predicted in the third quarter of 2010 (2.6 percent), making that period the fifth consecutive quarter of gross domestic product growth. The slight surprise was enough to raise expectations for the fourth quarter and for all of 2011. And the Dow Jones Industrial Average broke 11,500 (at least as of this writing), a two-year high.
That's all good news for the economy at large, but no news for food & beverage companies, who weathered the storm better maybe than any other industrial category. "It was a good year but not as good as it had been a couple years ago. The recession slowed growth but there still was growth," one member of our Editorial Advisory Board told me. He said rising raw material prices had the biggest impact. "So we had to scale back planned expenditures in a number of areas to avoid a price increase on our products, which would have hurt us."
However, another one of our board members said softness in his product category was "unprecedented … promotion [and discounting] was fierce. I think there are consumer sectors out there that are severely feeling the pain of this economy and high unemployment. It seems that consumers are just now showing a little more confidence in the future."
We saw the tip of a very positive iceberg back in August when we compiled numbers for our annual Top 100© listing of the largest food & beverage companies in the U.S. and Canada. Even though most of those numbers were from 2009, the food & beverage industry's legendary "recession-proof" reputation was holding up. "Fifteen of the top 25 food & beverage companies on this list recorded lower sales in 2009 (or an early fiscal 2010) than they did in the previous year," we wrote. "Yet 18 of those 25 had higher net earnings."
As we said back then, you all prepared for the worst, but the worst never came. Oh, it got bad, all right. We reported on bankruptcies, plant closings and layoffs, and our annual June Salary Survey uncovered its first reduction in average salary (6.3 percent). But through a combination of preparation and fortune, 2009 was not as bad as most feared, and 2010 definitely saw improvement.
There were changes, some of them structural: private label growth and other signs of more careful consumer spending, changes in who's selling your food and, with the return of the credit markets, more mergers & acquisitions.
And maybe all that should lessen our surprise at increases of only 1 percentage point in most of the positive and growth questions in our Annual Manufacturing Trends Survey. So 2010 was a pretty good year after all.
Tyson, one of those companies that closed its fiscal 2010 early (Oct. 2, 2010), reported "record sales and earnings despite some market headwinds," according to President/CEO Donnie Smith. Sales were up 7 percent, and earnings swung from a $215 million loss in FY2009 to a $1.6 billion profit.
At Hormel Foods, another company with an early fiscal close (Oct. 31), sales broke $7 billion for the first time, up 11 percent, and earnings per share were up 15 percent. Things were so good the company announced a two-for-one stock split, the first split in more than 10 years and the ninth in company history.
Through three quarters, PepsiCo was enjoying a 33 percent bump in sales and a 10 percent rise in profits; Kraft sales were up 26 percent and income up 13 percent (admittedly, both due in large part to the Cadbury acquisition); Nestle was up 6 percent in sales and Unilever was up nearly 4 percent in sales and a whopping 21 percent in operating profit.
Admittedly, unemployment is 9.8 percent, credit remains tight and the housing market is comatose. Most of you miss a laid-off coworker or two, and you probably also know a neighbor who still hasn't found a new job. Has your salary cut been fully restored?
But the worst definitely is over. Let's ring in a better 2011.