News that two of the world's largest food product companies in Kraft and Heinz are to merge and create one of the world's largest food and beverage companies demonstrates the strength of branded food and beverage businesses.
The deal is backed by Heinz's part owner and legendary investor Warren Buffett, who often praises the investment qualities of branded food businesses.
Buffett has profited from significant stakes in both Coca-Cola Amatil and Heinz and values the businesses due to their competitive strengths and brand power.
Buffett has famously said that businesses with happy customers don't fail and that is what provides their long-term investment appeal.
The ASX has several businesses that might appeal to Buffett and some of them have recently been providing Buffett like returns.
Coca-Cola Amatil Ltd (ASX: CCL) has suffered from falling sales of its core soft drink product in Australia recently, but new chief executive Alison Watkins says she is implementing a plan to cut costs and reverse the sales decline. Watkins has also shaken up the management team at this business and Coca-Cola remains a solid stock with an attractive yield.
If the new CEO can deliver on her promises today's price of $10.76 will look cheap with hindsight.
Domino's Pizza Enterprises Ltd. (ASX: DMP) is a franchisor of pizza stores across Australia, Europe and the fast-growing market of Japan. Pizza and it's generally universal appeal is the kind of sure thing product that might appeal to Buffett, although he may have concerns over Domino's moat or competitive advantages.
However, so far it seems Domino's has left the competition in the dust with its cheap prices, brand power and innovative approach as a modern digital retailer. The stock has quadrupled in price over the last three years, although today's valuation on 53x earnings looks expensive despite the outlook.
Retail Food Group Limited (ASX: RFG) is another fast food franchisor to have provided stunning returns to investors over the past few years. It has grown via acquisition and organically by increasing the amount of franchised stores in operation across its pizza, coffee, cake, bakery and donut empire.
Today the stock sells for $7.04 which is around 23x annualised earnings when using the first half's earnings per share as a yardstick. However, given the group noted a "buoyant outlook" it may be around fair value at current prices.
