Modest gain extends grain-based share streak to nine years
The Grain-Based Foods Share Index in 2017 barely squeaked out a fractional gain.

KANSAS CITY — In a year in which the overall stock market roared to new record highs, the Grain-Based Foods Share Index in 2017 barely squeaked out a fractional gain. Still, the index calculated by Milling & Baking News managed to end in the black for a ninth consecutive year.

At 0.7%, the advance was the smallest of the nine-year streak and followed advances of 14.2% in 2016, 4.3% in 2015, 17.4% in 2014 and 22.7% in 2013.

While ending at the highest yearly close ever, the 24413.16 close was below an all-time intra-year peak of 25137.46 reached in December 2016 and the 2017 intra-year high of 25568.38 reached in June.

The 0.7% gain fell far short of advances scored by major stock market indexes — 25.1% for the Dow Jones average of industrial shares, 21.7% for the S.&P.500 and 26.9% for the Nasdaq composite index.

Versus the 10 S.&P.500 sectors, the grain-based shares significantly underperformed each with the sole exception of energy, which declined 1%. Disappointingly, the grain-based index fell more than 12 percentage points shy of the 13% gain scored by the S.&P.500 consumer staples sector. The consumer discretionary index was up 23% in 2017. Gains from other sectors of the S.&P.500 ranged from a low of 12% for utilities to a high of 34% for technology.

Two companies included in the Grain-Based Foods Share Index in 2016 were acquired in 2017. In June, Tyson Foods, Inc., Springdale, Ark., completed an acquisition of AdvancePierre Foods Holdings, Inc., Cincinnati, for $4.3 billion. The announcement followed by less than a year the July 2016 initial public offering of Advance-Pierre that raised $219 million, at a price of $21 per share. By the end of 2016 AdvancePierre shares had surged 25%, and Tyson paid $40.25 per share in its tender offer, nearly double the i.p.o. price.

A longer-term spectacular success was Panera Bread Co., St. Louis, acquired by JAB BV for about $7.5 billion. The acquisition, completed in July, removed Panera from the Grain-Based Foods Share Index, one of its top performers ever. Often the leading annual gainer in the index over the last 20 years, total shareholder return over this period was 9,753%, versus a 210% gain for the S.&P.500 between April 1997 and April 2017, Ron Shaich, Panera’s longtime chief executive officer, said in an interview in late 2017. He noted that the return figures were twice those of Starbucks Corp. over the 20 years.

In 2017, the top performing stock in the Grain-Based Foods Share Index, for a fourth consecutive year, was MGP Ingredients, Inc., Atchison, Kas. Shares of MGPI rose 52% in 2017, remarkably the company’s smallest gain of the four-year reign as the top performer. MGPI shares jumped 93% in 2016, 64% in 2015 and 206% in 2014. In 2013 the company went through a proxy battle culminating with the turnover of top management. Since the change of leadership (the end of 2013), MGPI shares are up 1,430%. In 2017, the company’s operating income was flat during the first three quarters of the year, but results were boosted by an $11.4 million gain in connection with the sale of the company’s interest in Illinois Corn Processing, L.L.C. during the third quarter.

Ranking second in the Grain-Based Foods Share Index in 2017 was Lamb Weston Holdings, Inc., Eagle, Idaho. The strong performance was scored the first full year Lamb Weston has been trading as a stand-alone company after a spin-off from Conagra Brands, Inc., Chicago, in October 2016. Since initially trading at about $32 per share in October 2016, Lamb Weston shares have gained 76% in value. During 2017, Lamb Weston’s joint venture in Europe, Lamb-Weston/Meijer v.o.f., expanded with the acquisition of the potato division of Oerlemans Foods Nederland B.V. The transaction included a frozen potato processing facility in Broekhuizenvorst, The Netherlands. The company also expanded U.S. processing capacity in 2017.

The third top performer in 2017 was Snyder’s-Lance, Inc., Charlotte, N.C. At 30%, the Snyder’s-Lance gain compared with an 12% gain in 2016 and a similar advance in 2015. In 2017, Snyder’s shares were languishing at about unchanged until very late in the year. Shares surged in mid-December when Campbell Soup announced it had reached an agreement to acquire Snyder’s-Lance for $50 per share. Snyder’s-Lance shares ended 2017 at $50.08 per share. The year was one of some turmoil at Snyder’s-Lance. In April, the company announced the abrupt retirement of Carl E. Lee as c.e.o. Two months later, Brian Driscoll joined the company as president and c.e.o., and soon afterward, Mr. Driscoll announced a major restructuring plan that included an organizational restructuring, capacity reduction and stock-keeping unit rationalization.

