Diamond and Kraft Foods Face Higher Costs

Tallahassee, FL 11/7/11 (StreetBeat) -- Companies in the Processed Goods sector have been dealing with a rise in global food costs in recent times. For retail and consumer goods companies, rising food and commodities costs along with a weak dollar and a sluggish economy have caused margins to be squeezed.

Shares of Diamond Foods (Nasdaq: DMND) have been under fire as of late. Last week Diamond Foods, which owns Kettle potato chips and Emerald Nut brands, said its acquisition of the Pringles snack business from The Procter & Gamble Co. is now expected to close in the first half of 2012. Previously, it was expected to close in December.

The $1.5 billion deal would more than triple the size of San Francisco-based Diamond Foods. Adding Pringles would make Diamond Foods a distant second in the snack business to PepsiCo's Frito-Lay division, which controls nearly half of the market.

Kraft Foods Inc. (NYSE: KFT) reported a 22 percent jump in its third-quarter profit, boosted by higher prices on some of its products that helped offset increased costs for everything from ingredients to packaging. The company has been able to offset this pressure by raising prices on select products and expanding in emerging markets such as China, India and Brazil where demand is growing. It also has grown with help from Cadbury PLC, which it acquired in 2010, as candy and other sweets sales have soared.

Kraft also raised its outlook for full-year 2011 net income. It now expects to earn $2.27 per share, in line with analyst expectations and up from its prior forecast of $2.25 per share.

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