Del Monte Foods Co.
Capstone 4 Report
Del Monte Foods is an American food production, distribution company and marketer of packaged fruits and vegetables. The company is headquartered in San Francisco, California. It is one of the leading producers, distributors and marketers of premium quality, branded food and pet products in the US. The company generated revenue of $3.7 billion in 2010, 94 percent of the sales was from North American operations.
Del Monte has two operating segments, consumer products and pet products. The Consumer Products segment offers a wide selection of vegetables, fruit, and tuna products, under famous brands names, such as Del Monte, Contadina, Orchard Select, and StarKist. While it’s pet food and snack brands include Meow Mix, Kibbles 'n Bits, Milk-Bone, Pup-Peroni, Pounce and 9Lives. In addition, the company also produces private label food and pet products. Its products serve retail markets, the US military, certain export markets, the foodservice industry and other food processors.
Del Monte Food co. is recommended to be part of our client portfolio. The company has been found to be highly profitable. Net sales in 2010 increased 3.1 percent to $3.7 billion. The Pet Products segment grew by 4.6 percent during the year and Consumer Products segment also grew by 1.9 percent in fiscal 2010. The Altman’s Z score was 2.19 in 2010 from 1.88 in 2009. This is a good sign for the company was above the “distressed” zone, 1.8. The debt/equity ratio kept decreasing each year to 0.71 in 2010. This is a good sign for the company as it indicates that it uses less debt to finance its operations or assets. The gross and net profit margin has been improving year by year, indicating that the company is performing well and is in a good financial position. There is a high degree of competition among existing firms because there is very little differentiation in the industry. This makes the degree of the threat of new entrants into the industry very low. It is very unlikely that a new entrant will be successful unless a bigger player drops out. Switching costs are very low in the industry, which puts the threat of substitute products at a moderate or average degree of competition. Bargaining power moves into the customer’s favour since switching costs are low and customers are more than willing to pay less for a similar product.
The SWOT analysis has identified Del Monte Foods co. strength, weakness, opportunity and threats. The strength includes strong market position, portfolio of strong brands and strong financial position. However, its major weaknesses are the high reliance on North America (94% of 2010 sales) and high dependence on its largest customer Wal-Mart, accounting for large percentage of the net sales. Its major threat is the pricing pressure from its competitors across its market segments. Moreover, the increase in labour and raw material cost has an adverse affect on the company’s product cost, causing less profitability or selling at a higher price.
Del Monte Foods co. focuses on four corporate strategies, which are investment in growing markets, marketing, innovation and improving its profit margins. These corporate strategies and business strategies are described further in the report.
In 2010, Del Monte reported annual revenue of $3.739 billion, up 3.1% from $3.626 billion in 2009. This was driven primarily by net sales in both the Pet Products and Consumer Products reportable segments, and growth in existing products.
Del Monte Foods is an American food production, distribution company and marketer of packaged fruits and vegetables. The company is headquartered in San Francisco, California. It is one of the leading producers, distributors and marketers of premium quality, branded food and pet products in the US. The company generated revenue of $3.7 billion in 2010, 94 percent of the sales was from...
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