consumer staples sector - · pdf fileswot analysis 8. future prospects . ... kellogg's...
TRANSCRIPT
Consumer Staples Sector Team Sector Manager: Siobhan McManus
Analysts: Colm O’Shaughnessy Tom Ryan Zoe Deady Laurynas Gudaitis Richard Sparkes
Senior Analyst: Maeve O’Neill
1. Profile & Video
2. Investment thesis
3. Products & footprint
4. Financials
5. Valuation
6. Risks
7. SWOT analysis
8. Future Prospects
Company Profile
WhiteWave Foods' focus is nutritious, alternative food choices. Its products include plant-based foods and beverages, coffee creamers and beverages, as well as premium dairy products. The company's top brands include Horizon, Silk, Alpro and Earthbound Farm.
It offers alternatives to dairy with its Silk brand (soy milk, almond milk, coconut milk, and juice blends) and Alpro brand (nutritious, plant-based foods). Furthermore, its Horizon Organic brand is made without antibiotics, synthetic pesticides, or genetically modified organisms (GMOS).
Key Statistics Market Cap 6.25bn
Revenues 2013-$2,542(m)
2014- $2,525(m) in September
Enterprise Value (Nov 24, 2014):7.58B
http://youtu.be/PQ4RKi2-g4o
Investment Thesis
•WhiteWave Foods produces products to meet the consumer preference in the market today. •Regarding full-year 2013 growth, WhiteWave Foods had net sales growth of more than 10%. For Q2 2014, net sales were $838 million. This represents a 36% increase from net sales of $616 million in Q2 2013. •WhiteWave's performance was driven by double digit organic net sales growth year over year, along with a As such, it is quite likely that WhiteWave will be able to sustain its impressive performance in the future, which is why the stock's expensive valuation shouldn't be much of a concern for investors looking for a growth stock. • WhiteWave is a leading producer of niche plant-based beverages, premium dairy, and coffee creamers. Its shares are not cheap, but the company has an above average profit margins and it also offers an exposure to a market that is likely to experience secular growth.
Why we are looking to add WhiteWave Foods to the SMF Portfolio?
Silk® and Alpro® brands drove the creation of plant-based foods and beverages that are changing the very future of food.
Delight® and Land O Lakes® creamers and beverages bring all the flavours of the coffeehouse to people at home or on the go.
Horizon® and TruMoo® offer a diverse set of great-tasting dairy choices, such as premium-branded milks that nourish and bring delight.
Earthbound Farm® is the top organic packaged salad and produce brand in North America, making healthy, fresh foods simple and accessible.
All Whitewave Food brands within their respective categories or subcategories hold significant shares of the market.
January 2014 WhiteWave Foods acquired “Earthbound Farms” for
approx. $600 million. This gave them the leaders in organic packaged salads.
September/October 2014 WhiteWave Foods acquired “So Delicious” for approx.
$195 million So Delicious is the no.1 plant based frozen dessert
brand in the U.S. This provided WhiteWave with another category leading
brand with a strong market share.
Acquisitions
News November 2014 WhiteWave Foods’ third market quarter revenue up 34%
due to Earthbound Farm acquisition and growth in Europe – results exceeded analysts expectations.
In November, WhiteWave Foods also leased 50,000 square feet in Louisville for a new food preparation, research and testing facility.
The acquisition of Earthbound had a large impact on the recently reported third. Total sales increased 34% to $857 million in the quarter, including organic growth of 12%, the highest of the year. Operating income was up 50% and earnings per share increased 42% to $0.27.
U.S.
Largest plant-based food company in the U.S.
Outperforming both of its closest competitors, Hain Celestial Group and Boulder Brands, on the stock market.
Number 1 in plant-based beverages, premium dairy, organic produce, and coffee creamers.
Almond milk market is rapidly expanding and sales jumped 46%.
Market for plant-based beverages have an annual growth of 15%, far outpacing that of dairy milk.
