Why the beleaguered food industry is in activist investors' crosshairs

全食was the target of activist investor Jana Partners earlier this year,首席执行官约翰·麦基（John Mackey）came out swinging. He didn’t mince words, calling the hedge fund a bunch of “greedy bastards” looking to profit from a sale of his grocery chain.

对于Jana，他的参与最终导致了Whole Foods being acquired by Amazon in June for $13.7 billion,falling sales and increasing competition facing the natural and organic grocery pioneer came to symbolize a growing trend in the food space — the challenges at many CPG and grocery companies have attracted the attention of activist investors.

借助雀巢，海因·凯里斯蒂安（Hain Celestial）和达能（Danone）仅在今年以来的其他激进目标中，越来越多的证据表明，出售其产品的食品制造商和零售商将留在华尔街投资者的十字架上，渴望从这些稳定的公司中划出成本，提高他们的股票价格低落和数亿美元的努力。

“The industry remains ripe for activism. Whether that is an activist coming in because they want that company to be the next target of Kraft Heinz or some other type of spinoff, consolidation-esque type of event,” Brittany Weissman, an analyst at Edward Jones, told Food Dive in an interview。“行业中仍然可以发生很多事情，这就是为什么您看到如此多的行动主义以及为什么您会看到这种行动可能会继续下去的原因。”

削减成本并提高利润

As shoppers have changed their purchasing habits and increased their consumption of natural, organic and other foods they perceive as healthier, beleaguered packaged food companies have turned to acquisitions, incubators and clean label products — all in the hopes of attracting consumers.

A slew of companies such as Campbell Soup, General Mills, Conagra, Kellogg and Mondelez have also implemented significant cost-cutting programs and aggressive margin improvement targets, according to AT Kearney, a consulting firm.

But in most cases, these tactics have not been enough to curtail the drop in sales or prop-up their flagging stock prices.

Campbell Soup, for example,邮政ed its 11th-consecutive drop in quarterly sales last month。Denise Morrison, the company’s chief executive, warned “the environment for the packaged foods industry remains challenging” as businesses struggle to increase sales. Difficulties are expected to linger into 2018, she said.

标志性的汤制造商积极大修其产品组合and spending hundreds of millions of dollars to acquire companies that produce fresh, organic and natural products popular with consumers, saw sales drop 1% in its fiscal 2017, with a decline of as much as 2% forecast in the upcoming year.

Sales also have slumped atGeneral Mills, dropping about 11% since 2015。The cereal maker has cut expenses by spending less in areas such as advertising and research and development. But so far those efforts have failed to help. Just last week, the manufacturer of Annie's, Chex and Cheerios邮政ed a 4% net salesdecline for its first fiscal quarter of 2018-它的ninth straight quarter where the key figure has fallen。At Conagra，销售经历了类似的幻灯片，在2017财年的78亿美元跌至四年前的91亿美元。

Similar drops have occurred at countless other food companies, too. It’s not surprising that these declines have been reflected in their shares with Conagra, General Mills and Campbell Soup — among others-坐在多年的低点附近。

These struggles have made food companies prime targets for activist investors. Their impact varies depending on the tactic used by the investor, including whether it tries to replace the board or boot the CEO, the ability to persuade other shareholders to embrace their vision and even the willingness of the business itself to cooperate.

3G Capital gets involved

Those who follow the food and grocery industry said there was a noticeable surge in activist interest after private-equity firm 3G Capital Partners teamed up with billionaire investor Warren Buffett to purchase famed ketchup maker Heinz for $23 billion in 2013. Two years later, the pair were instrumental in helpingconsummate Heinz’s merger with Kraft.

3G使用经常批判的策略实施了积极的削减成本实践，包括裁员，工厂关闭和消除其他特权以提高运营利润率。

我t’s been a successful practice, with Kraft Heinz’s margins now at 28% compared to the high teens or low 20s for other companies in the food space, according toEdward Jones' Weissman。尽管3G的参与在这方面有所帮助，但还不足以减少收入幻灯片也影响了其同龄人：卡夫亨氏的销售in 2016 dipped $1 billion to $26.5 billion from the prior year.

The challenge for 3G is that once all the savings have been wrung out, the company is left with sluggish revenue — meaning it has to look for another purchase that allows it to begin the cost-cutting process again. Kraft Heinz attempted an ambitious $143 billiontakeover bid this February for Unilever，但是交易的灭亡，价格崩溃了，hasn't minimized the company's interestin making another move as it looks for growth.

