Y2K Food Stockpiling May Inflate Q4 Sales

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread


[Educational/research purposes]

CHICAGO (Reuters) - U.S. food companies may see a spike in fourth quarter sales if consumers load up on canned goods amid concerns of Y2K-related disruptions to the food supply, but the stockpiling could curb first quarter revenues.

Food industry analysts said companies that make products with longer shelf lives such as soup or canned foods would be most affected if consumers step up purchases ahead of the New Year's holiday and then cut back in January. However, the short-term increase probably will not boost full-year sales.

``I think it's a good-news, bad-news scenario,'' said Patrick Schumann, food industry analyst with Edward Jones. ''Whatever they sell more of now, they're going to sell less of later.''

John O'Neil, a food industry analyst with PaineWebber, said it was not clear whether consumer demand would be the primary force behind the increased sales, or if grocery stores would stock up in case of other potential snags such as logistical problems around the first of the year.

``I think there will be a little bit of shifting out of January and into December,'' he said. ``There are two issues. There is the consumer behavior, which may or may not be too big. Then there is the retailer, who may build inventories. Either way, it's still a zero-sum game.''

Trade groups and food companies say they are prepared for the so-called Y2K bug, which refers to older computers that used just two digits to designate the year in a date, possibly causing them to confuse the year 2000 with 1900. The biggest worry is that consumers might empty shelves of canned goods in the next few weeks.

Several food companies said they are seeing heavier-than-normal sales, although they don't recommend that people load up on food ahead of the New Year's holiday.

``We've seen some pretty good sell into the trade and you can probably attribute part of that to Y2K,'' said John Faulkner, a spokesman for Campbell Soup Co. (CPB.N).

He said the company had received requests from large-volume club stores for more 12-packs of soup, a request Campbell has attributed to Y2K-related buying.

Hormel Foods Corp. (HRL.N) the maker of Spam luncheon meats and Dinty Moore stews, said on Tuesday it was seeing signs of ''Y2K-related pantry inventory build-up'' which helped boost fiscal fourth quarter profits.

George Dahlman, a food industry analyst with U.S. Bancorp Piper Jaffray, said such stockpiling could lead to some weakness in January if consumers are stuck with full cabinets.

``We still have a nagging worry about how much of this (strength in Hormel's earnings) is Y2K,'' Dahlman said. ``I don't think it was more than a couple of pennies (per share), but we're dragging the first quarter (earnings estimates) down a little bit just to be on the safe side.''

Canned fruit and vegetable maker Del Monte Foods Co. (DLM.N) said in October it expected sales in the December quarter to be 1 million to 2 million cases higher than normal due to buying ahead of the Year 2000 changeover.

The Grocery Manufacturers of America, a trade group that represents food companies, said its surveys show most consumers are not worried about Y2K-related food shortages and do not plan to stock up. However, Lisa McCue, a spokeswoman for the trade group, said that remained a hot topic of discussion for grocery stores and food makers.

``How do you gauge how consumers are going to respond to this?'' she said. ``There is no precedent for it. We are recommending that consumers use common sense, that they shop as they would for any holiday weekend.''

Copyright 1999 Reuters Limited

-- Steve (hartsman@ticon.net), November 26, 1999


Thanks Steve. That's about as close as you can get to a non-article. '"Dunno, really," said some guy in an office when asked whether Y2K meant a smiley face or a frowny face.' :)

-- Colin MacDonald (roborogerborg@yahoo.com), November 26, 1999.

Just sharing the news, not writing it. Your summary is pretty spot on, though.

Why can't reporters connect a few dots or ask some basic questions? Are they simply sleepwalking through this huge story until there's some real drama?

-- Steve (hartsman@ticon.net), November 26, 1999.

``I think there will be a little bit of shifting out of January and into December,'' he said. ``There are two issues. There is the consumer behavior, which may or may not be too big. Then there is the retailer, who may build inventories. Either way, it's still a zero- sum game.'' Snip

Another story which gives the underlying message, preparing is foolish. After all, it's still a zero sum game = if you buy food now you'll use it in Jan as nothing will go wrong at all and you won't need it.

They're right about the zero sum part. It's either fixed or it ain't. My guess is it ain't even close.

-- Gordon (g_gecko_69@hotmail.com), November 26, 1999.

Again, we farm. Please everyone buy more food. They advertise generators with "Y2K" plastered all over the ad. They sell gas masks with "Y2K" in inch-high letters. Why not advertise unabashedly, "BUY FOOD. LOTS OF IT. IT'S GOOD FOR YOU!"

The assumption that a big spend on food now will mean a lull later . . . . . .I am never going back to nothing on the shelves. I like my life with a full pantry. Don't y'all? Isn't that the lesson learned, the advantage gained? "Be prepared" has been around a LONG time and the wisdom isn't calendar-specific.

Are people going to buy more of anything before 1-1? Check this out:

http://www.dailymail.com/display_photo.php3?iid=1032 No. Not until the crap strikes the whirling blades.

-- Becky (rmbolte@wvadventures.net), November 26, 1999.

Moderation questions? read the FAQ