The confectionery industry belongs to the consumer goods sector which is largely slow-paced compared to other industries. With the economic environment in the United States becoming more favorable, confectionery companies can expect upside in their sales in this region. However, this is not the only factor that is going to make these companies good investment opportunities. Most of the companies in the consumer goods sector have global profiles, and thus, they should be analyzed on their global outlook.
Three companies which are the major representatives of the confectionery industry of the United States are Mondelez International Inc (NASDAQ:MDLZ), The Hershey Company (NYSE:HSY) and Tootsie Roll Industries, Inc. (NYSE:TR). These companies produce sweet goodies, but can they really produce some sweet results for your portfolio? Let’s analyze which one of them has this potential.
Mondelez’s unclear path
Mondelez International Inc (NASDAQ:MDLZ) is a well-known manufacturer of snack foods and beverages with worldwide operations. The company has a diverse portfolio of products, which includes biscuits, chocolates, gums, candies, powdered drinks, cheese and other grocery products. The brands that we use every day, such as Oreo, Nabisco and Cadbury all come under the Mondelez family. The company was born when Kraft Foods changed its name to Mondelez and spun off its American operations as Kraft Foods Group Inc (NASDAQ:KRFT). Mondelez is, therefore, totally focused on the international markets.
Mondelez International Inc (NASDAQ:MDLZ) revenue (TTM) is only 0.9% higher than the company’s 2012 revenue. This is a dangerous slowdown as the already mentioned change in the company’s focus on its international division should have shown some positive results. The net income and EBITDA figures for the company have decreased in the 2012-TTM period.
The company’s portfolio of products should not be overlooked, as globally they rank number one or two in their respective markets. The company is hopeful of a recovery in its performance due to the improving metrics in the emerging markets. In these countries the company’s snacks categories are growing at high single digit/double digit figures.
News is that PepsiCo, Inc. (NYSE:PEP) might acquire Mondelez International Inc (NASDAQ:MDLZ) in order to diversify itself further. At present, though, the company’s future outlook is flat.
Hershey’s strong business model
The Hershey Company (NYSE:HSY) is the largest manufacturer of chocolate in North America. The company also produces other confectionary products, gums, and mint refreshment products. The company’s revenue has been increasing steadily since 2008.
I believe the company has some solid potential for growth. Firstly, the company has developed iconic brands that are known worldwide for their superior quality.
Second, the company reported an increase of 5.7% in its candy, mint and gum retail sales, when the participants in this category reported an average increase of 3.5% in the same period. This is why 46% of the growth in this category was attributable to The Hershey Company (NYSE:HSY).
Third, The Hershey Company (NYSE:HSY) has a dedicated sales force, which deals with the company’s different retail channels, such as the food, large mass and convenience stores.