Starbucks (NASDAQ: SBUX) is teaming up with Unilever (NYSE: UL) to manufacture and distribute Starbucks-branded ice cream in the United States and Canada. Unilever also markets ice cream under brands including Ben & Jerry's, Breyers, Good Humor, Klondike and Popsicle.
The ice cream will be marketed as "super-premium" -- über expensive -- and will come in coffee flavors. Grocery stores have been selling Starbucks ice cream for more than a decade, but the new arrangement could lead to new flavors and varieties.
It's an interesting development given that since Howard Schultz returned as CEO, the company has been trumpeting a renewed focus on coffee. But with macroeconomic headwinds making a turnaround for the stores unlikely to occur anytime too soon, Starbucks is taking the opportunity to capitalize on its brand with opportunities outside of its stores. Starbucks stores do not currently sell ice cream and there are no plans to do so.
TheStreet.com's Jim Cramer says this consumer-products titan has weathered the storm and should enjoy lower inputs.
General Mills (NYSE: GIS) (Cramer's Take) hits another 52-week high. This company has been one of the great standout performers this year, just a juggernaut, even though it is a gigantic buyer of grains and a huge user of cardboard boxes and plastic wrapping. Plus, it needs gasoline to deliver product. Some of this move has to be attributed to projections of huge declines in raw costs. Those are going to happen, as we know from the commodities.
But perhaps it is worth noting that few packaged goods companies -- perhaps Heinz (NYSE: HNZ) (Cramer's Take) is an exception -- dominate and innovate as well as GIS does. It has always been one of the great brand producers and acquirers, and also a company that can take out costs better than anyone. When I compare how a Unilever (NYSE: UN) (Cramer's Take) or a Clorox (NYSE: CLX) (Cramer's Take) has handled the raw costs to how General Mills has performed, it is almost as if GIS is a pharmaceutical with no raw cost exposure whatsoever.
Procter & Gamble (NYSE: PG) reported its Q4 and full-year results on Tuesday. The numbers looked very good to me (save for one, which I'll get to). P&G was up over 3% on Tuesday. Granted, the Dow saw one heck of a rally yesterday, but even so, P&G deserved a bid just due to its blue-chip corporate performance.
Revenues for the quarter increased 10%, and adjusted earnings per diluted share jumped over 19% to $0.80. For the year, revenues increased 9% and adjusted earnings per diluted share rose 15% to $3.50. As I stated in my earnings preview from the other day, Wall Street was looking for adjusted earnings to be around $0.78 per share. So P&G beat by two pennies.
Of course, the earnings beat is nice, but cash flow is even nicer. In fact, management likes to evaluate itself by comparing its free cash flow to net earnings. P&G would like the so-called "free cash flow productivity" metric to equal at least 90%. Well, shareholders need not worry, since productivity in these terms was 96% for the quarter and 106% for the fiscal year. Free cash flow for the year expanded by 21%, and it was more than enough to power P&G's great dividend.
Unilever (NYSE: UN, UL), the Anglo-Dutch consumer products giant, said Monday it was selling its laundry business in the U.S., Canada and Puerto Rico to private equity firm Vestar Capital for $1.45 billion. Included in the deal are the All, Wisk, Sunlight, Surf and Snuggle brands.
Selling mature or non-core businesses to focus on fast-growing units has been part of Unilever's recent strategy. Interestingly enough, though, the European laundry business has not been sold. Patrick Cescau, Unilever's CEO said that "Laundry remains an important category for Unilever outside North America." The sale will allow Unilever to concentrate on a "leading position" in Europe, Asia, Africa and Latin America, Cescau said.
Only last week, Unilever sold its Bertolli olive oil and vinegar business for $998 million to Grupo SOS SA and before that it sold its Turkish olive oil business. All part of a strategy to dispose of non-strategic brands, with collectively more than €2 billion ($3.14 billion) in turnover. It has made 19 divestments so far. The other parts of the plan include job cuts and other cost cutting measures. Unilever wants to concentrate on higher-priced products to boost profit, attempting to catch up to Procter & Gamble Co. (NYSE: PG).
