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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