Top 100 Food & Beverage Companies

The World's Top 100 Food & Beverage Companies - 2010

June 1, 2010
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Leading players are streamlining their businesses and investing in projects abroad, while optimizing environmental and operational performance.





 

No matter what their size, all food and beverage manufacturers have found themselves battling the challenges of a worldwide recession during the past year. To remain competitive and profitable in these difficult times involves cost cutting, streamlining and significant belt tightening, in addition to standard operational demands and the need to be innovative and sustainable.

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Despite the rigors set by the prevailing world economy, the top three players -Nestlé, PepsiCo and Kraft -remain the same in the Top 100 listing this year; however, Kraft (in the number three slot) is likely to be vying with PepsiCo for its number two position once the deal of the year, Kraft’s acquisition of Cadbury, sees the two companies fully financially integrated. Creating a “global powerhouse in snacks, confectionery and quick meals”-and the world’s largest chocolate and confectionery company- the combination of Kraft and Cadbury will result in a $50 billion company operating in 160 countries.  



 

“We have been following Cadbury for quite some time, and both companies are on a solid footing,” says Irene Rosenfeld, chairman & CEO of Kraft Foods. “We continue to benefit from the integration of LU Biscuit business that we bought back [from Danone-this year in 12th place] in 2007, and similarly, Cadbury has made excellent progress against the Vision into Action program. So I think it is an appropriate time for both companies to come together.”

Although Rosenfeld says it’s too early to comment on the potential $1 billion-plus cost speculated for restructuring in the coming months, she stresses that there were significant operational efficiencies to be had from the merger, including increased investment in distribution, marketing and new product development. In the meantime, it’s business as usual in the UK with new products, such as BelVita breakfast biscuits and Mikado White & Dark biscuits, being introduced under the Kraft Foods name.

Nestlé declined any interest in purchasing Cadbury and has juggled its multinational enterprise to demonstrate its winning prowess during the recession, picking up Kraft’s American frozen pizza business for $3.7 billion.

“2009 revealed itself to be a particularly challenging year-one of crisis, but also of new opportunities. The exceptional volatility of not only the economic but also the political environment has demanded extremely close attention from management,” says Peter Brabeck-Letmathe, chairman of Nestlé. According to Brabeck-Letmathe, Nestlé has had to address not only its long-term strategy, but also concentrate on short-term business as a result of the recession. “It has had to be rigorous in its management of working capital and investment. It has researched possibilities for operational improvement throughout the organization … rationalized and optimized the product portfolio [Nestlé Healthcare Nutrition reduced SKUs by 30 percent in the past year], and gained access to new market opportunities,” he says.

Despite the unprecedented economic turbulence, Nestlé’s growth in 2009 exceeded that of 2008, according to Paul Bulcke, Nestlé CEO, who highlights, in particular, the company’s success in tapping into opportunities in emerging markets. In September, Nestlé opened what it claims will be the world’s largest bouillon factory in China, where it will produce more than 100,000 tons of Totole, China’s leading bouillon brand. In February, Nestlé entered into a joint venture with Dashan, the bottled water market leader in China’s Yunnan province. It’s also opened a new research and development center in Abidjan on the Ivory Coast, where it will focus on improving locally sourced materials, such as cocoa, coffee and cassava, and adapting the products to the nutritional needs and tastes of West African consumers.

In the first quarter of this year, Nestlé Food & Beverages’ organic growth was 4.6 percent in the Americas, 5.1 percent in Europe and 11.2 percent in Asia, Oceania and Africa.  “Developing countries are progressing, and progressing fast,” says Bulcke. “Today, emerging markets account for approximately 32 percent of Nestlé’s total sales, and we expect this proportion to increase to 45 percent over the coming decade.”

With over half of its business already established in emerging markets, Unilever, which has slipped from fourth to eighth place this year, has refocused its efforts on volume growth, operating margin and cash flow, according to CEO Paul Polman.