WhiteWave Foods' Silk brand holds a 56% share of the total category and holds the No. 1 position in the almond, soy and coconut subcategories.
Acquisitions of So Delicious Dairy Free and Earthbound Farm have built North American presence and sales.
Europe
Sales up 24% this quarter.
Based in Brussels, with state-of-the-art
research facilities and factories in Belgium,
the Netherlands, the UK and France.
Operating income of 82%.
Alpro has a market share of 42% and is No.
1 in the 9 biggest markets.
European market for plant-based
beverages has an annual growth of 6%.
Another exciting opportunity will extend
WhiteWave’s reach to Asia.
Early in 2014 they announced that they are
forming a joint venture (of which WhiteWave
will own 49 percent) with a leading Chinese
dairy company, China Mengniu Dairy.
In addition to providing an entry into one of
the world's largest and fastest-growing
markets, this partnership gives WhiteWave a
chance to bring nutritious food and
beverage products to Chinese consumers.
Subject to the necessary government
approvals, the joint venture expects to begin
selling products in China in late 2014.
China’s market for plant-based drinks is
bigger than both the U.S. and EU with a
growth rate of 15-20%.
Danone • Danone groupe is the fresh dairy business behind the company
favourites yogurt brands Activia, Vitalinea, Danacol, Danonino and Irelands No.1 dairy brand; Actimel.
• Market cap: 41.66bn
Kraft • The Company manufactures and markets food and beverage
products in North America, including convenient meals, refreshment beverages and coffee, cheese and other grocery products, in the United States and Canada, under a stable of iconic brands.
• Market cap 34.87bn
General Mills • The Company’s U.S. Retail segment reflects business with a range
of grocery stores, mass merchandisers, membership stores, natural food chains, and drug, dollar and discount chains. The Company’s International segment consists of retail and foodservice businesses.
• Market cap 34.87
White Wave
DANONE General Mills
KRAFT Industry
Market Cap: 6.25B
41.66B 31.30B 34.87B 1.14B
Employees: 3,900 104,642 43,000 22,500 3.68K
Qtrly Rev Growth: 0.34 -0.05 -0.02 0.00 0.25
Revenue (ttm): 3.20B 25.97B 17.81B 18.10B 1.46B
Gross Margin (ttm):
0.34 0.47 0.35 0.35 0.24
EBITDA (ttm): 365.88M 3.94B 3.31B 4.48B 97.07M
Operating Margin (ttm):
0.08 0.12 0.15 0.23 0.06
Net Income (ttm): 127.16M 1.33B 1.71B 2.36B N/A
EPS (ttm): 0.72 0.45 2.68 3.93 0.51
P/E (ttm): 49.90 30.75 19.33 15.07 19.16
PEG (5 Yr expected):
1.66 1.78 2.97 2.27 1.66
P/S (ttm): 1.97 1.59 1.75 1.90 1.00
WhiteWave Foods is a classic spin-off done good; from its initial IPO price of $17, the stock has climbed consistently to its current level of $35.28, having reached a peak of just over $38.50.
The impressive quarterly growth of 0.34 is evidence that despite massive growth in the last year (85%) Whitewaves is still in full stride.
The high P/E ratio of 49.90 is significantly larger than the industry average; Is this confidence in Whitewaves’ potential justified?
Huge prospects
An Operating Margin of 8% is a reasonably strong position given the growth the company has experienced.
Strengths Weaknesses
Opportunities Threats
• Market leader in premium dairy and organic produce in USA and also in plant-based beverages in both the EU and American markets.
• Companies products are well placed to take advantage of changing consumer tastes and consumer trends towards healthy alternatives.
• Strong focus on R&D and innovation to add more advanced and customized products in its portfolio.
• Exposure to Europe and negative
macroeconomic conditions. • Raw Material input costs.
• Supply chain susceptible to extreme weather events (eg. California's almond drought).
• Potential to undertake further strategic
acquisitions to enhance the group’s geographical reach and product offerings.
