Although 2020 was not a terrible year for Big Food it wasn’t the gangbusters season that so much reporting (even ours) had predicted. We expected that the combined sales of “Big Food,” all 100 companies in this report would rise to double digits when we started this project.
What does +1.7% sound like?
The 2020 pandemic, which saw more people eating at home and the need to stock up on comfort foods and food, created huge opportunities for some businesses. Grupo Bimbo-Bimbo Bakeries USA, Canada Bread, and Canada Bread saw sales increase by more than $1.2 Billion, 16% to $8.8 Billion. Mondelez increased its revenue by a billion dollars (15%) PepsiCo saw a $2 billion increase, an increase in 5%.
Other double-digit sales gains included Grupo Lala’s U.S. operations (+22%) and B&G Foods (19%) and Unilever’s U.S. food company (+18%). Boston Beer Co., which makes Samuel Adams beer, but also a variety of trendy alcoholic drinks, saw a 39% increase in sales during a difficult year for large brewers.
All of those numbers and percentages are based upon “our numbers”, which is value-added food products and beverages that are self-manufactured in U.S. or Canadian plants. In our sidebar, we’ll explain why.
Sales also suffered, but they weren’t as many. Thirty-two of the 100 companies reported sales growths of at least 5% in the last fiscal year. Seven other companies reported declines, while the rest saw increases within +/-5%. The net income was the same: it went up for 30 and down for 15. Only three companies, Molson Coors and Hain Celestial, reported net losses. Utz Brands was the only one reporting net profits. Molson Coors reported net losses of nearly a billion dollars.
We compared the total sales columns for 2020 & 2019, and found that sales increased 1.7% for the 100 (except Sovos brands).
The majority of the negative comments in the previous paragraphs were made by the largest companies on our list. Meat & poultry companies seemed to be particularly hard-pressed. JBS’ net income nearly fell in half, and Pilgrim’s Pride’s was reduced fivefold. Sanderson Farms’ net income was cut in half. Kraft Heinz’s net in 2019 was one-fifth of what it was in 2019. AB InBev saw a profit increase from $9 billion in 2019 up to $1.4 billion last Year.
Conagra’s net grew by 54%, Bimbo SA’s by a third, and Campbell’s nearly eightfold. TreeHouse Foods, which is still in the middle of a portfolio restructuring, saw a $14 million profit in 2019. It went from a $361million loss in 2019 and is currently in the midst a portfolio reshaping. Constellation Brands made a $76million profit last year after suffering losses at Canopy Growth, the majority-owned cannabis company. This year, it earned $1.9billion.
Boston Beer Co. had some positives in the difficult year. The brewer noted in its annual report that “most of the company’s products are sold via off-premise retailers” and not through bars or restaurants. It also makes “high-end beer,” which was the only category of beer that saw growth prior to the pandemic. It has owned non-beer beverages like Twisted Tea, Truly Hard Seltzer and Angry Orchard Hard Cider since years. The mid-2019 acquisition by Dogfish Head Brewery helped to boost 2020 sales.
Pandemic effects
Any processor that relied heavily on foodservice revenue was in trouble through 2020. AB InBev’s revenue came mainly from on-premise sales (bar, restaurant, and live event), which was a 10% drop. However, its North American operations saw a nearly 1% rise. Bud Light Seltzer was introduced in January last year, and Budweiser Zero (no alcohol), followed in July. They caught the lighter-drinking trend which had moved to homes. Also, Labatt and Michelob Ultra saw growth.
Molson Coors sales dipped 4.4%. The Coca-Cola Co. also lost 4% due to similar reliance on sales on-premises. This is almost half a million dollars. According to the Coke annual report, “In certain COVID-19-affected markets, consumer demand has moved away from some of us more profitable beverages and away from home consumption to lower-margin product consumption.” Coca-Cola management decided it was time to reduce its portfolio. Tab, Zico coconut water and Odwalla were eliminated.
It was not just for beer and soft drinks companies. During the pandemic, most meat processors had no choice but to shift from foodservice to more retail sales. Most did this successfully.
Nestle lost 10% and 3% in U.S. sales last year, despite being the market leader in frozen foods and the top supplier of pet food – two rapidly growing categories during the pandemic. However, 7 to 8 points of that decline can be attributed in part to the appreciation in the Swiss Franc against all global currencies including the U.S. Dollar. Nestle Canada saw a 4% increase in sales, while Nestle USA fell more than 4%.
Nestle SA stated in its annual report that the Group’s organic growth was affected by COVID-19. This is based on product categories and sales channels. “Demand for trusted brands, products with nutritional benefits and at-home consumption was strong.” Strong growth was reported by Nestle Health Science, Purina PetCare and dairy products, as well as coffee at-home and Nestle Health Science.
