Cash-strapped consumers are embracing inexpensive meal alternatives, eat more meals at home and seek convenient and inexpensive options such as cereal, sandwiches, ramen, and macaroni and cheese. So, even with rising ingredient prices, it’s been a banner year (so far) for food companies.
Campbell Soup's sales rose 13 percent in the most recent quarter, Kellogg Co.'s second-quarter sales climbed 11 percent, General Mills saw U.S. sales increase 14 percent in the recent quarter, and Kraft Foods reported a second-quarter sales jump of 21 percent, reports AdAge.com.
Since food companies have been forced to raise prices to offset ingredient costs, volumes have declined, and that is worrisome. But Wachovia analyst Jonathan Feeney, predicted that as commodity prices stabilize, margins will grow.