BY BRIDGET MACDONALD – MEDILL NEWS SERVICE
Though shoppers have been whittling down their grocery lists over the past several months, Gimme Credit LLC analyst B. Craig Hutson pointed out that in a recession, “convenient meals” make the cut. The cheesier, the better.
CEO Irene Rosenfeld said Kraft has benefited from the “value orientation of consumers” who are staying home for dinner and packing lunches de rigueur. The company’s U.S. Cheese and U.S. Convenient Meals divisions both reported gains of over 50 percent in operating income during the first quarter.
While Kraft’s net revenue declined 6.5 percent in the quarter, Hutson said there were “glimpses of success” in the company’s performance. As with the food industry on the whole, Kraft has suffered from retailer efforts to promote private labels and scale back brand names from their shelves, but the company’s volumes declined by only 2 percent, an improvement on the 5.2 percent drop in the fourth quarter 2008.
Moving forward, Hutson said Kraft is focused on priority categories, brands, and markets, with near-term goals to grow market share and expand profit margins, which he said has been the company’s weakness in the past.
In February, Gimme Credit raised Kraft’s credit score and ranked it among the best food picks. Affirming the company’s own optimism, Hutson said he expects Kraft will easily meet its financial forecast for 2009 and has maintained an outperform recommendation.