The weakening economy is hitting restaurants hard as people cut costs by eating in. But companies that make condiments, soups, and other grocery items are seeing their sales rise.
Heinz and Smucker’s both posted big jumps in earnings on Friday. It wasn’t all from rising sales — their own price hikes, followed by a drop in corn and oil prices, were a factor, as were smart currency-hedging decisions in the case of Heinz. But both companies are profiting from the downturn, as grocers become the star performers of the retail sector.
Smucker’s co-CEO Tim Smucker said it’s been more than a decade since he’s seen such a switch to eating at home. Sales shot up for things like peanut butter and pancake mix. And Campbell Soup saw a dip in profits but a rise in sales, especially for condensed soup.
Fitch Ratings has predicted packaged foods will do well in the coming months. The biggest challenge will be competition from store brands, which are thriving. According to the AP, Smucker’s is looking at dropping some of its prices now that costs have gone down, but Heinz, which long been ranked as the country’s top-rated food brand, hopes to keep its prices up as long as possible.
