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OVERALL INDUSTRY NEWS
  • FDA increased regulations on partially hydrogenated oils, a main source of trans-fats. Even with all the reports out there that this is going to cost manufacturers billions of dollars we remain optimistic. Recognizing that our top ideas and many other food manufacturers have worked to drastically reduce the use of trans-fat over the last decade.
  • One new Avian Flu case was confirmed in Wright County, Iowa on Thursday. One million commercial chickens were taken by this particular outbreak, bringing the total number of affected birds in the U.S. to 48 million. This ended an 8 day outbreak-free period.
  • Post Holdings released a brief Avian Flu update on Thursday regarding a company-owned flock in NE that had presumptively tested positive for AI. The flock went through a number of testing rounds with the USDA under quarantine, but today was released from such, as the outbreak was not confirmed.

COMPANY UPDATES

GIS

  • GIS may benefit from the essential trans-fat ban brought on the FDA, as it has reduced trans-fat content in 350 of its product since 2008. The thought-to-be unsafe anti-stick trans-fats are still used in their Betty Crocker, Bisquick and Pillsbury brands. It will be difficult to use alternatives for those lines. 
  • Company named to Newsweek’s 2015 Green Rankings, placing 48th out of 500 US publicly traded companies, and 77th out of 500 global companies.
  • In the food and beverages industry alone, GIS came in 4th of 19 in the top 500. “[We will] continue pursuit to create economic, social and environmental value in the countries where we operate.” –Jerry Lynch, VP & Chief Sustainability Officer.

THE WEEK IN REVIEW - GIS Chart 1

WWAV

  • Sentiment remains high on WWAV after the acquisition of Vega was announced last week. The price has been on a slow but steady increase. Please contact us at for our WWAV Black Book we released last week.

THE WEEK IN REVIEW - WWAV Chart 2

HAIN

  • The street continues to like the stock, but after yesterday’s close, it is trading at -1.48% from its 52-wk high. Low EPS estimates and current P/E valuation are, however, beginning to weaken the confidence of consensus. We are sticking to our guns that HAIN is not an organic company, and does not deserve its current valuation!

THE WEEK IN REVIEW - Hain Chart 3

OTHER NOTABLES 

  • Jana Partners LLC has filed an SC 13D form against ConAgra Foods (CAG) with activist intentions. They have stated their plans of making changes to the Board of Directors. Changes to this consumer staples giant will likely bring on more long term competition for other industry players.
    • Jana believes that the company has underperformed in creating shareholder value, stemming as a result of their recent acquisition of Ralcorp, Inc.
  • HSY announced a productivity initiative, anticipating the elimination of about 300 jobs, beginning with a voluntary separation option in which transitioning employees will receive help. The program will yield up to $75 million in savings, which will be reinvested in the company, in part, to create long term shareholder value.
  • HSY also lowered EPS guidance for FY15 from $4.30-$4.38 to $4.10-$4.18, due to growth expectations in China having not been up to par for May and April. Trends on a more macro scale are affecting consumer behavior, in addition to increased competition within the category in China.
  • Nestle is reducing its African workforce by 15%. The company says it is partially due to an extremely small and static regional middle class, and also because the turnover in the region has failed to grow as was expected in previous years.

Food and Organic Relative Performance versus the SPX

THE WEEK IN REVIEW - Chart 4

Consumer Staples Best Ideas List

THE WEEK IN REVIEW - Chart 5