Usually, our Top 100© table shows a healthy food and beverage industry with sales and profits on the rise – as should be expected in a year in which the country’s overall economy is plugging along, albeit without setting records.
Look a little closer at the figures and the underlying situations, and we see an industry struggling to achieve growth. Especially among the bigger firms. Only one of the 16 largest companies saw sales grow appreciably in 2015, and that company, Tyson, did so mostly through a huge acquisition. All the others undoubtedly made some acquisitions in the past year, which didn’t do enough to prop up sales.
Tyson, by the way, is the new No. 1 company atop the U.S. and Canadian food and beverage industry, thanks to the $4 billion bump by former No. 32 company Hillshire Brands. Tyson was No. 1 back in 2006, having ended about a 30-year run by Kraft Foods as the largest food & beverage processor in the U.S. and Canada. This time, it ended PepsiCo’s five-year turn atop our list.
“We have an incredible team at Tyson Foods and our focus on consumer-relevant categories is what got us here,” CEO Donnie Smith told us when he learned of the No. 1 ranking. “We’ve invested in our prepared foods brands, chicken and the insights that drive innovation for a better consumer experience.”
For the overall food and beverage industry, profits are a slightly better picture … maybe. Net income was up at five of the top 16 … which means the bottom line worsened for eight. (No. 11 Mars is a private company and doesn’t tell us profits and for No. 5 Kraft Heinz we had no 2014 figure to compare its profit to.)
Mondelez is a great case in point. While the North American-only figures show a tiny improvement, worldwide sales were down nearly $5 billion; but net income nearly tripled from 2014 to a sensational $7.3 billion.
The view is only a little better at the bottom third of our table, where 12 of the 33 smaller companies gained sales ground and seven improved profits.
The figures punctuate the stories told at the Consumer Analysts Group of New York conference, where the top food and beverage companies annually make presentations to financial analysts. At that February meeting, the CEOs and CFOs of Campbell Soup, General Mills, Hormel and Mondelez all said recent years of cost-cutting are paying off in increased profits but decreased sales. Even at that meeting, Tyson happily bucked the trend, predicting both sales and profits would turn higher this year.
“The food processing industry tends to track the U.S. economy and therefore continues to grow at a steady pace,” says Casey Garten, managing director of food and agribusiness at Bank of the West Commercial Banking Group. “The industry is well capitalized with interest rates at historic lows, which provides opportunities for growth to meet growing demand.”
Moving in opposite directions
There are three big gainers on the table, all the result of full-year effects of major acquisitions. As previously stated, Tyson added $4 billion in sales largely because of its late-2014 purchase of Hillshire Brands. J.M. Smucker (whose 2016 fiscal year ended this April 30) grew 37 percent and moved from No. 23 last year to No. 17 this year thanks to the early-2015 acquisition of Big Heart Pet Brands – the former Del Monte unit that includes Gravy Train and Meow Mix – and its $2.3 billion in sales.