Top Food and Beverage Companies for 2011: PepsiCo Takes the Lead

We try not to make this annual list into any kind of a competition, but there is a new leader atop our Top 100© chart of the largest food and beverage companies in the U.S. and Canada.

PepsiCo Inc., which has been No. 2, 3 or 4 on this list in recent years, turned in a good 2010 by most measures, increasing its former core operations, the ones we measure, by 7-9 percent. But its biggest leap up our chart occurred with the February 2010 acquisition of its largest – and independent – bottlers. Pepsi Bottling Group Inc. added $14 billion in sales to the corporation's top line, and PepsiAmericas chipped in another $5 billion.

M&A Activity Returning to Pre-2008 Levels

With 322 total mergers and acquisitions recorded in 2010, the food and beverage industry is seeing the highest M&A figure since 2008, and about even with the 2005 figure. Read more about it at 2011 Mergers and Acquisitions Activity Returning to Pre-2008 Levels

While not all their sales were domestic, the sales (and efficiencies) of both have been so integrated into PepsiCo we cannot separate them out. Fortunately for us, PepsiCo does separate revenues by region. So, adding together PepsiCo Americas Beverages, Frito-Lay North America and Quaker Foods North America, we get our chart-leading $35.6 billion figure.

PepsiCo's growth notwithstanding, perhaps the biggest news in this year's table is the number of companies that recorded net losses during 2010: There was only one! Dole Food Co. (No. 17) got caught between lower banana production worldwide and weaker pricing, and the company lost $30 million, even though sales increased by nearly 2 percent. (Only 62 of the companies report net income – the private ones do not.) We haven't had only one company reporting a net loss for the year in at least eight years (and maybe much longer – our figures back then were incomplete).

Getting back to PepsiCo, that example illustrates much of the logic and the challenges we encounter each year in making this list. It is a list of the 100 largest food & beverage processors in the U.S. and Canada – not necessarily food marketers or resellers. We don't count products manufactured overseas (although we do count exports); we count only value-added products (not raw milk, produce or eggs); and we count self-manufactured products only, not those made by other food processors and rebranded (although we do count contract manufacturers and private labelers).

At least we try. There's an assumed homogeneity across the food industry but, as we pore through annual reports and other documents each year, we realize how every company is different. We make adjustments where we think they're warranted, which means you won't see many of these numbers in any other report.

All company sales all over the globe are included in the column "2010 Total Company Sales." And this list represents the most recent fiscal years available for these companies. For most, that means calendar 2010, but several already have reported 2011 fiscal years. For Cargill and ConAgra, fiscal 2011 ended as recently as May.

So it wasn't a bad year, although it did come with challenges. PepsiCo Chairman/CEO Indra Nooyi could have been speaking for most of these companies when she wrote in her company's annual report: "Amid the continuing challenge of the most difficult global macroeconomic environment in decades, we delivered strong operating performance that puts us in the top tier in our industry."

In a different statement to analysts, Nooyi noted some issues being faced by most companies on this list. "We posted broad-based worldwide gains in both snacks and beverages, our businesses deftly balanced a delicate price-value consumer equation and we aggressively managed costs and productivity." But she also noted being mindful of "three realities":

• A weak consumer landscape given the poor macroeconomic picture, especially the high level of unemployment in key developed markets.
• High levels of cost inflation for the coming year [2011], driven by broad and pronounced commodity inflation.
• A potentially difficult competitive pricing environment.

Her solution: "Differentiated products help us drive sales and pricing. In 2010, we again increased our R&D investments in sweetener technologies, next-generation processing and packaging and nutrition products. For example, SoBe Lifewater Zero Calorie, a product made with an all-natural, zero-calorie sweetener, was a direct result of that investment — the SoBe Lifewater brand grew volume 46 percent in 2010 alone. Similarly, our technology investments allowed us to reduce sodium levels in some of our salty snacks without compromising taste and to use 100 percent recycled PET in our Naked Juice bottles."

The PepsiCo chairman/CEO also noted the unique positioning of PepsiCo, and one of its six imperatives for the year. "Our third imperative is to unleash the power of the Power of One. Studies show that, 85 percent of the time, when a person eats a snack, he or she also reaches for a beverage. No company on earth is better positioned to fulfill both sides of that equation."

So next year at this time, we'll see how she capitalized on that unique positioning.

Top 100 Food & Beverage Companies: By the numbers
Last year, the title of this report was "Less is More" – as in lower sales in 2009 somehow translated into higher profits. Fifteen of the top 25 companies on last year's table recorded lower sales in 2009 than they had in 2008, yet 17 of those 25 improved their bottom lines.

This year, both those measures are up. Nineteen of the top 25 companies increased sales in 2010, and 18 of them also improved profitability. For the whole group, 63 of the 100 had higher sales in their latest fiscal year, and 40 also upped their net incomes; 22 went down in income (we have a lot of private companies who don't report to us their income – it's hard enough getting them to report sales).