COVID-driven home dining boom boosts U.S. food giants again

FILE PHOTO: Heinz tomato ketchup is show on display during a preview of a new Walmart Super Center prior to its opening in Compton, California, U.S., January 10, 2017. REUTERS/Mike Blake/File Photo GLOBAL BUSINESS WEEK AHEAD

(Reuters) - Some of the biggest U.S. packaged food companies raised their annual financial targets on Thursday, expecting the largely homebound consumer to spend more on everything from cheese to coffee in the months ahead, although at a more moderate pace.

Kraft Heinz, owner of the Philadelphia cream cheese and Heinz ketchup brands, bumped up its expectations for core profit, while Cornflakes maker Kellogg and Keurig Dr. Pepper raised both profit and sales forecasts, citing a strong uptick in at-home consumption.

The COVID-19 pandemic has drawn shoppers back to familiar brands and processed foods on fears of extended home confinement due to a resurgence in coronavirus cases.

This has helped turn the fortunes of the packaged food industry, which has long struggled for growth due to a perception that their products are unhealthy.

The shift to trusted brands amid lockdowns was one of the reasons Kellogg’s organic sales in emerging markets rose in the double digits percentage in the third quarter, much higher than anticipated, Chief Executive Steve Cahillane told Reuters.

“We are seeing strong home consumption and demand for our brands... We are ready to finish a great year in 2020 and track strong 2021 momentum,” Kraft Heinz Chief Executive Miguel Patricio told Reuters in an interview.

In another COVID-driven shift, people are increasingly moving away from small single packs. Kraft Heinz said it was seeing more demand for 12-pack Mac & Cheese and bigger bottles of ketchup.

Bigger packs of everything also means fewer visits to stores, prompting retailers to offer more promotions. The company cautioned this could cause fourth-quarter sales to be slightly softer than in the previous months.

Overall, data provided to Guggenheim by Nielsen showed that Kraft was a winner in U.S. retail sales over the past three months, with sales rising 9.8%, much more than rivals Kellogg or General Mills GIS.N.

Reporting by Siddharth Cavale and Praveen Paramasivam in Bengaluru; Editing by Sriraj Kalluvila, Arun Koyyur and Saumyadeb Chakrabarty