Philip Morris Cos. has been a major supplier to the vending industry for generations, originally as the nation's leading cigarette manufacturer, then as the parent company of Kraft Foods. Kraft's acquisition of General Foods Corp. in 1989 solidified its position as a major supplier of hot beverages for vending and coffee service. The addition of Nabisco last year put it among the top ranking of vendible snack suppliers as well.
Philip Morris Cos. reported that net earnings for the full year 2000 increased 10.9 percent to $8.5 billion, and diluted earnings per share rose 17.6 percent to $3.75 per share, meeting the company's previously announced earnings target.
For the fourth quarter, net earnings rose 8.3 percent to $2 billion and diluted earnings per share rose 13.9 percent to $0.90.
"Philip Morris continued its program of strategic growth and generated strong results in 2000," said Geoffrey C. Bible, chairman of the board and chief executive officer. "We are thrilled that Nabisco's talented employees and superb portfolio of brands have joined the Kraft family."
New products continued to drive the growth of both Philip Morris' North American and international food businesses, generating strong gains in volume, income and margins.
Due to the timing of the December 2000 acquisition of Nabisco Holdings for an aggregate $19.2 billion, Nabisco 2000 financial results are not included in Philip Morris fourth quarter and year-end income statements, as the effects of such inclusion would have been immaterial.
In the fourth quarter, Kraft Foods North America (KFNA) income rose 8.5 percent to $751 million, driven by a strong 7.7 percent gain in volume. Volume increased strongly for all of KFNA's businesses: Beverage, Desserts and Cereals volume was up 11.2 percent; Biscuits, Snacks and Confectionery was up 28.5 percent; Cheese, Meals and Enhancers increased by 4.1 percent; and Oscar Mayer and Pizza grew by 12.4 percent.
For the full year, KFNA income rose 7.8 percent to $3.6 billion, driven by volume growth and productivity improvements. Overall, KFNA volume increased 3.8 percent, fueled by new product successes.
The coffee business recorded volume and share growth with gains in "Starbucks," which is sold under license to grocery stores. The premium mail-order "Gevalia" coffee business contributed to volume growth. Early this year, Kraft launched a "Gevalia" single-cup coffee service initiative using a proprietary cartridge brewer (see V/T, January).
The year was also marked by increased shipments of "Kraft Handi-Snacks" ready-to-eat shelf-stable desserts, and success with the first-quarter acquisition of "Balance Bar" nutrition bars.
Oscar Mayer and Pizza continued to post strong growth, with volume up 5.9 percent. In the processed meats business, volume was higher, led by double-digit gains in "Lunchables" lunch combinations, which benefited from the introduction of "Lunchables Mega Pack."
Cheese volume increased with gains in several product lines, including the flagship "Kraft" Singles cheese slices and "Philadelphia" snack bars. Meals volume was lower, reflecting a decline in shipments of "Taco Bell Home Originals" Mexican products.
Philip Morris's domestic tobacco business increased 5 percent in the fourth quarter to $1.5 billion, and volume declined 1.8 percent to 51.4 billion units, primarily as a result of wholesaler inventory reductions following a fourth-quarter price increase. For the full year, income increased 6 percent to $5.4 billion, due largely to increased pricing and higher volume.
"For the full year 2001, underlying diluted earnings per share are projected to grow in the range of 9 to 11 percent, which includes the previouslly disclosed dilutive impact of the Nabisco acquisition," said Bible.
During 2000, Philip Morris raised its quarterly dividend 10.4 percent to an annualized rate of $2.12 per common share. In addition, the company repurchased 138 million shares of its common stock at a cost of $3.6 billion, reflecting 5.9 percent of the company's outstanding shares.