Milling & Baking News - January 26, 2021 - 26

Stock Market Analysis

Grain-based foods share
price charts
PepsiCo, Inc.
per share

After large gains, food companies seen boosting digital investment

$155

2020

$140
$125
2019
$110
$95
Jan.

March

May

July

Sept.

Nov.

Seaboard Corp.
per share

$4,700
2019

$4,150
$3,600
$3,050

2020

$2,500
Jan.

March May

July

Sept.

Nov.

Post Holdings, Inc.
per share

$125
2019

$110
$95

2020
$80
$65
Jan.

March

May

July

Sept.

Nov.

J.M. Smucker Co.
per share

$130
2020

$119
$108
$97
$86
Jan.

2019
March

May

July

Sept.

Nov.

TreeHouse Foods, Inc.
per share

$71
$61
2019

$51
$41
$31
Jan.

Stepping up their digital game

2020
March

May

July

Sept.

Nov.

Data ended Dec. 31, 2020
Source: New York Stock Exchange
26 / January 26, 2021

Milling & Baking News

NEW YORK - Not only will the surge of digital sales by food companies that occurred in 2020 extend
into the future, but it will propel them to invest in staff to become more sophisticated in their use of
analytical tools, said Robert Moskow, an analyst at Credit Suisse, New York.
" It forces these big companies to develop higher tech, big data analytics experts and e-commerce
experts internally, " he said. " I think there is going to be an ongoing need from these big companies
for highly skilled tech experts because they need to be as
strong and knowledgeable as their customers like Kroger
and Walmart into how to create a seamless omnichannel
environment. The vendors are going to have to continue to
shift more dollars in that direction so that they can participate in the retailers' omnichannel world. "
The data will better allow food companies to understand how shoppers are behaving, providing valuable insights they will be able to share with retailers.
" So far I've actually been pleasantly surprised that big
companies with big brands tend to have very good virtual shelf space in e-commerce, e-retailing sites, " he said.
" That is pretty different from the risk that was posed to
them by an unlimited shelf. When people started worrying
about Amazon entering the food industry, the concern was,
well, this will lower the barriers to entry for a lot of small
brands. But when you actually look at how the marriage
of digital retailing and brick-and-mortar has progressed, ©ONEPHOTO - STOCK.ADOBE.COM AND INSTACART
what you really see is when you go on these sites you shop
by category and the first page is all big brands because they are the most popular brands. And the
owners have big marketing budgets to get shelf space similar to what they would get in a physical
store. So I think all these big companies recognize that they need to keep pushing dollars into that
direction to keep pace with how the retailers set that environment up and the importance of being
first in consumer searches. " MBN
said Flowers is a leader in categories
within bread that are more attractive than
salty snacks.
" I think they get penalized because
they are in the bread category, which is
thought to be low growth and nothing
happening, " he said. " That's far from reality. I really like Flowers. "
Another grain-based company ranked
as " outperform " at Sturdivant is MGP
Ingredients, Inc., Atchison, Kan. While it
is MGPI's distillery segment that is " bigger and sexier, " it is the specialty proteins
and starch businesses that have been
growing rapidly, Mr. Pinheiro said.
The ingredient business has " really been
the standout performer and has really driven their earnings performance, " he said.
" They are in absolute right categories -
higher fiber trends and for higher proteins. "
Not only have sales been strong in the
specialty ingredient market, but profit
margins have widened to the high 20s
from the high teens, Mr. Pinheiro said.
The company's distillery business continues to drive MGPI's stock price, particularly following a controversy over a company strategy to age its liquor inventory in

the expectation of generating higher prices
for it in the future, Mr. Pinheiro said. The
strategy has been playing out largely as
management projected, he added.
" I think investors are beginning to understand it better, " he said.
With many newer, smaller companies
gaining market share in different parts of
the food business, Mr. Moskow said large
consumer packaged foods companies are
likely to be active acquirers in the year
ahead and beyond.
" They're going to try to use their balance sheets to buy the fast-growing
brands, " he said. " I think big companies
are strangely less comfortable developing startups on their own. I don't know
if that's the right word. These big companies are very financially conservative
when it comes to taking and developing
an early-stage startup. What they would
rather do is buy one that's been successful for a period of time and can benefit
the most by leveraging the big company's
distribution scale or manufacturing scale.
For example, General Mills buying Blue
Buffalo and Annie's. " MBN
- L. Joshua Sosland
bakingbusiness.com / world-grain.com

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

Milling & Baking News - January 26, 2021

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