Post 235

A snapshot of what’s going on in the world’s economy.  Financial Ructions and book reviews can be a bit more technical so feel free to skip them.  See disclaimer at the end of this note.

A shorter post today as I’m on vacation in Costa Rica.  World famous for birding.

  • To give you some perspective, in Eastern North America we have one type of hummingbird.
  • In Costa Rica they have 48.
  • The shuttle for my birding excursion tomorrow leaves at 3:30am!
    • Cynne decided to stay at the resort.
  • I probably won’t post again until next week.

Cheers.

Summary

News

Nestle: Pet Project

Nestle, founded in 1867, is the world’s largest food company and has over 2,000 brands including 31 of which have sales of $1 billion or higher per year.  Some brands include:

  • Baby Food: Gerber
  • Water: Perrier, San Pellegrino
  • Chocolate & Confectionery: KitKat, Smarties, Aero, Quality Street
  • Coffee: Nescafe, Nespresso.
    • 6,000 cups of Nescafe’s instant coffee are consumed around the world every second!
  • Carnation
  • Coffee-Mate
  • Hot Pockets
  • Lean Cuisine
  • Maggi
  • Movenpick
  • Nestea
  • Stouffer’s
    • Corny 1980s commercial ‘here
  • Toll House
  • Ice Cream: Haagan-Dazs, Dreyer’s (through JV Froneri)
  • Pet Food: Purina, Alpo, Friskies
  • And many more.

2023 Results

  • Adjusted sales: +7.2%
    • Price: +7.5%
      • Price up 10.6% in Europe.
    • RIG (like volume): -0.3%
      • Volume by region:
        • North America: -0.3%
        • Europe: -2.4%
        • AOA (Asia, Oceania, Africa): +0.3%
        • Latin America: +0.3%
        • Greater China: +2.5%
      • Only two of its categories had positive volume growth with the largest being Pet Care at +2.8%:
        • And that category also had price up 9.3%
        • Pet Care was the only category that grew sales at a double-digit rate.

General Mills

General Mills is an American company with the following brands:

  • Cheerios
  • Haagen-Dazs ice cream (Nestle owns the rights in the US)
  • Betty Crocker
  • Bisquick
  • Cocoa Puffs
    • PM: remember the Monster cereals launched by General Mills in 1971?
      • Count Chocula
      • Franken Berry
      • Boo Berry
    • According to Wikipedia, Franken Berry contained an indigestible pigment that turned children’s feces pink, known as Franken Berry stool.
    • Since 2010 they’ve only been available during the fall/Halloween season.
  • Green Giant
  • Old El Paso
  • Pillsbury
  • Yoplait
  • And many more

General Mills 2Q/2024 results were reported in December:

  • Adjusted sales: -2%
    • Price: +3%
    • Volume: -4%
      • North America: -5%
        • Pet: -11%
      • North America Foodservice: -1%
      • International: -4%

Kraft Heinz

Kraft Heinz owns the following brands:

  • Oscar Mayer
  • Velveeta
  • Heinz
  • Kool-Aid
  • Jell-O
  • Philadelphia Cream Cheese
  • Maxwell House
  • Cool Whip
  • Miracle Whip
  • Shake N Bake
  • Stove Top

Reported their 4Q/2023 results:

  • Adjusted sales: -0.7%
    • Price: +3.7%
      • International: +7.7%
    • Volume: -4.4%
      • North America: -5.5%
  • The company noted “headwinds that were driven by ongoing consumer pressure.”

From my post of October 2022 (3Q/2023 results):

Reported sales were up 11.6% on an adjusted basis.

  • They increased prices by 15.4%!
  • PM: Which means that, like most other consumer products companies, volume was down i.e. people have to pay higher prices which means they can afford to buy less stuff.
    • Kraft volume down -3.8%

Mondelez

Mondelez owns brands such as:

  • Cadbury
  • Chips Ahoy
  • Clorets
  • Clif Bar
  • Halls
  • Oreo
  • Ritz
  • Tang
  • Toblerone (PM: My favourite).
  • Trident
  • Triscuit
  • Wheat Thins

Announced their 4Q/2023 results:

  • Adjusted sales: +9.8%
    • Pricing: +10.2%
      • Up 26.5% in Latin America.
    • Volume: -0.4%
      • Down 5.5% in North America.
  • By Region 
    • North America: +1.9%
    • Latin America: +28.6%
    • Asia, Middle East, Africa: +7.9%
    • Europe: +11.6%

Yogurt

Danone is a French food products company focused on yogurt.

