Ignoring the 500-lb. gorilla in the 2020 room for just a moment, the fortunes of most of the major food and beverage companies turned rosier in the past year. Most of the companies in this report use calendar fiscal years, so even without what for most was a revenue bump this spring, sales increased for about half and many also improved profits.
Specifically, 45 of these 100 companies saw sales increases in whatever fiscal year just ended for them. Only 13 reported decreases (the rest were within +/-5%). Net income was more of a mixed bag: up for 18, down for 26. Four reported losses (TreeHouse, Borden, CROPP Cooperative, Del Monte Pacific).
Big Food has finally gotten back on the growth track.
This follows a trend that started with last year’s report – and companies’ 2018 financial reports – but reverses what we chronicled for three straight years. For fiscal years 2015-2017, nine of the 20 largest food & beverage companies suffered through three consecutive years of sales declines. For two straight years now, those key companies are back on the growth track; for the bigger food and beverage industry, it’s been three decent years.
Kraft Heinz, despite a tiny sales increase in 2018, shrank again in 2019, but at least it returned to profitability after a disastrous 2018, in which it reported a $10 billion loss, not so much operationally but in write-downs of the values of some of its best-known brands. Mondelez has been stuck at just shy of $26 billion for four years now, although no one would dispute its profitability during those years.
The lesson of 2015-2017: Small, entrepreneurial food and beverage companies were nibbling away the sales of the big food companies. Not individually but collectively. In an analysis we did in 2017, the Top 100 companies lost a total of $88 billion in sales. Overall food sales never decline, so where did those dollars go? To companies like Enjoy Life Foods, Angie's Boomchickapop, Happy Baby/Happy Family and Honest Tea.
Where are those sales going now? To Mondelez, Conagra, Danone and Coca-Cola, which bought the aforementioned small companies. The lesson of 2018-2019: If you can't beat 'em, buy 'em.
We usually start out these Top 100 stories with an analysis of how the year's top trends—and how the major food and beverage companies dealt with them—impacted the financial health of the industry's top companies.
We all know what happened next.
Now, bringing that 500-lb. gorilla into the discussion: The 2020 coronavirus pandemic has been disastrous for almost all of the U.S. and Canada economy, but not for Big Food.
Almost all of the bigger food and beverage companies rely on unexciting but proven and familiar products, age-old brands in formats like cans, boxes and frozen, which weren't faring well when consumers had money to spend and were looking for something exciting and new. Put a dent in their wallets and anxiety in their minds – and add in at-home kids, which make time-consuming dinners too difficult – and consumers were looking for frozen dinners, boxed macaroni and cheese and peanut butter and jelly sandwiches.
- General Mills' net sales increased 21% for the fourth fiscal quarter (its fiscal year ends May 31), buoyed by a 75% spike in its US meals and baking unit and growth in all five divisions.
- Kraft Heinz saw a rise in year-over-year comparable sales of 7.4% in its second quarter of 2020, which CEO Miguel Patricio attributed to homebound consumers turning to familiar center-store brands.
- Grupo Bimbo saw a sales surge of 36% over the second quarter of last year. The North American unit had profits of $183 million, exceeding the profit total of the Mexican unit for the first time in the company’s history.
- Nestlé's first-quarter sales saw a 4.3% year-over-year increase, although the second quarter slowed to a 1.3% rise.
- Organic net sales for Kellogg's second quarter increased 9.2% compared to the same period in 2019, with a boom in at-home consumption lifting cereal and Eggo waffle sales. Kellogg has raised its annual organic sales growth forecast from 1-2% to nearly 5%.
- Del Monte Pacific (with a fiscal year ending April 30) reports its Americas sales were up 65.2% due to the surge in demand from the pandemic.
- Unilever's 7.3% sales increase for North America during 2020's first half was buoyed by a 177% increase in e-commerce sales. A 26% jump in second-quarter ice cream sales benefited from Unilever's Ice Cream Now and third-party delivery services with more people ordering ice cream from home, said CEO Alan Jope.
