GLG News by CPG Consultants

Rick SheaPresidentShea Marketing Consulting Inc.

Ralcorp to Purchase Post cereals ?

November 5, 2007

Analysis of:Kraft Near Deal to Sell Post to Ralcorp | biz.yahoo.com

Ralcorp's potential pucrhase of Post cereals for $2.8 billion dollars will shake up the cereal category and provide another stronger competitor to General Mills and Kellogg's.The winner will be Ralcorp if they can successfully integrate Post and leverage their brands to strengthen their private label sales.The losers will be Malt-O-Meal and Quaker as both brands will be under further pressure in a consoildated category.  For Kraft Foods it means their divestiture strategy will speed up and provide them additional dollars to pursue acquisitions.Kraft's growth startegy is predicated on shifting their portfolio to focus on more international growth and focusing on the key snacks,beverages and possibly confections in markets outside the US.

Rick SheaPresidentShea Marketing Consulting Inc.

Are All Food Companies Hostage to Commodity Prices in 2008 ?

November 2, 2007

Analysis of:Kellogg's 3Q profit up,warns on 2008 | biz.yahoo.com

Wheat prices are up 100% in 12 month's. Dairy prices continue to climb, increasing the costs of most food manufacturers.Is this a temporary phenomenon or is food inflation here to stay ?  Both Kellogg's and Kraft have provided disappointing guidance in the last few weeks blaming wheat and dairy along with other commodity prices as the chief culprits.Does this mean all food companies will underperform for the next year or two ? What companies are best positioned to withstand the increasing cost pressures ?

Rick SheaPresidentShea Marketing Consulting Inc.

Can food companies survive the large increases in commodity costs ?

October 24, 2007

Analysis of:Kellogg's downgraded by Citigroup | www.marketwatch.com

Commodity cost increases (wheat,corn,oil,sugar) are causing havoc with food and CPG companies bottom lines.The significant upward pressures of wheat (+100% latest 12 months) specifically impact all cereal,baking, pasta and many other food companies profits. The key questions surrounding these increases include: 1) Are companies able to take pricing to offset this increase in costs? 2) What companies will benefit the most and be hurt the most by rising commodities ? 3) What impact will it have on consumer sales if companies pass through the cost increases? 4) What % of their total P & L is tied to commodities and can they offset the increases with savings and productivity in other places ?

Rick SheaPresidentShea Marketing Consulting Inc.

Will Wonder Bread Survive?

October 11, 2007

Analysis of:Interstate Bakeries Says Unions Only Looking Out For Their Own Interests | www.topix.com

Interstate Bakeries and its unions are locked in a negotiating stalemate  over employee jobs and compensation.Specifically, IBC's management is looking for job cuts and lower costs from the unions to make the company more cost competitive.The unions obviously are seeking to minimize impact on its members and disagree with IBC's strategic plan to reorganize the company.The results will likely determine if IBC can survive and exit bankruptcy.

Rick SheaPresidentShea Marketing Consulting Inc.

Where's Kraft Foods Volume Growth ?

September 14, 2007

Analysis of:Kraft Boosts Outlook | biz.yahoo.com

Kraft Foods has reported some progress in their recent quarterly earnings but the jury is still out on whether they can show sustainable sales and growth.Kraft has underperformed its food company peers over the last few years primarily because they have gotten away from what made them successful: new products and innovation and world class marketing.  If you look at what's been successful in the last few years in CPG food its been competitors & retailers embracing the natural & organic food trend and stronger focus on catering to the alternate channels (Walmart,Target,Warehouse clubs and even drug & convenience stores). Kraft has yet to devise a strategy that taps into these growing segments and growing customers.Until they do any volume growth will only be temporary and will be unsustainable. 

Brian StevensonPrincipalB. Stevenson Associates

Dean Foods Company gets hit by Commodity Price increases. Food verses Fuel, the Dean stockholders suffer.

June 12, 2007

Analysis of:Dean Foods Cuts Profit Forcast; Stock Slumps | news.moneycentral.msn.com

1.  Consumer Product Goods companies are at risk for commodity price increases even if they are not directly involved in the basic commodity businesses. 2.  In this case, Milk is the Produced article which is "manufactured" by cows eating basic commodity ingredients. 3.  Companies like this need to devise hedging strategies to protect shareholders from the risk of basic commodity price increases 4.  Just as importantly, pricing at the retail level is hard to get.  The consolidation of food retailers will only continue.  These massive buying agencies are not going to allow pricing easily.

Brian StevensonPrincipalB. Stevenson Associates

Food Verses Fuel, how does it affect Company Valuations

February 23, 2007

Analysis of:Food versus fuel: is a happy ending possible? | www.bakeryandsnacks.com

1.  The demand curve for Grains in the world is shifting to the right.  How much we do not know.  The market has not found a place where usage is rationed.

2.  Many CPG food companies will suffer in the short term while Big Box Retailers hold the line on price increases.

3.  We as consumers can count on food "inflation" in the next year and as long as the market has to search for a rationing price level.

Brian StevensonPrincipalB. Stevenson Associates

The New CEO is not the only News at IBC

February 1, 2007

Analysis of:I.B.C. names Jung, former PepsiCo exec, as new c.e.o. | www.bakingbusiness.com

 

• IBC asks the court to extend the DIP
• MOR for 4 weeks ending Dec 16 is reported
• Jung gets real incentives to turn the company around

Brian StevensonPrincipalB. Stevenson Associates

Expect Margin Squeeze for users of Corn for Food and Ethanol- Likely Negative Earnings Impact

January 17, 2007

Analysis of:Corn rallies to contract high as USDA cuts crop outlook | custom.marketwatch.com

 

• Corn Prices now top $4.00 per bushel, Ten year average is $2.10 to $2.30.
• Year ago prices were $2.25 to $2.50 per bushel.
• Pricing at the Big Box Retailers is hard for CPG companies to get.
• The best margins in the Ag Industry are still in Ethanol however even some of those companies will begin to feel the pinch.
• Firms that feed corn to animals will likely be most threatened.
• Corn prices affect other commodity prices like wheat and soybeans.

Brian StevensonPrincipalB. Stevenson Associates

Commodity Prices and Reduced Pricing Power takes its toll

October 31, 2006

Analysis of:Coke Enterprises profit hit by costs; lags view | today.reuters.com

• High Fructose Corn Syrup Prices go higher as its input Corn competes with Ethanol Production
• The demand for Corn by Ethanol producers has shifted the Demand Curve out for Carbohydrate commodities like Corn
• Corn planted Acres are at risk for next year as Wheat prices encourage farmers to plant wheat in fringe areas of Corn country.
• Price volatility is expected to continue and perhaps increase into next year as yields get pressure to supply enough corn for all uses next year.
• Margins for HFCS production will remain firm as those streams continue to compete with corn streams going into ethanol.

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