Phenomena like the low-carb diet trend are a blessing for some processors and a curse for others, as sales trends for industry leaders demonstrate.

Few consumer trends have impacted the food industry like the low-carbohydrate diet, and its ramifications are reflected in the performance of the industry's largest corporations. For processors of protein foods, the Atkins Diet was the best thing since sliced bread; for those who slice bread, Atkins created a diet trend they'd just as soon forget.

Though there are indications low-carb dieting has crested, an estimated 32 million American adults continue to follow diets such as Atkins and South Beach. No one is more cognizant of those numbers than executives at the world's largest food and beverage companies. At September's Prudential Securities presentation to stock analysts, one executive after another described how their firms were reaping the benefits or coping with the watershed changes that occurred in dietary habits because of the low-carb craze.

Meat companies Smithfield Foods (No. 26 in this year's ranking of the 100 largest food and beverage companies) and Tyson Foods (No. 7) enjoyed sales gains of $1.4 billion and $1.2 billion respectively in their most recent fiscal reporting periods, placing them among the fastest growing food and beverage processors in dollar growth. At the other end of the spectrum, three firms with a heavy reliance on baked goods were among the 10 companies suffering the largest relative sales declines.

Even December's Mad Cow case in the state of Washington couldn't dim Tyson's fortunes. "When the customer moves his protein spend around, we're in a position to capture it" with a product portfolio of beef, chicken and pork, CEO John Tyson told analysts. Still, as good as current consumer preferences are for processors such as Tyson--the company's website now poses the question, "Have you had your protein today?"--the pendulum eventually will shift. Tyson is bracing for the inevitable cycle switch with low-carb tortillas, "appetizers and other products around the edge of the plate," he said.

For many leading corporations, product diversity and reformulations are helping mute the impact of Atkins and South Beach diets. Orange juice is on many dieter's no-no list, and that has hurt brands like Tropicana, part of the Pepsico (No. 6) portfolio. Sales stumbles for Quaker bar snacks and Pasta Roni were additional sour notes in an otherwise strong first half this year.

Likewise, Kraft Foods Inc. (No. 3) offers consumers plenty of protein options with its cheese and meat products. Unfortunately, Kraft also offers crackers with cheese, as well as other Nabrisco brands like trans-fat rich Oreo cookies. Consequently, Kraft has been "hammered" in sales of cookies, cereal and pizza, CEO Roger Deromedi told analysts, and the conglomerate is scrambling to recast itself "at jet speed." Pizza revenues are down 5 percent, Post cereals are suffering double-digit declines, and rising commodity prices are hurting Kraft, Deromedi said. The company hopes carb-friendly product reformulations and reduced trans-fat cookies will help reverse profitability declines. Overall corporate sales growth was 4.3 percent last year, well below the 7.7 percent average for its peers in the Top 100.

Sara Lee Corp. (No. 17) provides additional perspective on fad diets. Both the beverage and meats units (Ball Park, Jimmy Dean, Hillshire Farms) enjoyed double-digit sales gains in the fiscal year ending July 3, but Sara Lee Bakery posted lackluster results. Improving sales in Europe and Australia took some sting out of global declines in unit volume. The Sara Lee experience underscores the fact that carb-counting is a North American phenomenon; hard times for New World bakers are not reflected overseas. Past production provides additional proof: While US leader American Italian Pasta Co. mothballed one plant and furloughed workers at others and second place New World Pasta Co. is shuttering facilities as it struggles with bankruptcy reorganization, global leader Barilla SpA (No. 63) is enjoying some of the strongest growth in its 127-year history.

Sara Lee bolstered its bakery portfolio a few years ago when it acquired Earthgrains Co., one of three US-based bread makers on Food Engineering's Top 100 list in 2000. Another was Flowers Industries, which dropped from the top ranks because of last year's sale of the Mrs. Smith's pie division for $240 million to Schwan Food Co. (No. 57). The only remaining domestic baker in the Global 100 is troubled Interstate Bakeries Corp. (No. 67). The baker of Wonder bread, Hostess and Twinkies has been nagged by declining sales and escalating losses in the new century. When the company announced in late August a second delay in filing its annual report, stock prices plummeted 42 percent amid speculation about the company's continuing viability.

The global village

Despite the difficulties faced by some corporations, North America remains the dominant region for food and beverage giants. Four Canadian firms join 37 US-based corporations on this year's list, and those organizations increasingly are looking abroad for future growth. In a recent analyst presentation, Pepsico International CEO Michael D. White noted that only a third of Pepsico's sales come from regions where 95 of the world's population reside. China, India and Russia will fuel much of the snack and beverage firm's near-term growth, he says.

US dominance of the global food industry is underscored by the presence of seven companies in the Top 10; 15 of the 25 largest are US based. Japan is home to 20 leading firms, though only two rank in the Top 20. The British Isles host nine conglomerates, including one Scottish and two Irish processors, while the Netherlands are home to seven food giants. Three Mexican companies are led by FEMSA de CV (No. 33), the dominant soft-drink bottler and brewer in many of the largest Central and South American markets.

