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Top 100 Food and Beverage Companies for 2018: A Return to Topline Growth?

The new tax law inflated profits, but sales figures appear moving in the right direction for U.S. and Canadian food and beverage processors.

By Dave Fusaro, Editor in Chief

FP TOP100 Logo 2018 300Apologies for ending that headline with a question mark, but the data is inconclusive. Nevertheless, 54 of the 100 largest food and beverage processors in the U.S. and Canada improved their sales in 2017, and only 19 suffered another year of sales declines. On the other hand, the 10 largest companies showed an even split. Five saw improved sales, five saw declines, an indication that it’s tough being big.

Profitability is up, too – significantly – but much of that improvement may be due to last year’s business tax break. More on that later.

That’s been the story behind these Top 100© lists of ours the past few years. Big Food seems to have hit a wall back in 2014, with most of the marquee companies suffering through annual sales declines since. Where did the sales go? To the smaller the companies, although even the bottom company on our list, Monogram Foods, is no midget at $566 million in sales.

No, the sales are going to the really small ones, the entrepreneurial upstarts with sales in the $1 million-$50 million range. With names like Enjoy Life Foods, Angie’s Boomchickapop, Beyond Meat. Individually, they’re mosquitoes, but collectively they sucked millions, maybe a billion or more, out of the sales of Big Food. And now Big Food is buying or investing in them.

Big Food Sales 2017 FP100First, an explanation of how we calculate those numbers in the first column (which you can see in our interactive chart). We rank companies based on value-added/consumer-ready (but not necessarily branded or in final form) foods and beverages that were manufactured in U.S. and Canadian plants. That’s why PepsiCo’s figure is $39 billion, not $63.5 billion (its global sales). Cargill appears as a $9 billion meat packer, not a $110 billion owner of ships and trains around the globe. ADM is not on the list at all. Neither is Monster Beverage Corp. – even at nearly $3 billion in sales, the company manufactures none of its own beverages; all are done by copackers.

And that’s what makes this list unique … and, we think, a fair comparison of companies as food and beverage manufacturers in the U.S. and Canada.

Some standouts

The biggest sales increase on our table belongs to Danone North America, its $6 billion in 2017 sales were nearly triple the $2.1 billion we recorded for the company in 2016. But this is a far different company. The French parent’s 2017 acquisition of WhiteWave Foods, with sales twice the size of the former Dannon North America, moved the new entity 30 spots up the list.

“With WhiteWave, we have found a perfect match to build a global leader leveraging consumer trends and expectations for healthier and more sustainable eating and drinking choices,” Danone SA wrote in its annual report. “The former Danone Dairy and WhiteWave activities in North America have been combined into a new subsidiary that has been incorporated as a Public Benefit Corporation, and is now the largest company of this type in the world. In the U.S., this entity is one of the top 15 food and beverages companies [No. 24 by our count] and the largest refrigerated dairy company, excluding cheese.”

The USA, by the way, is now the French company’s biggest market. (For an explanation of public benefit corporations, see Power Lunch: Growing Interest in Public Benefit Corporations).

Also due to a big acquisition, Molson Coors Brewing Co. recorded a 66 percent increase over its 2016 sales. But back then, its sales represented only the Canadian and export sales of  primarily Molson brands. U.S. sales were tied up in the Miller-Coors joint venture, which was reported as a separate company. When Anheuser Busch InBev in 2016 bought SAB Miller, the Miller business had to be sold off (“less filling”).

JBS USA saw a $5 billion bump in its 2017 sales. In addition to good organic growth, the meat company acquired Plumrose, which makes bacon, ham and other processed meat products from five case-ready food plants and two distribution centers in the U.S. In 2017, the Brazilian parent firm celebrated 10 years since its entry into the U.S. market via the purchase of Swift & Co.

Pilgrim’s Pride, which is majority-owned by JBS (but which reports its financials separately) acquired GNP Co. (dba Gold ’n Plump) in the U.S., as well as Moy Park, the largest privately held company in Northern Ireland. That accounts for its 8 percent sales increase.

