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Big Food Faces Pressure as Consumers Seek Fresh Meals, Snacks
| cracking pocket flask | 02/17/18 |
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Date: February 17th, 2018 8:30 PM Author: cracking pocket flask Big Food Faces Pressure as Consumers Seek Fresh Meals, Snacks Kraft Heinz, Campbell Soup and J.M. Smucker each reported tighter quarterly gross margins Kraft Heinz, maker of Jell-O pudding and Oscar Mayer deli meat, said Friday that fourth-quarter comparable sales inched down 0.6% globally. Kraft Heinz, maker of Jell-O pudding and Oscar Mayer deli meat, said Friday that fourth-quarter comparable sales inched down 0.6% globally. PHOTO: CANDICE CHOI/ASSOCIATED PRESS By Annie Gasparro Updated Feb. 16, 2018 12:52 p.m. ET 27 COMMENTS Major food makers on Friday said they remain under pressure in the U.S. as consumers turn to healthier meals and snacks.
Kraft Heinz Co. KHC -2.63% , maker of Jell-O pudding and Oscar Mayer deli meat, said its comparable fourth-quarter sales slipped 0.6% globally, including a 1.1% drop in the U.S.
“Our financial performance in 2017 did not reflect our progress or potential,” said Kraft Heinz Chief Executive Bernardo Hees. “We had a slow start, some missteps along the way.”
He said Kraft Heinz would move faster this year to meet changing consumer preferences. Campbell Soup Co. CPB -3.21% and J.M. Smucker Co. SJM 1.48% said some of their sales trends in the U.S. also remain weak, meaning a rough start to the new year.
Food makers have struggled to adapt as Americans swap boxed and canned foods for fresher options, while also eating more snacks and fewer full meals. Nestlé SA on Thursday said sluggish demand for its food in the U.S. last year led to its slowest sales growth in decades.
“This was a difficult quarter,” Campbell Chief Executive Denise Morrison said. Sales of Campbell’s fresh-food products like Bolthouse Farms juice languished along with the company’s mainstay soups, which have struggled to maintain sales momentum for years.
“We know that consumer preferences for fresh and healthier food continues to be strong,” Ms. Morrison said, adding that management is “acting with urgency” to transform Campbell into a health-oriented snacking company.
Campbell’s comparable sales fell 2% in the recent quarter, as U.S. soup sales dropped 7% after the company lost a promotional deal with Walmart Inc. In December, Campbell said it would buy snack company Snyder’s Lance Inc. for $6.1 billion, including debt, the largest deal in its history.
Smucker, which besides its fruit spreads owns Jif peanut butter, Folgers coffee and Milk-Bone dog treats, said coffee and pet-food sales were stronger in the quarter, while its Pillsbury and Crisco brands struggled.
The company reduced marketing spending on some brands like Crisco “in order to invest where we really think we can get the biggest bang for our buck,” said Chief Executive Mark Smucker. “It helps consumers to regain trust in Big Food.
Smucker’s sales rose 1% overall, despite a decline in its U.S. consumer-foods segment.
Shares in Kraft Heinz and Campbell dropped 3%, while Smucker’s shares rose 1.5%.
Kraft Heinz said it plans to invest up to $300 million this year to market its products more effectively and to launch fewer, higher-quality products. Planters nuts, Oscar Mayer meat and natural cheeses led the company’s sales declines in the recent quarter, offsetting growth in sales of macaroni and cheese, Capri Sun drinks and Lunchables snacks.
Kraft Heinz, Campbell and Smucker also said higher trucking costs are hurting profit margins. Analysts said grocery stores might be adding to the cost pressures by pushing food makers to lower prices and by adding fines for late deliveries.
In recent years, disappointing sales trends have led to cost-cutting, and Kraft Heinz, a merger created by Brazilian investment firm 3G Capital LLC, has earned a reputation for efficiency.
Led by 3G Capital executives, Kraft Heinz has stripped $1.7 billion from annual spending by closing factories and cutting back on corporate expenses like executive travel. Profitability has risen as a result.
But analysts expected the company to report a higher margin on Friday.
Kraft Heinz’s Mr. Hees said in a presentation released late Thursday that weak sales and other challenges in the U.S. will drive more consolidation among food makers. He hinted that Kraft Heinz might do more deals to build on its own 2015 merger.
Mr. Hees said on Friday that Kraft Heinz is still looking to buy companies with strong brands that can expand internationally. Stock-market valuations of food companies “are more attractive than they were even two months ago,” he said.
“If there will be more forces of consolidation in the industry,” he said, “we would like to be one of them.” |