Coffee (and other beverages) makes up 17% of Mondelez sales and on June 10 it announced it will begin selling its own coffee pods for the Nestle Nespresso machine, rolling it our first in Western Europe. The company added that despite economic weakness in Europe, Greece and Spain have been big adopters of the Tassimo and coffee pods in general.
Mondelez spun Kraft Foods off last fall and has a lower yield than the new Kraft Foods Group Inc (NASDAQ:KRFT), the domestic food giant. Mondelez kept most of the snacks: Cadbury’s, Oreo, Nabisco, LU biscuits, and Jacobs coffee. It also kept former Kraft CEO Irene Rosenfeld.
The J.M. Smucker Company (NYSE:SJM) is also competing with the new Kraft Foods as well, as it kept Maxwell House, the biggest coffee brand competing with Folgers. Kraft Foods is J.M. Smucker’s most direct competitor, competing on peanut butter, Lunchables vs. Uncrustables, juices, and baking products. Kraft Foods also owns coffees Gevalia Kaffe and Yuban as well as flavored Maxwell House International.
Kraft Foods Group Inc (NASDAQ:KRFT) has a high 3.70% yield (at a 59% payout ratio) but also has the lowest growth with a PEG of 3.21. This was expected since the spinoff that Kraft (no relation) would keep domestic brands and offer yield to attract value investors. Mondelez has the jolt of international and emerging market growth and faster growing snack brands for the mo-mo investor.
Of the three The J.M. Smucker Company (NYSE:SJM) has the highest operating margin at 16.47% to Kraft’s 16.14% and Mondelez’ 11.76%. Comparing apples to apples is challenging with these three as the product mixes aren’t identical but with the lowest dividend payout ratio at 42% J.M. Smucker would be the winner. (Trivia: J.M. Smucker started selling apple butter in 1897.)
All three should benefit from lower coffee bean costs and Kraft and J.M. Smucker from lower peanut costs as well. However Kraft Foods Group is highly exposed to meat and commodity costs.
The final gulp
J.M. Smucker is well positioned to benefit from America’s favorite sandwich, the PB&J as well as a global java addiction. J.M. Smucker can continue its stock’s ascendancy with reliable dividend increases to attract value buyers and new products for growth investors. The company guided higher on the call and basically said all systems go for java.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. AnnaLisa is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Will Java Keep This Pantry Powerhouse Jolting Higher? originally appeared on Fool.com and is written by AnnaLisa Kraft.
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