Key Takeaways:
America's biggest food companies have tried cutting prices, boosting marketing and adding protein to legacy brands — and none of it has stopped the decline.
General Mills, Kraft Heinz, Conagra and Campbell's are trading at their widest discount to the S&P 500 in two decades as consumers abandon ultraprocessed staples for fresher alternatives and private labels.
"These businesses are shrinking and don't know how to stop," said Max Gumport, an analyst at BNP Paribas.
Conagra last week halved its dividend and guided to a steeper-than-expected earnings decline. General Mills posted a 2% drop in organic sales for fiscal 2026 and forecast another year of flat-to-declining revenue. Kraft Heinz and Campbell's face similar pressure. The group now trades at 9.8 to 12 times forward earnings — a nearly 60% discount to the broader market — while each stock has lost 50% to 70% of its value over the past decade even as the S&P 500 more than tripled.
With the Iran conflict pushing Brent crude above $90 a barrel and raising costs for fertilizer, packaging and freight, the industry faces a fresh margin squeeze. Unlike in 2021, when stimulus checks gave shoppers spending power, retailers including Walmart and Costco — where private labels now account for 31% and 34% of unit sales, respectively — are expected to resist price increases, leaving food makers to choose between losing volume or losing margin.
GLP-1s and the K-shaped squeeze
More than 1 in 10 American adults now take a GLP-1 weight-loss drug, accelerating a shift away from calorie-dense, ultraprocessed foods. Affluent shoppers are trading up to fresher, smaller brands, while lower-income households are trading down to private labels. Even US population growth — a tailwind the industry relied on for decades — has slowed as immigration enforcement tightens. "What had been an advantage for this group throughout its history is now gone," Gumport said.
The long road back
The fixes are slow and expensive. General Mills' fresh refrigerated dog food under its Blue Buffalo brand — acquired in 2018 — shows the kind of innovation that works, Gumport said. Gimmicks like adding protein to old brands do not. Bigger deals, including McCormick's tie-up with Unilever's food business announced earlier this year, can force focus or add scale. But most companies carry heavy debt with unsustainably high payout ratios, Bernstein analyst Alexia Howard noted. Conagra's dividend cut is what that pressure looks like.
"This all leaves Big Food facing a long road back to the American shopper," Howard said. "Getting back into investors' good graces will be an even longer journey."
This article is for informational purposes only and does not constitute investment advice.
