2014 Consumer Analysts Group of New York Report

Food and beverage CEOs give contrasting views at annual financial analysts meeting.

By Dave Fusaro, Editor in Chief

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The very first two food companies to present at a financial analysts meeting in February were polar opposites in how they view success in the marketplace. Then again, there were a lot of contrasts among the companies speaking at the February Consumer Analysts Group of New York (CAGNY) meeting.

General Mills was all about understanding the consumer, growing overseas and celebrating its brands and spending to promote them.

ConAgra aims most to understand its retail partners, grow its private label business, find operational economies and otherwise hunker down in Omaha, Neb.

Kraft Foods Group and its onetime other half Mondelez presented a similar contrast in back-to-back presentations. The CEOs and CFOs of some of the largest publicly traded food companies make an annual pilgrimage to the meeting to "sell" their companies to financial analysts. CAGNY has been coordinating this meeting for 50 years.

Also making presentations were Campbell Soup Co., Clorox Co., Coca-Cola Co., Green Mountain Coffee Roasters, Hershey Co., Hillshire Brands, Kellogg Co., Mead Johnson Nutrition, McCormick & Co., PepsiCo Inc., SABMiller Plc and WhiteWave Foods Co., as well as some non-food consumer goods companies.

Campbell Soup CEO Denise Morrison may have uttered the most interesting quote of the week: "There's a shrinking middle class in the U.S., but growing middle classes elsewhere in the world." (See our news item on the shrinking middle class)

It was just an aside, a justification for Campbell's increasing business interests in developing nations -- Campbell acquired Kelsen A/S of Denmark last August and has plants in several countries around the globe. And it was confirmed with hard numbers by Kraft CEO Tony Vernon. But it stung just the same. Who's the "developing nation" now?

While there was a good amount of pessimism and explanations for recent financial shortfalls from many of the CEOs, Ken Powell, chairman and CEO of General Mills, talked glowingly of numerous new products pouring out of his company's R&D pipeline, including new cereals, dinner kits from Hamburger Helper and Old El Paso, and biscuits and bars.

He noted the recent groundbreaking on a yogurt factory in China and the success of its year-old Latin American acquisition, Yoki. "There's plenty of growth to be had," said Powell. "It's our job to go out and get it."

Batting second, ConAgra CEO Gary Rodkin described a company in transition that was nearing the end of a difficult fiscal year (ending in May).

Food Processing's 2013 Processor of the Year, ConAgra's, foodservice division faced two huge setbacks: the loss of a large distributor and a problem with the quality of its potato crop. Rodkin was reversing a strategy of finding new consumers for key brands, particularly Healthy Choice, Chef Boyardee and Orville Redenbacher products. "We tried but did not succeed," he said, so the new plan is to get core consumers of those brands to buy more. There also were "short-term operational challenges."

Even the private label business, which grew impressively during the recession and on which ConAgra has placed a very large bet with the acquisition of Ralcorp, experienced flat sales last year. And the integration of Ralcorp has not been without issues.

"We learned a lot of tough lessons this [fiscal] year," said Rodkin. "Still, we are in a better position than we were six months ago."

Officials from PepsiCo probably were preparing their typical CAGNY overview … then, on the morning of their presentation, investor Nelson Peltz released a letter renewing his call for a split of the company into a fast-growing snacks business and slower-growing beverage business. Perhaps in response, "Better together" was the theme of the talk by Brian Cornell, CEO of PepsiCo Americas Foods (Chairman/CEO Indra Nooyi was not scheduled to appear).

Cornell said the company's four priorities, in order, were brand-building, innovation, execution and productivity. He made no mention of a possible split or any references to Peltz, whose investment firm, Trian Fund Management, owns about $1.2 billion of PepsiCo stock.

Cornell did acknowledge a year-long review of the company's business with an eye toward improving financial results, which only confirmed the synergy between snacks and drinks. "Sixty-five percent of sales meet common, complementary needs. Thirty-five percent meet differing needs."

But, in Q&A, one of the analysts did bring up Peltz and his July 2013 "whitepaper," which recommended splitting PepsiCo and having the resulting snacks company buy Mondelez. Cornell, sounding only a little testy, indicated he would entertain only one such question, and answered: "We've looked at this from every single angle and we're absolutely convinced this is the right decision for the company." (See our Reporting: Memo to PepsiCo: Lose the beverages, keep the snacks and buy Mondelez)

Peltz, by the way, did buy his way into a seat on the Mondelez board of directors. His name didn't come up in the Mondelez presentation, but Chairman and CEO Irene Rosenfeld discussed the much-talked-about ascendance of snacking. "Snacking is a $1.2 trillion global market," she said, noting it's firmly entrenched in North America and other developed markets but is growing faster in developing markets.

She acknowledged, however, that snacking growth slowed in 2013 – most of her company's categories grew at 5 percent or less, compared to 6-7 percent growth rates in the two previous years. She also noted that Mondelez is saddled with older Kraft, General Foods and Nabisco domestic plants, which may be replaced with facilities in developing markets. Mondelez sales currently are 61 percent in developed markets and 39 percent in developing markets, but the latter is expected to grow.

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