Pros:
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8 billion dollar brands, 13 500+ million
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After zero based budgeting was done, they are the leaders in the consumer goods sector with ~26% operating margin
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Beginning to invest into other channels such as ecommerce, clubs, and monthly subscription services and investing into start ups and niche brands
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Very efficient after cost cutting, cut out older workforce and hiring younger millennials with a cut throat environment. Employees are compensated higher salaries out of the industry in turn for greater responsibility.
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Currently ~4.1% dividend with a low payout ratio (more on that later)
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Approaching near book value. Additionally investing into tech upgraded warehouses/plants and have been getting industry awards for their creation of new, efficient plants and factories.'
Neutral:
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3G and Berkshire make up majority
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Warren Buffett stepping down from board because of old age (although remains invested in the company, optimistic about future)
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Possibly looking to acquire more companies. Not too interested in smaller companies but also not interested in purchasing completely different sectors. Interested in synergies and applying zero based budgeting (but much of the industry has been adapting to or adopting those principles)
Negative:
Low glassdoor rating, employees warn of too much accounting based focus. Ex: must print on both sides of paper, have to get key for office supplies, opportunity cost of time when scrutinizing every action over looking into innovation/ideas
- Millennial taste/trends shifting away from packaged food
Negative cont:
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Shrinking revenue overall
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A lot of debt after merger, a fair amount financed in house by Berkshire Hathaway
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Long-term sales questionable
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Growing competition from store brands, private labelers such as Aldis (and even whole foods now), health conscious options competition on price, growing negative stigma towards artificial ingredients. Side note: While KHC has removed those ingredients from their product lines, I still think people associate packaged, processed foods with the name
Ideally, I'd like to see them sacrifice a little bit of their margin to give employees appropriate supplies to work with although I agree with cutting excess fat, parties, unnecessary shit. They also make cost cutting economically inefficient when every last penny is focused on. Thinking about any expense under $10 stalls efforts on growth and the company does need to shift focus although their has been an effort to do so in the workforce they're hiring and being active digitally.
An example of the digital side is their recent Mayochup Twitter campaign. Unfortunately, the naming and some of their approach to it was forced and could be reworked but it was a good way to get free publicity and solicit direct information as to what some of their current consumer base wants. Again, a step in the right direction but with gaps to improve on. Their reach on the campaign reached over 900k votes. I'm intrigued by their lean approach to marketing. It's promising to see in house ideas/work get this large of a reach. Furthermore, I got curious digging to search employees with a digital background (as that's where a lot of previous center aisle traffic is shifting towards) and a lot of employees have high achieving backgrounds which leads me to believe their HR knows how to sell the prestige and success of the company itself.
Overall I think the company has been currently hit hard after another quarter decline and overall poor year. I don't expect short term growth but I think the company is large enough to hold onto their current market share given their current efforts. If they continue with their digital presence and efforts in targeting niche consumer bases they'd be well suited long term.
I've seen some discussion and previous threads crunching some numbers on their debt and based on their payment terms, must turn their revenue decline around within 5 years or else they will have to cut dividends at the very least to have cash which would obviously hurt long term and make this a rough hold but either way, I'd intend on holding it through thick and thin. However, on top of that, if Kraft was to continue with their current guidance on declining sales that would indicate a fair price to pay at around is ~$54 putting it right on book value. Therefore, I'm conflicted if now as a fair time to buy.
Submitted April 15, 2018 at 09:03PM by cashplan123 https://ift.tt/2JLsWb8
