Shop Talk

Retailers, consumers and prices

Check Out Line: Beware the ides of rising costs for food companies

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gis1Check out fears of rising costs for U.S. food companies.

Rising commodity costs and promotional discounts are pressuring profit margins for food companies and analysts said more may be on the horizon.

General Mills, whose brands include Cheerios, Green Giant and Haagen-Dasz, said on Tuesday that the gross margin in its most recent quarter was flat, excluding higher ad costs and other items.

On Thursday, General Mills said it expects pricing and promotions to look the same over the next six months as they have the prior half year. It also sees some players in the sector moderating their promotional activity as commodity costs rise and sees raising list prices in some categories after that. 

The company’s comments were seen as a harbinger of things to come, especially since its 2011 earnings forecast missed Wall Street estimates.

Check Out Line: Campbell profit mmm, mmm good

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cpb1Check out Campbell Soup’s better-than-expected profit .

The world’s largest soup company posted operating earnings of 30 cents a share in the fourth quarter of fiscal 2009.

That was four cents better than Wall Street had expected, thanks to higher prices and increased sales of condensed soup and Prego pasta sauce as people ate at home more to save money during the economic slump.

Costly Classical Christmas

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Christmas is much more expensive this year. At least it is if you go the swans-a-swimming and geese-a-laying route.
 
PNC’s Christmas Price Index was up 8.1 percent this year, the second biggest leap in the 24-year history of the index, which is based on the holiday classic “The Twelve Days of Christmas.”
 
The biggest culprit for the increase? Those darn seven swans-a-swimming, which will costs $5,600 this year, compared with $4,200 in 2007, PNC said.
 
PNC also puts out a core Christmas Price index, which excludes the highly volatile swan sector. That core CPI was up just 1.1 percent.
 
PNC CPI’s sources range from retailers to the National Aviary in Pittsburgh and Philadanco, a modern dance company in Philadelphia.
 
Commodities prices, concerns about increased energy and shipping costs, jobs and a second straight minimum wage increase were major factors in the cost of the index, James Dunigan, managing executive of investments for PNC Wealth Management, said.
 
Prices for turtle doves, partridges and pear trees are also all up more than 30 percent, PNC said.
 
But if you want to save some money, see if your true love will let you get away with only the five golden rings — which are down 11.4 percent this year at $349.95.
 
Hey, there is a recession on, you know.

(Reuters photo)

Check Out Line: Data dump

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food.jpgCheck out the latest retail scanner data.
 
The data, compiled by ACNielsen, show what consumers are buying and what they are taking a pass on.
 
According to J.P. Morgan’s take, the data show that shoppers are still scouring stores for ways to save money.
 
“The general themes remain consistent this month: sales growth is being driven by price, private label is gaining both dollar and volume share, and volumes continue to decline overall (likely due in part to a migration from measured channels to unmeasured channels such as Walmart),” J.P. Morgan analysts said in a research note.
 
Oh, that last part might be a bit important – that bit about unmeasured channels.
 
Not all stores are measured by Nielsen and competitor IRI. And some of those stores are the ones consumers are heading to in droves in what many economists say is a U.S. recession. Think Walmart and dollar stores, for example.
 
Some food companies say they expect to ship fewer products after raising prices in a weak economy. Hershey said yesterday that it expects volume to fall, for example.
 
That said, sales are still up for many food makers, helped by sharp price increases put in place to combat commodity costs that soared to unprecedented levels.
 
But lower-priced private-label products (or store brands) are also gaining market share. So the balancing act continues as food makers try to keep prices high but at the same time, need to ensure the price hikes don’t result in too much lost volume.

In yet another twist, many commodity prices are now falling. That could lead to lower prices from store brands as retailers try to get more customers in the stores and lure them with lower prices.
 
Also in the basket:
 
Housing starts plunge
 
Mexico’s Modelo not looking to buy back stake
 
Sonic posts lower quarterly profit

Check Out Line: Commodities trump kisses at Hershey

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hershey.jpgCheck Out how higher commodity costs offset the benefit of a higher prices at Hershey.

Back in August, Hershey announced a roughly 10-percent price increase in the United States as it tried to deal with higher costs for cocoa, corn sweetener, sugar and peanuts.

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