Editor's Plate: More Signs the Recession Is Over

April 8, 2010
From our capital spending report to the new grocery stores in my neighborhood, food and beverage is leading the comeback.

There are two dominant grocery store chains in Chicago, Jewel and Dominick's, and neither one has exactly been celebrating over the past year. Dominick's closed some stores, including one near me, which remained vacant for at least a year … until about two months ago when a small independent opened in that space.

A similar thing happened a few months earlier when a two-store chain opened its third store in a space long vacated by a fading regional chain. Then the exact same thing happened on the other side of my town. Any day now, a CVS drug store (you can't really use that term anymore with all the food they sell) should open in the strip mall near me.

Not only are the crocuses and tulips defying the last grips of winter up here in chilly Chicago, food stores are shaking off the nasty economic weather of 2009 to sprout, too. And what's good for food stores is good for food and beverage processors.

I've cheerleaded (cheerled?) an end to the recession before on this page, but now I officially pronounce it dead and over. Our cover story, the Annual Capital Spending Report predicts a 19.5 percent increase in capital expenditures this year. That comes after last year's projected 3 percent decline, which turned into a real 9 percent drop as the year wore on and the recession deepened. It was the first drop we had seen in the five years we had been doing this report.

This uptick in expansion projects looks solid and widespread. Admittedly, there are some big companies with big increases (PepsiCo up 71 percent, Tyson up 63 percent), but 24 of the 32 public companies we track are projecting increases; only three are forecasting decreases.

And on our last day of production for this issue, Sanderson Farms announced a $94 million big-bird deboning complex for Goldsboro, N.C. (That news arrived too late for our cover story.) I hope this isn't a typo, but they claim it will employ 1,100 people plus 150 contract growers to supply 8.9 millon lbs. of dressed poultry per week.

Those are not the only signs the economy is in recovery. Quarterly financial reports also are filled with good news.

Smithfield Foods, which ended its fiscal 2009 last May 3 with a $190 million loss and carried that through the first two periods of its FY2010, reported a return to profitability in its third quarter of 2010, with net income of $37.3 million for the period ending Jan. 31.

After a $312 million loss in 2008, its first (partial) year of existence, Dr Pepper Snapple Group rebounded in 2009 with a $555 million profit, it recently reported. Cott Corp. returned to profit in the fourth quarter and full year of 2009, with full-year earnings of nearly $82 million, compared to a loss of $123 million the year before.

It seems every other day brings a positive financial report. General Mills bucked the trend even last year, enjoying a strong fiscal 2009, which ended last May 3. It's continued to beat Wall Street expectations every quarter since, most recently reporting third-quarter net earnings of $333 million, a 15 percent increase from the year-earlier period. Some others:

  • ConAgra's third quarter (ended Feb. 28) net income rose 18 percent to $229 million.
  • Campbell Soup's second quarter (ended Jan. 31) net income rose 11 percent to $259 million.
  • J. M. Smucker's third quarter (ended Jan. 31) income nearly doubled, up 74 percent to $135 million.

Even a Chicago favorite, Tootsie Roll Industries Inc., ended 2009 with a 38 percent increase in net income. The company said it was helped by price drops for dairy products, corn syrup and vegetable oil, as well as energy.

So understand why there's a champagne cork popping on our cover. Pop a cork of your own.

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