What we learned
The Hershey Company has a competitive advantage that it expresses elegantly as “channel ubiquity.” In essence, that means the company’s products are sold everywhere — convenience stores, wholesale clubs, mass merchandisers, drug stores and supermarkets. Wherever we shop, a Hershey’s product is within reach, beckoning us.
That said, there’s room to grow. According to CompaniesAndMarkets.com, chocolate products are expected to remain the largest segment of the confectionary market and the fastest growing over the next five years, with a CAGR of 3.2 percent.
Kellogg Company (NYSE:K)’s strategy includes going after baby boomers who are concerned with maintaining good health as they (gracefully) age. It is also developing product innovations such as “Special K Nourish,” which has a formula for weight management that features the superfoods quinoa, oats and barley.
The acquisition of Pringles gives the company a larger presence in the snack market. According to research firm IBISWorld, potato and other chip products account for nearly 50% of this $31 billion market.
I wouldn’t have expected this, but Tyson Foods, Inc. (NYSE:TSN) is the largest of the three companies in terms of sales revenue. According to the National Chicken Council, chicken is the number one protein consumed in the United States. The average American consumes nearly 84 pounds of chicken per year. Tyson Foods, Inc. (NYSE:TSN)’ performance is even more remarkable given the Council’s forecast of relatively low growth in chicken production in 2013.
Tyson is also putting an emphasis on product innovation as a key driver of future growth — and a way of sparking customer interest when demand is soft.
The Bottom Line
So we have three companies with great management, global presence, an emphasis on innovation and excellent near-term results.
Kellogg Company (NYSE:K)’s battle for market share takes place in the brutally competitive grocery store channel, where private label cereals are right next to the company’s brand name products on the shelves. The decline in U.S. Morning foods sales is troublesome. The company’s marketing team should look at it as a wake-up call, so to speak.
Tyson Foods, Inc. (NYSE:TSN)’ beef segment volume is huge. We’ve seen increases in the prices of beef and may see more. Can these be passed on to the middle-class consumer that Tyson caters to, or will sales be negatively affected?
I like The Hershey Company (NYSE:HSY) best because of that channel ubiquity advantage, the company’s ability to grow its brands globally, and because in consumers’ minds there are no substitutes for its branded products. Sometimes you just gotta have a Hershey bar.
The article Three Food Products Companies to Nourish Your Portfolio originally appeared on Fool.com and is written by Brian Hill.
Brian Hill has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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