2008-06-19

Higher Profits on Higher Food Prices?

According to this article in Investopeida, US food producers are showing increased profits resulting from higher prices. Heinz raised prices 4.5% and saw net income increase 7%. General Mills has seen a 17% earnings gain at the same time it was reducing box sizes to offset higher ingredient prices. If that works for them, great, but in Japan, the talk at many companies is simply how to stay profitable.

The article credits brand loyalty and stronger oversees sales. I am not in marketing, but I would guess that brand loyalty is not nearly as strong in Japan, because a culture of always trying something new has been cultivated. Consumers see a price they consider too high or a box they think is not as big as it should be and they simply buy something else.