Inflation has yet to dent big food’s earnings
FOR YEARS nutritionists have advised Americans to steer clear of grocery shops’ central aisles and instead fill their trolleys from the outlying shelves. Fresh meat, dairy products, fresh fruit and vegetables often line supermarket walls; cans, boxes and other packages of less salubrious processed food are stacked in the middle. Some shoppers have heeded that advice: sales of canned soup have been lacklustre in recent times, even as those of fresher refrigerated potages have grown. Now makers of the packaged stuff are staging a comeback. This says as much about shifting economic conditions as it does about products on shelves.
This month Conagra, which owns brands including Orville Redenbacher’s popcorn, Bird’s Eye frozen veg and Duncan Hines cake mixes, reported bumper results for its latest quarter. Sales and margins were all up year on year. The company expects higher earnings in the fiscal year to May than it had previously forecast. A few weeks earlier General Mills, which peddles canned soups, frozen vegetables and breakfast cereals, unveiled similarly juicy quarterly numbers. McCormick & Company, which sells spices and sauces, and the J.M. Smucker Company, best known for jams and peanut butter, are likewise having a sweet time of it. Investors are licking their lips: Conagra’s share price has risen by 8% in the past 12 months, compared with a decline of 7% for the S&P 500 index of large American firms. General Mills’ has shot up by 23%.
For America’s packaged-food firms, the past decade was a cycle of famine and feast. Lean years before the pandemic ended when restaurants closed amid covid-19 and people stocked their pantries. Stimulus cheques from the government meant that shoppers were flush and the food companies were not being nagged by their retail partners to offer discounts. Then in 2022 people began dining out again, putting pressure on volumes even as commodity-price shocks caused by…
2023-04-13 08:28:56
Source from www.economist.com