Processing Magazine

Heinz gains, Hormel hurts on high commodity costs in quarter

August 25, 2008

Rising commodity costs kept weighing on food makers H.J. Heinz Co. and Hormel Foods Corp. in the most recent quarter, even as consumers continued to swallow price increases for their favorite foods according to the Associated Press. Hormel Foods, the maker of Spam and Jennie-O Turkey, said Thursday that its fiscal third-quarter profit fell 9 percent as higher meat, fuel and other costs outweighed price increases and hurt margins. But revenue was up 10 percent, helped in part by the higher prices charged to customers. H.J. Heinz''s fiscal first-quarter profit rose 11 percent, fueled by double-digit sales growth in North America and Europe. The company, which is also facing higher commodity costs, raised prices an average of 5.2 percent across all its product lines, including Heinz Ketchup, Weight Watchers Smart Ones products and Ore-Ida potatoes, to try to keep profits strong. The economy also hurt demand for both companies'' segments that serve the food industry as consumers pulled back on their restaurant spending and ate more meals at home. Consumers, like companies, are faced with higher costs for fuel and food, so they''re cutting back on expenses, including trips to restaurants.