Food feels pinch, but not from 9/11

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Predictions that Sept. 11 would greatly change consumers' eating habits turn out to have been grossly exaggerated. Trends among supermarket manufacturers and restaurateurs seem little affected by the tragic events, and any changes at all seem more a result of the recession.

Expectations that consumers would eat out less and buy more packaged food as they sought refuge at home haven't panned out.

"Grocery has been declining, declining, declining since the beginning of 2000, though it went up a little right after 9/11-when a lot of people decided to seek the comfort of home. ... The general trend continues that restaurants are operating at a much higher annual growth rate than grocery," said Kim Feil, division president-worldwide innovation at Information Resources Inc. She cited Department of Commerce data showing grocery retailers were flat, and restaurants were up 2% in 2001. In a report issued Sept. 26, IRI found "the terrorist attacks had minor impact on consumer purchasing behavior."

Similarly, in a study comparing the 15 weeks from Sept. 23 to Dec. 30, 2001, with the year-earlier period, IRI found while food sales did rise 2%, spending per trip to the supermarket grew only two of those weeks. In fact, the few companies that noted effects from the attacks blamed profit declines on the event.

H.J. Heinz Co. is one example. "Heinz had a profit warning [preceding the release of second-quarter earnings] in November specifically targeting the fall of the food-service business, which is close to 20% of their portfolio, as a result of 9/11," said Credit Suisse First Boston analyst Dave Nelson.

But he noted the magnitude of the profit warning seemed large in relation to the size of the food-service business. "It was a lame-brain excuse, since the segments that were the weakest were tuna and pet food," said Banc of America Securities analyst Bill Leach.

A Heinz spokeswoman said the company also referenced the economic downturn and higher-than-expected supply-chain costs overseas as reasoning for the adverse effect on earnings-per-share.

Campbell Soup Co. also cited Sept. 11 as a factor in its less-than-stellar earnings release, as its Godiva Chocolatier unit lost two stores in the attacks and suffered from reduced spending in airports and resorts.

Outside of those directly affected by the attacks and the travel-sector collapse, most restaurant-industry observers agree it is too hard to separate the effects of Sept. 11 from the recession.

"It's really the economy," said Harry Balzer, VP, NPDFoodWorld. "There was a segment of the restaurant industry that really served us that week-the ones that cooked our meals to eat at home."

That said, one would presume pizza chains would have performed well, but the four leaders were split. Pizza Hut and Papa John's showed sales dropped after September, while Domino's Pizza and Little Caesar each claimed increases.

In January, restaurant consultant Technomic upgraded its 2002 industry-growth forecast to 2%. Some chains have prospered, including Tricon Global Restaurants' Taco Bell and KFC, and Darden Restaurants' Red Lobster and Olive Garden, which in January posted double-digit same-store sales increases.

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