It seems the whole western world is showing off holiday foods and all things peppermint. Oreo has its mint filling, and Starbucks has its peppermint mochas. Hershey Co. has its kiss in mint chocolate and red and green M&M’s.
“These big companies are always looking to stay relevant with their customers,” says trend analyst Daniel Levine, director of The Avant-Guide Institute in New York.
But is relevance enough to make a profit from peppermint?
“It depends. I think that you can’t see the trend that early around the Christmas time, although it could build into something if it were a sustainable drink. For instance, if mint lattes were actually going to be something that we’re still desiring in about May, then you’ve got a new trend,” says Mag Black-Scott, CEO and founder of Beverly Hills Wealth Management in California.
Here’s a quick review of some publicly traded companies with tasty holiday treats.
Hershey Co. (ticker: HSY). Although mint kisses and red and green M&M’s are becoming a holiday staple, they might not be enough to pull Hershey from the holiday doldrums. Some management missteps in China are still dragging down the stock’s results, says Tigress Financial Partners analyst Philip Van Deusen, who gives the stock a neutral rating. “They’ve spent a significant amount of capital in China, and things really didn’t pan out. That looks to be like something that they’re going to have to work through not just the next year, but possibly a couple of years,” he says.
Yet there is hope, says Morningstar analyst Erin Lash, who considers HSY stock slightly undervalued, since China only accounts for about 5 percent of the company’s total sales base, and Hershey has been making a big effort to offer new products, updated packaging and marketing behind those products.
Hershey is also known for its attention to detail, particularly when working with stores to stake out the best places to position its products. “So, for instance, placing confectionary offerings underneath checkouts, in between self-checkouts and at curbside locations makes sure its offerings are getting in front of consumers where they’re shopping,” Lash says.
That kind of focus could be pretty sweet for HSY stock.
Mondelez International (MDLZ). Oreos are the go-to cookie in the U.S.: Sales for the 103-year-old oh-so-sweet sandwich cookie have grown by 60 percent since 2005. And now there’s a holiday peppermint version.
Mondelez’s business in North America is particularly focused on what it terms “biscuits,” aka cookies and crackers. Chocolate sales for Mondelez only occur outside North America.
“Since splitting from Kraft just more than three years ago, Mondelez has been challenged by slowing growth around the world as well as its own executional stumbles in select markets like China, Brazil, Russia and Canada. Those efforts seem to have been corrected; however, its profitability still lags its packaged food peers. And so its current strategic focus has been on driving profit improvement, operating margin improvement, particularly within North America,” says Lash, who rates the stock as slightly undervalued. Mondelez stock is up 21 percent for the year.
Although MDLZ stock remained nearly flat during the third quarter, its strong performance over the last three years helped make it a popular choice among hedge funds, with a net 20 more funds reporting owning a stake in the company as of the end of September, compared to June.
Starbucks Corp. (SBUX). Are mint lattes here to stay? Cheaper gas prices mean more money for coffees, and November restaurant spending was up 6 percent from a year ago. Even when people cut back on spending, they don’t seem to cut back on their Starbucks habit. “Starbucks has become, I think, ingrained into the culture of coffee drinkers,” Black-Scott says.
Starbucks is ahead of other chains on mobile payments and opened its first “express” store this year in New York’s financial district, where customers can place their orders and pay for them through the Starbucks app before they get to the counter. “Customers are coming to expect that faster, better customer service from every brand that we work with,” Levine says.
Starbucks now offers flavored coffees, and the company made moves when it was too heavy in certain areas. “For instance, in Paris, they pulled back because the ubiquitous Paris cafe held sway over, yes, even Starbucks, other than for the American tourist,” Black-Scott says. “We’ve seen them move into tea; we’ve seen them move into snack foods. We’re seeing them broaden out their base. I think it’s through shrewd marketing and analysis.”
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