At 21%, the share price advance of Dunkin’ Brands Group, Inc., Canton, Mass., in 2017 ranked fourth within the index. The performance followed a share price gain of 23% in 2016, when Dunkin’ was the eighth top performer. In 2015, Dunkin’ shares were essentially unchanged for the year. During early 2017 Dunkin’ announced a number of executive leadership changes. These culminated with the April resignation of Paul Carbone as chief financial officer. In July, the company announced what was called a “maniacal focus” on core strengths, an effort that resulted in the culling of numerous items from its menu, including afternoon sandwiches, a few muffin and bagel varieties and some bakery items like Danishes and cookies.

The fifth through seventh top Grain-Based Foods Share Index performers in 2017 were squeezed in a tight range with Hostess Brands, Inc., Kansas City, up 14.5%; PepsiCo, Inc., Purchase, N.Y., up 14.2%; and J&J Snack Foods Corp., Pennsauken, N.J., up 14.1%.

For Hostess Brands, 2017 was the first full year of trading after the company’s Nasdaq listing in November 2016 in connection with the Hostess acquisition by Gores Group. Hostess shares rose 7% in the final two months of 2016. While the Hostess share performance ranked among the best in 2017, the closing price of $14.91 per share for the year was down 13% from the 52-week high of $17.18 per share posted in April. Financial results during much of the year were soft, compounded in the third quarter ended Sept. 30 by product supply issues from a co-packer, costing Hostess about $3 million in quarterly revenue. Also during the year, Hostess announced plans by the c.e.o. to step down once a replacement is named and the departure of its chief operating officer.

The 14.2% advance in PepsiCo shares in 2017 represented a strong improvement from the 5% share gain posted by the company in 2016. Early in the year, PepsiCo c.e.o. Indra Nooyi hailed a portfolio transformation at the company.

“What we refer to as ‘everyday nutrition products’ account for approximately 25% of our portfolio by net revenue,” she said. “These are products that include positive nutrients like grains, fruits and vegetables or protein, plus those that are naturally nutritious like water and unsweetened tea.”

Over the course of the year, Pepsi-Co announced numerous leadership changes, culminating with the naming of Ramon Laguarta as president of PepsiCo, effective Sept. 1. Most recently Mr. Laguarta was c.e.o. of PepsiCo’s Europe Sub-Saharan Africa segment.

J&J Snack Foods’ 14.1% share gain in 2017 was nearly identical to the 14.4% share gain posted by the company in 2016 and extended a long streak of gains — 7% in 2015, 23% in 2014 and 39% in 2013. Results in 2017 initially were boosted by the contribution of Hill & Valley Inc., a Rock Island, Ill.-based baker of premium cookies, cakes, pies, muffins and other baked foods. As the year progressed, though, Hill & Valley increasingly was seen as a drag on performance. J&J expanded in 2017 with the acquisition of Labriola Baking Co., Alsip, Ill., a baker of bread products and artisan soft pretzels.

Ingredion, Inc., Westchester, Ill., rose 11% in 2017, the ninth best performer in the Grain-Based Foods Share Index. The double-digit advance followed a 30% gain in 2016 when the company’s performance was fifth best. Ingredion shares were up 13% in 2015 and 24% in 2014. In September, the company announced that veteran Ingredion executive James P. Zallie would succeed Ilene Gordon as the company’s next c.e.o. Ms. Gordon will transition to executive chairman of the board, a position she will hold until her retirement in July 2018. Numerous additional changes were announced later in the year, including the promotion of Jorgen Kokke to executive vice-president, global specialties and president, North America, effective Feb. 5. Pierre Perez Y Landazuri was promoted to senior vice-president and president, EMEA, effective Jan. 1.

Ranking 10th in Grain-Based Foods Share Index advances in 2017 with a 10% gain for the year was Seaboard Corp., Merriam, Kas. In 2016, Seaboard ranked second in the index, with a 36% gain, which followed a decline of 31% in 2015, when Seaboard had the worst share price performance in the index. Milling earnings were erratic over the course of 2017 at Seaboard Corp.