However, sales of confectionery and water declined due to their high exposure through out-of-home channels as well as on-the-go consumption. Due to high demand for at-home food, retail sales saw a single-digit organic increase of only 1%. The sales of out-of-home channels fell significantly.”
We believe Nestle USA will see a drop in sales during 2021, as it has sold its $4 billion water business this year.
Many companies experienced increased costs as a result of the pandemic. Boston Beer stated that it had experienced higher labor and safety-related expenses at its breweries. The brewery’s productivity was also affected by COVID-19 safety measures. This has resulted in more volume being transferred to third-party beer breweries which has negatively impacted gross margins and production costs.
Nestle SA calculated the cost of the pandemic. 2020 COVID-19 related costs were CHF420 million (US$475million). This includes expenses for bonuses to frontline workers, employee safety protocols and donations, as well as other staff and customer allowances. It also had to absorb costs of CHF 170million (US$192 millions) for staff and facilities that were not used due to lockdown measures. However, it acknowledged that there were savings in travel expenses.
The bright spots
Boston Beer Co. suggested that 2020 was a great year to be a contract producer. Ron Puvak is the executive director of , The Association for Contract Packagers & Manufacturers. “Our members increased production, especially for big, bulky stuff.”
Mondelez and Kraft Heinz had difficulty keeping up with the record-breaking sales of boxesed macaroni and cheese, so they turned to contract producers to fill in the gap.
Campbell Soup was the most popular soup brand. In the 2020 annual report, CEO Mark Clouse stated that “our soup performance this year had been historic.” U.S. soup consumption increased 15% in 2020 after years of decline within the company and across the entire category.
B&G Foods saw 18.5% growth thanks to its stable of familiar pantry staples (Crisco oils, shortenings and Clabber Girl baking flour, Cream of Wheat), plus Green Giant vegetables. In the annual report, interim CEO David Wenner boasted that B&G Foods set a new company record for net sales. This was 18.5% higher than last year, at $1.968 billion. Adjusted EBITDA (earnings before interest taxes, depreciation and amortization) increased 19.4% to $361.2 million.
Ecommerce and direct-to-consumer sales (DTC) were also good options for 2020. Nestle SA reported that E-commerce sales increased by 48.4% to 12.8% of the total Group sales. “Coffee, Purina PetCare, and Nutrition & Science were the major growth contributors. There was strong momentum in all categories.
To meet the ecommerce surge, PepsiCo established micro-fulfillment centres. Two DTC sites were launched by PepsiCo: Snacks.com features more than 100 Frito-Lay products, including Tostitos brands Lay’s, Lay’s, Cheetos, Ruffles, and Tostitos. It also offers dips, crackers, and nuts. PantryShop.com allows customers to order pre-determined bundles of pantry favourites from brands like Tropicana, Gatorade and SunChips. The prices for the kits ranged from $29.95 to $49.95. PepsiCo also acquired Be & Cheery (one of the most popular online snack companies in China).
Food & Beverage companies not only recovered lost sales in ecommerce/DTC but also gained valuable insights and data from direct contact with customers. Anheuser-Busch InBev wrote that the 20+ ecommerce direct-to consumer (DTC) ventures around the globe offer convenience to our consumers and valuable data that allows them to anticipate emerging trends.
There are always comings and goings
This year’s Top 100 list has one remarkable thing: not one company was acquired. It’s the first time that this has happened in recent memory. There has always been a Pinnacle Foods or Dean Foods that gets consumed by larger companies and drops off our top 100. This year, there are two newcomers.
Utz Brands was until recently a regional chip manufacturer. It was a small, regional chip maker until recently. Collier Creek Holdings bought it in 2020. This company was founded by ex-Blackstone Group executives and went public with stock. Utz Brands debuted this year at No. 964 million in sales, and one of our largest net losses, -$104 millions, according to reports.
Similarly, Sovos Brands (No. Advent International created 97 in 2017. It was formed by small acquisitions like Rao’s Specialty Foods, Michael Angelo’s Gourmet Foods, Noosa Yoghurt, Birch Benders and Rao’s Gourmet Foods. The company has reportedly made $800 million in sales.
Let’s close with a cautionary tale. Although the pandemic appeared to be over a month ago, many sales were already returning to normal. In some cases this was the “new normal,” while in others it was the old normal. In its third quarter ended May 2, Campbell’s sales fell 12%, with sales of soup down 24%.
Conagra just reported that its fourth quarter net sales fell 17% and organic net sales dropped 10%. The company explained that this was due to the “significant increase in at-home food intake at the onset COVID-19 pandemic” the previous year.
The pandemic is making a comeback as of writing. We’re hearing from many companies about inflation warnings – some cost increases will be passed on, but not all. Big Food will have another exciting year in 2021.
