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More Meals At Home Help Heinz, Smucker

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The Associated Press

Published: November 22, 2008

MILWAUKEE - With consumers looking for comfort foods and ways to save money, foodmakers H.J. Heinz Co. and J.M. Smucker Co. posted higher earnings Friday and said they're benefiting from price increases and the trend of more people eating at home.

Sales in the recent three-month quarter were strong for Heinz's core products, such as its namesake ketchup, and T.G.I. Friday's frozen meals, and Smucker's fruit spreads, Hungry Jack potatoes and pancakes.

Heinz plans to invest in marketing to show consumers how its foods provide value, even offering recipe books on how to make nutritious, inexpensive meals, Chief Executive William R. Johnson told analysts on a conference call. The company is also looking at changing the size of packages and launching new items to keep consumers wanting its products.

"Consumers will generally remain loyal to our brands if we give them reason," Johnson said.

The Pittsburgh-based company's revenue rose 4 percent to $2.61 billion in the quarter ended Oct. 29, on a 7.1 percent worldwide price increase. Volume slipped 1.3 percent as consumers in some areas, including Britain and Russia, cut back their spending on items like frozen meals and secondary branded products.

Smucker's sales rose 19 percent to $843.1 million in the three months ended Oct. 31, and the Orrville, Ohio-based company said pricing was the primary driver, though it also saw volume gains.

Food companies have been facing high costs for key ingredients like corn and oil, so they've raised prices in the past year to offset that. Now that commodity prices are falling, their bottom lines are benefiting.

Tim Smucker, chairman and co-chief executive of Smucker, likewise said that the company's brands - which include Folgers, Jif, Crisco, Eagle Brand and Hungry Jack and others in addition to its namesake jams - are in a position to meet the needs of consumers.

Smucker hasn't seen such a shift to eating-at-home in more than a decade, he said.

"The number of meals prepared and consumed at home, as recent market data indicate, continues to be trending upward in this challenging economic environment, and is currently at levels not seen since 1994," he said.

But since people are looking to save money, there's some worry among companies and analysts that consumers will trade down to store brands, forgoing the name-brand products.

That's why Heinz said it will be pushing its value message to consumers, said Christopher Shanahan, a research analyst with Frost & Sullivan.

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