Food firms to do well despite inflation, recession

Despite turbulence in the commodities and financial markets, food companies are raking in profits without much hurdles.

On Monday, the world's biggest food company and the leading Swiss giant Nestle announced an impressive growth of 6 per cent in the first quarter sales that touched over $25.21 billion (Swiss francs 25.7 billion). The company is confident that its full year growth forecast is on target.

"On the basis of this high-quality growth, with a good balance between real internal growth and pricing, I am confident that we will achieve our 2008 targets," said Paul Bulcke, the newly-appointed chief executive officer.

The Nestle group's sales of over 2,500 products witnessed 9.8 per cent organic growth, while the acquisitions of Gerber and Novartis Medical Nutrition added 3.2 per cent, it said in a statement. But the impressive results had little impact on the company's stock, which fell 1.1 per cent after it reported first quarter figures.

Nestle's performance is a clear indication that the food firms would continue to do well at a time of rising prices of basic food items and worsening recessionary fears in major industrialised countries, analysts said.

With prices of wheat and rice having doubled this year since 2004, which are already causing riots in some Asian, Caribbean and African countries, food companies are subjected to various economic pulls, said a Geneva-based trader, suggesting that they are also facing a high degree of turbulence.