Shorthand for Fomento Economico Mexicano SA, FEMSA is a model of global consolidation and cross ownership. The firm's Coca-Cola bottling division acquired Panama City-based Panamerican Beverages Inc. for $3.6 billion last year, creating the second largest Coke bottler in the world. FEMSA subsequently lowered its ownership stake to 45.7%, while Coca-Cola Co. boosted its share to 39.6%. The balance is publicly held. When independent, Panamco ranked as the world's 89th largest food company.

This year, the brewer of Tecate, Dos Equis and other brands took legal action to block the merger of Interbrew SA (No. 28) and Brasil's American Beverage Co. (No. 98). FEMSA and Interbrew's Labatt Brewing are partners in a US importer. Interbrew and Ambev shareholders approved a $11.4 billion merger in August to create the world's largest beer maker by volume and second largest in sales.

The deal overshadows July's merger of Adolph Coors Co. (No. 58) and Molson Inc. to create Molson Coors Brewing Co. The combined companies will rank as the world's fifth largest brewery by volume and command almost $6 billion in annual sales, officials say.

They've come undone

Food companies are not immune from corporate scandal. Two of the Top 100 firms are in financial freefall because of management misdeeds. Tokyo-based Snow Brand Milk Products Co. Ltd. (No. 91) ranked as the world's 13th largest food company as recently as four years ago. Its fortunes dimmed when contaminated milk resulted in Japan's worst food poisoning outbreak in history, and a fraudulent meat-labeling scheme two years ago almost finished Snow off. Last year's sales were a fifth of the level in 2001.

A similar slide is underway at Parmalat Finanziaria SpA (No. 36). The Milan, Italy, dairy climbed to the 25th ranking a year ago. Accounting irregularities surfaced in November, and a month later Chief Executive Officer Calisto Tanzi was imprisoned on fraud and embezzlement charges. Prosecutors are trying to account for up to $12 billion in missing corporate assets, and a global network with operations in 30 countries is unraveling.

Parmalat and Snow Brand had the dubious distinction of experiencing two of the largest sales declines among the Top 100. The only firm with a more precipitous slide was ConAgra Inc., (No. 12), though that reflected divestiture of its fresh beef and pork operations. Consequently, a new company with an old name was created. Swift & Co. (No. 22) set sales records for its short history and makes its debut in this year's Top 100. The company overcame sluggish early-2004 beef sales caused by BSE concerns with strong movement in pork and Australian beef.

Record earnings and sales also propelled Corn Products International Inc. (No. 97) into the ranks of the elite, though the achievement represents a 98-year benchmark. The company operates 37 plants in 19 countries. Organic growth rather than acquisitions fueled the Westchester, IL, processor's $222 million sales gain. The same path is being followed by Katokichi Co. Ltd. (No. 95), the third new entry in this year's Top 100. The Japanese maker of frozen foods and beverages has added manufacturing capacity in recent years in China and plans to use it as a springboard for global exports.

Gaining ground

In sheer dollar-volume growth, the biggest gainers are Nestle S.A. (No. 1), Archer Daniels Midland (ADM) Co. (No. 2), Unilever plc (No. 4), Swift & Co. and Cargill Inc. (No. 5). ADM's growth was sufficient to overtake Kraft Foods as the US's largest food operation. ADM's sales almost doubled in the last seven years, and fiscal 2004's 18 percent growth is modest compared to the prior year's 35.8 percent gain. Joint partnerships overseas are keying the boom: the number of foreign processing facilities is rapidly approaching its 143 US total, and overseas operations account for almost half of operating profits, up from 3 percent a decade ago. Thanks to 24 joint ventures in which it is a minority stakeholder, ADM is poised to grab a large chunk of the rapidly expanding $100 billion Chinese market for processed foods.

One-quarter of the Top 100 is composed of manufacturers of beverages, both hard and soft, and their performance is a microcosm of the industry. They represent almost 27 percent of the Top 100's $764.9 billion in combined food sales, and their average growth of 7.9 percent is two-tenths larger than the overall average. But beverage makers were more polarized between winners and losers than other food groups. One of the strongest performers was Constellation Brands Inc. (No. 65), which posted a 30 percent sales gain through a mix of acquisitions and organic growth designed to make the beer, wine and spirits company a one-stop shop for emerging retail powerhouses, according to Richard Sands, Constellation's CEO and chairman.

Sands recently told analysts that a projected 10-20% shortfall in this year's California grape harvest will drive up prices on the spot market and make "super-value wines" such as Two-Buck Chuck more expensive. "This is very positive for us," he added, because it will narrow the price differential with Constellation's mid-priced brands.

Besides, wine is a low-carb drink.