Packaging Digest is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Packaged food: is the market declining?

In a special report released today, Fitch Ratings says the overall operating environment for the U.S. packaged foods sector is mixed. Private label competition has intensified, but input cost inflation is moderating as the year progresses. However, negative factors are beginning to outweigh the positive factors for those companies rated by Fitch.

"Americans are choosing to eat at home more often during the recession since packaged foods are a good value in comparison to restaurant meals," said Judi Rossetti, Director for Fitch Ratings. "However, offsetting that positive trend for the sector, cash-strapped consumers are buying more private-label products, which could contribute to market share losses for branded competitors. The greatest risk for branded packaged food companies in the near term is the extent that consumers will accelerate purchases of private-label food products. Furthermore, food retailers' increasing investment in their own brands will provide formidable competition for packaged food companies."

"Additionally, packaged food firms that compete in commodity oriented categories or categories absent of product innovation will be the ones more susceptible to competition from private labels and therefore market share erosion," added Wesley Moultrie, Senior Director for Fitch Ratings. "As input cost declines, packaged food companies must effectively manage price differentials to private labels and store brands."

Overall, the investment grade packaged food companies have maintained adequate liquidity and access to capital during the recent unstable credit markets. Fitch expects companies with weaker credit metrics for their rating levels to maintain conservative financial strategies with regard to share repurchases and acquisitions. As a result, credit metrics for Kraft Foods, Inc., H.J. Heinz Company and General Mills, Inc. are expected to improve in the near-term. Sara Lee Corporation's Positive outlook reflects its low leverage for the rating level. However, its cash flow needs to improve before an upgrade would be considered.

Fitch's Universe of Coverage in the Packaged Foods Sector includes:

-- Campbell Soup Company 'A'; Stable Outlook;

-- ConAgra Foods, Inc. 'BBB'; Stable Outlook;

-- Flowers Foods, Inc. 'BBB'; Stable Outlook;

-- General Mills, Inc. 'BBB+'; Stable Outlook;

-- H.J. Heinz Company 'BBB'; Stable Outlook;

-- Kellogg Company 'A-'; Stable Outlook;

-- Kraft Foods, Inc. 'BBB'; Stable Outlook;

-- Sara Lee Corporate 'BBB'; Positive Outlook.

The full report, "What's in Store for U.S. Packaged Foods?" is available on the Fitch Ratings' web site at www.fitchratings.com.

Source: Fitch Ratings

.

Hide comments
account-default-image

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish