Developing Markets To Draw Interest At US Consumer Conference
February 12 2010 - 8:42AM
Dow Jones News
Executives of the world's largest consumer-goods companies will
gather at an industry conference next week in Florida, where many
companies are likely to offer deeper insight into their plans to
bolster sales overseas in the wake of the spending slump in the
U.S.
Many branded makers of basic goods like detergents, drinks and
cosmetics that saw weakness in sales during the recent recession
are now under pressure to convince shareholders that they can
revive business in North America, while boosting sales in emerging
markets. Investors and analysts will scrutinize those strategies as
well as these companies' plans on dividends, buybacks and
acquisitions at the Consumer Analyst Group of New York conference
at Boca Raton.
"It will be about where they are finding growth [and] potential
opportunities," said Walter Todd, a portfolio manager at Greenwood
Capital, which holds shares of consumer-staples companies.
Kraft Foods Inc. (KFT), one of the early presenters when the
conference starts Tuesday, will also report its fourth-quarter
earnings the same day. Based on a Thomson Reuters survey of
analysts, Kraft is expected to earn 45 cents a share on revenue of
$11.07 billion.
Investors will pay attention to what the company might say
regarding its recently announced deal to buy Cadbury PLC (CBY),
which will give the U.S. food maker a big presence in Asia. Kraft
is expected to provide more details in coming months on integrating
its massive candy business, and utilizing the Cadbury supply
network to bolster Kraft's international presence.
"In the underlying business, [Kraft] had been gaining traction
prior to Cadbury. Beyond that, it would [be] great to get some
details on cost savings, revenue synergies and the integration in
general," said Morningstar analyst Erin Swanson.
The largest consumer companies are also likely to face questions
about their acquisition strategies, particularly as many makers of
consumer staples are cash-rich. Companies like Coca-Cola Co. (KO)
have said they will push for the wider use of their products and
increased per-capita consumption in developing markets, though they
haven't shut the door to deal-making.
Coca-Cola's presentation will be made by the president of its
Latin America group, Jose Octavio Reyes, another sign of the
growing importance of developing markets for the company.
Some companies could also offer clues about their cash
utilization. Sara Lee Corp. (SLE) has said it will provide further
details of its dividend and buyback plans at the conference.
Hershey Co. (HSY), meanwhile, which failed to make a bid for
Cadbury, has in recent weeks said it remains open to making
acquisitions. The candy maker said it will use the event to share
more views about the types of retail and consumer trends it sees in
the industry.
While overseas markets will be crucial to growth, consumer-goods
manufacturers would also need to highlight how they plan to entice
reticent consumers in the U.S. to trade back to higher price
brands. Sales in the U.S. have been growing at a slower rate than
emerging markets in recent years, but the U.S. is still the single
largest profit source for many of the companies.
Food makers, in general, will need to give investors details
about how they will continue their long-running fight against
cheaper private labels and what steps they are taking to get
consumers to trade up now that the economy is picking up, said
Morningstar's Swanson.
Recent results have shown sales improvement for a number of
companies, including Procter & Gamble Co. (PG) and Sara Lee.
But investors have also worried that consumer companies have been
offering more price promotions and lower-priced products to drive
up volumes, and would like to gain clarity from manufacturers'
plans to balance margins with sales growth. Attendance at the
conference is up this year with more than 500 analysts attending,
compared with 465 last year.
-By Anjali Cordeiro, Dow Jones Newswires; 212-416-2200;
anjali.cordeiro@dowjones.com
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