Food and Beverages
A Review of Foreign Food Retailers
Some of the largest food and drug retailers in the U.S. are Kroger(KR), Safeway (SWY), Whole Food Market(WFMI), Supervalu (SVU) and The Great Atlantic and Pacific (GAP). These companies operate in multiple states and take advantage of their size by selling products sometimes at very low prices. Even the world’s largest retail chain Wal-Mart(WMT) is a major player in the food retail industry with its Sam’s Club division and Wal-Mart Super Stores that have large food sections. Due to continuous over-production and the commodity nature of food products, food retailing is a low margin business and usually involves cut-throat competition as each retailer tries to take away market share from rivals.
The same business terrain exists overseas for this sector. Wal-Mart’s global competitor Carrefour of France is not listed on the organized exchanges. However five foreign food retailers shown below are available for US investors as ADRs:
| S.No. | Company | Ticker | Country |
|---|---|---|---|
| 1 | Blue Square-Israel | BSI | Israel |
| 2 | China Nepstar Chain Drugstore | NPD | China |
| 3 | Companhia Brasileira de Distribuicao | CBD | Brazil |
| 4 | Delhaize | DEG | Belgium |
| 5 | Grupo Casa Saba | SAB | Mexico |
Besides Europe and Asia, Belgian firm Delhaize Group(DEG) operates 1,500 stores in 16 states in the U.S. under the Food Lion, Bloom, Bottom Dollar, Harveys, Hannaford Bros., and Sweetbay names. Israel-based Blue Square Israel Ltd(BSI) has a current yield of 9.25%. China Nepstar Chain Drugstore Ltd. (NPD) is a retail drugstore chain with 2,709 stores located in 12 provinces and 76 cities across China. Companhia Brasileira de Distribuicao(CBD) operates 597 stores in Brazil selling food, clothing, home appliances, etc. Grupo Casa Saba (SAB) is a national wholesale consumer goods distributor in Mexico.
Nine Foreign Food Sector Stocks
As a consumer staples sector, stocks of food producing companies can provide some margin of safety and stability to a portfolio especially in adverse market conditions. Only a handful of foreign food companies trade in the organized U.S. exchanges.
Two of the large global food companies are Europe-based Unilever and Cadbury. British confectioner Cadbury is the owner many famous brands in the world such as Dairy Milk, Creme Egg, Stride, Chiclets, Trident, etc. American food giant Kraft Foods is now engaged in a takeover bid of Cadbury. Unilever’s portfolio of brands include Lipton, Dove, Sunsilk, Surf, Rexona, Pond’s and many others. The other six companies shown here have low market capitalizations and are from emerging markets.
The complete list of foreign food producers are listed below:
| S.No. | Company | Ticker | Country |
|---|---|---|---|
| 1 | Agria Corporation | GRO | China |
| 2 | BRF - Brasil Foods | BRFS | Brazil |
| 3 | Cadbury | CBY | United Kingdom |
| 4 | Cresud | CRESY | Argentina |
| 5 | GRUMA | GMK | Mexico |
| 6 | Industrias Bachoco | IBA | Mexico |
| 7 | Unilever | UL | United Kingdom |
| 8 | Unilever | UN | Netherlands |
| 9 | Wimm-Bill-Dann Foods | WBD | Russia |
Agri-Food Stocks Offer Potential Investment Opportunities
Food prices skyrocketed worldwide in 2007 and early 2008 leading to a crisis in many developing and under-developed countries. In 2008 and last year prices stumbled and the crisis faded away from headline news.
Last November BusinessWeek had an interesting report titled Land Rush in Africa. The article discussed in detail how Agri-business and global investors are scooping up fertile farmland in Africa. In the same month World Bank President Robert B. Zoellick warned that low food stocks and shortages could force food prices up again in 2010.At a panel discussion on food crisis three leaders warned that the food crisis may repeat again. One of the leader that shared this thought was Dr.Josette Sheeran of the United Nation World Food Progamme(WFP). She said that the cost of cereal had risen 17% and global food prices are 50% higher than just five years ago.
Some facts from the World Bank site on Food Crisis:
- 1.1bn people were living on less than $1 a day
- A 2 kg bag of rice now costs half the daily income of a poor family in Bangladesh
- Between 130m and 155m people fell into poverty in the last 2 years due to high prices
- Although lower than at their peak in 2008, major food grain prices are still above average
- Although international prices have fallen, local prices in many countries have not
In the World Investment Report 2009, UNCTAD said over 900 million people worldwide are undernourished and 65 countries are in serious danger of food shortages. Globally Foreign Direct Investment (FDI) in the agriculture sector has increased sharply since 2005. many of the large companies are getting involved in the upstream and downstream of the value-chain.Large multi-national companies participate in agriculture production by contract farming. Some of the countries with heavy investment by foreign companies in farming include Vietnam, Kenya and Brazil.
The continued rise in oil prices, weather-related and man-made events can cause food prices to go higher this year. During the crisis in 2007 many Agri sector stocks had incredible runs.
