February 04, 2013 08:00 ET

Processed & Packaged Goods Industry's Mergers and Acquisitions

The Provides Stock Research on ConAgra Foods Inc. and Green Mountain Coffee Roasters Inc.

NEW YORK, NY--(Marketwire - Feb 4, 2013) - Growth in processed and packaged goods industry, according to definition provided by the U.S. Department of Commerce, "transforms livestock and agricultural products into products for intermediate or final consumption." It is one of the largest manufacturing sectors in North America. Growth in the industry has slowed down after a fairly steady growth during the 1997-2006. Whereas established companies like ConAgra Foods have benefits of healthy operating margins, smaller companies like Green Mountain Coffee Roasters may become possible takeover targets.

Access our free reports on ConAgra Foods Inc. (NYSE: CAG) and Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR). Traders can also connect to our Wall Street Trading Floor where our research desk and market pros are standing between 8:50 am to 4:15 pm ET at 

The main driving force of the industry is technological innovation. The focus of research and development is to come up with better quality foods, increased taste, greater convenience and cheaper products. For achieving this, the industry often takes help from industries, including biotechnology and nanotechnology. For reduction in cost, the industry looks at reducing waste, reducing labor cost by increasing automation and using effective manufacturing techniques used in other industries. 

There is a dire need of time-efficient and cost-effective integration of newly developed technologies. Moreover, targeted research and specialized knowledge is of utmost necessity if the industry has to expand to meet generational shift in demand.

However, the biggest challenge to the industry comes from the increased focus of the population on healthy foods and rejection of processed foods. This requires increased focus on developing nutritional foods without harmful ingredients such as trans-fats.

While releasing the company's Q2 earnings report, ConAgra's CEO, Mr. Gary Rodkin, said, "Effective margin management initiatives, moderating input cost inflation, the benefit of acquisitions, and good results from our potato operations are collectively driving high-quality EPS growth."

ConAgra has chosen to grow on the shoulders of acquisitions. Its recent acquisitions include Del Monte Canada, the pita chip operations of Kangaroo Brands, P.F. Chang's Home Menu and frozen meals businesses of Unilever PLC. In November 2012, ConAgra also announced that it was acquiring Ralcorp for $6.8 billion including assumption of debt. The acquisition was completed in January 2013 and funded through a public offer to sell through an underwritten public offering, roughly $240 million of its common stock.

Conversely, Green Mountain Coffee Roasters is a much smaller company as compared to ConAgra but it was not always so. Its stock has been on a roller coaster ride since November 2011, when it was trading at $115. In July 2012, the stock was hardly above $15. The company announced a large share buyback program, which led the share price to rise almost three times to $45.

The single serve K-Cup of Green Mountain is among the most recognizable coffee brands in the U.S. It is convenient and allows consumers to brew a single cup at home or office and comes in a variety of flavors. Sale of K-Cups jumped by 59% in the fiscal quarter ended September 2012. However, overall growth has slowed down dramatically. Further growth is possible only if the company explores the overseas market. If Green Mountain does not think about it seriously enough, it runs the risk of becoming a takeover for some bigger company.

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