At the US Consumer Analyst Group of New York conference, the two companies admitted that the current commodity squeeze is putting pressure on the food industry. Kraft, in particular, has suffered in recent weeks, reporting earlier this month a 15 per cent fall in operating profit for the tax year 2007.

However, Kraft and Sara Lee said they anticipated higher profits in 2008, leading them to predict single-digit margin growth for the year.

Kraft

Kraft chief executive officer Irene Rosenfeld said that the 2007 results were the best in six years, despite the margin squeeze, standing the company in good stead for 2008. Margins for the company will grow four to seven per cent, she said.

Vice president Tim McLevish admitted that commodity costs are expected to stay high during 2008, but said that Kraft would achieve its profit aims through a combination of increasing marketing spend and streamlining the supply chain.

"We have redoubled our efforts to reduce overhead and other costs, while continuing to make the necessary investments in our brands," Rosenfeld said. "I'm confident that we have the right strategy, clear operational focus and the financial discipline to fuel Kraft's return to reliable growth.

In terms of overhead cost reductions, Kraft told conference attendees that it hopes to reduce the cash used for its restructuring programme from $500m in 2008 to $300m in 2009.

According to McLevish, these overheads will therefore be reduced as a per cent of revenue by at least one percentage point.

The company also highlighted new strong selling products, such as DiGiorno pizza, Cakesters snack cakes, and Bagel-fuls hand-held breakfast sandwiches.

Sara Lee

Speaking at the same conference, Sara Lee chief executive officer Brenda Barnes said that she also expected expanding margins over the course of 2008.

Sara Lee fared slightly better than Kraft over the tax year 2007, with operating income for the period increased to $323m dollars - a massive improvement from the $2m loss reported in 2006.

However, Sara Lee's expansion plans are fairly similar to those of Kraft, as the company also anticipates increasing prices to cover commodity costs.

"We have taken appropriate pricing actions and have made significant investments in marketing and innovation in the first half of the year," Barnes said.

The company also said it hopes for strong growth in emerging markets, and that consumers will stay loyal to key brands such as Senseo coffee and Sara Lee bakery products.

"Our strong brands are a true asset, especially in this challenging commodities environment," said chief operating officer CJ Fraleigh. "We are aggressively monitoring the effect on pricing on consumer behaviour and thus far have not seen any consumers trading down to lesser brands."