- Year-over-year net revenue for Mondelez grew 17.3% in North America for the second quarter due to continued increases in at-home consumption of snacks and chocolate, said CEO Dirk Van de Put. Mondelez has raised its quarterly dividend by 11%.
- Sales grew 6.2% for Keurig Dr Pepper's packaged beverages, although its overall second-quarter sales grew just 1.8%. A shift to at-home consumption boosted the company's coffee system sales by 5.4%, offsetting a loss in office and hospitality business.
- PepsiCo's second-quarter revenue gain of nearly $16 billion surpassed analyst estimates, with its Quaker Foods division posting a 23% increase in revenue and sales for the Frito-Lay unit increasing 6%. Although beverage sales fell overall in North America due to foodservice shutdowns, revenue for the Bubly and Pepsi Zero Sugar brands grew by double digits.
Without center-of-store foods or snacks, Coca-Cola Co. didn't fare as well. In fact, Coke got slammed by the pandemic for its most recent fiscal quarter, with revenue down 28% from last year and earnings down 32%. The beverage giant is in a highly exposed position in the pandemic, with much of its sales coming from soda fountains in restaurants, theaters and other places that have been shut down.
So for now, at least, it's good to be Big Food.
Explaining our numbers
For Food Processing's Top 100©, 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 Coke is listed at No. 9 with $11.925 billion in sales, not $37 billion – the rest of its sales and manufacturing is global.
That's also why No. 1 PepsiCo’s figure is $41 billion, not the $67 billion the company has in global sales. Cargill appears as an $8.9 billion meat packer, not a $113 billion owner of ships, trains and iron ore mines around the globe. ADM is not on the chart at all. Monster Beverage Corp., even at $4.2 billion in sales, is not on this list (the company manufactures none of its own beverages, all are done by copackers).
It's tough enough to figure out the sales of value-added, consumer-ready, U.S. and Canadian self-manufactured foods and beverages for the public companies; for the private companies, we rely on their statements to us and other public reports about their finances or the general health of their business.
Sometimes smaller is better
Despite all the celebration over first-half 2020 sales, a number of large companies have been intentionally slimming down. That's the strategy currently pursued by Campbell Soup, TreeHouse Foods and Hain Celestial. After years of acquisitions (some with questionable multiples) and now with new CEOs in place, those companies are realizing it may be easier and more profitable to manage a smaller, focused company than a sprawling, diverse one.
Similar shrinkage was the strategy pursued by Conagra … until the 2018 acquisition of Pinnacle Foods for $10.9 billion. That and General Mills' 2018 purchase of Blue Buffalo pet foods for $8 billion were the industry's last blockbuster deals. Companies have been conservative since then.
Names come and go on this list. Gone this year is Dean Foods, most of which is now a part of cooperative Dairy Farmers of America after the former's bankruptcy filing last year. Keystone is now entirely integrated into Tyson Foods. Cott Corp. has divested all its packaged beverage business and now is a water delivery company.
The replacements are three companies we've overlooked for a while because of their private status. While much of Ocean Spray is commodity cranberries with little value-add, we've been assured its beverages and fruit snacks now exceed $1 billion in sales.
Mountaire Farms is one of those tightly held poultry companies that has few brands of its own but probably $2 billion in direct sales to grocery stores and foodservice.
Wonderful Co., formerly known as Roll Global, is owned by Stewart and Lynda Resnick and it owns Pom Wonderful, Fiji Water, Wonderful Pistachios (and Almonds and Halos) and a couple wineries.
In an ownership, change, National Beef Packing Co. is now 80% owned by Brazil's Marfrig Global Foods. Jefferies Financial Group Inc., a New York financial services company, at the end of last year sold its remaining 31% holdings in National Beef to Marfrig, a process it started in 2018. By the way, National Beef did some acquiring of its own, snagging Iowa Premium LLC last year.
And longtime family-held Schwan's Co. is fully integrated into CJ CheilJedang, which last month folded into the Minnesota company TMI Trading, an Asian food company in the CJ CheilJedang portfolio.