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Higher ingredient costs drive US food prices up
NEW YORK (April 22
2004): The US food-makers are raising prices on
everything from cheese to luncheon meat in a bid
to make consumers pick up their share of the tab
for rising prices on many basic ingredients.
Some of the nation's biggest food companies,
including Kraft Foods Inc, Hormel Foods Corp, and
Bob Evans Farms Inc, said this week that they are
taking measures to pass on the soaring costs of
commodities such as meat, soybean oil, wheat, and
milk. And analysts said it is just a matter of
time before others in the food industry are forced
to raise prices too.
"The price increase will likely stick and be
accepted by retailers given the fact that higher
commodity prices are an industry-wide issue,"
Merrill Lynch analyst Leonard Teitelbaum said in a
note, adding that "Hormel's price increase is
likely to be the first of many for the industry."
Leading US food-makers are expected to raise
prices, by 2 percent, on average, in the second
half of this year, according to Teitelbaum.
This is likely to contribute to inflationary
pressures. A 0.5 percent rise in March US consumer
prices, reported last week, led to concerns that
inflation could become a threat again and
triggered a rise in interest rates.
"The big issue here is now much are they going to
be able to pass on?" said Anthony Chan, Chief
Economist with Banc One Investment Advisors. "They
are going to be able to pass on a little bit more
in an environment where the economy is improving,
but at the same time they are not going to be able
to pass on all of it."
Food companies typically have difficulty raising
prices because discounters like Wal-Mart Stores
Inc, the world's largest retailer, hold so much
sway over the US grocery market.
But Lehman Brothers analyst Andrew Lazar said in a
report on Tuesday that he expects prices on
store-branded products will also move up, which
should help the price increases stick.
Austin, Minnesota-based Hormel said on Tuesday it
will raise prices on its Dinty Moore beef stew,
Spam luncheon meat and other canned goods, in part
because of higher beef, pork, and POULTRY prices.
The increase will begin June 14 and will drive
prices up between 4.5 percent and 6.5 percent.
The popularity of high-protein diets such as the
Atkins Diet, and an improving economy, have
increased demand for all types of meats, sending
wholesale beef prices up 20 percent from a year
ago. Pork prices, meanwhile, are up 30 percent,
and turkey prices are up 30 percent or more.
Soaring demand for food in China, as an economic
boom raises incomes there, has also fed voracious
demand for everything from grains to meat.
Pork sausage producer Bob Evans Farms said it has
raised the price points on its in-store promotions
in order to offset some of those costs.
"A year and a half or so ago we were targeting
$1.99 for 1-lb. rolls of sausage, whereas now the
best consumer deal out there is two-for-$5," said
Roger Williams, executive vice-president of Bob
Evans Farms, in an interview.
The low-carb, high-protein diet craze has also
driven increased demand for cheese. Add that to
higher milk prices, partly because of a shortage
of milk-producing herds, and cheese prices have
surged.
Kraft, the maker of Philadelphia cream cheese,
Cracker Barrel cheddar cheese and Kraft singles,
on Monday said it raised prices on cheese between
5 and 15 percent, depending on the product, at the
end of the first quarter.
The company also raised its prices on frozen pizza
last week and Kraft Chief Financial Officer Jim
Dollive said it would continue to try to push
through other price increases.
"To the degree that these commodities move, we
will make every attempt to pass those increases on
through higher prices," Dollive said during
Kraft's quarterly earnings conference call with
analysts on Monday.
Courtesy Business Recorder |
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Pakissan.com; Advisory Point
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