Posts Tagged ‘ PEP ’

Hostess Brands Files for Chapter 11 – Again

January 11, 2012

I grew up within 5 minutes of a Hostess/Wonder Bread factory and one of my enduring childhood memories was going to the factory store with mom on the discount day (I think it used to be Wednesday) when the snack cakes were all on sale. The excitement was unbearable as we approached the factory and the wonderful smells of the bakery overwhelmed once you were within a quarter mile of the factory store parking lot.

Hostess Brands has filed for Chapter 11 again, after previously filing for bankruptcy just three years ago. Courtney Donohoe, from Bloomberg news, points out, with her very cute lisp, that the combination of a weak economy, unionized workforce, heavy pension obligations and competition has done Hostess in. The brands were owned by private equity firm Ripplewood Capital Partners. Reportedly, Hostess Brands will continue to operate in Chapter 11, with $75M in financing commitments from Silverpoint Capital.

While very unhealthy, the iconic brand portfolio of Twinkies, HoHos, Suzy Q’s, Donettes, Fruit Pie, Ding Dongs, SnoBalls, and Zingers surely have tremendous brand equity. I wouldn’t be at all surprised to see a bid from Kraft (KFT), PepsiCo (PEP), or Berkshire Hathaway (BRK/B).

Good luck to Hostess! If there are going to be tremendously unhealthy snack foods around that we indulged in as kids, the world is a better place if Hostess is one of them.

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Pepsi (PEP) – A Constructive Quarter with Snacks and Emerging Markets Drving Growth

October 12, 2011

pepsiPepsi (PEP) is one of the first companies to report Q3 earnings. While the carbonated beverage business in North American is essentially a flat business (volumes grew 1% ex-acquisitions) the rest of Pepsi’s business showed some resiliency.  The non-US business, particularly in emerging markets is doing exceptionally well and the snack business (Frito-Lay) is also leading growth from both higher volumes and pricing power. Some growth rates which were discussed on the conference call for the international snack business:

EM Snack business volume growth:

  • China: +31%
  • India: +26%
  • Saudi Arabia: +24%
  • Egypt: +15%
  • Turkey: +22%
  • Russia: over 35%

EM beverage business is growing volumes between high single digit and double digits, and Gatorade volumes grew 9% around the world.

While Alcoa was disappointing, the materials sector is one of the worst positioned for the near term dynamics of strong dollar, lower commodity pricing, and slowing growth.

Pepsi had a very constructive call and the near-term technicals for the stock now look good. There are many stocks similarly positioned as we head into Q3 earnings.


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