Milling & Baking News - January 26, 2021 - 24

Stock Market Analysis

investor growth profile. That's been the investor tension around these companies. "
Mr. Pinheiro also sees as a major question mark hanging over the food industry

the degree to which changed consumer
behavior will persist after the pandemic.
While he expects foodservice to rebound
as the pandemic resolves, Mr. Pinheiro

Farha Aslam sees strong interest in
private food venture markets

FARMER'S FRIDGE

NEW YORK - The investment environment for the food sector is far more dynamic than may be understood by looking at public markets alone, said Farha Aslam, managing partner, Crescent House Capital.
While the indifferent share price performance of publicly traded food companies in 2020 could
suggest a lack of excitement, she said investor enthusiasm in private businesses related to food and
agriculture has never been stronger.
" Private markets in food are far more vibrant than people realize, " she told Milling & Baking News.
" There is great interest in investing across the food and agribusiness supply chain - to make it more
efficient and modernize it. "
The agrifood technology sector is experiencing an influx of capital as investors partner with innovators to address the industry's challenges, including those caused by the COVID-19 pandemic, climate
change and global trade wars, she said. In the first three quarters of 2020, startups in the sector
raised a record $11.6 billion in funding.
As a longtime stock market analyst and now as an adviser to
private startup ventures Ms. Aslam's career has spanned both
worlds. She said her work at Crescent House focuses on corporate strategy and governance to help companies grow. Among
companies she is partnering with are Saffron Road, a Stamford,
Conn.-based maker of frozen natural meals and snacks, and Chicago-based Farmer's Fridge, which sells fresh meals and snacks
through vending machines. She is also a board member at PSSI,
Kieler, Wis., a provider of food safety and sanitation services.
She remains connected to the publicly traded sector as a corporate director on the board of Pilgrim's Pride Co., Greeley, Colo.,
and Calavo Growers, Santa Paula, Calif.
Ms. Aslam highlighted a handful of trends she said are driving
change across the food industry:
* Consumer: " Surveys of US consumers also show that consumers are enjoying cooking at home and plan to continue to
have more meals at home following the pandemic, " she said.
" Therefore, my view is that as the US emerges from the pandemic,
high-end restaurants will recover quickly, QSRs will do well, and
Farmer's Fridge is among the grocery retail sales will remain elevated. Middle-tier foodservice
privately held companies Farha offerings, particularly those without drive-thru and delivery options, will likely be challenged. "
Aslam is advising.
* Health and Wellness: Ms. Aslam said health and wellness has
become a priority in the wake of the COVID-19 pandemic with consumers more drawn to products
with nutritional benefits, " particularly items that support the immune system, enhance gut health
and foster a claim headspace. " She said superfoods, probiotics and broths are all gaining popularity.
* Supply Chain: Supply chain is an area of intense interest in the investment community, Ms.
Aslam said, particularly given the strains revealed by the pandemic. " Companies have had to contend
with radically altered consumer demand and purchasing patterns, uncertain raw material availability,
transportation and logistics delays, and significant production disruptions, " she said. " Management
teams are reassessing just-in-time processing, creating more safety stocks and redundancies throughout the production process. Food producers are actively adopting new technologies to better forecast
demand, automate production, and enhance operational flexibility. The changes will likely lead to a
safer, more efficient, and more robust food ecosystem. "
* Digital: Ms. Aslam said automation, artificial intelligence, and digital technologies are increasingly being adopted in order to improve food quality, production efficiency, environmental sustainability and supply chain resiliency.
* Sustainability: While interest certainly predates the COVID-19 pandemic, Ms. Aslam said sustainability is a strategic priority for the food industry. " Companies are setting goals to do more with less,
from packaging to production and distribution, " she said. " There is an effort to decrease food waste,
reduce carbon emissions and employ sustainable packaging. " MBN

24 / January 26, 2021

Milling & Baking News

said, " Eating from home is going to stay
strong for a long time. "
Restaurant traffic will pick up markedly as the pandemic wanes, shifting back
toward 50% of consumer food spending, Mr. Pinheiro said. The likelihood a
significant proportion of the workforce
will continue working from home is an
element that favors consumer packaged
foods companies retaining some of the
gained business, he said.
" I now eat cereal in the morning and
a sandwich at lunch, " Mr. Pinheiro said.
" I'm not going out to Panera necessarily
or somewhere else. "
Ready-to-eat breakfast cereal companies are likely to experience lingering
benefits post-COVID, he said.
Mr. Moskow said another tailwind for
food at home could be economic distress
resulting from the pandemic.
" It's a positive because there are people trying to save money, but it's also a
negative in that they don't have as much
money to spend, " he said.
Among packaged foods companies
Mr. Moskow favors in 2021, Mondelez

'No one wants to overpay
for earnings that are going
to disappear over the next
12 months.'
- Mitchell B. Pinheiro,
Sturdivant & Co.
International, Inc., Chicago, ranked first
because of what he called their globally balanced platform. The company's
emerging markets were weak in 2020 because of the pandemic while developed
markets were strong, including the US
Nabisco business.
" In 2021 I expect those two regions to revert back to the norm, and you should end
up on a net basis pretty much on algorithm
for their 3% to 4% top-line projections for
growth, " he said. " So that I think will stand
out compared to US food companies that
have these huge gains in 2020 and now are
facing one, probably two, years in a row of
declines off of 2020 peak levels. "
He said Nabisco in the United States has
benefited from strong management at the
corporate level and from steps taken to
simplify the business, focusing on innovation. He said the company has capitalized
on the advantages it has by operating a
direct-store distribution system during a
period other companies have exited DSD
in favor of warehouse distribution.
He favors Hershey, too, because of
market share gains the company has
achieved versus Mars, Inc. He said Hershey has a good chance of beating its
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Milling & Baking News - January 26, 2021

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