Analysts said 3G's involvement sent a message to other food companies: Make similar cost cuts to appease shareholders and help increase their stock price — otherwise they risk becoming an activist target, or the prey of a private equity firm or another business in their industry.

3G “has been the catalyst for a lot of it, and it has demonstrated for these kinds of companies there is a lot value to unlock in a lot of situations,”科尔尼（Kearney）的合伙人兰道夫·伯特（Randolph Burt）在接受采访时说。“我认为，这使投资者和激进投资者的目光投向食品，这是这样一个活动确实可以产生良好股东回报的空间。”

Looking to unlock value

Other Wall Street investors have since made their own foray into food.

Last month,Corvex管理对冲基金由活动st investor Keith Meister,取了一个价值约4亿美元的法国酸奶制造商达能的股份, citing a depressed stock price.

Hain Celestial还面临激进投资者的董事会大修订婚的资本占用了自然和有机产品制造商9.9％的股份this summer.

Danone and Engaged Capital declined to comment for this story.

我6月，亿万富翁激进投资者丹尼尔·勒布（Daniel Loeba $3.5 billion position in Nestle，约占公司股份的1.25％。A spokesman with Third Point declined to comment.

但是，对冲基金已公开概述了瘦肉，Nescafe和Butterfinger的制造商可以制造的，包括提高利润率，创新其核心业务和销售非核心资产。

“Nestle has fallen behind over the past decade in an environment where growth has slowed due to changes in consumer tastes and shopping habits, as well as an influx of new competition from smaller, local brands,”Third Point said in a June letter.“While its peers have adapted to this lower growth world, Nestle has remained stuck in its old ways.”

雀巢发言人表示，为了回应第三点的变革，该公司保持“与所有股东进行公开对话，我们仍然致力于执行我们的战略并创造长期股东价值。”

第三点参与公开后仅两天Nestle announced plans到buYback约有价值210亿美元的股份，并将其资本支出工作集中在高增长的食品和饮料类别上 - 此举似乎提前三个月了。

But when it comes to food, no other activist has shown a penchant for getting involved in the sector more than Jana Partners. It was instrumental in getting Conagra, known for its Peter Pan peanut butter, Hebrew National hot dogs and Pam cooking spray, to spin off its Lamb Weston frozen potato company and出售其专用标签业务2016年以27亿美元的价格向Treehouse Foods提供。

And just this year, Jana purchased an 8.2% stake in Whole Foods and urged the struggling natural and organic retailer to explore a sale. Jana sold它的股份在7月中旬a $300 million profit杂货商宣布将其出售给亚马逊之后不久。最近的监管文件表明它也有purchased shares in beleaguered meal-kit maker Blue Apron and新芽市场，一个高增长的天然和有机杂货店。

A Jana representative said the hedge fund doesn't specifically single out businesses in the food space but has seen opportunities recently where companies are undervalued and its involvement could help unlock value.

Pressure to improve

Analysts who follow the industry say the recent activity is likely to continue.

伯特说：“您将继续看到，激进分子将继续煽动股票价格降低的地方，并且有相对容易的事情可以改变公司的价值。”他说：“其他激进投资者将开始寻找机会，例如Jana Partners在Whole Foods中……价值差距”。

Burt added there has been a general shift in how CEOs are responding to the outside pressure. A growing number of executives have shown a willingness to listen, a “sort of co-opting the activist,” he said — a strategy that allows them to consider whether the investor’s ideas could create shareholder value while at the same time allowing them to avoid a nasty public war of words that distracts them from running the company.

“Five years ago, there was a lot of resistance and that’s how John Mackey reacted to Jana Partners by calling them ‘greedy bastards’ in the press and getting really agitated by them publicly,” Burt said. “You see other CEOs reacting very differently now, much more conciliatory.”

我t’s largely uncertain who will be the next activist target. Food and beverage analysts speculate that nearly everyone in the sector is susceptible as the industry continues to flounder. Still, with investors keeping close watch on company margins and growth rates, further stumbles could find more businesses falling into the arms of activists.

“A lot of them are under immense pressure to improve results and to improve margins,” Weissman said. “If you keep stumbling, and if you’re not growing, someone is going to come in or you’re going to become a takeover target.”