Rising input costs was in the spotlight in Kraft Foods’ third-quarter earnings call, with higher prices in response to rising commodity costs a key driver in its results.

The manufacturer’s CFO Timothy McLevish said input costs “spiked in the third quarter”, but it has “moved quickly to price [its products] accordingly” and has either implemented or announced price increases in around 40% of its North American portfolio.

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However, he said “price realisation will lag higher input costs, at least in the short term”.

Kraft’s chairman and CEO Irene Rosenfeld said that during the quarter, the company experienced input cost increases of 20% to 30% against the previous year.

McLevish remains confident that the price increases will not negatively impact the top line in what remains a very weak consumer environment. “We’ve come out of the chute and quickly responded with pricing. We’re entering that into a generally weak consumer environment but so far, we’re quite pleased with the reaction from our customers, direct customers, retail partners and the consumer responses has been okay as well,” he said.

While Rosenfeld saw volumes soften over the quarter as Kraft’s competition have not upped their prices yet, she expects price gaps to narrow in the fourth quarter as “the reality is, costs are going up for everyone”.

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Additionally, the company has now shifted its focus away from short-term promotions and is now focused on investing in the “equity of our brands,” said Rosenfeld. “We are not inclined to play around with short-term promotional pricing that doesn’t really have a benefit for the long term health of the business.”

McLevish is positive that its cheese pricing will remain stable going into 2011, due to the company’s “very active hedging programme” and its “pretty robust forecasting group”. However, he was confident that the company’s continued investment and strength in brand equities will mean it will be able to “price to offset any future changes in input costs”.

The company remains confident it will be able to deliver on its forecasts, despite net profit falling 8% over the quarter. “To backstop the pricing, we have solid forth quarter programming in place, particularly in North America and Europe, which will accelerate growth and deliver our revenue guidance for the year. As we look forward, we have solid programming in place and we anticipate more merchandising activity,” said Rosenfeld. “Therefore we expect further sequential improvement in organic growth across our North American portfolio in the fourth quarter.

Shares in the company were down 2.82% at 14:23 ET to US$32.90.