November 19, 2007: Food for thought

pictures: cereal is inded a popular food and, are these fish sticks?



As the market seemingly turns defensive, here are a few random thoughts about a few prominent food stocks.

Price inflation is a reality in the foodstuffs area. Alternative energy has raised basic grain process, which has a ripple effect upon almost all food companies' bottom line.

That said, Kellogg continues to dominate the competition in cereals. Kellogg (K) managed to increase market share while raising prices 2.9% over the past four months. Kellogg's brand power seems to be getting stronger as competitors lost market share while trying to increase prices with Kellogg. Overall sales growth was 5.9% during the past seven weeks and was strong in every area except cookies.Kellogg stock looks attractive.

General Mills sales growth was about 1.5%. Sales declined in cereal, refrigerated dough, frozen and canned vegetables and dry dinners. Yogurt, soup and snack bars had sales growth north of 10%. Danone, however, is taking additional share away from General Mills' (GIS) yogurt operations. This company is stuck in neutral.

Heinz sales growth of 4.6% and is sustainable. Frozen entrees, frozen potatoes and spaghetti sauces all grew. Frozen dinner entrees especially were up: 12.6%.
The new Healthy Choice line is selling much better than the dry-wall tasting products marketed as Healthy Choice previously.Heinz looks good.

Kraft sales were up approximately 3.2%. Cheese was the dominant player, up 7%. Importantly, Kraft lost share in 13 out of 20 top categories, which is a real problem for this company. I am not impressed with Kraft at this time.

Here are some companies you may want to explore for inclusion in your portfolio:

Danone (DANO.PA)France
Heinz (HNZ)
Kellogg (K)
McCormick and Company (MKC)
Wal-Mart (WMT) that sells 'em all

If anyone has ever eaten a decent fish stick, please e-mail me. Just curious.