Smithfield Foods, since it’s owned by a Chinese company, Shuanghui International Holdings, no longer makes financial information available to the public. But a spokesperson for the pork processor reported to us 2017 sales of $15.3 billion, a nice billion-dollar increase over the previous year. “Sales growth was driven by a number of factors including acquisitions, higher volumes and higher market prices,” the spokesperson explained.

What about profits?

While we didn’t drill down and examine how each company was affected by the Tax Cuts and Jobs Act of 2017, it appears most benefited from it, some immensely. The effects inflated many income statements.

The legislation cut the corporate tax rate from 35 percent to 21 percent and caused some other financial juggling. The greater a company’s domestic production, the greater the benefit. Companies with overseas plants took a hit and, as PepsiCo explained in its SEC filing, the law “imposed a mandatory one-time transition tax on undistributed international earnings.” PepsiCo took a $2.5 billion charge in the fourth quarter of 2017 as a result.

On the other hand, if you’re an overwhelmingly domestic company like, say, Kraft Heinz, the new tax law was a windfall. Kraft Heinz has one of the standout profit increases on the table – nearly $11 billion in income on sales of $26 billion, a 42 percent profit margin. When we pressed a company spokesman to explain, he said, “It was related to income tax accruals that were reversed based on the new tax law… Our adjusted net income  … was $4.36 billion.” That’s still, a nice increase from the previous year’s $3.64 billion net.

Overall, 32 of the 49 companies that report earnings – for the most part, that means the public companies – recorded increases in profits in 2017; only 11 saw a dip. Three reported losses: TreeHouse Foods, Del Monte Pacific Ltd. and Seneca Foods.

TreeHouse is in transition. In early 2016 it completed the biggest acquisition in its brief history, doubling its size by getting the former Ralcorp private label business at a fire sale price. But two years later, TreeHouse still hasn’t been able to make the acquired business profitable. Founder and CEO Sam Reed retired July 1 and the company is undertaking a strategic review under new CEO Steve Oakland, who came from J.M. Smucker.

U.S. sales account for three-quarters of Del Monte Pacific’s revenues. The $28 million corporate net loss was “due to one-off expenses amounting to $74 million for two plant closures in the U.S., as part of a planned program to achieve operational efficiency and reduce cost.”

Seneca Foods lost $14 million in its fiscal 2018 (its fiscal year closed March 31) as “canned fruit sales … continued to decline in the face of shrinking consumer demand and competition from lower priced imports … combined with the rising cost of food processing in California and higher prices being paid for fruit.”

Much of the loss was connected with the closing of its Modesto, Calif., cannery. “Modesto was the largest peach cannery in the world,” Seneca lamented in its annual report, “and was operating at well below capacity in recent years as growers pulled out their peach orchards in favor of more lucrative options, such as almonds and walnuts.”

Comings and goings in food and beverage

Every year, a few new names appear on our chart and others disappear. Gone are WhiteWave Foods (acquired by Danone), Snyder’s-Lance (bought by Campbell Soup) and AdvancePierre (now part of Tyson). Ready Pac is missing, but its acquirer, Bonduelle Americas, makes its debut at No. 91. Grupo Lala, which made the list by virtue of its ownership of Borden Dairy, slipped off the list but Borden appears (at No. 77).

Debutantes are Ferrero USA (No. 56), which makes the list by acquiring the U.S. candy business of Nestle. Lindt & Sprungli, premieres at No. 85 after consolidating U.S. chocolate businesses Ghirardelli, Russell Stover and Whitman’s. Triumph Foods should have been on all along, the $1.6 billion pork processor flying under our radar because of its lack of brands. And sales at former No. 100 John B. Sanfilippo & Son slipped just enough to let Monogram Foods take the last spot.

We use the most recent fiscal year available. Unless the companies do the math for us, we convert euros, pesos and Canadian dollars to U.S. dollars at the rate on the last day of the company’s fiscal year or on Dec. 31, 2017.