Pasta makers' business cooking as economy droops

Low-carb craze now history, pasta makers see business cooking as economy droops

As struggling consumers turn to casseroles, soup, pasta salad and good old macaroni and cheese to stretch their food dollars, the nation's pasta makers are returning to a rolling boil after many years overshadowed by the low-carbohydrate fad.

Sales of pasta products in the United States -- including frozen and refrigerated pasta, canned pasta, soup mixes and prepared dinners -- rose 5 percent last year to $6.4 billion, according to Kansas City-based American Italian Pasta Co., the nation's largest manufacturer of dry pasta.

Most of that increase came as manufacturers passed along a stiff jump in the price of wheat and other costs.

But Peter Smith, chief executive of Harrisburg, Penn.-based New World Pasta, which makes such brands as Ronzoni, American Beauty and Creamette, said he was amazed commodity price hikes last year didn't dampen pasta sales the way they did sales of other consumer goods.

"I think what happened this past year is with all the inflation running rampant through the stores," he said, "It's like a certain number of people rediscovered pasta."

Smith said revenue at his company rose 25 percent last year to around $460 million while volume grew between 1 percent and 2 percent.

Total U.S. consumption rose 0.4 percent by volume, according to The Nielsen Co., although those number don't include sales at Wal-Mart Stores Inc., where industry officials say noodle numbers grew even faster.

The volume increase is particularly welcome because pasta consumption had been falling 1 percent or 2 percent annually for years because of high-protein diet fads, said Carol Freysinger, spokeswoman for the National Pasta Association.

"There's this renewed vigor, this renewed energy in the pasta companies," Freysinger said. "They really got beat up by the low-carb diets, which showed to not be that effective in the long run.

"Pasta has been vindicated," she said. "And (now) the economy is driving consumers to more cost-effective options."

Judy Donnellan, 45, was shopping for macaroni at a grocery store in Kansas City Tuesday and said her family eats pasta about three or four times a week.

"It's simple and cheap and I have kids and that's something they like," Donnellan said.

She said she couldn't tell if she was buying pasta more than before but said the staple's price and flexibility "is basically why I use it."

"When they sell it for, like, four for $1, I stock up," she said.

The U.S. division of Italy-based Barilla Group, the world's largest pasta manufacturer, saw a 15 percent boost in pasta volume and a 22 percent increase in sales, said the division's president, Kirk Trofholz.

He said the company, which makes Barilla-branded pasta, has also seen success with pasta made with whole wheat or extra fiber, calcium, omega-3 and other nutrients.

"We expect the 'better for you' pastas to continue to grow fast," he said.

In 2008, consumption of dry pasta hit its highest level since 2003, according to American Italian Pasta, which makes consumer brands such as Ronco, Mueller's and Pennsylvania Dutch and supplies pasta for in-house grocery store brands and for manufacturers who use pasta in prepared dishes.

Annual sales at AIPC soared 42 percent to $569 million in 2008, and AIPC's net profits more than tripled to $19.1 million -- even as its volume fell 0.5 percent.

CEO Jack Kelly expects higher volumes in 2009 as his company focuses on its best markets, and he predicts improved sales of grocery store brands, which have benefited from bargain-hunting consumers.

The company has seen its stock price rise 76 percent to $25.90 since mid-November when its shares were relisted after it spent three years dealing with an internal accounting matter.

"It is still an incredibly great value," Kelly said of pasta. "For about $5, you can feed a family of four."