This post is part of a series on celebrity spokespeople who ended up doing serious harm to the brands they were hired to promote, or vice versa. See how we rank the 20 top spokesperson fiascos.
I have to wonder what Slim-Fast (Unilever ADR, NYSE:UL) was thinking when they hired Whoopi Goldberg. Many of their earlier spokespersons, including Ann Jillian and Kathy Lee Gifford, exuded a sort of "if you don't love me, I'll die," desperation. On the other hand, Whoopi's self-confidence and pride are as much a part of her persona as her granny glasses and trademark braided hair. Although she has never shied away from the spotlight, a great deal of Whoopi's strength lies in her low-key energy and undeniable power. In retrospect, this might have made her a less than ideal choice to shill for the brand, which thrives on insecurity.
Regardless, in late 2003, Slim-Fast talked Whoopi into hawking their shakes; presumably, there was a very large check involved. Things progressed relatively well until July 2004, when she decided to appear at a gala fundraiser for Democratic Presidential candidate John Kerry. Carrying a bottle of wine onstage, Goldberg pretended to read from the label: "When Bush comes to shove, don't whine. Vote Kerry." She proceeded to launch into a series of bush-themed double entendres.
Almost immediately, Bush supporters began calling and writing Slim-Fast, threatening to boycott the company's products if it continued to employ Goldberg. Slim-Fast quickly caved, stating that it was disappointed in Whoopi and would no longer air her commercials. She responded that, "While I can appreciate what the Slim-Fast people need to do in order to protect their business, I must also do what I need to do as an artist, as a writer, and as an American -- not to mention as a comic [...] I only wish that the Republican re-election committee would spend as much time working on the economy as they seem to be spending trying to harm my pocketbook."
Goldberg proceeded to reprise the routine at other venues; she later found a place on The View. In the meantime, Slim-Fast went on to hire Rachel Hunter, whose conventional good looks and palpable insecurity are far more fitting for their marketing demographic. Recently, however, the company has demonstrated an amazing inability to learn from the mistakes of the past. In January 2008, they approached rapper Eminem with an endorsement offer; one can't help but wonder if his misogynistic, violent lyrics might not alienate Slim Fast's target market!
This post is part of our Big Company, Small Town series, featuring large companies and the small towns in which they are headquartered.
This entry in the Big Company, Small Town series features one of the great recent American business success stories, as this powerhouse brand came from very humble beginnings only 30 years ago.
Ben & Jerry's was started in 1978, when Long Island, N.Y., natives Ben Cohen and Jerry Greenfield used a $12,000 investment to open up a homemade ice cream scoop shop in Burlington, Vermont. The Ben & Jerry's shop grew rapidly in popularity, and by 1980 they began packing pints to sell in grocery stores. By 1985, the company's sales were more than $9 million, and it began building its manufacturing plant in nearby Waterbury, Vermont. The plant in Waterbury was then opened to the public for tours of Ben & Jerry's ice cream making operations, creating a tourist attraction for the town, which has a population of around 1,700.
Although Ben & Jerry's was bought in 2000 by Unilever (NYSE: UN) for $326 million, the company still maintains its local roots, with its headquarters in South Burlington and its factory still open for tours in Waterbury. The founders of Ben & Jerry's, while no longer holding any positions within the company, have worked with Unilever to make sure it remains as socially conscious as when they ran it, keeping that small-town, grassroots feel that made it such a success worldwide.
To this day, Ben & Jerry's maintains its Free Cone Day, which Ben & Jerry started to honor the first anniversary of their ice cream shop.
Unilever (NYSE: UL) shares were climbing $1.68, or 5.17% to $34.15 in early trading this morning. This is after, according to Bloomberg, "the world's second-largest maker of food and detergent, said revenue will beat its forecast for the first time in six years."
