Food companies remain upbeat despite downturn

By Brad Dorfman and Jessica Wohl

BOCA RATON, Fla./CHICAGO (Reuters) - While the recession has taken a bite out of sales, food manufacturers remain optimistic about their performance this year as consumers eat more meals at home, executives said on Tuesday.

Executives speaking at the Consumer Analyst Group of New York (CAGNY) conference in Boca Raton, Florida, tried to reassure investors that they will hold on to price increases and meet their profit forecasts even as consumers trade down to lower-priced products and retailers stock fewer items.

The S&P packaged foods and meat index .GSPFOOD was down 1.9 percent while the broad S&P 500 index .SPX was down 3.7 percent on fears a global recession was getting worse.

But General Mills Inc (GIS.N), maker of Progresso soups and Haagen-Dazs ice cream, said it expects to be able to hold on to price increases it took in recent months as commodity costs soared.

Despite the recession, consumers are still willing to pay a certain premium for their favorite brand-name products, General Mills executives said. Retailers are also willing to accept higher prices, which also means more profit, if they see that a brand offers advantages over a lower-priced store brand.

Still, ConAgra Foods Inc (CAG.N) CEO Gary Rodkin acknowledged that retailers are pushing back more on prices now than they were six to eight months ago.

The large branded manufacturers that have presented so far have an advantage in current times, said Dave Kolpak, analyst at Victory Capital Management.

"They have the resources, they have the relationships, they have the clout" to succeed in a weak economy, he said.

Generally, those types of companies and private label manufacturers will gain ground in a recession.

"You don''t want to be number three," Kolpak said.

Perhaps the No. 3 players will disappear. Sara Lee (SLE.N) Chief Executive Brenda Barnes said she expects that eventually, many categories will have only No. 1 and No. 2 players, along with private label products.

"If you can''t show you are bringing value, you are going to get knocked out," Barnes told reporters after a presentation.

General Mills shares fell 0.3 percent on Tuesday, while ConAgra advanced 0.5 percent and Sara Lee fell 4.8 percent. Kraft Foods Inc (KFT.N) slid 1.5 percent and Kellogg (K.N) shed 2.6 percent.

HAMBURGER HELPER A HIT

Consumers are seeking lower-priced items like Hamburger Helper from General Mills and ConAgra''s Banquet meals.  Continued...