CPG Follies
Conagra’s deal to buy Pinnacle Foods is more evidence that you have to get big to make money in packaged goods. Both companies have strong brands but have been hurt by the consumer swing to healthier, fresh options. They have made some changes to address this as the growth in their frozen food businesses attests. But that clearly is not enough to please investors. After the deal was announced, stock in both companies took steep drops.
Meanwhile, the bleeding continues at General Mills. The company is cutting over 600 jobs by next spring after continued sales losses in their yogurt and baking products. It also reported lower earnings in the last quarter due to ongoing margin pressure from high transport costs and increased commodity costs. The jury is still out on their $8 billion spending splurge on pet food maker Blue Buffalo. Interest costs are up 27% YOY largely due to this deal Will take a lot of dog and cat food sales to get a return on that.
Labor Challenges in QSR
A report in the Wall Street Journal highlighted the challenges that the food service industry is having with staffing and to the point where more quick service restaurants are looking to automation. Hospitality, which includes restaurants, has more job openings than any other industry. Chains like Arby’s, Wendy’s, and Panera Bread are automating repetitive and difficult tasks such as dish washing and burger flipping. They are also using kiosks to manage customer orders, taking pressure off the front end workers. But the food service industry walks a fine line with automation. Customers have pushed the industry this direction with the demand for quick service and safe, high-quality food at a good price. Will they be willing to give up all human contact in the transaction or will the restaurants which invest in good help to provide a personal touch win more customers in the long run?
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