Naturally, with rising commodity prices, I expected the company to feel at least a margin squeeze, but Unilever has been proactive and has raised prices 4.8% in the quarter to offset its rising costs. The company increased not only prices but also managed to grow sales of Dove soap, Hellmann's mayonnaise and Lipton tea to post a first-quarter net income climb of 33% and exceed analysts' estimates.
Apparently, the company's Boursin cheese unit, which took the brunt of the price increase, also helped boost gains as revenue grew 7.2% and sales rose 14% in the Asia Africa region and 9.6% in Latin America, making up for disappointing growth in Europe.
TheStreet.com's Jim Cramer says the exchange rate plus massive undervaluations make the great brands prime targets.
There's always been a groupthink in Europe about currencies. The companies that want to buy American companies have, at times, seemed to care more about the currency, or at least not buying a company in a country whose currency is in decline, than they care about the actual target.
That's what it looks like now that a large German company and now a large Italian company have decided to start splurging. It is no coincidence that Deutsche Tel (NYSE: DT) (Cramer's Take) and Finmeccanica are exploring Sprint (NYSE: S) (Cramer's Take) and DRS (NYSE: DRS) (Cramer's Take). These companies are selling for something like 40% off for those bearing euros, and neither potential acquirer has debt problems or subprime issues, so the deals don't have big borrowing problems.
That's what I am thinking about when I see the better-than-expected figures today from Unilever (NYSE: UL) (Cramer's Take) and the other day from Nestle. These companies are part of that same groupthink. They are looking, no doubt, at a Heinz (NYSE: HNZ) (Cramer's Take) and thinking, "Wait, that's about a $10 billion company that's a global leader."
Kimberly-Clark (NYSE: KMB) reported for the first quarter today. Net sales increased almost 10% to $4.8 billion. Adjusted earnings per share increased 5% to $1.08. That's a rather small jump, granted, but you know something, it was enough to keep the stock in the green (at the time of this writing, at least) instead of in the red on a day when the major market averages -- and just about all of the stocks in my personal portfolios -- are bathing in the evil crimson color of doom. And according to Briefing.com, Kimberly-Clark played the beat-the-expectations game and won by the proverbial penny! Shareholders should be pleased.
A non-pleasing item to be found in the release centers on cash from operations -- it decreased by about $100 million to $426 million due to changes in working capital. That doesn't concern me so much right now, though, since Kimberly-Clark will probably do well over the coming years in terms of cash generation. The company, by the way, has been repurchasing stock, so management seems pleased with the shares as a potential investment idea.
Kimberly-Clark, which is a consumer-products business in the league of entities such as Procter & Gamble (NYSE: PG), Energizer (NYSE: ENR), Colgate-Palmolive (NYSE: CL), and Unilever (NYSE: UL), could be a value right now based on its P/E ratio and dividend yield. Out of the stocks mentioned here, I like P&G the best, but I do respect Kimberly-Clark -- in fact, it was mentioned recently in an article by Steven Halpern that centered on an analyst's picks for quality and yield.
Disclosure: I don't own shares in any of the companies mentioned; positions can change at any time.
MOST NOTEWORTHY: Tyson Foods, Unilever, Brooks Automation, Akzo Nobel and Yahoo! were today's noteworthy upgrades:
Deutsche Bank upgraded shares of Tyson Foods (NYSE: TSN) to Buy from Hold on valuation and the potential for protein complex improvement.
Goldman upgraded shares of Unilever (NYSE: UN) to Neutral from Sell to reflect the company's diversified product range and growing exposure to developing and emerging markets.
Bear Stearns raised its rating on Brooks Automation (NASDAQ: BRKS) to Outperform from Peer Perform. The firm cited the company's compelling valuation and growth drivers.
Akzo Nobel (OTC: AKZOY) was upgraded to Buy from Hold at SNS Securities, as they see absolute total return greater than 20%.
CIBC upgraded Yahoo! (NASDAQ: YHOO) to Sector Outperformer from Sector Performer on valuation following the recent pullback and their analysis of Yahoo's non-operating assets. They believe Yahoo's stake in Alibaba Group is now worth about $4/share and raised their target to $31 from $28.
