Kraft also owns a strong brand portfolio including Maxwell House, Capri Sun, Jello, Planters, Oscar Meyer and others. The company has more than 50 product categories and its top 12 categories account for approximately 70% of the revenue. These strong brands along with Kraft’s dominating market share bode well for the company in delivering strong financial performance in the future. As the company operates in a mature and competitive industry, product innovation is the key to fuel top and bottom-line growth.
A look at competitors
ConAgra Foods, Inc. (NYSE:CAG) is a manufacturer of branded food products and ingredients. The company has two main operating businesses; Consumer Foods and Commercial Foods. It seems the worst is priced into the stock and recently the company has done a good job in product innovation and increasing the advertisement budget to strengthen brand image and consumer loyalty. Going forward, the company might opt for strategic acquisitions and restructuring to fuel growth and improve efficiency. Restructuring efforts aimed to improve efficiency is believed to be an important stock price catalyst for ConAgra as it has lower margins in comparison to its industry average (as shown in the table above).
ConAgra has experienced sales growth of 4.8%, EPS and dividend growth of 3.25% and 5.70%, respectively, in the last five years. Moreover, the analysts are forecasting a healthy growth rate of 12% per year for the next five years. Other than strong growth prospects, the company offers a decent dividend yield of 3%.
The Hershey Company (NYSE:HSY) manufactures, distributes and sells its confectionery and grocery products. The primary markets where the operations of the company are focused on are Canada, Mexico and the U.S. Among the popular products offered by Hershey are Hershey’s chocolate, Jolly Rancher and Twizzlers candies. The company has the leading position in the U.S. chocolate market which is expected to fuel earnings growth in the longer term. Moreover, the company has been spending aggressively, approximately 6% of annual sales, on advertisement that will prove beneficial for the company. Hershey has been also undertaking manufacturing realignment program, which is expected to result in annualized savings of $60 to $80 million by 2014.
Hershey has registered sales, earnings and dividend growth of 6.1%, 25% and 6.5% respectively in the last five years. Analysts are expecting Hershey to deliver earnings growth of 9.5% per annum over the next five years. Other than healthy growth projections, the company offers a decent dividend yield of 1.90%.
Food and beverage companies with significant developed market exposure are focusing on restructuring, product innovation and strategic acquisitions to fuel growth in the longer term. This is mainly due to the mature and competitive nature of the industry. Also, these food and beverage companies offer decent dividend yields.
Among the companies mentioned above Kraft Foods Group Inc (NASDAQ:KRFT) offers an attractive investment opportunity due to the factors outlined above.
Faizan Chudhry has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article Kraft: Best Positioned in Food and Beverages Industry originally appeared on Fool.com.
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