  • 1919: The company got its start in Barcelona.
    • Founder Isaac Carasso named the company after his son’s nickname: Danon.
  • 1929: Set up in France under the brand Societe Parisienne du yoghourt Danone.
    • PM: Quite a mouthful.
  • 1942: Established Dannon in the US.
  • 1972: Quote from then head of the company Antoine Riboud:
    • We should lead our companies with our hearts as much as with our heads, and we should not forget that while the energy resources of the earth are limited, those of humankind are infinite as long as we feel motivated.
      • PM: His son Frank took over the company and we met him a couple of times.
      • At times it seemed like the company was more focused on saving the world than running a profitable business.
      • It’s good to save the world, but profit must come first.
  • Some of their brands include:
    • Activia
    • Oikos
    • Danonino
    • Silk
    • Actimel
    • Evian
    • Volvic
  • It used to own other brands like:
    • Kronenbourg
    • Lu biscuits
    • Peak Frean
    • HP Sauce:
      • Founded in Nottingham, UK in 1895
      • One of the main ingredients is tamarind fruit.
        • Also found in Worcestershire sauce.
  • 4Q/2023 results
    • Adjusted sales: +5.1%
      • Price:
      • Volume: +0.8%
        • -0.4% for the full year.
    • North America had the weakest growth at +3.1%.

Advertising

WPP is a UK-based global advertising company.

  • WPP stands for Wire and Plastic Products as it was founded in 1971 to make wire shopping baskets.
    • Martin Sorrell bought it in 1985 and transformed the listed company into various marketing services.
  • In 2000 they bought US company Young and Rubicam, which was founded in Philadelphia in 1923.
    • The acquisition made WPP the largest advertising company in the world.

4Q/2023 Results:

  • Adjusted sales: +0.3%.
    • US: -4.5%
      • US advertising sales fell in the following sectors:
        • Technology
        • Healthcare
        • Retail

Missing Lynx

Calgary based discount airline company Lynx Air was founded as Enerjet in 2006.

  • In 2021 it announced its name change to Lynx Air.
  • It is now filing for bankruptcy:
  • “…operations will end February 26, 2024 12:01am.”

From their website:

  • “Lynx is redefining what it means to be an ultra low-cost carrier. Enjoy ultra low prices, no hidden fees and friendly service everywhere we fly.”
    • PM: Great idea, but you need to charge enough to stay in business.
  • Reasons for closing their doors: “compounding financial pressures associated with:
    • Inflation
    • Fuel costs
    • Exchange rates
    • Cost of capital
      • PM: High interest rates.
    • Regulatory costs
    • Competitive tension in the Canadian market
    • Previous grounding of their Boeing 737 MAX jets.
  • The company is not offering refunds for any upcoming trips that people have booked.
    • PM: As some who book flights on Lynx Air do so because they may be on a tight budget, this will hurt many who can least afford it.
      • Some may be able to get refunds through their credit card provider.

Canada: Continuing Disinflation

Inflation in January:

  • Dec: 3.4%
  • Jan: 2.9%
    • Moving UP
      • Mortgage interest costs: +27.4%
      • Electricity: +11.1%
      • Rent: +7.9%
      • Car insurance: 6.9%
      • Grocery prices: +3.4%
    • Moving Down:
      • Cellular services: -16.4%
      • Airfares: -14.3%
        • From Dec they were down 23.7%
      • Gasoline prices: -4.0%

Goods vs. Service:

  • Goods: +1.4%
  • Services: +4.2%

Core inflation excluding food and energy:

  • Jan: 3.1%

Financial Ructions

Economist Alex J Pollock was the guest on Jim Grant’s podcast recently.

Quote from Tom Stanton (via Alex J Pollock):

  • Risk migrates to the hands least competent to manage it.

Alex J Pollock

  • He asks his students “What is the collateral when a bank makes a loan for a company to buy an office building?”
  • His students invariably respond that the collateral is the building.
  • He says no.  The collateral is the “price” of the building.

I quoted Pollock in a previous post:

  • He says that we shouldn’t be referring to interest rates as “higher for longer.”
  • Instead, we should be saying “normal for longer.”
    • From 2008 to 2022, interest rates were “abnormally” low.

Disclaimer: Note that Paulitical Economy™ should not be considered as investment advice, and I have not verified all of the sources of information.  It is meant for general interest purposes only.  Please consult an advisor if you plan on putting any of your hard-earned capital to work during these turbulent times.

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