Looking overseas for growth
At the Consumer Analyst Group of New York (CAGNY) conference in Boca Raton, Fla. this week, U.S. food makers said they are looking overseas for more profitable growth over the next few years, as they often must rely on short-term price promotions to drive sales at home, reports Reuters.
Kraft Foods Inc said its acquisition of British chocolatier Cadbury Plc would accelerate long-term growth, though it expects the deal to hurt 2010 results. In developing markets, organic revenue rose 10.4 percent for Kraft (Organic revenue excludes the effects of acquisitions and currency fluctuations), whereas organic revenue in the U.S. fell 2.7 percent in the fourth quarter. An expanding middle class in emerging markets encourages General Mills Inc. Chris O'Leary, COO for General Mills' international unit, said for now GM is focusing more on growth than profit margins in emerging markets. General Mills expects its sales in China to nearly triple to $900 million in fiscal year 2015 from $306 million in fiscal year 2009. It also sees potential in Russia, Indonesia and Vietnam, O'Leary said. Another growth opportunity is Western Europe. In the U.S. General Mills expects rivals to pick up the pace of new product development. Private label has been competing successfully during the downturn, so brand manufacturers have increasingly used price promotions to keep U.S. consumers buying their brands over cheaper store labels. Sara Lee Corp. CEO Brenda Barnes said many categories are dominated by branded foods and her company has been more disciplined about pricing. Barnes added acquisitions are possible, but any deals would have to be done with discipline as the company works on its leaner profile.
ConAgra stood by its 2010 forecast and long-term growth expectations, announced a $500 million share repurchase plan, and said there is no let-up in consumers' desire to save, so prices are very important to store traffic. ConAgra wants to see continued growth from products such as Ro-Tel diced tomatoes, said Consumer Foods President Andre Hawaux. He even told investors at the Florida conference about a queso cheese dip that can be made by mixing Ro-Tel with Kraft's Velveeta. "You know it must be good for me to plug one of Irene's brands so hard," Hawaux said during a morning presentation, prompting some laughs.
"The U.S. consumer is all grown up, and future growth in consumer spending will be outside the U.S.," said Edward Jones analyst Matt Arnold.