“We removed costs wherever we could and accelerated restructuring where possible. We reduced our office headcount by approximately 1,000 managers, froze salaries and cut travel budgets and all other elements of discretionary expenditure,” says Polman, who points to continued tough conditions during 2010. “We simplified our portfolio and rationalized packaging materials and ingredients to drive more efficient buying. We started to leverage scale more effectively than before with all main supply contracts renegotiated. Overall cost savings were €1.4 billion in the year.”

With the savings, the company is investing more heavily in support of its brands and in innovation, as well as in emerging markets where Polman says volume growth has returned to pre-recession levels.

Also capitalizing on this potential in emerging markets, and in particular Latin America, is Heineken (currently in 13th position), which has just completed its acquisition of the FEMSA beer business in Mexico and Brazil. FEMSA (at number 27) has effectively exchanged its beer operations for a 20 percent economic interest in Heineken.

“This will allow our shareholders to participate in the value creation we believe will come from aligning FEMSA Cerveza with Heineken,” says José Antonio Fernández, chairman & CEO of FEMSA. “At the same time, we increase FEMSA’s operational and financial flexibility, and we will be able to focus our attention and resources on the significant opportunities for Coca-Cola FEMSA and FEMSA Comercio.”

In the US, Hormel Foods, which is sitting in 54th place in the Top 100, is also looking at strategic overseas investments as well as development in the home market, including products that meet changing consumer demands.

“We have the cash to make a strategic investment at this time. The key is that our acquisitions are strategic, which means we are looking for entities that will contribute to our bottom line. With a decade of experience in China, we continue to see sales and demand for our products in China and other international markets,” says Julie H. Craven, vice president of corporate communications, who points out that, as a result of the recent economic recession, many consumers have redefined their understanding of value. “For some consumers, this may mean purchasing more private label products, or opting for canned items instead of the premium heat-and-eat options.”

Hormel Foods now plans to revisit its entire product portfolio and examine its offerings under the new definition of value. “In 2000, we set the Billion Dollar challenge, a goal to generate $1 billion in sales from new products by the end of fiscal year 2009,” says Craven. “We met this goal two years early, and have since established a new goal, to generate $2 billion in sales from new products by 2012. We have already achieved $1.3 billion toward that goal.”

The company’s new developments include Hormel’s Natural Choice meats line, which pioneered the use of  high-pressure processing (HPP) in meat packaging and positioned the company as the first to use HPP to create an all-natural, nationally distributed protein offering, and Hormel Turkey Pepperoni Minis-bite-sized rounds of turkey in a single-serve portion. In June of last year, the company announced the creation of MegaMex Foods-a 50/50 joint venture with Herdez Del Fuerte, which will introduce a portfolio of products targeting Mexican-American and mainstream consumers of Mexican foods. In January this year, Hormel Foods opened its first new plant in 25 years. The new Progressive Processing LLC plant in Dubuque, IA-a wholly owned subsidiary of Hormel Foods-will use at least 25 percent less energy and water and produce Hormel’s Compleats microwave meals.



Similar challenges faced in Asia-Pacific region

It’s clear that Western companies are not the only ones making cuts, innovating and looking abroad for growth opportunities during these difficult times. Major Japanese players are also adopting these tactics in pursuit of growth.

“China is the largest beer-consuming country in the world,” says Hitoshi Ogita, chairman and CEO of Japan’s Asahi Breweries, which has moved from 21st position to 15th place in the Top 100 listing during the past year. “We have acquired 20 percent shares in one of the biggest breweries in China, Tsingtao Brewery Company. One of our goals is to establish Asahi brands-such as its core brand, Asahi Super Dry-in China in the near future.”

In April of last year, Asahi acquired Schweppes Australia, the second largest beverage manufacturer in Australia. Its goal is to have overseas sales account for 30 percent of total sales by 2015.

