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Kraft Heinz (KHC) to Vend Cheese Plant to Upstate Niagara

The Kraft Heinz Company KHC entered into an agreement to sell its Campbell-based cheese plant to Upstate Niagara Cooperative, Inc., a farmer-owned cooperative of 360 dairy farms. The deal is expected to close within the next 30 to 60 days.

Kraft Heinz has been on the look out for a buyer for its Campbell facility. The plant was scheduled to close in late May but got a reprieve until August, putting over 300 jobs at risk.

The agreement with Upstate Niagara ensures that at least 125 jobs will remain in Campbell, with the number expected to increase to 150 within a year. Upstate Niagara will also invest $10 million in new machinery and equipment while the Empire State Development is providing $5 million in grant to facilitate the transitioning of the plant. Additionally, Kraft Heinz will invest $3–$5 million to improve and maintain the facility.

Notably, Kraft Heinz has been able to generate higher profits on cost savings amid tepid sales. The company plans to save $1.7 billion in annual costs by the end of 2017 (up from $1.5 billion earlier expected), primarily focused on workforce reductions along with factory closures and consolidations. As of first-quarter 2017, the company realized cumulative savings of approximately $1.3 billion.

Other productivity improvement initiatives include programs such as zero-based budgeting, modernization and capability building within the manufacturing footprint and building a performance driven culture in the company.

As part of these initiatives, savings are being re-invested in the business for innovation, brand building and marketing to stimulate top-line growth. The company is also working for whitespace expansion of Kraft and Heinz brands in both food services and international channels.

Stock Price Movement

Shares of Kraft Heinz dropped 6.1% in the last three months, comparing unfavorably with the 3.8% drop of the Zacks categorized Food-Miscellaneous/Diversified industry. Earnings estimates for the current year and next have also moved down for this Zacks Rank #4 (Sell) stock in the last 60 days. The company's tepid sales growth, owing to soft retail spending environment, could weigh on the company’s performance.

Stocks to Consider

Better-ranked stocks in the industry include Associated British Foods PLC ASBFY, Nomad Foods Limited NOMD and B&G Foods, Inc. BGS.

Associated British Foods and Nomad Foods sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Associated British Foods is expected to witness 14.3% growth in fiscal 2017 earnings.

Nomad Foods is likely to see about 7.6% growth in 2017 earnings.

B&G Foods, a Zacks Rank #2 (Buy) stock, is expected to witness 7.3% growth in 2017 earnings.

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B&G Foods, Inc. (BGS): Free Stock Analysis Report
The Kraft Heinz Company (KHC): Free Stock Analysis Report
Associated British Foods PLC (ASBFY): Free Stock Analysis Report
Nomad Foods Limited (NOMD): Free Stock Analysis Report
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