Potential peanut residue contamination in the upstream supplier of flour, Grain Craft, has necessitated the recall of snacks. This, in the wake of PepsiCo’s and Hostess Brands product recall earlier this month.
Kellogg Company’s (K) stock has fallen over 1.3% by noon today and is expected to go even lower.
The Michigan based manufacturing company had this to say on the company website; Kellogg Company today announced that it is voluntarily recalling certain varieties and limited dates of production of Mother’s, Keebler, Kellogg’s Special K brownies, Murray and Famous Amos snacks and cookies because they may contain undeclared peanut residue. Kellogg initiated the recall after its supplier, Grain Craft, recalled wheat flour that has the potential to contain low levels of peanut residue.
The FDA confirmed that the amount of peanut contamination is low and is not expected to have an adverse effect on consumers.
Better than average company performance, noteworthy return on equity, predictable stock price performance, and expanding profit margin, all underpin the share’s appeal, and most stock pickers remain optimistic over this stock.
When stacked against the Food Products industry, and the S&P 500 Index averages, Kellogg performed better with a return on equity which improved on quarter one last year. The strong, 40.83% in gross profit margin is up when compared to the same period last year, but the net profit at 5.17%, lags the industry average.
Effective management of the business is borne out by the stable earnings per share over the past 12 months, and whilst the stock price has surged by 26.30%, ahead of market performance, commentators have remarked that it is pricey against the rest of FP industry. They latest quarter is somewhat more sobering, with earnings per share dropping by 23.4%. Nonetheless, this figure is expected to grow over the next 12 months. The decrease in earnings per share is attributed to its revenue decline which under performed the industry average of 16.1%.
Kellogg, General Mills, Kraft Foods, and HJ Heinz dominate the US Food Products industry, and are not immune to lethargic growth rates worldwide. High energy costs of production and the swing to healthy and organic options are among the challenges facing the industry and putting pressure on already thin profit margins. Shifting the increasing input costs to the consumer is likely to have a significant impact on consumer demand. A conundrum for some manufactures who are finding their products to have export appeal as a result of the falling dollar value.
An increasingly vocal consumer sector is questioning the ethical supply, manufacture, and marketing of processed foods in all markets worldwide, a response, in part, to growing obesity levels in many emerging markets particularly. Manufacturers are also seeing inflation price resistance, and remain frustrated by increases in edible commodity prices.
The value of brands is receiving much focus in the face of falling demand, as consumers opt for cheaper dining options at home. It is expected that input costs are like to continue rising, prompting manufactures to squeeze out any processing inefficiencies.