CAG ConAgra Brands Inc

Kraft Foods Inc. (KFT) reported that it spent $730,000 during the second quarter 2011 on issues related to transportation, agriculture, food safety, milk price regulation, marketing and other matters. The lobbying charges inched up 7.4% from $680,000 spent during the second quarter of 2010 and 1.4% from $720,000 spent in the first quarter of 2011.

According to the filing with the House clerk's office on July 20, Kraft lobbied Congress, U.S. Department of Agriculture, the Office of Management and Budget, the Food and Drug Administration, the U.S. Trade Representative and other agencies from April through June.

As a major food producer in the United States, Kraft’s business is affected by agriculture policy, food safety regulations, trade policy, and other government activity and regulations. Kraft spends a lot of money on the political process and focuses on policy issues that affect its interests.

During 2009-2010, Kraft’s employees and its PAC spent $951,016 on campaign contributions, whereas the company spent $6.4 million on lobbying in 2009-2010.

One bill they lobbied on included the Safe and Efficient Transportation Act of 2009, which would have increased the weight limit for freight trucks, allowing them to transport more in one load, and would have also provided money to repair bridges, presumably because of the increased stress caused by heavier trucks. However, the bill did not become law.

Two other bills Kraft lobbied on, the FDA Food Safety Modernization Act and the Food Safety Enhancement Act, would have increased federal authority over food supply and increased the number of inspections of food processing plants. Both were supported by Kraft and opposed by small food producers, and neither became law.

Kraft also received $402.06 million in federal government contracts in 2010, most of them for grocery resale.

On August 9, Kraft posted robust second-quarter 2011 earnings of 62 cents per share, ahead of the Zacks Consensus Estimate of 58 cents. Management credited the benefits of increased investments in marketing and innovation, and focus on End-to-End Cost Management for strong results in the quarter.

The company is also planning to spin off its North American grocery business to its shareholders and split into two independent public companies. One would focus on international snack brands, and the other on its North American grocery business.

Kraft is stated to drive confidence from the belief of continuing strong business momentum in the challenging environment of weak consumer and category growth as well as significant input cost inflation.

We remain encouraged by the company’s investments in quality upgrades, promotions and marketing as well as initiatives taken to improve margin and productivity by reducing manufacturing and overhead costs and enhancing operational efficiencies by modernizing plants and information systems.

However, higher commodity costs, increased marketing expenses, competition from private labels and presence of tough competitors like Unilever Plc. (UL) and ConAgra Foods Inc. (CAG) concern us.

Currently, we prefer to rate the stock as Neutral. Further, Kraft Foods holds the Zacks #2 Rank, which translates into a short-term Buy rating.

 
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