Kraft gets profit boost as private label growth moderates

Posted by Daniel Palmer on 6th May 2009

Kraft Foods has announced a first quarter profit increase of 10 per cent as inventory reductions at grocers stagnate and consumers increase demand for cheap, convenient food.

Organic net revenue growth of 2.3 per cent was helped by price increases, with profit assisted by higher margins, the company said.

“We’ve had a very solid start to the year, and we’re on track to deliver our 2009 commitments,” Irene Rosenfeld, Chairman and CEO, advised. “Our business momentum remains strong despite a challenging consumer environment. We are intensely focused on investing our cost savings to build our core brands, improve our product mix and drive superior retail execution. This will further enhance our profit margins and improve market shares as the year unfolds.”

Ms Rosenfeld said the American consumer was starting to revert back to more normal behaviour and, as a result, supermarkets were no longer cutting inventory at such a fast rate.

Importantly, private label share growth has moderated ensuring that fears of margin pressures on manufacturers have begun to subside.

“The market share improvement for private label has gone down sequentially,” said Stifel Nicolaus analyst Chris Growe, according to Dow Jones. “It’s gaining share, but it’s gaining less share each month.”

The Asia Pacific region grew due to gains in several key brands, with Oreo one of the leading performers.

Food makers resilient

The maker of Vegemite in Australia joins the growing list of food manufacturers around the world who are withstanding the global downturn as grocery sales remain robust. Kellogg’s, Cadbury and Nestlé have been among those to post solid results in recent weeks. All have reaffirmed their full year guidance but are stressing caution given the economic uncertainty.