While Financial Crisis Continues, Food Industry Flourishes

NJBIZ, Oct 6, 2008 by Gaudio, Thomas

NJBIZ's first list of the top food companies in the state comes at a time when things are looking sour for the economy as a whole - but sweet for the packaged food industry.

While the influential financial sector has been in crisis mode, food makers, including Campbell Soup Co., Kraft Foods Inc., Anheuser-Busch Inc. and J&J Snack Foods, are flourishing.

Food manufacturers are a "safe haven in uncertain times" for investors, says Gregg Warren, an analyst with Morningstar, a Chicago based investment research firm. "Their cash flows are stable. When you boil it down, people still have to eat."

Campbell Soup

The Camden-based food company - the largest in the state - is "mmm mmm" profitable. For the six months ended June 30, Campbell had net profits of $1.2 billion on sales of $8 billion, compared to net profits of $854 million on sales of $7.4 billion during the prior-year period. As of Sept. 22, Campbell shares were trading at $37.54, between a 52week range of $30.19 and $39.87.

Campbell sells products under labels that include Pepperidge Farms, V8 and Swanson, alongside its bread-and-butter soup lines.

"Campbell dominates the U.S. wet soup category, with an 85 percent share of the condensed market and a 53 percent share of the ready-to-serve soup market," says David Palmer, an analyst with UBS Investment Research, in a note last month.

Warren says Campbell's $850 million sale of its gourmet Godiva Chocolatier business, to Yildiz Holding A.S., earlier this year was a bid to focus on its core products. Campbell is trying to crack emerging markets like Russia and China with its soups, but the company is facing an uphill battle in those countries, where "soup is traditionally made from scratch in the home," he says.

KRAFT FOODS

The Northfield, 111. -based company, which has a large presence in East Hanover as the state's second-largest company of its kind, made its debut on the Dow Jones industrial average last month after American International Group was booted from the stock index, since it "is one of the world's leading food companies," said Robert Thomson, managing editor of The Wall Street Journal, who oversees the index's makeup.

Kraft had net profits of $ 1.3 billion on net revenues of $21.5 billion for the six months ended June 30, compared to net profits of $1.4 billion on net revenues of $17.8 billion during the prior year. As of Sept. 22, Kraft shares were trading at $33.05, between a 52-week range of $28.04 and $35.29.

The company, whose brands include Oreo cookies and Maxwell House coffee, also is trying to make its mark in the developing world. Kraft's acquisition of Group Danone's biscuits business has resulted in "more exposure in places like China, Russia and Indonesia," Warren says, but taste "tends to be local."

"It's hard to take a branded food product that does well in one country and bring it outside those borders," he says.

E-mail to tgaudio@njbiz.com