(FROM THE WALL STREET JOURNAL 2/13/15)
By Annie Gasparro
Several top U.S. food makers served up grim financial news and
disclosed leadership changes on Thursday, highlighting the
industry's struggle to adapt to shifting consumer tastes and global
economic challenges.
The wave of bad news battered shares in Kellogg Co. and Kraft
Foods Group Inc., which reported losses -- in part on charges --
for their latest quarters and hit Campbell Soup Co. and ConAgra
Foods Inc., which lowered their earnings outlooks for their current
fiscal years.
Kraft, which unexpectedly named a new chief executive two months
ago, said several other top executives are leaving, including its
chief financial officer and a senior research-and-development
official. ConAgra named a replacement for Chief Executive Gary
Rodkin, who had disclosed last year-amid ongoing struggles with its
business -- that he would leave this spring.
Kraft -- the maker of Oscar Mayer deli meats, Maxwell House
coffee and Velveeta cheese -- said it hasn't moved quickly enough
to shift its business based on the changes in how Americans eat
today.
"I don't think Kraft has done as aggressive of a job in this
regard as we need to," John Cahill said on Thursday in his first
public comments since taking over as CEO of the Northfield, Ill.,
company in December. Mr. Cahill, who also is chairman, said Kraft
lost market share in 40% of its U.S. businesses last year and was
flat in the rest, though its sales rose 2% last quarter to $4.7
billion. He said Kraft needs to improve the quality of its food and
make its marketing spending and innovation more effective.
Kellogg, the largest maker of breakfast cereal, said persistent
declines in U.S. cereal sales hurt its earnings in the latest
quarter and contributed to its deteriorating revenue outlook as
breakfast blues persist. The Battle Creek, Mich., maker of Frosted
Flakes and Pop-Tarts posted a 7.7% drop in comparable U.S.
morning-foods sales last quarter, while its U.S. snacks fell
3.1%.
"There is no one simple solution to the problem," Chief
Executive John Bryant said in an interview.
Kellogg said it now projects long-term annual revenue growth of
1% to 3%, excluding some items, compared with its previous view of
3% to 4%. Its shares fell 5% on Thursday.
Several of the companies said part of their financial woes
flowed from the strong U.S. dollar, which makes overseas sales less
valuable when converted to their home currency. That sentiment
echoed comments on Wednesday from Mondelez International Inc., the
maker of Oreo cookies and Cadbury chocolate, which said the weaker
foreign currencies delivered a $149 million hit to its operating
income in the fourth quarter.
Campbell on Thursday said currency gyrations were partly to
blame for it lowering expectations for per-share earnings of
between $2.32 and $2.38 for the year ending in August, versus its
previous forecast for between $2.42 and $2.50. It also estimated
sales for the period would be roughly flat. Camden, N.J.,-based
Campbell is scheduled to report its quarterly results later this
month.
Campbell also has said it may need to reshape its portfolio of
brands, which range from its namesake soup to Pepperidge Farm
snacks and V8 juice, in order to achieve long-term growth. The
company acquired Bolthouse Farms juices and Plum Organics baby food
in recent years, hoping to get a piece of the fresh-food pie. Last
week, it announced a new line of organic soups.
Big packaged food companies have been wrestling for years with
diminished demand for established products from consumers
increasingly interested in items deemed healthier or more natural.
Kraft and Campbell are in the midst of reorganizing their
businesses to cut costs, and Kellogg and General Mills are closing
factories and laying off employees in light of weaker demand for
their food.
ConAgra, which makes Chef Boyardee canned foods and is the
largest U.S. maker of foods for supermarket brands, said Sean
Connolly will replace Mr. Rodkin atop the Omaha, Neb., company in
April.
Mr. Connolly, who was CEO of Hillshire Brands Co. before its
acquisition by Tyson Foods Inc. in August, takes on the challenge
of trying to fix a major acquisition gone wrong. ConAgra acquired
private-label food maker Ralcorp two years ago and said Thursday
the problems with that business -- tough competition forcing it to
drive down prices and customer-service issues -- are one reason
that it has lower earnings expectations for the year.
ConAgra said Thursday it expects comparable earnings of between
$2.13 and $2.18 a share for the fiscal year ending in May.
Previously, it expected a mid-single-digit percentage per share
gain over last year.
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