Kraft (NYSE:KFT): One of the Strongest Recession Plays Right Now
Source: http://feedproxy.google.com/~r/ContrarianProfits/~3/h4U6KRGYPEU/16342Posted on Wednesday, May 6th, 2009 | In Market Commentary
When recessions bite, people turn to cheap comfort foods like macaroni and cheese. And as it turns out, those deliciously cheesy elbows have been a pretty good indicator of difficult times.
This from the Financial Times: Sales of Mac & Cheese – which can feed two or more people for as little as $1 – have become an indicator of the health of the US consumer.
Kraft first reported a surge of “almost 20 per cent” in Mac & Cheese sales during spring and early summer last year as economic pressures increased.
Mac & Cheese sales also jumped in 1990, when the US economy was also in a downturn.
It’s not just Mac & Cheese that are surging, either. Other budget menu items are also making gains. Kraft, the largest US food group, reported “solid gains” in powdered drinks and desserts. “Businesses like Jell-O, Mac & Cheese, and Kool-Aid are doing exceptionally well,” says Irene Rosenfeld, CEO of Kraft. “There is no question that we are benefiting from the value orientation of consumers,” she said.
Kraft also reported strong sales of its ready-to-eat frozen DiGiorno and Jack’s pizzas, which it markets as a cheaper and higher quality alternative to ordering pizza to be delivered. Overall, its food business has been benefiting as families eat at home more rather than in restaurants.
That makes Kraft (NYSE:KFT) one of the strongest recessionary plays we’ve seen in a long time.
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