More on Food Inflation — from Food Companies' Mouths

I made note this morning of Dean Foods' ability to pass on notable price increases, partly to offset rising dairy costs.

Dean Curnutt of Macro Risk Advisors compiled an interesting list of commentary on food inflation from recent food company conference calls...his conclusions are the same as mine: "This round of recent earnings calls suggest companies are successfully passing along price increases to consumers ..." and that consumer demand remains strong despite high unemployment.

· Whole Foods: “consumer confidence continued to improve even as gas prices rose…clearly the gas thing is real, but I think the news here for us is that our sales have stayed strong…this is a very different time than 2008 and this a very different customer. This customer is way more adaptive, has good strategies and has a stronger commitment to the lifestyle.

· Hanes Brands: “we feel more and more confident in our ability to not only secure the price increases but have the retailers understand that this is absolutely necessary to do… I think as the media continues to focus on it, consumers are going to understand it. And overall I think we're done with deflation in this industry, and we're going to go in to a period of moderate inflation.”

· Kraft: “Early results indicate our prior estimate around the price elasticity of demand might have been a bit conservative. Nevertheless, we remain cautious. That's because the impact of our pricing is not likely to be fully reflected on store shelves until midyear.”

· Sysco: “In response to this dramatic and sustained increase in fuel costs, we made the decision in March to implement a fuel surcharge in the street side of our business...I think this inflation in all the commodities, I think it's working its way through the whole supply chain right now…I would say we did a better job, clearly, in the third quarter on passing [price increases] along…the restaurants are beginning to be more receptive and to pass it along…I think we're all at a point where we have to pass it along to some extent

· Clorox: “Similar to our plans to take pricing earlier in the commodity cycle, we're now seeing many of our suppliers accelerate their pricing actions on the commodities we use in our products.”

· Cheesecake Factory: “everybody knows that every food is expensive. It's going up everywhere. It's in people's minds and our price increase will be reasonable compared to really what's going on out there in supermarkets and many other restaurant chains.”

· Southwest Airlines: “there is risk with the Consumer segment in particular in continuing to pursue fare increases. On the other hand, like Laura said, we're $1.5 billion ahead of last year's fuel bill and $1 billion over our fuel budget with what we had forecasted, so not taking a fare increase is not a successful strategy.”

· General Cable: “there has been stronger pricing power happily than we had forecasted the first quarter in several of the North American segments.”

· Tyson: “I was cautiously optimistic about a brighter outlook for the food service sector based on earlier unemployment figures, but as gas prices continue to rise, my optimism is waning. And I believe we can expect to see an impact on traffic in both QSR [quick-service restaurants] and casual dining.”

· YUM Brands: “We are now estimating commodity inflation of about 7% for the full year…We're not planning on doing anything in the next several months. We like what we've seen from the sales and transaction perspective, and we think we've got the overall profitability and value equation pretty good right now.”

· American Eagle Outfitters: “rising product costs are a reality in the back half of the year…I've been in this business, as you all know, a long, long time. And each year, every time there were going to be cost increases, I quite didn't believe it, and it never really happened, I must tell you. This is the first time that raw commodity goods, take cotton, that was a year and a half ago $0.60 a pound, and now we're talking about over $2 a pound. And think about the weight of a denim jean, quite frankly, so the costs are going up…But there's no question that the costs are going up for everyone in the business.”

· Delta: “As you see fuel rise and continues to rise over the course of the next few months, you can expect ticket prices to increase. I think that's a fairly basic fundamental.”

· Chipotle: “we plan to hold off on price increases for the rest of the country until the third quarter, which will allow us to see the magnitude and timing of inflation and to assess the customer reaction to price increases at other restaurants.”

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