It’s the time of year when leading US food executives and Wall Street analysts head to Florida for the annual CAGNY investment conference.
After the weather some parts of the US has endured in recent months, a week in the Sunshine State will be welcome but, with the economy remaining fragile and food manufacturers feeling the pressure from commodity costs, there are clouds on the horizon for a number of those presenting this week.
Go deeper with GlobalData
Faced with an investment community keen to hear how margins can be preserved amid the twin pressures of a weak consumer and a rising raw-material bill, the likes of Kraft Foods and Kellogg are likely to emphasise their ability to increase prices.
Nonetheless, competition in some categories remains fierce – ConAgra Foods, for instance, operates in sectors where promotional activity is high and private label is stronger – so protecting profits is not simply a matter of raising prices. Expect cost savings, then, to be a key feature of many a company’s presentation at CAGNY as they set out plans to deal with the latest spike in costs. And, in the run-up to the event, analysts have flagged issues such as innovation and further investment in emerging markets as likely topics of discussion. just-food will again be covering the event – which starts tomorrow (22 February) so check our news and insight pages for more throughout the week.
One company set to feature at CAGNY is Campbell Soup Co., a company that continues to see its core business – its domestic soup operations – struggle. On Friday, Campbell again cut its targets for annual sales and profits after its US soup division suffered during the first half of the company’s fiscal year. Campbell discounted heavily but admitted the price cuts had not increased volumes sufficiently, with sales revenue falling.
“The overall competitive environment remains challenging throughout the food industry, particularly in the US,” Campbell president and CEO Doug Conant said. “Three of our four segments are growing earnings. We have an issue here in the US and we are on it. We can and will do better.”
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataRetail watchers in the US will be keen to see if Wal-Mart Stores did any better in its fourth quarter when the company publishes its quarterly and annual results on Tuesday. Wal-Mart has seen same-store sales in the US fall for the last six quarters but analysts are not sure the most recent quarter would have put an end to that run. In any case, the size of Wal-Mart means the retailer’s numbers will be closely scrutinised for any insight into consumer confidence in the US, while outside the country, Wal-Mart watchers will be keen to say how its international operations, particularly in the UK (with Asda) and Japan are performing.
Intriguingly, Wal-Mart was named as a possible interested party in last week’s big M&A story in our sector. The company was cited as a possible rival suitor for US discounter Family Dollar Stores, which has received an unsolicited takeover bid that could be worth up to US$7bn from activist investor Nelson Peltz.
Those in global food manufacturing would have heard of Peltz – in recent years, he has ruffled feathers at Heinz, Cadbury and Kraft Foods – and now it seems he and his investment vehicle Trian Fund Management – have their sights on Family Dollar, the retailer than runs over 6,800 stores in 44 states.
Peltz’s Trian fund owns around 8% of Family Dollar and bought its first shares in the business last summer, when it indicated that it saw room for improvement at the retailer. Family Dollar has said little about Peltz’s approach and will have a fiduciary duty to consider the bid but analysts believe the retailer’s management will look to keep the business independent.
The jury is out over whether a rival bidder could emerge. Some believe fellow discounter Dollar General could table an offer while Wal-Mart has been touted as “a more likely strategic buyer” by an analyst at BB&T Capital Markets. Anthony Chukumba said the likelihood of Wal-Mart launching a bid “was fairly low”, pointing to its traditional preference for overseas acquisitions. Nonetheless, he argued that a move for Family Dollar could give the retail giant “immediate scale in small-box retailing”, where it has endured “a lack of traction”.
There is, however, greater focus on what Peltz and Family Dollar’s board will do next. Peltz could be looking to pressure the Family Dollar board into greater and faster change but nothing can be discounted.
