There could be some changes coming down grocery aisles near you in coming months affecting some of your favorite brands.
The changes start at food giant General Mills (NYSE: GIS), which is testing its pricing power by raising prices after a disappointing quarter. Things aren't falling apart by any stretch of the imagination, but the company is responding to earnings that missed expectations slightly. Net income was up 8.6% to $613.9 million, and the company reinforced its forecast for 2011 hoping higher prices will make next year better.
But I have to question raising prices when "high levels of price promotion" hurt sales. If competition is going up, how can you raise prices? Maybe food producers are going to start playing nice to improve margins for everyone.
Kellogg (NYSE: K) and ConAgra Foods (NYSE: CAG) are raising prices as well, and it seems like the trumpets of higher prices are sounding all at once. With unemployment at 9.5%, I'm not sure customers won't just trade down to save money. Consumers have gotten used to trading down over the past few years, and moving a few steps to a generic brand of cereal doesn't seem like a stretch.
Buyer in aisle four
Another more subtle change for consumers may be in store for Sara Lee (NYSE: SLE) if JBS is successful in acquiring the company. Shares of Sara Lee spiked on the news Friday, and it sounds like the Brazilian firm has a good chance of landing one of America's grocery staples if the price is right.
This company isn't chicken
As General Mills and Kellogg fight over our cereal aisle domestically, Yuhe International (Nasdaq: YUII) has been busy counting profits selling chickens in China. And things are going so well, it raised 2010 guidance last week. The Chinese chicken supplier now sees earnings growth of 44.5% compared to 2009 as selling prices for day-old broilers are exceeding expectations.
Prices may be going up in China, but I'm a little more skeptical that our American food giants can command price increases with U.S. growth at still-anemic levels.
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Mmm, food:
