PepsiCo’s (PEP) Q2 2017

CEO Indra Nooyi

Business in Latin America performing well in spite of the challenges

“in Latin America we continue to see very challenging macroeconomic conditions, geopolitical instability, and high levels of inflation in key markets, including Brazil and Argentina, which are dampening consumer spending. Within this context, our businesses are performing well.”

Strategies to counter increased global challenges

“We are pricing to cover the increased cost of doing business, we are going more aggressively after productivity to reduce our overall costs, and we continue to transform our beverage portfolio to offer more non-carbonated options and reducing sugar levels across the portfolio.”

They are paying attention to e-commerce

“The good news is, our e-commerce business is growing brilliantly. We are doing very, very well. We are not yet ready to talk about it in any significant way….it’s growing with our traditional products and our traditional packaging, if you want to call it that….we are looking at meaningful innovation, both in snacks and beverages, in order to address the exploding growth of e-commerce”

Retail is changing and we must change with it

“Perhaps more pronounced are the changes we are witnessing in retail where the lines are blurring between channels…the channels are beginning to blur between food service, retail, home delivery, restaurants, everything, the channels are beginning to blur….you now have a shopping occasion being replaced by home delivery or replaced by a meal delivery of kits. So what we have to do is rethink what is the real growth of the marketplace, the food and beverage marketplace, in a much more holistic way…we all as manufacturers have to start to rethink how we serve this multiplicity of channels and how we should retool our business models to serve every one of these fragmenting channels.”

 

Pilgrims Pride 4Q14 Earnings Call Notes

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

Portfolio strategy to minimize volatility

“we do not expect to follow the full peaks and troughs of the broader industry pricing trends. Rather, our portfolio strategy means that we will benefit from strong markets and at the same time be buffered from some of the impacts of lower pricing, given our lower overall volatility. The net benefit is we believe that we will have a better margin structure relative to our peers over an extended period of time.’

Chicken is the best value in protein right now

“chicken still represents the best value in protein. Although we’ve seen some movement in pork prices, we don’t see that as an imminent threat to chicken demand.”

Export off east coast, but others shipping through there too

“So far, we’ve not been affected by the West Coast slowdown as most of our exports are shipped off the East Coast. One of the things that we’re keeping our eye on, though, is as other producers and exporters divert product to the East Coast ports, that’s causing more product to roll through East Coast ports and thereby creating competition for shipments off the East Coast. So it’s certainly in our interest to have that issue resolved as soon as we can so that we could keep all product flowing for the export market.’

Whole Foods FY 1Q15 Earnings Call Notes

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

Online delivery sales are as high as 5% of total in some stores

“With online delivery sales as high as 5% of total sales in some of our stores, we’re very excited about the future potential as we expand our reach to more markets, provide richer content highlighting our quality standard and broaden our product offering.’

Apple pay is 2% of sales now

“With, the largest Apple Pay retailer in terms of both transactions and sales, further reinforcing the notion that our customer base wants to take advantage of the latest digital technologies. This payment option has grown quickly to 2% of sales which we expect will continue to increase especially after the Apple Watch launches this year.”

Taking out cost requires study and hard work

“it just requires a lot of hard work, I mean, obviously if we knew exactly the big areas to cut we’d already have done that. So, it’s about working on it, studying it, making it our priority which is what our regional presidents were doing and our executive vice presidents for operations. We’re very cautious of the fact that we need to take cost out of our system. And we’ve done it in the past, and we’re going to continue to do it going forward.”

We could move a lot faster as a private company

“e’re a public company. So we’ve got to juggle a lot of things, meaning that we, I mean, suppose if Whole Foods was a private company, we would act a lot faster. But it’s been our experience that market often times overreacts to anything we do.”

We’re still small in the overall market in most of our markets

“One thing to understand is that in only few of our markets, just Whole Foods Market have like the leading market share for food, in supermarkets or food retailing. I mean, in almost all of our markets but maybe a few, we are, our market share is relatively low.

We’re not, I mean, we, the point of it is, is we’re not a big threat to a major supermarket who dominates the market. It doesn’t make, in most cases, it doesn’t make much economic sense for them to go overreact and lower all their produce prices to try to match Whole Foods Market because they’re destroying our profitability or harming our profitability for very little market share gains.”

We’ve always been about quality not being the lowest priced

“Whole Foods is about quality, it’s about service, it’s about selection, it’s about ambience. We’ve never been and we never will be trying to be the lowest priced supermarket that’s sort of not very attractive, doesn’t give very good service. That’s not what we’re about. I mean that’s a valid niche in the marketplace just to be at a low priced, low-cost operator. But that’s not Whole Foods’ strategy. Our strategy has always been about the quality and the service and the selection.”

Competition is good

“And yes, I mean, competition is harder today than it used to be, but on the other hand, Whole Foods is a lot better today than it used to be. In fact, competition, it is your ally. It’s your ally that helps you to get better. It knocks you out of your complacency. It keeps you from being lazy, it forces you to evolve.”

People think we’re just going to sit still

“I think that’s something people have never understood about Whole Foods Market. They think we’re going to sit still and let people catch us. But we’re not going to sit still. We’re going to rapidly innovate and improve, that’s what we’ve done for over 35 years and that’s what we’re going to do going forward.”

We;re going to be relevant on price

“Yes, and I guess Scott, just to add to that Scott. We’re going to be relevant on price. We said that before, we say it again. Our tracking of competitor’s pricing and indexes is much more sophisticated now than it was two or three years ago. We know where we stand relative to the others.”

White Wave Foods 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Supply of organic products responds slowly to demand

“I think it’s important to step back and remember the fundamentals of this business which are that to increase the supply of organic milk, takes considerably longer than what instantaneous changes in demand might be. So to increase the organic milk supply you have to have new organic animals. You can’t convert conventional animals from eating a conventional feed ration and have been producing organic milk. You have to have cows that are of organic stock in order to have organic animals and that just takes time. So we would love to have more supply and we would love to have it on an instantaneous basis but it just doesn’t work that way in this industry. The organic farm community has to be convinced that the demand that they are going to try and satisfy is enduring, isn’t a permanent demand and that the pricing environment gives them a return before they will make the investments to grow the organic herd.”

Coca Cola 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Deteriorating economic environments

“In many of our key emerging markets we see deteriorating economic environments coupled with continued softness in consumer spending in the U.S. and particularly in Japan and Europe. This is placing strong pressure on the short term performance of our business. These factors have driven a deceleration in personal consumption expenditures and as a result the non-alcoholic beverage industry is growing one to two points slower than our initial forecast at the beginning of the year.”

We have to change faster

“we’ve taken a hard look at our progress to date. Our strategies and our actions and realize that while the five strategic priorities we laid out at the beginning of the year are on the right track we recognize that we must do more. Above all, the slope and pace of our actions must change to improve our ability to capture non-alcoholic beverage industry growth.”

cutting costs

“we will drive efficiency through aggressively expanding our productivity program. We plan to expand the program from 1 billion in savings by 2016 to 2 billion in annualized savings by 2017 and 3 billion by 2019.”

refranchising

“third action is to refocus on our core business model of building the world’s greatest beverage brands and leading an unmatched global system of strong local bottling partners. In North America, we have a clear and definitive plan to refranchise the majority of our company owned bottling territories by the end of 2017, so at that time we will retain approximately one third of the total bottling distributed volume in North America. ”

Still generating a lot of cash

“We generated $8 billion in cash from operations year-to-date and returned $1.9 billion to share on us through net share repurchases.”

A 7 point currency impact??

“After considering our hedge positions, current spot rates, and cycling of our prior-year rates, we now expect a seven-point currency headwind on operating income during the fourth quarter of 2014, with a six-point impact on operating income for the full year 2014′

We’re in a challenged disposable income environment

“firstly it’s fair to say that we are in a challenged disposable income growth environment, that’s no question. The consumer is challenged everywhere around the world. Its not related to Western developed markets of Europe and Japan, United States and Canada, but it’s also related to emerging markets. There’s a lot of volatility in the world when you look at in the currencies, when you look at interest rates, when you look at the growth rates and when you actually factor in all the different geopolitical issues around the world. There just is a lot of apprehension.”

Brown Forman 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Whiskey consumption has been in long term secular decline

“let’s go back to 1970s and look at how many cases of American whiskey were sold at that time, it’s about 100 million cases. That’s when the consumption of American whiskey actually peaked.

We’ll fast forward it to today where there is a 40-year secular decline in the category. It was roughly cut in half, so it’s about 50 million cases. If you look at the U.S. population of legal drinking age at that time, it’s grown about 50%, meaning the per capita consumption of American whiskey has fallen by almost 70% over that period. So, we were witnessing an inflection point in the U.S. American whiskey around 2010 where we really saw consumer interest in the category reignited.”

craft distilling and changing taste profiles have helped spur demand

“when we look at what we think is the cause of this renewed demand, of course, there is multiple factors, but I’m just going to mention a few. One, is the rise of craft distilling, which is led by our own Woodford Reserve, the consumer interest in heritage and authenticity, and what appears to be vodka fatigue.

I’m going to focus on another factor I’m calling a fourth factor today, which is the important as the flavored whiskey. So, in 2013, in the U.S. the flavored whiskeys accounted for about 45% of the American whiskey volume growth.

Looking at what drove that was definitely demographics played a major role in that with increased interest from women and minorities based on their changing taste profiles and preferences, as well as convenience.

I can speak to this. I have a couple of millennial kids myself, but I know I probably taught them to like things that tasted differently, but millennials definitely have grown up with many different flavor offerings whether it’s cereals or soda or water or juices. So they now expect to have all kinds of choices and tastes and they want great tasting things.”

We have one of the highest tax rates of our competitors

“I think we have the highest tax rate of all of our competitors’ business and something that we’ve been very, very focused on and looking for smart ways to reduce our tax rate. And, of course, one of the biggest ways is to continue to grow your business outside the U.S. like we have been”

Marijuana legalization is a threat

“you occasionally have things like a U.S. consideration of the legalization of marijuana becomes a big threat. You try to assess and look at and think about long term. “

Sysco 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

5% sales growth

“Sales for the fiscal year grew 5% to $47 billion and adjusted net earnings were $1 billion. ”

Inflation picked up significantly

“Inflation increased significantly at the end of Q3 and was 4.1% for Q4, contributing to our sales and gross profit growth while also pressuring our gross margin.’

Food service industry remains under pressure

“Our results reflect the impact of the slow and modest economic recovery in a food service industry that as a whole remains under pressure.”

Inflation continued throughout the quarter

“During our May earnings call we indicated that inflation jumped substantially at the end of March. That trend continued and we saw a meaningful increase in inflation throughout the quarter. The overall rate was driven by inflation in the meat, seafood and dairy categories which together total more than one-third of our annual sales.”

We expect inflation to fall, but so far it’s been comparable to what we’ve seen

“We haven’t seen it yet. I think what we’re saying is people that we all follow and just looking at some overview reports on commodities and that type of thing, and just the math of this thing as you get into the last third of next year we would expect it to subside some. But at this point it’s still very comparable to what we’ve seen in the last three or four months.’

Consumer wants new experiences at lower cost

“Our customers are under a lot of pressure from the consumer to offer innovative experiences in food and presentations and to do it more and more cost-effectively.”

You can’t wait for a merger to be approved to start integrating companies

“There’s been a tremendous amount of work that’s been done and we’ve had external consultancy professionals helping us all along the way. So it’s a tremendous amount of work that’s been done, a lot of hard work by a lot of people that is reflected in these dollars as well as the hours so that when the thing is approved you’re ready to go. Unfortunately you can’t wait for it to be approved and then decide that you’re going to plan for how to integrate the two companies together. It’s something we have to do every day.”

Customers have to pass on food costs at some point

“from what I’ve been reading which is I’m sure the same material you read in those categories, customers are… Obviously they have to pass them along at some point. These are double-digit increases. So I think they are selectively passing it along where they feel that they can support it in their business; I’m sure they’re also working their menus.”

Manage portions, menu mix, etc

“I think they’re managing the portions, I think they’re managing the mix of the menu and they’re passing it along where they can. That’s been my experience in terms of going out to eat.”

Dean Foods 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

most difficult operating environment in history of company

“This is by far the most difficult operating environment in the history of the company, reinforcing the importance of the initiatives that we have underway.”

Milk volumes soft

” the fluid milk category volumes remained soft and infact volume declines have accelerated beyond what we would consider the normal trajectory of the category. As Class I raw milk continue to rise through May, the category continued to weaken. ROI data suggest that year-over-year refrigerated fluid milk in the multi outlet or MULO in convenient store channels were down 4.1%, 4.8% and 4.7% respectively for April, May and June.”

Ready to eat cereal is declining too

“We are also concerned about the health of the ready-to-eat cereal category and its impact on fluid milk. Within MULO, total cereal volumes in Q2 were down 5% versus year ago levels which compares to last quarters year-over-year decline of 3%.”

High milk cost hit volumes

“Second, very high milk cost and resulting increases in retail prices created incremental volume softness in addition to increased pressure on our margins as pricing and retail was pressured by both price gap and price threshold considerations. In addition, higher raw milk cost raised the cost of Dean Foods of route returns, dumps, production losses and other forms of shrink.”

4% volume decline

“Total volumes in the second quarter were 674 million gallons, which represents a 4% decline from 703 million gallons in the second quarter of 2013.”

35.9% market share

“Our share as a fluid milk category for the quarter to date ending in May was 35.9%, which represents a 0.2% increase from the prior quarter”

Milk prices may improve late this year into 2015

” Although prices continued to remain in their record levels it is our and industry experts belief that we are seeing meaningful signs that raw milk pricing may improve as we move into late 2014 and early 2015.”

Bumping up against leverage covenants

“On an all-cash netted basis, our Q2 leverage ratio was 3.61 times net debt to EBITDA against our covenant maximum of four times. Today, we announced our intention to further amend our senior secured credit facility and receivables-backed facility to among other things, modify the consolidated net leverage ratio covenant to increase our maximum permitted consolidated net leverage ratio.”

higher cost firms will likely fail

“We would expect that this extremely challenged operating environment may cause some higher-cost firms to fail resulting in long-term opportunity for Dean to service additional customers at competitive prices.”

Consumers trading down to private label

“within Dean’s Foods, Chris, there was a — there is a negative mix shift taking place. So, our business transitioned about 1% of volume from brand to private label. So that’s a headwind for us as we experience that mix shift. But to Gregg’s point, brand versus brand, our brands continue to win in the marketplace versus competitive brand.”

All the fundamentals say that prices should come down, but they aren’t

“trying to prognosticate Class I at this point, all the data shows you that it should start to come down. All the fundamentals of the market say it should start to come down. But those fundamentals have been in place now for probably five to six months and we have not seen it come down.”

Margins on branded are 60c

“we have said in the past is that our branded margins, I think run at about $0.60 — $0.60 to $0.65 depending on the part of the country, higher than the private label margins.”

Coca Cola 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“we were faced with unusually widespread wet and cold weather conditions across the multiple regions, including North America and across Northern Europe and India all of which impacted our industry.”

” Latin America, we grew volume 2% in the quarter and 3% year to date. Volume growth was a little software in the quarter due to macroeconomic challenges in the few major markets, specific increase in consumer debt levels and higher food inflations along with concern over transportation fees contributed to some civil unrest and faster consumer spending in Brazil. In Mexico, weaker job creation and higher inflation impacted disposable income resulting in reduced retail sales.”

“turning to Coca-Cola International starting with Europe. The weak economy continues to be a key factor affecting our performance in Europe especially in the southern regions where unemployment remains high while consumer confidence and expenditures remain low.”

“As is well publicized, China’s economy has been slowed as this is now being soft consumer spending. China’s first half retail sales was the slowest in 10 years while much of the growth in the non-alcoholic ready to drink beverage industry in the second quarter came from the value oriented water category.”

“we saw things in Brazil that we hadn’t seen before, the economy slowed, there were social unrest. It didn’t last very long, things are slowly getting back to normal and we expect a better performance sequentially as we progress through the year in Brazil and in Mexico.”

“It’s customary sometimes that when in the kind of businesses that we are in, when you have a blip in your volume because of a confluence of events some of which are — was not in your control. The first thing you do go our and cut marketing, and I think if you look at our numbers, we have continued to invest aggressively in our brand through the second quarter, through the first — in the first half and as you know every investment and marketing does not pay back in that quarter, it pays back in future quarters.”

“It’s customary sometimes that when in the kind of businesses that we are in, when you have a blip in your volume because of a confluence of events some of which are — was not in your control. The first thing you do go our and cut marketing, and I think if you look at our numbers, we have continued to invest aggressively in our brand through the second quarter, through the first — in the first half and as you know every investment and marketing does not pay back in that quarter, it pays back in future quarters.”

“we always believe here in the Coca-Cola Company, the best ideas are outside.”

“our business, we have said many times, is about brand…I think that is what this business is all about, adding value through brands to our system and I’m confident that you will see us add many more billion dollar brands to our roster in the near future.”

Dean Foods 1Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“The dairy commodity environment looks to be a neutral factor in our forecast. Diesel, resin and sugar are expected to be modest tailwinds. We are confident the momentum behind our cost-reduction activities will deliver solid bottom line results.”

“I mean, our continued focus is to continue to drive down our debt, and we need to get it below the 2.5 target that we’ve set for ourselves and we need to keep it below that for an extended period.”

[analyst comment] “So we’ve had several examples of other people in the industry rationalizing capacity. I’m — and you’ve obviously closed plants as well. Could you give us any rough estimates of what proportion of the total industry capacity has come out over the last year to 18 months?”

“As far as other industry capacity, I can’t really speak to what has come in or out, as I don’t — I can speak to what we’ve done. And as I talked to earlier, we’re going to take 10% to 15% of our facilities out. That should translate in very similar types of capacity. It may be a little bit less, but it should be relatively close to the percentage of facilities that we take.”

“in the U.S. market. I think we’re going to be relatively stable through the back half of the year, slightly increasing…Per cow output within the U.S. has remained very strong, so some of the fundamentals look pretty good.”