Five companies in the Grain-Based Foods Share Index sustained declines of greater than 10% in 2017. The steepest share price drop was sustained by TreeHouse Foods, Inc., Oak Brook, Ill. The 32% drop followed declines of 6% in 2016 and 8% in 2015. The revolving door for the president at the company continued turning in 2017, with the resignation of Robert B. Aiken Jr. in November, after just five months on the job. In 2016, Christopher D. Sliva resigned after only three months as president. TreeHouse has struggled to gain its footing following the 2016 acquisition of the private brands business of Conagra. In November, Sam K. Reed, the company’s longtime chairman and c.e.o., said he would step in as president of TreeHouse but that the board of directors was launching a search for a new c.e.o.

The second steepest share-price decline in 2017, 21%, was sustained by the Campbell Soup Co., Camden, N.J. The tumble represented a reversal following gains of 15% in 2016 and 19% in 2015 and suggested a setback in the company’s long-term efforts to adjust to what the company has described as “tectonic generational shifts” and a rapidly changing consumer food product landscape. The company’s adjusted income in the year ended July 30 was up 3% from the year before, and in the first quarter of fiscal 2018, Campbell Soup net income declined 6%. The company’s Pepperidge Farm, Inc. business was a source of strength, and Campbell Soup is seeking to expand its grain-based snacking business through the acquisition of Snyder’s-Lance, Inc. announced in mid-December.

The third weakest share price performance in 2017 was by B&G Foods, Inc., Parsippany, N.J., down 20%. The share price drop represented an about face from 2016 when the company’s stock jumped 25% and 2015, when B&G shares rose 17%. The 2016 gain was ranked sixth among grain-based foods companies. In the third quarter ended Sept. 30, B&G earnings were flat despite a sharp increase in sales. B&G has been an aggressive acquirer in recent years, and in August 2017 the company reached an agreement with Brynwood Partners VI L.P. and Mondelez International to acquire Back to Nature Foods Co. for approximately $162.5 million. Significant management changes were announced during the year. In November, the company announced Kenneth G. Romanzi has been named executive vice-president and chief operating officer, a newly created position at B&G.

Tied for fourth steepest decline in 2017, at nearly 12%, were shares of Archer Daniels Midland Co., Chicago, and Kraft Heinz Co., Pittsburgh. The drop in ADM shares followed a 24% surge in 2016 when the stock price rose by 24%, seventh best in the index. ADM’s stock has been volatile for a number of years, falling 30% in 2015, rising 20% in 2014 and up 59% in 2013. Shares rallied somewhat in the final two months of 2017 from a 52-week low of $38.59 set Oct. 31, but weak financial results weighed on the stock price through much of the year. Operating results at the company fell shy of expectations in the third quarter ended Sept. 30.

“Our services were impacted more than expected by the lack of competitiveness of the U.S. corn and soybeans in global markets,” Juan Luciano, president and c.e.o., said in an Oct. 31 conference call. “And in oilseeds, global crush margins were even more compressed than our outlook last quarter, and we continued to experience tight origination margins in South America.”

Mr. Luciano described numerous steps taken by the company to improve competitiveness, including a restructuring of ADM’s global workforce; reconfiguring its Peoria, Ill., ethanol complex; work to complete several operational start-ups; asset monetizations and furthering the company’s Project Readiness initiative.

The 12% share price decline at Kraft Heinz also represented a reversal from a strong performance in 2016, when Kraft shares jumped 20%. During the year Kraft Heinz tried without success to acquire Unilever for $143 billion. In the most recent quarterly results, for the period ended Sept. 30, Georges El.-Zoghbi, a strategic adviser for Kraft Heinz, said the company has been challenged trying to ensure its broad portfolio of brands and products are effectively placed and priced in traditional and emerging retail channels. In September, Kraft Heinz announced several important management changes, including the appointment of Paulo Basilio to zone president of the U.S. business and David Knopf to executive vice-president and c.f.o. In his new role, Mr. Basilio is responsible for all facets of Kraft Heinz’s U.S. business. Kraft also said that Mr. El-Zoghbi would transition to his role of strategic adviser from the position of c.o.o. of the U.S. business.

Lagging performances were recorded for two foreign companies with major U.S. operations — Grupo Bimbo S.A.B. de C.V., Mexico City, and George Weston, Ltd., Toronto. Bimbo’s shares closed the year down 7%, following a 3% gain in 2016 and a 12% gain in 2015. Weston shares fell 4%, versus a 6% gain in 2016 and an 8% gain in 2015. Bucking the weaker trend, Maple Leaf Foods Inc., Mississauga, Ont., jumped 26% in 2017.