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Private label sales increase as budgets tighten

BY Alaric DeArment

NEW YORK Private label foods are making inroads as consumers’ budgets become tighter, Citigroup said Tuesday following a conference call with Tom Pirovano, director of industry insights for Nielsen.

Private label product sales have increased by 10.2 percent at drug stores, as well as 8.9 percent at grocery stores and 10.4 percent at Wal-Mart. Pirovano said during the call that Wal-Mart had become a benchmark retailer in private labels by keeping prices for its private label products low compared to branded products and private-label products from other retailers.

The shift to private labels has been most dramatic in foods that have seen the largest increases, such as eggs, milk and cheese. Sales were lower in processed foods.

At the same time, however, makers of branded food products have been trying to compete by adding extra features such as nutritional enhancements, changing quantities or making the products safe for the microwave.

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Hershey tuning its ears to customer comments, sets plan for long-term net sales boost

BY Jenna Duncan

HERSHEY, Pa. The Hershey Co. said it will announce its plan for meeting long-term for net sales goals and increasing earnings per share growth today. The company said that a new plan was developed after Hershey completed a market structure/category segmentation review. The company will also realign its plans to focus on the interests of key consumer segments to help drive growth.

Hershey said it is readjusting its resources and plans to beef up its advertising by about 20 percent in 2008 and 2009. A focus will be directed on core brands currently generating around 60 percent of the company’s U.S. net sales.

“Our extensive consumer research validates our strategy of increasing advertising and consumer investment behind the core U.S. brands that offer the greatest potential for growth,” David J. West, president and chief executive officer said. “We will combine this focused approach with consumer-centric innovation and continued international expansion to achieve our long-term net sales growth rate of 3 to 5 percent. Longer term, as marketplace trends improve and targeted consumer initiatives are executed, the Company expects to generate earnings per share growth of 6 to 8 percent.”

Hershey has said that it estimates its total net growth for 2008 to be at around 3 to 4 percent. Earnings per share were expected to be around $1.85 to $1.90. Hershey’s management planned to discuss the new strategy and long-term goals at a meeting with investors earlier this morning.

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Nestle says it will keep its prices steady

BY Jenna Duncan

VEVEY, Switzerland Due to a price ceiling hit by rising costs of commodities, Swiss food maker Nestle will most likely not raise prices of its products any higher in the near term, the company’s chairman said Sunday.

“You are now seeing the impact of price increases which were done some months ago,” Peter Brabeck-Letmathe, Nestle S.A. chairman, said to Dow Jones Newswires. “I would expect [the rising costs of foods] to flatten out over the next several months and not increase anymore as our costs have come down.”

Brabeck-Letmathe was in Malaysia attending the World Economic Forum on East Asia. He said “the worst is probably past” for surges in the costs of raw ingredients such as milk, coffee, salt and cocoa.

Brabeck-Letmathe also said that his company will probably not make any acquisitions any time soon because there aren’t many attractive deals in the horizon. He also reported that Nestle doesn’t have a firm decision to sell its 29 percent hold in L’Oreal, however, it may review the idea some time next year.

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