I am retired and take educated guesses on all things financial.

July 29, 2007

July 30, 2007: Soups on...some dough for your portfolio

Pictures: A.C. Nielsen and Jobe Cerney/Pillsbury Doughboy (Morton High School graduates)

Some comments from the respected team at Credit Suisse First Boston as they parse a recent Nielsen Survey on processed food. Disclosure: A.C. Neilsen and I graduated from the same high school. Decades apart.

Kraft is having some problems. Total sales declined 0.3% over the past three months ended July 14th. Kraft lost dollar share in 17 of its top 20 categories. Cheese continues to be a big problem. Kraft lost 130 bps of market share in cheese while pricing was raised 3%. Private label cheese took 70 bps of share while taking pricing up 7%. Conclusion: Kraft is not being recognized as a premium brand despite a heavy advertising campaign and appears adrift.

Heinz maintains strong retail sales and favorable currency exchange. CSFB feels the pullback on these shares is unjustified. Heinz dollar sales rose 5.2% in the past three months. Dollar sales and volumes of frozen dinners are up almost 17.5% gaining almost 1 share point. Higher prices in frozen potatoes is being supported by increased promotion which drove sales up 5.4%. Ketchup sales rose 2.4% and pasta sauce sales were up 3.4%.

General Mills is pretty flat all around. They are bringing out a lot of new products and retiring some old packaging which has lead to discounts as they strive to empty grocer shelves before the new launches. General Mills bears watching as they restructure their gut products.

Wrigley sales were up 3.9% over the past three months. Chewing gum sales were up 4.9% even though Cadbury continues to take market share. Hard candy flopped 2.8%. Strong international markets for Wrigley products are a lifesaver.

ConAgra is not doing very well. Dollar sales declined 2.1% over the past three months. Promotions fell flat. Of its top ten categories, six declined. Healthy Choice continues to get traction - especially in the frozen food area where sales collapsed 13.6%. Maybe Healthy Choice is doing poorly because the food TASTES LOUSY.
A bright spot was old standby Chef Boyardee products with sales growing strongly.

Campbell dollar sales grew 3.7%over the past three months. Pepperidge Farm products shine with dollar sales up 9.1% and cracker sales growing 7.7%. Soup sales were good. Perhaps soup is now more than a seasonal food.

Kellogg dollar sales were up 2.4% driven by a 3.4% increase in pricing that has held up. Crackers and snack bars continue to see strong growth at 2.5% and 18% respectively. Cereal is holding its own.

General Mills lost dough with Pillsbury sales declining 4.5%, Disclosure: The voice of the Pillsbury Doughboy and I graduated from the same high school, at about the same time. Progresso sup is doing well, especially the new non-meat light varieties. Snack bar sales were up 39.9%. Dried fruit snacks are about even with Kellogg after loosing market share last year.

To sum up. If you are looking for some defensive stocks, don't buy the food group en masse, be selective.

CSFB recommends:

Heinz (HNZ)
Kellogg (K)
Nestle (NSRGY) - not discussed but listed, and I like this company a lot.

I also like Campbell (CPB)

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