Tuesday, January 29, 2008

Goodman Fielder a hedge against an economic slump

Chart for Goodman Fielder Limited Ordinar (GFF.NZ)

Consumers still eat, even during economic downturns. Goodman Fielder is well
placed to weather the storm.




A stock likely to do well over an economic slump, a slump looking more likely than not, is the Australasian food giant Goodman Fielder (GFF).

With operations in Australia, New Zealand and throughout the Pacific Islands, Goodman has a business with food staples such as bread, milk, butter, flour, and highly branded packaged and processed foods for breakfast, lunch and dinner, and the snacks in between.


http://hsc.csu.edu.au/food_technology/industry/research/wondwite.jpg
Wonder White, a strong
Australian brand.



Consumers are loyal to their brands and tend to stay true even when prices rise. Having said that there have been some large price increases of their products on the retail floor because of higher commodity prices, like wheat and sugar and increased labour, packaging and energy costs.

Unlike other companies, in less consumer essential businesses, Goodman Fielder has been able to pass on much of their increased business costs, so margins havent been affected on the downside too much.

Margins have been under pressure though and prospective buyers must be aware of this caveat.

Goodman does have competition, although Goodman does tend to dominate allot of food staples and brands: Vogels bread, Tararua, Kiwi, Edmonds, Meadowlea, Quality bakers, Irvines, anchor and a whole host of other recognised brands.

Goodman's share price has suffered of late, down to a low of NZ$ 1.78 last week from a high of $3.20 at the end of last year and finishing up 3c at $1.93 today.


Related Share Investor reading

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Goodman Fielder 2007 full year profit

Disclosure: I own GFF shares


C Share Investor 2008