In the recession of recent days, the packaged food industry plans to minimize the economic loss through restructuring and cost saving measures. As of now, the economy is coming out of recession; companies in the packaged food industry are likely to grow their business by acquisitions, innovations, and emerging markets at a global level.
Many other factors are involved in fueling the growth for this industry. This industry is predicted to see constant growth. This is because a growing demand for each product is boosting overall food-packaging demand. On the whole, the market demand is led by beverages, meat products, and snack foods.
Additionally, restaurants, particularly quick service casual restaurants, which use pre-packaged items and portion control products, will drive growth in demand. Though, take-out establishments, restaurants, and beverages are using over 75% of food service packaging.
In this article, I picked three star companies operating in this industry. These are Kraft Foods Group Inc (NASDAQ:KRFT), Kellogg Company (NYSE:K) and General Mills, Inc. (NYSE:GIS). These three companies are generating increasing profits year after year. All three companies are making smart moves to generate sustainable growth. Let’s dig into each company for sustained growth and consistent returns.
How Kraft is set for big profits
Kraft Foods Group Inc (NASDAQ:KRFT) is one of the best companies operating in the packaged food industry. Kraft Foods has been showing strong growth for investors since its spinoff from its parent company. At the moment, it is offering a quarterly dividend of $0.50 per share. Combined with solid dividends, Kraft is showing a hefty surge in its share price. In the last year alone, its price went up by 25%.
The company is seeking to sustain these returns for investors. To do this, Kraft Foods Group Inc (NASDAQ:KRFT) is making smart moves to generate increasing cash. It is operating under five business segments. At the end of the latest quarter, all of its business segments were generating increasing profits except for the grocery business.
Its solid brands, including Oscar Mayer, Jell-O, Crystal Light, and Maxwell House are providing it a competitive benefit to grow as a key supplier for retailers. Additionally, its focus on new product innovations and emerging markets are fueling growth to its business. In the latest quarterly results, it showed strong organic growth of 2.1%.
On the other hand, its management is also contributing their part to fuel profitability. At the end of the recent quarter, Kraft Foods Group Inc (NASDAQ:KRFT) managed to achieve 9.2% growth in operating margin when revenue growth was near 2%, representing strong management. As a result, Kraft is anticipating generating $1 billion in free cash flows by the end of this year.
I think Kraft Foods Group Inc (NASDAQ:KRFT) is one of the safest companies in the packaged food industry. Its dividend is safe, as the company is generating increasing profits and hefty free cash flows. Along with cost cutting measures, its strong growth in new emerging markets is adding to increasing profits. On the whole, its solid business model and strong management should be able to sustain returns for share holders.
How Kellogg is set for big profits
Kellogg Company (NYSE:K) has been paying regular quarterly dividends over the last 35 consecutive quarters. Recently, it announced an increase in its quarterly dividend by 4.5% to $0.46 per share. Kellogg has been able to increase its payout ratio over the last 10 years and currently is standing at 67%. On the other hand, its share price increased by nearly 30% over the year.
Kellogg Company (NYSE:K) was struggling to generate more sales in the past two years. However, with the recent smart moves, Kellogg is back on track to capture its markets. The management has suspended its buyback program in order to strengthen its product portfolio and improve its balance sheet. To do this, it acquired Pringles and Keebler.
These two acquisitions led it to generate 12% growths in its sales. Additionally, the Pringles purchase is helping it to capture the snacks market.