Food & Drink On Tap (Drip Port) August 3, 1999

<THE DRIP PORTFOLIO>
Food & Drink on Tap
The industry study is served

by Jeff Fischer (TMFJeff

ALEXANDRIA, VA (August 3, 1999) -- Moving slow but steady -- steady as honey sliding from a spoon -- we're ready to glide into our appetizing food and beverage study. Today we serve a taste of what's to follow.

First, for this study we promise even more puns than you'd expect from Rodney Dangerfield or our own TMF Edible. Second, we promise slow-baked progress -- but progress just the same. Third, Brian promises to lay off my hairstyle. Fourth, we promise to study at least eight food and beverage companies up close and in understandable terms, and we promise resolution.

The companies that we'll consider (and we may add one or two to this list -- including a review of Campbell Soup) are:

Company                   Ticker
Coca-Cola               (NYSE: KO)
PepsiCo                 (NYSE: PEP)
Wm. Wrigley Jr.         (NYSE: WWY)
Hershey Foods           (NYSE: HSY)
International Flavors&  (NYSE: IFF)
   Fragrances    
Brown-Forman            (NYSE: BF.A)
H.J. Heinz              (NYSE: HNZ)
Philip Morris           (NYSE: MO)

We will ingest them in order, beginning with Coca-Cola tomorrow.

How will we consider them? One per week. I will write one column on each company, and Brian will write one column on each company, thereby providing two viewpoints, essentially, on the same company. Hopefully the viewpoints will complement each other to offer a fuller picture. We will also highlight your thoughts on each company from the message board. On average, two Drip Port columns per week will rely largely on you, the community. We will highlight your posts, responses to posts, questions that you ask and that we'll try to answer, and I'll also highlight any jokes you make about Brian or Vince or George.

It will work like this. Most weeks, I'll write a column first, ask for comments and questions for the next day's column at the end of that column, and then I'll share your comments and thoughts in the next column. The following day after that, Brian will write his column on the same company. This way, we spend three days on a single company, sharing my thoughts, your thoughts, and Brian's thoughts. There is a catch, however. If you don't participate, the community-based columns will be lightweight. We won't make any words up for you. We'll instead have short columns based on what you share or -- more accurately -- don't share.

Brian and I will consider the essential fundamentals of each company and where we think each can go in the coming years. You may recall from 1997 and early 1998 that we dumped cereal makers because the pricing issues and competitive environment were too soft and too crunchy, respectively. To date, cereal leaders have proven us on target. The business ain't been pretty.

We also snubbed Philip Morris, largely because lawsuit outcomes were a monstrous uncertainty. Worries have kept the stock smoldering all this time and uncertainty still swirls, especially following a recent lawsuit that found tobacco makers liable for a case of cancer. We want to be just as general in this industry study, meaning we'll try to nail down where markets and companies are generally going in the long-term before getting to specifics. If we feel a company's general fundamentals are rotten or questionable, we may never dig deeper. Why waste the time?

But typically, aside from studying fundamental, macro outlooks, we will study company-specific, micro financials. Our previous food and beverage study considered certain qualities for each and every company, as you can see in the example linked here. We'll continue that again, looking at such things as free cash flow (very important), return on equity and key profitability ratios, debt levels, inventory management, and (in a slightly different vein) dividend payouts and share buybacks.

So let the games begin!

Wait. Actually, Vince already cooked up an excellent start for us. He considered Worthington Foods (Nasdaq: WFDS) the last two Fridays (see Part 1 and Part 2). Vince compared key measures at Worthington to those of other leading companies, such as Wrigley and Campbell Soup. He'll check back on the company next quarter because he concluded that it is worth watching.

If you have questions, comments, or thoughts to add before we continue, please slide on over to the Drip Companies message board.

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