Quaker Oats 1999 sales rise 3.5% - Brief Article

Eurofood, Feb 17, 2000

US food and drink manufacturer Quaker Oats reported consolidated sales up by 3.0% to US$949.1bn (??968.5bn) in the final quarter of last year as the business achieved growth in most of its major businesses in its core US market. Once again it was Gatorade, the energy drink, which stole the show with fourth quarter sales up by 26% despite the winter months traditionally proving difficult for soft drinks. The core hot cereal business grew by just 1% -- and that in its conventionally peak season, although a mild winter could be partly to blame.

Over the full year, sales decreased by 2% but rose by 3.5% if the ongoing businesses are examined in isolation. Operating profits from these businesses rose by almost 13% from US$630m to US$710m. Volume sales rose by 7% in the year. The food businesses contributed US$447.1m to overall operating income while sales inched up by 1%. While the Asian operation moved into profitability and business in the US and Canada showed a small increase, the news was not so promising in Latin America, where profits declined by 7.1% to US$26.2m after a bruising currency devaluation and recession in Brazil and, to a lesser extent, Colombia.

Gatorade showed robust growth during the year with operating profits up by 13% to US$263m on sales worth US$1.84bn, up by 7% from US$1.7lbn in 1998. Quaker said that this reflected robust growth in the US and Canada, which accounted for 82% of worldwide sales, offsetting a 14% decrease in Latin America which accounted for 12% of sales. As chief executive officer Robert Morrison said, "Gatorade is a key driver of growth in our portfolio, representing nearly 40% of Quaker's total sales and operating profits. We're fuelling this brand's profitable growth with product innovation, expanded distribution, added manufacturing capacity and aggressive cost management initiatives."

Not that Quaker is devoting all its energies or funds to drinks -- see page 12 for news of a functional foods joint venture the group has set up with Novartis.

Quaker Oats, Q4 and full year 1999 results (US$m)

                                             Q4
                               1998         1999        % /-

Net sales
Foods:

US and Canada                  550.9        560.6        1.8
Latin America                   92.4         80.9      -12.4
Other(*)                        58.6         57.3       11.4
Total food                     701.9        898.8       -0.4

Beverages                      219.3        250.3       14.1

Overall total(1)               921.2        949.1        3.0

Operating profit (loss)
Foods:

US and Canada                  115.0        105.1       -8.6
Latin America                    6.5          9.4       44.6
Other(*)                        -2.1          0.7        n/m
Total food                     119.4        115.2       -3.5

Beverages                      -32.2        -32.6       -1.2

Overall total(1)                87.2         82.6       -5.3

                                         Full year
                                1998       1999        % 1-

Net sales
Foods:

US and Canada                 2 274.1     2 359.5        3.8
Latin America                   372.9       308.4      -17.3
Other(*)                        202.9       215.4        6.2
Total food                    2 849.9     2 883.3        1.2

Beverages                     1 709.0     1 835.2        7.4

Overall total(1)              4 558.9     4 718.5        3.5
Operating profit (loss)

Foods:
US and Canada                   369.8       399.8        8.1
Latin America                    28.2        26.2       -7.1
Other(*)                         -1.2        21.1        n/m
Total food                      396.8       447.1       12.7

Beverages                       214.9       253.9       18.1

Overall total(1)                629.9       710.2       12.7

Source: Quaker Oats. Note: (*) Other includes European and Asia/Pacific results, n/m = not meaningful. (1) Ongoing businesses