Moneymaking machines?

April 21, 2008

There's nothing sexy about a Slim Jim. And no one's lining up at midnight to buy the newest box of Wheaties, reports CNN/Investor’s Business Daily.

But even in the current slowdown, Americans are still buying prepared foods, translating to modest revenue and earnings growth for food manufacturers. Food companies are considered recession-resistant, so investors flock to them in tough times. In fact, Steven Ralston, a senior analyst at Zacks Investment Res ...

There's nothing sexy about a Slim Jim. And no one's lining up at midnight to buy the newest box of Wheaties, reports CNN/Investor’s Business Daily.

But even in the current slowdown, Americans are still buying prepared foods, translating to modest revenue and earnings growth for food manufacturers. Food companies are considered recession-resistant, so investors flock to them in tough times. In fact, Steven Ralston, a senior analyst at Zacks Investment Research, calls food companies "moneymaking machines."

Rising energy prices, higher ingredient prices and fierce competition translate to higher food prices. But Americans and consumers in the global market continue to eat. The food, beverage and consumer packaged goods industry brings in more than $2 trillion in sales globally each year, according to the Grocery Manufacturers Association. While established economies such as the U.S. and Europe represent the biggest markets, most new growth is coming from fast-growing economies in China, Russia, India and Brazil.

The consumer price index for all food climbed 4 percent in 2007, and the government forecasts a rise anywhere from 3.5 percent to 4.5 percent for 2008. Consumers so far have accepted rising grocery prices, analysts say. And while some consumers have vowed to dine out less or buy more store brands and generics, big-name manufacturers say they're not seeing massive defections. Meanwhile, opportunities in the developing world bode well for firms with the right products and reach.

CNN article

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