Is it permissible for my friend to purchase in-kind goods with the money sent to him for the purpose of Zakat, instead of distributing it in cash, and is this action considered to fulfill the obligation of Zakat?

The basic principle is to give Zakat from the same type of wealth upon which Zakat is due. An exception is made for trade goods, which are appraised, and their value is given in cash. Therefore, your friend is not permitted to buy food for the poor with Zakat money; rather, he must give them cash, unless giving food is more beneficial for the poor person.