Home » CAGNY members hear food processor woes
CAGNY members hear food processor woes
By Dave Fusaro, Editor in Chief
It’s kind of a Valentine dance, the annual meeting of the Consumer Analyst Group of New York (CAGNY) with the heads of consumer goods companies. Every February, the Wall Street guys take a weeklong break in a warm setting to get to know these companies, especially food processors, better.
Usually, the highest-level food company execs visit to give hourlong looks at how their companies are doing. This year, 28 executives addressed the association of brokers and portfolio managers on issues such as raw material and energy costs, price increases and private label competition.
Here are some of the newsiest presentations by some of the biggest food companies:
Tyson Foods Inc. Chairman/CEO John Tyson said market conditions are hurting the company's beef and chicken segments. "This has been one of the most highly volatile years we have seen, and that volatility continues," he said in a report carried on the company web site.
John Tyson reported the beef segment is expected to generate double the operating loss compared to the first quarter of fiscal 2006. In the chicken segment, leg quarter prices are currently in the 15 cents-per-pound range, which is lower than anticipated. The company continues to forecast fiscal 2006 earnings from 42 to 72 cents per diluted share. "We're doing everything we can to execute against our strategy and work through this difficult environment," he concluded.
John Tyson reiterated the company's business strategy, which is to increase value-added products, improve operational efficiencies and expand its international business. And he said brand awareness, helped by the current Powered by Tyson marketing campaign, is at its highest level.
Kraft Foods Inc. CEO Roger Deromedi confessed his company still has a ways to go in its restructuring efforts. He said too many of the company's products are positioned in the shrinking middle of the market, but added that Kraft will benefit from innovation that will see more convenience- and health-focused products, according to the Chicago Tribune.
New convenience products will include a simpler version of its "Easy Mac" macaroni and cheese and a new sundae topping that can be sold from a Kraft-designed, battery-operated freezer, which can be placed anywhere in a store. Other new products planned include single-serve packets of Kool-Aid and Country-Time lemonade, flavored water under the Capri Sun brand and disposable macaroni and cheese containers.
Kraft also plans to boost its advertising budget to 5 percent of revenue from 3.9 percent in 2005. More of that amount will be spent via print, radio, on-line, in-store and direct mail than in the past, when two-thirds was spent on television advertising.
Mike White, chairman/CEO of international operations, represented Pepsico. He said health and wellness, a key growth vehicle, has three strategies: renovation of all core brands, expansion of the Quaker platform and growth of the Gatorade and Tropicana brands. He also told of tremendous growth in China and claimed Pepsi was now the No. 1 brand there (an assertion disputed by Coca-Cola).
Sara Lee Corp. expects to double its North American lunch meat business and triple the profits from its bread division, said Chairman/CEO Brenda Barnes. The company also will centralize purchasing, sign longer supply contracts and improve distribution in an effort to improve margins, according to the Chicago Tribune.
But, "There's not a lot of (sales) growth out there," she said, echoing CEOs of the other food companies who spoke. Barnes said the company is still stocking its supply line with new ideas from last year, including whole-grain white bread, whole-grain English muffins and Jimmy Dean Skillets. And she is sticking to a financial target of a 12 percent operating margin by 2010 (currently that margin is 7 percent).
Barnes also said the company continues its restructuring, which will make Sara Lee primarily a food company again after selling off underwear and household and body care products.
Douglas Conant, president/CEO of Campbell Soup Co., talked of “two breakthrough areas,” for his company’s products: emerging demand for premium soups and lowering sodium across all product lines. He said Campbell’s strategy is to trade consumers up to “higher levels of satisfaction,” and that presumably means higher margins.
Chairman/CEO Stephen Sanger promised a reinvigorated General Mills that is more global and in more non-grocery store channels, especially foodservice.
Todd Stitzer, CEO of Cadbury Schweppes, is making a run at gum market leader Wrigley, and claims to be “within a few basis points of global confectionery share leadership.” That is the result of a number of acquisitions, especially the 2003 purchase of Adams, which Stitzer called “truly transformational” for his company.
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