Kraft Foods (NYSE:KFT) reported third-quarter earnings yesterday and saw some noticeable stock price swings as investors digested the numbers.

Starting with the good news: Third-quarter EPS more than doubled on the back of a whopping $0.57-per-share gain from the sale of the Post cereal business. But investors who know the consumer products companies look for EPS before unusual items, which for Kraft was $0.44 -- equal to last year, and a penny better than consensus analyst expectations. The company strongly reiterated both 2008 and 2009 earnings guidance.

For me, the disappointing news was that case volume remains stuck at a 1% decline, the same result that Kraft reported last quarter. Beverages volume is growing nicely (over 3%), but cheese and snack products volume continue to slide at a mid-single-digit rate. I took Kimberly-Clark (NYSE:KMB) to task last week for a price-driven volume decline, and I think it's appropriate to voice the same concern about Kraft.

The big question is whether stretched consumers will trade down from higher priced branded products to generic store brands. CEO Irene Rosenfeld addressed this head-on in the conference call, saying that commodity-related price increases are over at Kraft -- at least for the time being. She also noted that consumers are trending toward made-at-home meals and value offerings, which she expects will benefit the company.

I must admit to not being completely impartial, as I own Kraft shares, but I think there's some meat to this argument. I also like the idea that with commodity prices coming off their peaks this past summer, food companies like Kraft, General Mills (NYSE:GIS), and Heinz (NYSE:HNZ) could benefit from an earnings tailwind next year.

I've been nibbling at Kraft ever since Warren Buffett took a big stake in the summer of 2007. This year, the stock is down 10% -- not up to typical Berkshire Hathaway (NYSE:BRK-A) standards, but a far sight better than the 35% year-to-date decline for the S&P 500. I'm content to hold on at this point, collect a tasty 4% dividend, and wait for Mr. Market to figure out that regardless of housing prices, people still eat.

For related Foolishness:

Kraft and Kimberly-Clark are Income Investor selections. Berkshire Hathaway has been recommended by both Stock Advisor and Inside Value.

Motley Fool contributor Timothy M. Otte surveys the retail scene from Dallas. He welcomes comments on his articles, and owns shares of Kraft, but none of the other companies mentioned in this article. The Motley Fool owns shares of Berkshire Hathaway. The Fool has a disclosure policy.