“The U. S. consumer is all grown up and future growth in consumer spending will be outside the U. S.”
– MATT ARNOLD
U. S. food makers are looking overseas for more profitable growth over the next few years as they often must rely on short-term price promotions in order to drive sales of their products at home.
Kraft Foods Inc. said its recent acquisition of British chocolatier Cadbury Plc would accelerate long-term growth, even though it expects the deal to hurt 2010 results.
The largest North American food maker is already seeing erosion in its home turf, where organic revenue fell 2.7 per cent in the fourth quarter. In developing markets, organic revenue rose 10.4 per cent.
General Mills Inc., meanwhile, said it is encouraged by a growing middle class in emerging markets.
“We expect our international business to lead General Mills growth,” Chris O’Leary, chief operating officer for General Mills’ International unit, said during a presentation Feb. 16, which kicked off the Consumer Analyst Group of New York conference in Boca Raton, Florida.
General Mills expects its sales in China to nearly triple to $900 million in fiscal year 2015 from $306 million in fiscal year 2009. It also sees potential in markets like Russia, Indonesia and Vietnam, O’Leary said.
General Mills, Kraft and their peers have increasingly used price promotions to keep U. S. consumers buying their brands over cheaper store labels in the economic downturn.
ConAgra Foods Inc., said there is no let-up in consumers’ desire to save and that prices are very important to store traffic.
“The U. S. consumer is all grown up and future growth in consumer spending will be outside the U. S.,” said Edward Jones analyst Matt Arnold.
General Mills said it also sees opportunities to grow sales in Western Europe, noting that household penetration for products like Haagen-Dazs ice cream, Old El Paso Mexican foods and Nature Valley cereal products in that region is well below that of other parts of the world.