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Consolidation is the name of the game in the food processing industry. Processors are acquiring companies and merging primarily to boost market share; secondarily, to diversify. With developed markets mature, the best growth opportunities are in the emerging markets of Latin America, Asia and Eastern Europe, where food processing infrastructure is lacking. Most food stocks are flat, but investors should consider issues with 1 and 2 Safety ranks.

The food processing industry is expected to experience weak prospects as a result of an improving economy and increasing competition in the food reseller market. Investors are shunning defensive investments and instead are concentrating on cyclical and capital-intensive companies. Competition from distribution points such as warehouse clubs and mass merchandisers has led resellers to reduce inventories, which impacts the food processing industry. Few investments in this industry are promising, but conservative investors could profit from long-term gains from large-capitalization issues.

The food industry stocks are flat during 1994, and these firms have faced such obstacles as the recession, during which the public turned to less expensive private brand products, which had evolved into higher quality products. In addition, the industry has faced increased competition from discount retailers and warehouse clubs. Some firms are expanding internationally or moving into new product areas.

Food processing industry stocks are expected to do better in the long term and in international markets than in the short term domestically. The industry has an average Timeliness rank but several companies are good options for conservative investors. The price/earnings ratio has fallen below the historic norm for the industry. Large companies that are expanding in rapidly growing foreign markets include Wrigley, Sara Lee, Kellogg and Heinz.

Food processing stocks are ranked among the lowest for being appropriate to buy in 1993. The industry has been hit with the recession in 1990-1991, which has caused consumers to purchase more private store brand products. As a result, generic products have improved in quality and brand-name products have suffered in sales. In addition, computer technology has made inventory tracking more efficient, and, consequently, inventories have been kept lower. However, as the recession eases, the public is expected to return to brand-name foods.

The stock swap between Borden Inc. and RJR Nabisco Inc. in Sep 1994 may have been structured as a taxable transaction to benefit Kohlberg, Kravis, Roberts and Co. (KKR), the investment banking firm that agreed to buy Borden as a part of the deal. Structuring the transaction as a stock swap will provide KKR with capital losses that it can later use to offset capital gains expected upon the sale of Borden's intangible assets. IRC section 197, which allows for the depreciation of acquired brand-name assets, would appear to have motivated this tax structure.

New York-- Borden, Inc. sustained a loss of $593.6 million in the fiscal year ended Dec. 31 after booking $864.4 million in charges related to a comprehensive restructuring program and [...]

Borden Inc suffered a loss of almost $440 million in 1992 due to reorganization costs and lower sales. Its planned dividend of $1.20 could be as much as 63% of earnings paid out in dividends. Several analysts believe the positive results from Borden's restructuring could restore the company's finances.

Borden Inc., reported net income of $107.8 million, or 73 cents a share, for the third quarter ended Sept. 30, 1990, compared with a net loss of $303.4 million, or [...]