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The food industry's growth track appears to be at an end.

As about 35,000 people convene this week in Chicago for the Food Marketing Institute's annual Supermarket Industry Convention, it's against a backdrop of stagnant to declining volume for most major food companies during the first quarter.


Stung by a 10.5% volume slide in U.S. cereals, Kellogg Chairman-CEO Arnold Lango said the marketer will be "more competitive in our marketing investment for the remainder of the year."

Nabisco Biscuit Co., hurt by a 1% decline in sales after adjustments for extra selling days in the first quarter, is vowing increased marketing support and a full lineup of new products in the second quarter. H.J. Heinz Co. is making good on its promise to return to advertising its ketchup, and will break a $20 million TV effort nationally this week.

Even Kraft Foods, often held up as the gold standard in food, took a hit in the first quarter, showing "underlying" volume growth of only 1%, excluding businesses sold. If those businesses are included, Kraft pegged its North American food volume as up 3.8% -- a slim growth rate in most industries, but a whopper by today's food industry standards.


"We look at the food industry in general as growing with the population," said Kraft CEO Robert Eckert in an earlier interview. "People don't wake up saying, `I'm going to eat an extra 10 things today.' Our business is a mature one."

"In the '70s and '80s, [food marketers] grew by raising prices. But [they] can't do that anymore," said DLJ Securities analyst William Leach.

"There's nothing more to get out of the cost side," said Burt Flickinger, Reach Marketing consultant. "After trimming from the marketing and trade side, the question is how to get the resources to reinvest against the consumer."

Nevertheless, he said, while marketers claim they are spending on advertising, at the end of the year when it's time to make their targets, food company CEOs "call the agency up . . . and tell them to pull the plug on the media plan."

The marketers showing good growth have been fueling it through new products.

Hershey Foods Corp., for example, saw first-quarter sales climb almost 10% in the quarter, to $1.09 billion, after a string of hit new products including Reese-Sticks, Classic Caramels and Jolly Rancher Jolly Jellies.

Truly innovative new lines still are few and far between.

"I don't think we'll see any blockbuster new products in the next three months, or even the next 12," said Ken Harris, consultant with Cannondale Associates, noting that the last big breakthrough -- rising crust pizza -- is already 2 years old.

"Retailers want to know, `What have you done for me lately?' "

he said.

Some new lines do have blockbuster potential, namely Frito-Lay's Olean-based Wow! chips and Procter & Gamble Co.'s No-Fat Pringles, which retailers said is due to roll national June 15.


More common are new twists on old lines. Ocean Spray Cranberries is unveiling a new line of "premium varietal fruit juices" under a new brand name, Wellfleet Farms. Dannon Co. is bringing out a line of yogurt -- under the Fruit on the Bottom label -- that pairs vanilla yogurt with raspberries or strawberries and a tropical flavor with peach fruit.

An estimated $10 million-plus ad campaign from Grey Advertising, New York, will support the Dannon line.

Industry watchers said the more interesting products -- and fresh ad spending -- are coming from smaller companies. For example, Aurora Foods and Vlasic Foods, the latter with a collection of underutilized brands spun off from Campbell Soup Co., are hiking ad spending.

Vlasic is telling analysts it will triple ad spending on its Swanson and Vlasic brands within two years, to $30 million.

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