Hindsight, they say, is 20-20. But a review of recent financial statements from the food and beverage industry shows that things don't seem any clearer at the end of earnings season than they did at the beginning.
The entire industry, it seems, is in flux. Tastes are changing. Weather seems to grow less predictable. Currency and commodity markets are riskier than usual.
Here's a look at some of the more interesting trends stemming from this earning season.
Size doesn't matter
Once upon a time, being one of the giants of the food world ensured a sort of stability. People knew your products, and they bought them. If competitors emerged, you could beat them back with massive marketing spends. Or, if you preferred, you could buy the newcomer and merge it into the empire.
That's not true anymore, and recent earnings reports from some of the big boys in the industry make that clear.
ConAgra kicked off the most recent earnings season with a poor performance that fell short of expectations ... again. The beleaguered owner of brands such as Chef Boyardee, Healthy Choices, Reddi-Wip, Swiss Miss, Pam, Banquet, Jiffy Pop, and more said sales in its consumer unit fell 7%. Within weeks, the Omaha-based company announced that its CEO would step down next year.
Kellogg said its profit fell, and it warned of more trouble ahead. Mondelez reported a drop in sales, and also warned that the future wouldn't be as rosy as hoped.
And the bad news wasn't limited to U.S. companies. France's Danone said its sales fell 5.3% in the first half of the year, largely because of the continuing fallout from the false-alarm recall of baby formula in Asia.
And Nestle, which makes more money from food sales than any other company on earth, said organic sales fell 4.8% in the first half.
Cash is king
The world's biggest meat company, Brazil's JBS, reported a staggering 32% jump in revenue in the most-recent quarter. But it was all for naught. The company said finance expenses -- particularly losses from currency hedges -- totaled $440.3 million. When the numbers were added up, JBS reported a 25% drop in net income.
SABMiller has also had currency problems this year. Although the global brewer seemed to have no major currency problems in Q2, it warned that full-year losses attributable to currency markets would slash about $400 million from Ebitda. It was a similar story for global supermarket conglomerate Royal Ahold, which cited a weak U.S. dollar when it reported a 29% drop in net profit for the quarter.
In fact, the wisest course of action for food companies appeared to be cutting costs, rather than trading currencies or selling goods. Heinz swung to profitability despite a 4% drop in revenue, as the ketchup company continued to slash expenses.
Back to the futures
About the only thing crazier last quarter than the world's currency markets were the world's commodities futures markets.
For companies such as ADM, that worked out well. The agriculture-processing giant said its net income doubled, as the company wound up on the winning side in futures trades.
Profit also doubled at rival Bunge. There was a lot of good news in its earnings statement, but the most important factor was that the company avoided the futures losses that hurt it so badly in the prior quarter.
It was quite a different story for rival Cargill, which said its net income dropped 12% in the quarter.
It's a small world, after all
In a global economy, everything is connected. And earnings from the most recent quarter proved that.
First, the World Cup attracted lots of marketing cash from some of the biggest names in the industry. And the big winner among the brands that invested in the soccer tournament was AB InBev.
On a far darker note, the world watched and worried as Russia invaded Ukraine and tensions built in Eastern Europe. The company with the highest-profile loss in the conflict was Cargill, which learned its sunflower-crushing facility in the eastern Ukraine had been seized by pro-Russian rebels.
But it was the beer industry that first forecast the actual losses the conflict will generate. Both Carlsberg and Heineken expect serious problems from the conflict. And by the end of the current quarter, we should know just how bad those problems may be.
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