Return of inflation in food business?

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Driving Up Costs?

Meanwhile, commodities markets will continue to attract money flow from investment funds and others seeking a natural hedge against inflation.

"We would expect to see investment funds continue to pour into commodities in 2010. I think this year you'll see more of the pension funds -- the last bastion of Wall Street which has been stuck mostly in stocks and bonds. That could be where most of the brand new money comes from," Nelson said.

More demand for commodities will likely drive costs for items like corn, wheat and energy higher for food makers. Most food company executives have said that they expect commodity inflation to return in 2010, but not to reach the levels that were seen in 2008.

Companies were able to raise prices then in order to counter some of that inflation. But with the economic recovery in a fledgling state, manufacturers have been more prone to offer promotional discounts to spur sales volume and are not likely to be able to raise prices any time soon.

"You've got a recovering economy, albeit slow, and you've got shoppers that are continuing to be nervous and will not return to spending levels of the 2006-2007 era for quite some time," said Ken Harris, CEO of consulting firm Kantar Retail US.

Many beverage makers have said it will be difficult to increase prices this year, and are instead hoping to drive revenue growth with volume gains.

There is also renewed chatter of mergers in the space, given PepsiCo Inc's recent purchase of its two largest bottlers and Coca-Cola Co's plan to buy its largest bottler's North American operations.

One of the potential beneficiaries of these moves is Dr Pepper Snapple Group Inc, which received a USD 900 million payment from PepsiCo to let it continue to distribute Dr Pepper Snapple brands, which include 7UP, Sunkist, A&W and Canada Dry. Analysts expect Coke will eventually pay Dr Pepper something similar.

Dr Pepper, whose CEO, Larry Young, is one of the summit guests, plans to use some of that money to pay down debt. Its board also authorized the repurchase of an additional USD 800 million in shares. The company, whose wide portfolio of flavoured sodas has helped it in the downturn, forecast 2010 earnings of USD 2.27 to USD 2.35 per share on sales expected to rise 3-5%.

For 2009, Dr Pepper's first full year as an independent company, it earned USD 2.17 per share on net sales that fell 3%, hurt by no longer distributing Hansen Natural Corp drinks and by currency exchange rates. Excluding those items, 2009 sales rose 2%.