Last week, the WSJ observed that 3 major food companies were having "their lunches eaten by soaring commodity prices. Costs at Campbell Soup (NYSE:CPB), J.M. Smucker (NYSE:SJM) and Hormel Foods (NYSE:HRL) rose faster than sales in the prior quarter ended in October, helping to push their share prices lower at a time when such defensive stocks ought to be in high demand."
While Campbell reported a 6.7% year-over-year revenue growth, its costs of goods sold rose 8.7%. Same thing at Smuckers: a 17% sales growth, but a 19% jump in costs. Even though Spam-maker Hormel had an 11% drop in hog prices, high feed costs hurt its Jennie-O Turkey Store division.
After years of absorbing these cost increases, it's reached the point where there is little choice but to pass price increases on to consumers. According to an AC Nielsen survey, eight U.S. branded-food companies had raised prices by more than 2% over the 12 weeks ended Jan. 26. Annualize that, and it's a nearly 9% price increase:
"This is all hard to ignore...unless of course you're an economist. They often disregard food prices when measuring inflation."
And that's our quote of the day.
It Is Hard to Ignore Soaring Food Prices
WSJ, February 15, 2008; Page C1