“The alcoholic and non-alcoholic beverage market in Australia is expected to be very stable in terms of growth and revenue because of its large market size and its duopoly,” says Ogita. However, Asahi’s main business remains in Japan, where the beer market has declined in size by 17.5 percent in the past 15 years. “In order to expand our business continually, it is important for us to generate cash flow from the domestic alcoholic beverage market in Japan.”

Asahi believes that despite the decline in the Japanese beer market, opportunities exist. “With a population of over 100 million, Japan is still a huge market for beer,” says Naoki Izumiya, president and COO, Asahi Breweries. “The consumption of beer per capita in Japan is just 50 liters per year, compared with 80 liters per year in the US, 110 liters per year in Germany and 160 liters per year in the Czech Republic. We believe that more attractive approaches to consumers, such as new product launches with added value, are keys to growth.”

Nudging up two places in this year’s Top 100 listing is Maruha Nichiro Holdings of Japan, which is the result of a 2007 merger of the 127-year-old Maruha and 100-year-old Nichiro.

“The current global economic turmoil has been almost like rubbing salt into a wound for Japan, since its consumer demand has been negative for years due to structural problems such as aging and a dwindling population,” says Toshio Kushiro, president of Maruha Nichiro Holdings, who explains that consumers in Japan now pay more attention to price than ever before. In response, Maruha Nichiro Holdings has reorganized its production lines, reduced stock, cut expenses and consolidated its portfolio.

“We do what every manufacturer must do. Fortunately, the merger of our two companies took place ahead of the crisis and the past two years have been spent completing the merging of the two operations, consolidating factories and labor, which has meant that we have realized higher margins than other domestic competitors,” says Kushiro. “The combined operations benefited from an increased leverage in seafood purchasing on the global market and cost synergies in manufacturing, which have offset some of the difficulties of the 2009 economic crisis. However, as we do not expect a big improvement in 2010, there is little doubt that we will have to continue with cost cutting and develop into other markets.”

Maruha Nichiro Holdings has invested heavily in research and development of its fish product portfolio and, in particular, its healthy offerings. It is working with medical and scientific institutes to explore the efficacy of fish DHA in treating Alzheimer’s disease and recently launched a consumer pack of “nursing foods” for the elderly in its range of products for nursing home facilities and food service. And for health-conscious consumers in the US market, Maruha Nichiro Holdings is currently advertising its Crab Classic brand-marketed by the wholly owned subsidiary Trans-Ocean-in Weight Watchers Magazine.



Sustainability a worldwide concern

As with all players in the Top 100, Maruha Nichiro Holdings is also dedicated to sustainability, not only of the business and its sales but also of its raw material supply and resources.

“Our company’s sustainability de-pends entirely on the sustainability of our natural resources, and our sourcing is only from areas that are well managed. We not only catch and trade fish, we also farm,” says Kushiro. The company has recently developed a patented artificial feed for tuna, which will eventually mean the fish can be effectively reared without using standard natural feed sources, such as mackerel and squid. This will prevent the depletion of mackerel and squid for human consumption, and avoid water pollution associated with other artificial feeds.

This position is similar to every one of the Top 100 companies, which, despite the recession, have all woken up to the critical need to act sustainably. “When we look at the consumers who reach for our brands 1.6 billion times each day in 206 markets around the world, we are clearly seeing a reset-a reset of priorities, values and expectations. Consumers today increasingly are judging us as much on the content of our character as the content and quality of the products and services we produce,” says Muhtar Kent, chairman and CEO, The Coca-Cola Company. “And, it’s not just a Western European, or Japanese, or North American trend. We’re also seeing greater sensitivity for the planet among consumers in developing and emerging markets around the world. Brazil, India and China, for example, now have among the most environmentally aware consumers in the world. According to the 2009 National Geographic Greendex, over 70 percent of consumers in these three countries support additional spending on low-carbon products and plan to spend more for them in the coming year.”



 

As part of its bid to improve its own environmental footprint, The Coca-Cola Company has commercialized the PlantBottle, plastic packaging made from 30 percent plant material (first piloted in the US with its Dasani brand last year). In February, the company announced its intention to test fuel cells powered by environmentally friendly biogas at its Odwalla juice packaging plant in Dinuba, CA.

