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ConAgra Boosts Ad Spending as Commodity Costs Drop

April 3, 2013

Will lower inflation spur more ad spending?

In the case of ConAgra Foods, the answer is yes. On an earnings call today the company cited better-than-expected input costs as one reason it hiked marketing spending 33%, or $27 million, in its fiscal third quarter, which ended Feb. 24. Like a lot of food companies, ConAgra last year was forced to raise prices in the face of rising inflation, which hurt sales volume.

But raw-material-cost concerns seem to be easing across the food industry. Jonathan Feeney, an analyst with Janney Capital Markets, reported this week that his "Feeney's Food Cost Factor" is down 5.1% on a year-over-year basis. Packaged-food costs in March were driven down in part by larger-than-expected grain stockpiles. Another positive pricing sign came Tuesday when spice marketer McCormick & Co. said its cost inflation "will moderate from a high single-digit rate of increase in 2012 to a level close to 3% in 2013."

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