Kraft Foods profit falls as price hikes hit sales

Wed Oct 29, 2014 5:49pm EDT
 
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(Reuters) - Kraft Foods Group Inc KRFT.O said quarterly profit fell nearly 11 percent as price hikes, designed to offset higher commodity costs, hit demand for its popular products such as Velveeta cheese and Jell-O desserts.

Kraft's shares were down 1.8 percent at $55.87 in after-hours trading.

The company, which also makes Oscar Mayer meats and Kool-Aid beverages, said gross margin fell to 29.3 percent in the third quarter ended Sept. 27, from 33.8 percent a year earlier.

The company said sales growth at its cheese foods business, which makes up 21 percent of total revenue, was slower than that of the U.S. cheese market as it raised prices to counter "an unrelenting dairy cost environment".

Kraft has been raising prices on more than half its products. At the same time, it has been offering discounts to boost sales at its meals and desserts business, where revenue fell 6.7 percent as consumers increasingly reach for healthier, organic food over desserts and processed items.

Rival General Mills Inc (GIS.N: Quote) reported a lower-than-expected quarterly profit last month on weak demand for its packaged foods and beverages such as Green Giant canned and frozen vegetables and Progresso soup.

General Mills CEO Ken Powell told Reuters at the time that sales of non-durable goods, which include food and beverage items, have been flat to down for the industry.

Kraft's net income fell to $446 million, or 74 cents per share, in the third quarter, from $500 million, or 83 cents per share, a year earlier.

Revenue edged up 0.1 percent to $4.40 billion.   Continued...

 
Kraft cheese products are seen on the shelf at a grocery store in Washington, May 3, 2012. REUTERS/Jonathan Ernst