New Age Noshers
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
According to Phil Lempert, Supermarket Guru, who annually releases his food trend predictions, Millenials, age 19 to 34, some 50 million of them, will change the way food companies market and manufacture their wares in 2013. One of the biggest trends is that of frequent mini-meals, also called grazing, noshing, or eating you out of house and home. (I should know, I have two millenials visiting for the holidays!).
Campbells On The Go
Some companies already aware of this trend are Hain Celestial (NASDAQ: HAIN), General Mills (NYSE: GIS), Campbell Soup (NYSE: CPB), and Pepsico (NYSE: PEP). The company most actively responding to this trend may be Campbells as they're offering more portion size soups, called On The Go, and mini-meals in more varied and ethnic flavors. (Another trend is toward increasingly sophisticated palates in the Millenials.) This shift in emphasis started with new CEO Denise Morrison and as I wrote she told analysts in July the company was wooing milennials actively.
Campbells is expected to grow by mid-single digits but the company trades at a 15.05 P/E and is closer to a 52 week high than low. Its yield is at 3.20%, but you should know that the payment for April 2013 had been accelerated to this December so for the short term yield shouldn't be a consideration.
Pepsi's Not a Slacker
Millenials are also very concerned about their nutrition and Campbells makes the popular vegetable-fruit drinks and smoothies, V-8 Fusion which will soon see competition from Farmstand, a fruit-vegetable juice line from Tropicana owned by Pepsico. This is expected to be their biggest product launch since 2009. This adds another dimension to their growing portfolio of still beverages that are more nutritional and functional like Sobe and Amp energy drink.
Pepsico has been no slacker when it comes to food trends with snacks, cereals, cereal bars and more. They have been actively promoting to Milennial Moms as noted in a New York Times story about the company's campaign to update Quaker's image, even to changing the Quaker man photo (who is called Larry for some inexplicable reason. For years my kids thought he was Benjamin Franklin.) The update will include on the go oatmeal bars adding to the portable oatmeal portfolio of Real Medleys, a microwaveable single portion of oatmeal with fruit and spices and oatmeal cookies.
Pepsi has a slightly higher P/E of 18.54 and a 3.10% yield. When it reported on October 17 the Quaker division growth was more modest than other divisions with Latin American Foods division growth up 13%. The Quaker redesign along with the Farmstand roll-out concurrent with Super Bowl promotions should be positive catalysts going forward.
General Mills Gets Crunchy
General Mills just reported very good numbers on December 20 and announced 100 new products to debut in 2013, with Green Giant salty veggie snacks challenging Pepsi on the snack front while courting the milennials' preference for nutritious noshes. General Mills also has its yogurt brands including the super popular Greek yogurt adding new flavors for 2013 and also new flavors for their Larabar and Fiber One bars.
From earnings we learned that their Small Planet Foods and snacks divisions are both up double digits supporting the the "nutritious noshing" thesis. Not doing as well were yogurt and cereals as most of these two divisions' products are more "little kid" oriented with the notable exception of Greek yogurt. CEO Ken Powell also expected commodity prices to stabilize and that price hikes enacted due to the 2012 drought would likely stay in place. He also raised guidance for 2013.
Analysts expect mid single digit growth. Like Campbell's it has a 3.20% yield and trades at a 15.17 P/E. It's a stable stock that has beaten analyst expectations on top and bottom line for three consecutive quarters and has a beta of -0.02. Campbell Soup competes directly with General Mills with its Progresso soup line. Value investors have traditionally preferred General Mills for its consistent dividend history.
Milennials Have Grown Up With Hain
To some investors Hain Celestial may still have a "crunchy" health food and Birkenstock image but the youngest Milennials have literally grown up with it having been fed Hain's Earth's Best Baby Foods and eating their ever growing line of healthy snacks, like Terra chips. Just on December 20, Hain closed its acquisition of Blue Print, a maker of raw fruit and vegetable juices and raw fruit and nut bars. This brings their product portfolio to almost 50 brands including nut milks, Greek yogurt, and gluten-free products.
Hain has the highest P/E of this group at 30.25 and has pulled back from its 52 week high since a Barron's article in late November charged that a slowdown in acquisitions and competition from new nutritional products could lead to a 30% price share decline. CEO Irwin Simon fired back on CNBC saying the acquisition pace continues and that the company has 2,000 products available at Whole Foods and over 700 in traditional supermarkets like Kroger.
Analysts still expect a 16.27% growth rate over the next five years. With its recent pullback it may be a good time to get in the name as its ever-growing product portfolio includes most of the nutritious noshes that Millenials have grown to love.
Valuing Millenial Growth
At issue here is which company is poised best to capture the Milennial market and at what price. Hain is the growth name here and on sale from its 52 week high, but for stability and value the other three have attractive yields and low betas. You have probably picked up these companies are already on top of the most important Milennial trends and are fighting for shelf space on many of the same categories. Consider one of these for shelf space in your portfolio.
leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of Hain Celestial and PepsiCo. Motley Fool newsletter services recommend Hain Celestial and PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!