The Top 25 Trans-National Food and Beverage Companies that are increasingly moving into other parts of the value-chain are:
- Nestlé SA (OTC: NSRGY)
- Inbev SA (BUD)
Note: Budweiser merged with Inbev to form Anheuser-Busch InBev - Kraft Foods Inc (KFT)
- Unilever (UN, UL)
- Coca-Cola Company (KO)
- SAB Miller (SAM)
- Diageo Plc (DEO)
- Pernod Ricard SA
- Cadbury PLC (CBY)
- Bunge Limited (BG)
- Heineken NV (OTC: HINKY)
- Pepsico Inc (PEP)
- Molson Coors Brewing Company (TAP)
- Kirin Holdings Company Limited
- Archer-Daniels-Midland Company (ADM)
- Associated British Foods PLC
- Carlsberg A/S
- HJ Heinz Company (HNZ)
- Danone (OTC: DANOY)
- Anheuser-Busch Companies Inc
- Wilmar International Ltd. (Singapore)
- Sara Lee Corp. (SLE)
- Constellation Brands Inc (STZ)
- Fraser & Neave Ltd. (Singapore)
- Danisco A/S
Source: UNCTAD
Note: These companies were selected based on 2007 foreign assets
Investors can use the above list as a starting point to do further research for selecting stocks.
Ten Global Food and Beverage Titans
The Dow Jones Food & Beverage Titans 30 Index represents the leading global companies in the Food & Beverage sector. The components of this index are selected based on rankings by float-adjusted market capitalization, revenue and net profit.
Since this is a defensive sector, the index was down only about 26% last year - which is relatively lower than the performance of other sectors such as financials or the overall market. The 5-year annual return of this index is about 9%. As of November 30,2009 the index is up about 27% and the dividend yield is 2.10%.
The Top 10 Components of the Dow Jones Food & Beverage Titans 30 Index are:
1.Company: Nestle S.A.(OTC: NSRGY)
Country: Switzerland
2.Company: Coca-Cola Co. (KO)
Country: U.S.
3.Company: PepsiCo Inc. (PEP)
Country: U.S.
4.Company: Unilever N.V. (UN)
Country: The Netherlands
5.Company: Monsanto Co. (MON)
Country: U.S.
6.Company: Diageo PLC (DEO)
Country: U.K.
7.Company: Unilever PLC (UL)
Country: U.K.
8.Company: Danone S.A. (OTC: DANOY)
Country: France
9.Company: Kraft Foods Inc. (KFT)
Country: KFT
10.Company: Anheuser-Busch InBev N.V. (BUD)
Country: Belgium
Danone and Nestle are two of the top global companies that trade on the OTC markets.
Food and Beverage ADR Stocks !!
Food prices are increasing in all parts of the world. While the price increase in the US and other Western countries has been somewhat moderate to high, the hardest hit are the countries in the developing world. There seems to be many reasons for this dramatic rise.
The following are some facts from the BBC website:
“Price of rice has risen by 70% during the past year
Wheat price doubled in a year
Corn and soya trading well above 1990s averages
Factors include growing population and emerging economies like China and India
Environmental pressures also blamed”
Source: http://news.bbc.co.uk
They have been running a series called “Food Price Crisis - The Cost of Food” which focuses on this critical issue. More information can be found in the following links:
http://news.bbc.co.uk/2/hi/7284196.stm
http://news.bbc.co.uk/2/hi/in_depth/world/2008/costoffood/default.stm
Some of the article titles from the BBC site such as
“Rice prices rattle restaurateurs,Rice prices ‘to keep on rising’,
Africa food price ‘tsunami’ fear,India introduces rice export ban ,
Food mob attacks Haiti palace “
show how this price increase affects many folks around the world.
Against this backdrop, no wonder all the agricultural related stocks like YARIY, AGU, etc. have skyrocketed in the past few months.
Fellow blogger “Confused Capitalist” reiterated his call “to make agriculture-related an important part of your portfolio” in article titled “Agricultural, it’s all about the diet ..”
Adding some food and beverage ADRs to your portfolio may be a good investment in these times. The following table lists most of the stocks in this sector:
| S.No. | Company | Ticker | Country |
|---|---|---|---|
| 1 | AmBev | ABV | Brazil |
| 2 | Anadolu Efes Biracilik ve Malt Sanayi | AEBZY | Turkey |
| 3 | Blue Square-Israel | BSI | Israel |
| 4 | C&C Group | CCGGY | Ireland |
| 5 | Cerveceria Nacional | CVNLY | Panama |
| 6 | Companhia Brasileira de Distribuicao | CBD | Brazil |
| 7 | Compania Cervecerias Unidas | CU | Chile |
| 8 | Delhaize | DEG | Belgium |
| 9 | Diageo | DEO | United Kingdom |
| 10 | Distribucion y Servicio | DYS | Chile |
| 11 | Embotelladora Andina | AKOA | Chile |
| 12 | Eucatex SA Industria e Comercio | ECTXY | Brazil |
| 13 | Fomento Economico Mexicano | FMX | Mexico |
| 14 | Fosters | FBRWY | Australia |
| 15 | Grupo Casa Saba | SAB | Mexico |
| 16 | Grupo Continental | GPOCY | Mexico |
| 17 | Grupo Modelo | GPMCY | Mexico |
| 18 | J Sainsbury | JSAIY | United Kingdom |
| 19 | Jamaica Broilers | JBCLY | Jamaica |
| 20 | John Boutari & Son Wines & Spirits | BJSPY | Greece |
| 21 | Koninklijke Ahold | AHONY | Netherlands |
| 22 | Quilmes Industrial | LQU | Argentina |
| 23 | SABMiller | SBMRY | United Kingdom |
| 24 | San Miguel Corp. | SMGBY | Philippines |
| 25 | Supermercados Unimarc | UNRMY | Chile |
| 26 | Tesco | TSCDY | United Kingdom |
| 27 | Vina Concha y Toro | VCO | Chile |
