In the intertwined fates of two companies, we see a painful lesson in high finance apparent in this, our 40th annual Top 100© listing of U.S. and Canadian food and beverage processors: Don’t expand too much too soon.
If it weren’t for a little financial sleight-of-hand, ConAgra Foods and Post Holdings might be the same company at this point. So there’s no telling how that would have impacted (or compounded?) their respective $607 million and $359 million losses, the biggest on our table.
Post, which moved up from No. 85 last year to No. 49, can claim the biggest one-year sales jump on our chart on (up 133 percent). After this cereal-only company was spun off in a poison pill attempt by Ralcorp in 2012 (it did not work; ConAgra acquired Ralcorp anyway), it weighed in at a measly $959 million in sales.
But Post quickly went on a buying spree, netting Dakota Growers Pasta, Golden Boy Foods, Dymatize Enterprises, Agricore United Holdings and the private label cereal business of Hearthside Solutions. But its real jump in sales came with the 2014 acquisition of Michael Foods, which alone added nearly $2 billion in sales. The purchase earlier this year of MOM Brands, formerly Malt-O-Meal, will push it even further up next year’s chart.
But that kind of merger and acquisition activity also brings a heavy burden of debt, helped in no small way by its $359 million loss in 2014.
The dubious distinction of biggest loss ($607 million) belongs to ConAgra – which also incurred that red ink as the result of a big acquisition and a big (38 percent) jump in sales. As we said, Ralcorp resisted ConAgra’s overtures for much of 2012, even spinning off Post Foods to make itself a less attractive takeover target. But ConAgra’s former CEO wanted that private label business badly … and that’s exactly what he got.
ConAgra (over)paid $6.8 billion for the cereal-less Ralcorp, even more than it first offered for a Ralcorp that included Post. For whatever reason, the business never fit into ConAgra well and sales never took off. Quarterly financial reports over the past year invariably used the term “lagging.” Gary Rodkin, the CEO who engineered the deal, announced his intention to retire at the end of ConAgra’s fiscal year, this May 31. He was replaced by Sean Connolly, who had recently lost his job when his Hillshire Brands Co. was bought by Tyson last August.
By the way 1: That private label business, apparently including ConAgra’s sizable homegrown business, is up for sale, Connolly announced in July.
By the way 2: Connolly may have been saved by Tyson from a similar fate. Analysts questioned his $4.23 billion offer to buy Pinnacle Foods, which was terminated as a result of Hillshire’s acquisition by Tyson.
But that’s part of the circle of life in this food and beverage industry, which each year causes a few venerable, often old, names to disappear and new ones to appear at the bottom of our table.
Every year there are some comings and goings, but in the past year we lost several significant companies: Big Heart Pet Brands (the former pet food business of Del Monte, sold to J.M. Smucker), Canada Bread (sold by majority-owner Maple Leaf Foods to Grupo Bimbo), Hillshire Brands (acquired by Tyson) and Michael Foods (bought by Post Holdings).
Two companies are still on the list with slightly different, and longer, names. Beam Inc., distiller of all those wonderful bourbons, is at No. 61 as Beam Suntory. Del Monte comes in at No. 65 as Del Monte Pacific Ltd., the result of its sale to a Singapore firm and former licensee. Also, Lactalis American Group, former No. 36 on our list, has been fully folded into Parmalat North America (No. 44). It’s confusing, but Parmalat SpA is majority-owned by Lactalis’ French parent, which engineered the sale. Lactalis American Group owned the Sorrento, Precious and Président brands here in the States.
Among other comings and goings, Dole Foods has dropped off our list, largely because early last year it sold its packaged foods business to Japanese firm Itochu Corp. for nearly $1.7 billion. The division represented a third of Dole’s revenue. But also because David Murdock, chairman and CEO of Dole Food Co., who already owned nearly 40 percent of the stock, took the company private again, and we can’t ascertain how much if any value-added/processed food is left.
That, by the way, explains a lot about our list. We rank companies based on value-added/consumer-ready (but not necessarily in final form) foods and beverages that were manufactured in U.S. and Canadian plants. That’s tough enough to figure out for the public companies; for the private companies, we rely on their voluntary statements to us and other public reports about their financial figures or the general health of their business.
That’s why PepsiCo appears as a $38 billion company, not the $67 billion global manufacturer that it is. And Cargill appears as an $8.6 billion processor, not a $135 billion owner of ships and trains around the globe. ADM is not on the list at all. Unilever is portrayed as an American food processor, not a global maker of shampoos and deodorants. And Monster Beverage Corp., even at nearly $3 billion in sales, is not on this list (the company admits it manufactures none of its own beverages, all are done by copackers).