• Potential to organically increase sales by anticipating future changes and trends in American and European consumers diets
• Increasing middle class in China willing to pay a premium for foreign imports where White wave has just gained a presence.
• Regulations related to quality of food products.
• Intense competition in a rapidly changing environment can negatively impact Whitewave’s market share.
• Currency Fluctuations. • Erratic market dairy prices due to Global dairy
deregulation.
Economic Downturn
Liquidity
Geographic/Currency
Competition
Bargaining Power of Buyers
Economic Downturn
Liquidity
Geographic/Currency
Competition
Bargaining Power of Buyers
Gregg L Engels – Chairman of the Board and CEO
Chief Financial Officer at The WhiteWave Foods Company, since August 2012 and served as its Senior Vice President of Finance. Served as Vice President, Finance for The Gillette Company's European Commercial Operations and Head of Finance for the Duracell brand's Global Business Management Served as Senior Vice President and Chief Financial Officer of Mother's-Archway Cookie Company and as Vice President and Corporate Controller of Specialty Foods Corporation.
He served in various senior management positions with subsidiaries of Suiza Foods since 1988. He has been the Chairman of The WhiteWave Foods Company since August 7, 2012. He serves as a Director of Electrolux, Booth Creek, Ltd., Independent Packaging, LP, and Texas Capital Bank. Between 1996 and 2000, Suiza bought 40 more dairy producers in deals that Engles negotiated personally. Degree in law from Yale. After acquiring Reddy Ice in 1988, Engles began buying other small regional ice companies and folding them into the business. Within a few years Reddy Ice became the largest packaged-ice company in the United States.
President at WhiteWave Foods Company since November, 2009. He served as President of Kellogg's wholesome portable breakfast and snacks division and frozen foods division for 13 years. He served as General Manager of Kashi and led Kellogg's Kashi company.
Blaine E. McPeak - President
Kelly J. Haecker – Chief Financial Officer
At Whitewave since 2004 Responsible for the complete management of WhiteWave Foods' supply chain, including procurement, manufacturing, customer service, logistics and quality assurance Served as Vice President of Operations for its Hong Kong and China network where he directed the entire production network Worked for the Pepsi Bottling Group for 15 years, progressing through multiple positions domestically and internationally, including a $1.5 billion responsibility as director of Operations for Northern California and the Pacific Northwest.
Scott Toth – Senior Vice President of Operations
• As of Nov 22, 2014, the consensus forecast amongst 23 polled investment analysts by The financial times covering WhiteWave Foods Co advises that the company will outperform the market.
• In the past two months analysts at Deutsche Bank, Tigress financial, The Street and Morgan Stanley in research notes of WWVA stock have rated it as buy. Credit Suisse and Imperial Capital have rated the stock as outperform.
• Vanguard Group, Inc. and BlackRock Fund Advisors are major shareholders in WWVA holding 7% and 2.86% stakes respectively. Given the successful performance of their previous investments we believe WhiteWave Foods Co. is a stock with many future prospects.
Buy 6
Outperfor
m 9
Hold 6
Underperfo
rm 2
Sell 0
Analysts Predictions and notable major shareholders
• Global sales of dairy products are forecast to reach $494 billion in 2015 of which the U.S. will account for approximately 25%.
• In 2012, 16.7% of U.S. milk production was exported, up from just 10% in 2010.
• Underlying reasons for the increasing global demand for dairy products and rising U.S. dairy exports are: - Popularity of dairy products - Westernization of diets (to include more dairy) - Broader array and appeal of dairy products
• China Mengniu Dairy has outstanding potential for further sales growth despite already having a 20% market share of the Chinese liquid milk market in 2012.
• The dairy industry in China has experienced rapid growth in recent years. The market was worth $40.6 billion last year, compared with only $20.7 billion in 2008.
•
Why Invest?
1. International expansion to China
2. Smart acquisitions and brand building
3. Favourable industry dynamics
