Despite high profile crackdowns on unhealthy snacks companies are still profiting from people’s love of treats. In a move to expand the munchie market, emerging markets and the flavors of those regions has increasingly become a target for flavor and snack producers in an attempt to capitalize on changing tastes and demographics.
Latin America is at the heart of this shift in flavors for large food manufacturers. Companies like Nestle and Kraft Foods Inc. (KFT) are contracting flavor producers in Latin American to see how local preferences can be applied to their products. These companies outsource about eighty percent of their flavor development to companies like Givaudan SA, a Switzerland-based company that sends researchers to far-flung places in emerging countries to cue into native aromas and tastes.
And snack producers have been experiencing solid earnings of late. J&J Snack Foods (JJSF) reported earnings that were twenty five percent above estimates, making it Zach’s #1 “buy stock”. Strong sales of processed foods like pretzels, chips, and baked goods gave earnings a boost and paid dividends to their bottom line. It is possible that considering the decline in median income in the United States in the past few years that the consumption of these items has increased as a result of their status as inferior goods. Other companies in the same field, such as Pepsico Inc. (PEP) and The Coco Cola Company (KO), have also been pegged as stocks to watch for growth and dividend payouts.
Business Section: Investing Ideas
Will stocks of these food manufacturers who specialize in snacks continue to rise? Well if the reaction to a recent Oreo gay-pride campaign is any indication, people are surely passionate about their snacks. In fact, the “Chocolate Chip Cookies” page on Facebook has more likes than the page for “God”.
Listed below are a few companies who specialize in making these sacred goods. Do you think they have more upside to price in?
1. Kraft Foods Inc. (KFT, Earnings, Analysts, Financials): Together with its subsidiaries, manufactures and markets packaged food products worldwide. Market cap at $68.65B, most recent closing price at $38.72.
2. J&J Snack Foods Corp. (JJSF, Earnings, Analysts, Financials): Together with its subsidiaries, manufactures nutritional snack foods, as well as distributes frozen beverages to the food service and retail supermarket industries in the United States, Mexico, and Canada. Market cap at $1.06B, most recent closing price at $56.24.
Written by Dan Connelly
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