Retailers, consumers and prices
Check out the latest raft of earnings and outlooks kicking off the holiday-shortened week in the consumer world.
Kraft Foods, which makes Oreo cookies and Velveeta cheese, posted quarterly revenue that fell short of expectations, but said its recent acquisition of British chocolatier Cadbury would accelerate long-term growth.
Check out Nestle’s waiting game.
It could take years, but analysts in Europe think that Nestle is waiting for the pressure of competing with two confectionery giants on its home turf to eventually melt Hershey’s resolve, letting Nestle buy the Pennsylvania-based chocolate maker.
While Pennsylvania law says the state’s attorney general would have to approve any deal that dilutes the Hershey Trust’s control over the candy maker, analysts think that eventually the trust will have to look at a Nestle bid.
U.S. chocolate maker Hershey and Italy’s privately owned Ferrero both said separately they were evaluating their options over a possible bid for Cadbury, the world’s No. 2 confectioner, but analysts still see hostile bidder Kraft’s $16.2 billion offer as the front runner.
Reuters and other media have reported Hershey, known for its namesake chocolates and Reese’s peanut butter cups, and Ferrero were discussing a joint bid and the UK Takeover panel asked the companies to clarify their intentions. They gave no hint whether they may be working together on a joint bid.
Check out Kraft’s cash hoard. ******Kraft had almost $3 billion of cash on its books at the end of the third quarter, roughly four times what it had a year ago.******The world’s second-largest food maker might have disappointed***analysts with its third quarter sales and a profit outlook that implied a weaker-than-expected fourth quarter. But when it comes to its battle to win Cadbury, at least the company is generating cash – expenses cuts helped Kraft generate $2.7 billion in cash in the first 9 months of 2009.******Also, Reuters Loan Pricing Corp reported on Tuesday that Kraft has arranged $9 billion in financing for a bid.******Sources have told Reuters that Kraft is not likely to raise its initial bid for Cadbury if it makes a formal offer by the Nov. 9 deadline. But analysts do think that shifting the offer to more cash and less Kraft stock — which is down 3 percent on Wednesday after the company posted lackluster third-quarter sales — could be a step in the right direction.******Also in the basket: ******Warnaco beats estimates; Liz Claiborne misses ******Molson Coors higher profit tops view, shares rise ******M&S sees no repeat of blanket pre-Christmas promotions ******Talking shop with Isaac Mizrahi (WWD)******(Reuters photo)
Kraft offered $16.7 billion for the world’s No. 2 candy and chocolate maker on Monday. Cadbury shares soared after it rejected the initial bid as investors bet Kraft or another company will sweeten the offer.
Analysts said Cadbury has few options but to look for a higher bid or more cash after the Kraft offer. Investors like the logic of the combination and few, if any, counterbids are seen likely to emerge.
Check out the latest peeks into consumer behavior.
You know how when there is a huge news event, people stay home to watch it unfold on TV and order pizza?
Well, apparently that doesn’t happen when the major news event is a meltdown in the U.S. financial system.
Domino’s reported a dip in quarterly profit on Tuesday, with U.S. sales down 6.1 percent at restaurants open at least a year.
The credit crunch has also made it harder for the company to open new restaurants, overhaul existing ones and turn over poor performing franchisees, CEO David Brandon said.
Less pizza being sold also means less need to wash it down with Pepsi. PepsiCo missed Wall Street earnings expectations, hurt by disappointing U.S. soft drink sales.
Pepsi trades in brand names, like Cheetos and Tropicana. But brand names are coming under fire from thrifty shoppers seeking private-label products.
Just ask Supervalu. The grocery chain operator also posted lower profit as consumers traded down to lower-cost store brands.
So, to paraphrase John Belushi’s Greek diner owner, “No Coke! No Pepsi! Sam’s Choice.”
Also in the basket:
Thriftiness on special in aisle 5 (N.Y. Times)
Credit crunch raises pressure on U.S. textile industry (WWD, subscription only)
Cadbury cuts more jobs as Q3 sales rise 6 pct
Dr Pepper Snapple Group debuted on the New York Stock Exchange Wednesday after being spun off from British candy and gum company Cadbury.
The company is putting together a five-year plan to improve its business in Latin America, but its main focus will be on selling more drinks in the United States, Chief Executive Larry Young told Reuters.
Unfortunately, that might not be what Wall Street wants to hear.
Dr Pepper’s exposure to the sluggish U.S. soft drinks business could hurt growth.
”The firm has a mixed stable of brands, lacks the scale and product portfolio breadth enjoyed by larger rivals Coke and Pepsi, and relies almost exclusively on the mature and highly competitive U.S. market,” Morningstar analyst Mitchell Corwin said.
Still, Young says the company’s brands will take care of themselves.
“We have great brands, great people and are focused on delivering great results,” he said. “We’ll let the market take care of the price.”
Check Out investors waking up to a sweet deal on Monday morning.
M&M’s maker Mars Inc and Berkshire Hathaway Inc are buying Wm Wrigley Jr Co, the largest U.S. chewing gum maker, for $23 billion.
The deal will create a confectionary giant, bringing together Wrigley’s Altoids, Extra and Eclipse brands, with Mars’ M&M’s, Snickers, Starburst and Twix.
The newly announced deal could trigger a renewed push toward consolidation in the global candy business.
One potential deal that has been discussed previously, and could invite fresh interest, is that between London-based Cadbury Schweppes, known for its Dairy Milk chocolate, and Trident gum brands, and top U.S. chocolate maker Hershey Co.