However, its grocery products segment, which includes Skippy peanut butter, Spam, Dinty Moore stew and Mary Kitchen hash, helped offset some of those losses. The segment, which accounts for 18% of Hormel Foods Corporation (NYSE:HRL)’s top line, reported 49% sales growth and 10.4% bottom line growth, fueled by strong demand for peanut butter.
Compared to Smucker, Hormel Foods Corporation (NYSE:HRL)’s businesses are less aligned with each other. A notable problem is that the cost of grain is outpacing the cost of turkeys and hogs.
However, the recent takeover of Smithfield Foods, Inc. (NYSE:SFD), the world’s largest pork producer, by Chinese pork producer Shuanghui International Holdings, indicates that global demand for pork products will continue to rise. In addition, North American turkey sales should accelerate into the Thanksgiving and Christmas holiday season. Therefore, the back-to-school and holiday seasons could help steer Hormel’s sales in the right direction again later this year.
ConAgra’s forgotten peanut butter brand
Although Jif and Skippy are the largest peanut butter brands in the world, a smaller brand, ConAgra Foods, Inc. (NYSE:CAG)’ Peter Pan, is also notable. ConAgra Foods, Inc. (NYSE:CAG) is the largest processed foods manufacturer in America, and is best known for Chef Boyardee pasta, Hunt’s Ketchup, Orville Redenbacher’s popcorn, and Swiss Miss hot chocolate.
ConAgra recently acquired private-brand foods and foodservice giant Ralcorp Holdings for $5 billion, which is expected to add $0.05 per share to its adjusted fiscal 2013 profit. ConAgra recently reported a 57% decline in profit to $0.29 per share, or $280.1 million, primarily due to this acquisition, but sales rose 13% to $3.85 billion. Ralcorp contributed $292 million and $5 million to ConAgra’s top and bottom lines, respectively.
Although Peter Pan peanut butter comprises a tiny part of ConAgra Foods, Inc. (NYSE:CAG)’s revenue, in comparison to Smucker and Hormel Foods Corporation (NYSE:HRL), the lower commodity costs that The J.M. Smucker Company (NYSE:SJM) had forecast last quarter should also be a boon to ConAgra this year.
The Foolish Bottom Line
Warren Buffett once famously stated, “A ham sandwich could run The Coca-Cola Company (NYSE:KO).” I’d like to modify that quote slightly to say, “A peanut butter and jelly sandwich could power up your portfolio.”
For me, a peanut butter and jelly sandwich represents a beautiful simplicity that investors should appreciate. It is made from three simple ingredients, which have been in high demand for the past century. It shows a timeless resilience in times of economic prosperity and despair. Therefore, the companies that produce products related to peanut butter and jelly sandwiches (packaged food products) will remain in constant demand despite economic turbulence and can be robust investments when things get tough.
The article Investing in the Perfect Peanut Butter & Jelly Sandwich originally appeared on Fool.com and is written by Leo Sun.
Leo Sun has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Leo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
