Milling & Baking News - January 2, 2018 - 21

Stock Market Analysis

results. This notion that it is Amazon
exerting pressure on industry, it's
not in the numbers yet. Whole Foods
had 450 stores. That's less than 1.5%
of the food market."
Meanwhile, Amazon has retrenched in other parts of its food retail initiatives, exiting Amazon Fresh
in several states.
"They're still trying to figure out
the right formula," Mr. Dreyer said.
Mr. Dreyer noted sales of large
brands over-index in e-commerce
versus performance in traditional
brick-and-mortar stores. Still, the
shift in focus toward e-commerce
represents a cost for large food companies presently.
"Companies are investing in online promotion and display," he said.
"They're trying to figure out how
they are going to compete in e-commerce, but they are going to do it."
Looking forward to trends expected to emerge in 2018, Mr. Hundley
said efficiency will be a major theme
for food and beverage companies
in 2018.
"Broadly, I think it's going to be
another year of s.k.u. (stock-keeping
unit) rationalization," he said. "That
has been a major storyline between
2017 and 2018. All major companies have talked about becoming
more efficient. That is playing out
against a situation among retailers
in which grocers are starting to alter their assortment in stores. Target
and Kroger are starting to minimize

Grain-based foods share price charts
Archer Daniels Midland Co.
per share

$48

$52

2017

$43

$34
2016
Sept. Nov.

$28
Jan. March May July

per share

2017
Sept. Nov.

Bunge Ltd.

Bridgford Foods Corp.
$88

per share

2017

$14

$76

$12

$64
2016

$10
$8
Jan. March May July

Sept. Nov.

$52
2016
$40
Jan. March May July

per share

Sept. Nov.

Conagra Brands, Inc.

Campbell Soup Co.
$68

2016

$40

$28
Jan. March May July

$16

per share

$46

$38
$33

B&G Foods, Inc.

$43

per share
2017

$61

2016

$38

$54
$33

$47
$40
Jan. March May July

2017
Sept.

Nov.

2016
$28
Jan. March May July

Sept. Nov.

Mixed bag 'likely once again' in 2018

oing into 2018, Farha Aslam, managing director, Stephens, Inc.,
New York, said a mixed bag is likely once again with a mixture of
winners and losers.
"Companies in the right categories will be well positioned," she said.
"Companies that focus on the periphery of the store, particularly on produce and protein and deli will do well. Companies with strong innovation
such as Pinnacle and B&G Foods will benefit from the growing interest in
frozen. Companies with successful M.&A. programs, for example, Hormel,
will do well."
High on Ms. Aslam's list of promising companies is Calavo Growers,
Inc., Santa Paula, Calif.
"Calavo is an avocado company with a strong presence in guacamole
and a growing business in fresh cut fruits and vegetables as well as meal
kits," she said. "It has done well and is very well positioned with its
supply chain and distribution capabilities to succeed. We believe it will
continue to perform well."
Protein companies also are likely to do well in 2018, she said.
In grain-based foods, Ms. Aslam has a neutral view toward Flowers Foods,
Inc., Thomasville, Ga., but is upbeat about Hostess Brands, Inc., Kansas City.
Flowers Foods has eyed and struggled with the periphery of the

bakingbusiness.com / world-grain.com

supermarket with its acquisition of Alpine Valley Bread Co., one of two
organic bread baking businesses Flowers acquired in 2015. That the second and larger acquisition, Dave's Killer Bread, has done well and Alpine
has struggled does not surprise Ms. Aslam.
"The periphery of the store has its own supply chain, its own buyers,"
she said. "It is a different skill set. As they move in, there is a lot of learning to be done.
"Flowers acquired two organic brands - D.K.B. and Alpine. Alpine
was purchased partially because they had capacity to produce D.K.B. In
that sense, the acquisition has been a success because they got the capacity. Alpine as a brand has struggled because there has been so much
growth and focus on D.K.B.
"They want Alpine in their portfolio. They've recently hired a new chief
marketing officer, and that c.m.o. will look at their whole brand portfolio
and really segment where each brand should play. I think that will help
Alpine going forward."
Tempering Ms. Aslam's view of Flowers has been the "lackluster" performance of the company's core portfolio. She emphasized
efforts by Flowers to invigorate the business through the hiring of Debo Mukherjee as c.m.o. and cost reductions necessary to
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January 2, 2018 / 21

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Milling & Baking News - January 2, 2018

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