“We see our environmental performance increasingly as an important strategic element for competitive differentiation, in addition to taste and nutritional value,” says Peter Brabeck-Letmathe of Nestlé. “I firmly believe that the environmental and social impacts of products all along the value chains will become an increasingly important purchasing criterion for many consumers, both in industrialized countries and emerging regions, such as China and Brazil. Nestlé has therefore decided that caring for the environment is not only an absolute necessity to ensure the future availability of agricultural raw materials-and hence, the very basis for future business success as well as food security-but has made environmental sustainability a core component of every new product.”

With sustainability, innovative products that meet consumers’ changing needs, shrewd investment and the leanest operations at the forefront of business strategy, the food and beverage industry leaders of today are sowing the seeds to remain as the business leaders of tomorrow.



The Coca-Cola Company

Consumers increasingly are judging us as much on the content of our character as the content and quality of the products and services we produce, says Muhtar Kent, chairman and CEO of The Coca-Cola Company. “And, it’s not just a Western European, or Japanese, or North American trend. We’re also seeing greater sensitivity for the planet among consumers in developing and emerging markets around the world. Brazil, India and China, for example, now have among the most environmentally aware consumers in the world.”



Kraft Foods

Kraft is likely to be vying with PepsiCo for its number two position on the Top 100 once Kraft’s acquisition of Cadbury sees the two companies fully financially integrated. The combination of Kraft and Cadbury will result in a $50 billion company operating in 160 countries.  “We have been following Cadbury for quite some time, and both companies are on a solid footing,” says Irene Rosenfeld, chairman & CEO of Kraft Foods. Although Rosenfeld says it’s too early to comment on the potential $1 billion-plus cost speculated for restructuring in the coming months, she stresses that there were significant operational efficiencies to be had from the merger.



Nestlé

“We see our environmental performance increasingly as an important strategic element for competitive differentiation, in addition to taste and nutritional value,” says Nestlé Chairman Peter Brabeck-Letmathe. “I firmly believe that the environmental and social impacts of products all along the value chains will become an increasingly important purchasing criterion for many consumers, both in industrialized countries and emerging regions, such as China and Brazil.”



Asahi Breweries

According to Hitoshi Ogita, chairman and CEO of Japan’s Asahi Breweries, one of the company’s goals is to establish Asahi brands-such as its core brand-Asahi Super Dry-in China in the near future. China is the largest beer-consuming country in the world. In April of last year, Asahi acquired Schweppes Australia, the second largest beverage manufacturer in that country. Its goal is to have overseas sales account for 30 percent of total sales by 2015.

“The alcoholic and non-alcoholic beverage market in Australia is expected to be very stable in terms of growth and revenue because of its large market size and its duopoly,” says Ogita. However, Asahi’s main business remains in Japan, where the beer market has declined in size by 17.5 percent in the past 15 years.



Unilever

With over half of its business already established in emerging markets, Unilever, which has slipped from fourth to eighth place on the Top 100, has refocused its efforts on volume growth, operating margin and cash flow, according to CEO Paul Polman. “We removed costs wherever we could and accelerated restructuring where possible,” says Polman, who points to continued tough conditions during 2010. “We simplified our portfolio and rationalized packaging materials and ingredients to drive more efficient buying. We started to leverage scale more effectively than before with all main supply contracts renegotiated.”



Maruha Nichiro Holdings

“The current global economic turmoil has been almost like rubbing salt into a wound for Japan, since its consumer demand has been negative for years due to structural problems such as aging and a dwindling population,” says Toshio Kushiro, president of Maruha Nichiro Holdings, who explains that consumers in Japan now pay more attention to price than ever before. In response, Maruha Nichiro Holdings has reorganized its production lines, reduced stock, cut expenses and consolidated its portfolio. It has invested heavily in research and development of its fish product portfolio.



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