Seeking Alpha
Profile| Send Message|
( followers)  

Food manufacturers continue to post solid earnings growth driven by lower commodity costs. However, for increased profitability to be sustainable, companies need to drive sales growth and increase their long term dollar share in their respective food categories. Having a number one or two share is the best way to drive long term profitability in the food sector.

With that, we have identified our top 5 companies within the supermarket industry that have gained market share over the last two years through sales growth or new acquisitions. We prefer that share gains come through organic growth, but strategic acquisitions can also be very helpful in driving above-average earnings.

Smuckers (NYSE:SJM)
They have done a nice job integrating and driving growth with the Folger's acquisition. I always cringe when the acquirer builds in better execution as their means for justifying a new purchase, but I have to admit Smuckers has delivered. Smuckers has driven share gains both in the mid price segment with strong growth on Folgers and also in the premium segment with their licensed Dunkin Donuts brand.

Nestle (OTCPK:NSRGY)

Nestle's recent acquisition of the Kraft Foods (KFT) Pizza division is one of those game changing events that makes a ton of sense strategically. Look for Nestle to be the new 800 pound gorilla in the frozen case. Through combining DiGiorno, Tombstone and California Pizza Kitchen brands with Stouffers, Lean Cusine and Hot Pockets, they will be the undisputed leader in the frozen food aisle.

General Mills (NYSE:GIS)

General Mills continues to gain share in the RTE (ready-to-eat) cereal category. They have boosted their share from the high 20's over the last few years to around a $31 share. While still second to Kellogg's (NYSE:K) $34 share, they have closed the gap considerably. Share losses in the cereal category have mostly come from Ralcorp's (NYSE:RAH) Post division. They also have grown share mostly through brand strength and advertising and that makes it clearly more sustainable than promotion orientated share gains.

Bimbo Bakeries (OTCPK:GRBMF)

Not a familiar household name, but Bimbo Bakeries, a subsidiary of Grupo Bimbo (OTCPK:GRBMF), is the number one bread and sweet goods maker in the US. Their purchase last year of George Weston Bakeries (Entenmanns, Arnold, Thomas, Brownberry brands) vaulted them into the number one position in the bread market. The acquisition made them the first truly national premium baker in a very fragmented and local bread market. Their new-found scale should help immensely when securing promotion and shelf space with top retailers like Walmart (NYSE:WMT) and Target (NYSE:TGT).

Treehouse Foods (NYSE:THS)

Treehouse continues to grow through a combination of organic private label growth and acquisitions of key companies. Their recent purchase of Sturm foods provides them a strong vehicle for driving growth in the hot cereal and powdered beverage categories. Treehouse continues to take advantage of the above-average growth of private label products and is positioning itself as the number one private label supplier.

Disclosure: No positions

Source: 5 Growth Food Stocks