Milling & Baking News - December 29, 2009 - 9

Business 

Fitch Ratings sees value-conscious
consumers benefiting food industry
CHICAGO - Better profit margins for
food companies are likely in 2010 even
as consumers remain value conscious
when making food purchase decisions, according to an outlook from
Fitch Ratings.
"Looking ahead at 2010, the outlook
for the packaged foods companies
remains stable as we expect positive
free cash flow (cash flow from operations less capital expenditures and
dividends), conservative capital structures and ample liquidity," said Judi
Rossetti, director at Fitch. "Moderate
input cost inflation, cost savings from
productivity initiatives and pruning
of low-margin products should allow
investment grade packaged food companies to expand margins in 2010."
The ratings service forecast sales
growth in the sector to be in the low
single-digit range in 2010, driven mainly by a slight rebound of volumes.
"Volumes should improve as higher pricing abates, s.k.u. (stock-keeping unit) rationalization slows and

volume comparisons from the prior
year get easier," Fitch said. "However,
if volume growth is slow to return,
sales growth may hover near zero."
Fitch said it expects food service
volumes to remain "lackluster" due to
adverse restaurant industry trends.
In terms of acquisitions, Fitch said
packaged food companies may use
positive free cash flow for small bolton acquisitions and/or share repurchases in 2010. Debt reduction, on the
other hand, is not likely to be a high
priority, Fitch noted.
"Investment grade packaged food
companies have ample access to credit
and may shift to a less restrained attitude toward share repurchases and
merger/acquisition activity," Fitch
said. "However, if companies engage
in significant M.&A. activity, such as
Kraft Foods' potential acquisition of
Cadbury P.L.C., share repurchases will
need to be put on hold until leverage is
more appropriate for the rating level."
Competition is expected to remain

Tasty Baking adds cupcake and cookie bar lines at Navy Yard site
PHILADELPHIA - Tasty Baking Co.
has shifted two additional production
lines to its bakery within the Philadelphia Navy Yard. The cupcake line and
cookie bar line join a pie production
line that was commissioned in early
November.
With its progress on the transition
moving smoothly, Tasty Baking said it
expects the full transition to be completed by spring 2010 rather than
summer.
"We are pleased to now have three of
the seven production lines successfully

operating at the Navy Yard bakery,"
said Charles P. Pizzi, president and

Petition concerns safe use of vitamin D2 bakers yeast
WASHINGTON - Lallemand, Inc., Montreal, has filed a petition proposing that the
food additive regulations be amended to
provide for the safe use of vitamin D2 bakers yeast as a dual purpose nutrient supplement and leavening agent or dough relaxer

in yeast-containing baked products, according to a Dec. 17 notice in the Federal Register.
The petition proposes to amend the food
additive regulations in part 172 "Food Additives Permitted for Direct Addition to Food
for Human Consumption" in the Code of

Cargill to acquire Goodman Fielder edible fats and oils unit
MELBOURNE, AUSTRALIA - Cargill has
reached agreement to acquire the commercial edible fats and oils business of Goodman
Fielder for A$240 million ($220 million).
The transaction would include the
commercial business' four fats and oils
refining assets located in West Footscray
10 / December 29, 2009 Milling & Baking News

in Melbourne, Murarrie in Brisbane, Bunbury near Perth and East Tamaki in Auckland, New Zealand.
"The operations refining footprint complements our existing state-of-the-art edible oil refinery in Newcastle near Sydney,"
said Bram Klaeijsen, president and regional

intense heading into 2010 as well,
Fitch noted. Food retailers need strong
brands and innovative products to attract customers and spur category
growth, and packaged food companies
that own these brands should be able to
command more pricing power and be
exposed to less of a risk of losing shelf
space, Fitch said.
"Companies with high margins for
the sector, including General Mills,
Kellogg, Campbell and Heinz have
greater resources to invest in their
brands to preserve or gain market
share relative to competitors," Fitch
said. "Lower margin companies Sara
Lee and ConAgra have significantly
pared their portfolios in recent years
and are starting to make progress to
improve profitability in their U.S. retail businesses."
The ratings service said it expects
companies to continue to favor temporary in-store promotions and coupons
- as opposed to lower list prices - to
draw value-conscious consumers. In
addition, perceived health benefits,
such as higher fiber, added probiotics and reduced sodium, remain a key
buying point for consumers. MBN

chief executive officer of Tasty Baking. "This significant capital project
will provide operational efficiencies
and product innovation opportunities
not currently available in our Hunting
Park facility. Although the commercial
production of cupcakes and cookie
bars in the new facility is an exciting
milestone, the continuing start-up,
commissioning and transition period
will likely impact ongoing operating
results. Until fully commissioned, we
expect to experience incremental production waste, transportation, training
and labor expenses." MBN
Federal Regulations. Neither an environmental assessment nor an environmental
impact statement is required because the action is of a type that does not individually or
cumulatively have a significant effect on the
human environment, according to the Food
and Drug Administration. MBN
director, Cargill Asia-Pacific. "This acquisition will provide Cargill with national Australian and New Zealand manufacturing
and supply capabilities."
The transaction also would include a
10-year supply agreement under which
Cargill would supply refined fats and oils
products to Goodman Fielder. MBN
bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - December 29, 2009

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