OTHER UPGRADES:
First Analysis upgraded Spss Inc (NASDAQ: SPSS) to Overweight from Equal Weight.
UBS upgraded Yamana Gold (NYSE: AUY) to Buy from Neutral.
MOST NOTEWORTHY: Merck, the European semiconductor sector, Thornburg Mortgage and Prudential were today's notable upgrades:
Merck & Co Inc (NYSE: MRK) was upgraded to Buy from Neutral by Bank of America, which believes the company's sales momentum will continue.
The European semiconductor sector, which includes Infineon Technologies AG (NYSE: IFX) was upgraded to Positive from Neutral by Lehman Brothers, as they believe a recovery is under way in the industry. The firm upgraded Infineon to Equal Weight from Underweight.
Thornburg Mortgage Inc (NYSE: TMA) was upgraded to Market Perform from Underperform at Piper, as they see limited liquidity risks, given the strong quality of the company's mortgage assets.
Prudential Financial Inc (NYSE: PRU) was upgraded to Outperform from Neutral by Friedman Billings, which cited valuation and the quality of the company's investment portfolio.
The conventional wisdom used to be that shoppers went looking for their favorite brands and that consistency of product packaging assured customer loyalty. Apparently marketers now have decided that good old reliable product packaging is making those products invisible to consumers. According to the New York Times, Pepsico (NYSE: PEP), known for its resistance to label design changes throughout its long history, is now changing some label designs every few weeks.
The problem is that, with the internet and hundreds of television channels, it's becoming increasingly harder for marketers to get their messages out to customers. Product packaging now has to do more than simply identify the goods within, but actually reach out and grab your attention. Hence, Mountain Dew bottles that appear to have been tagged by graffitti artists, or Unilever's (NYSE: UN) shampoo bottles shaped like video game joysticks. Target Corp. (NYSE: TGT) has been in the forefront of bringing eye-catching advertising to its themed store aisles.
There are other motives for this experimentation with product packaging as well. Some companies are searching for ways to reduce container sizes and to have less environmental impact. Some household product manufacturers are looking to make their once utlitarian packaging so pleasing that people may be willing to display it in their homes.
And it looks like things are only going to get weirder. Pepsi has a plan in the works for cans that spray a pleasing scent when opened. And you know that product packaging that talks to you can't be that far down the road. If you thought pop-up ads and TV commercials were annoying, just wait for the day you go into the shop and all the products are screaming for your attention.
MOST NOTEWORTHY: RadioShack (RSH), Weyerhauser (WY), Goodyear Tire (GT), Hot Topic (HOTT) and Unilever (UL, UN) were today's noteworthy downgrades:
Citigroup downgraded RadioShack (NYSE: RSH) to Sell from Hold on valuation as they believe shares have priced in a more aggressive top-line recovery than the company can deliver over the next 12 months and that margin improvement is likely to slow.
Merrill downgraded Weyerhauser (NYSE: WY) to Neutral from Buy based on the tighter credit environment and the impact on a potential containerboard divestiture or merger.
Matrix downgraded shares of Goodyear Tire (NYSE: GT) to Sell from Hold to reflect rising oil prices and negative fundamental trends.
AG Edwards downgraded Hot Topic (NASDAQ: HOTT) to Sell from Hold to reflect negative performance momentum and a lack of back-to-school prospects.
Credit Suisse downgraded Unilever (NYSE: UN, UL) to Underperform from Neutral as their analysis suggests the company continues to lose market share...
Starbucks (NASDAQ: SBUX) is teaming up with Unilever (NYSE: UL) to manufacture and distribute Starbucks-branded ice cream in the United States and Canada. Unilever also markets ice cream under brands including Ben & Jerry's, Breyers, Good Humor, Klondike and Popsicle.
Procter & Gamble
I have to wonder what Slim-Fast (
This post is part of our 
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