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 That is the reality for major food producers, including companies
reporting earnings next week, as they adapt to a more
health-conscious consumer.
Tyson Foods and Post Holdings report results Monday, followed
Tuesday by Campbell Soup and Hormel Foods. They are beating the S&P
500 by different margins, but that is not the case for all the
industry.
Spending on food is shifting due to better-informed and increasingly
health-conscious consumers. Savvy investors are taking note.
""We are looking at changing consumer patterns with regards to
looking at the label," billionaire value investor Mario Gabelli told
Reuters reporters during the Reuters Global Investment Summit in New
York.
He mentioned yogurt and probiotics - not exactly Thanksgiving
staples, but buzz words among health-minded consumers. Gabelli's
investing ideas include General Mills, Paris-based Danone and
Tokyo-based Yakult Honsha for their yogurt products, and probiotics
maker Chr Hansen, from Denmark.
Gabelli is not alone in looking for value in the trend. Earlier this
week, Target Chief Executive Brian Cornell singled out yogurt as a
key category "where we added premium and better-for-you brands."
SHIFTING GROUNDS
Tyson Foods, likely the provider of many a turkey at the table next
week, said in April it plans to end the use of human antibiotics in
its chicken by 2017, while Hormel announced in May the acquisition
of natural and organic meat processor Applegate Farms.
Investors will likely sift through their earnings next week to see
how the process of catering to a new type of customer is affecting
the business.
Hormel's stock, up 31 percent year to date, has gained more than 20
percent since the Applegate announcement. It hit an intraday record
high on Friday before closing the day down 1 percent.
Tyson shares are up almost 9 percent this year, while the food
producers index is up more than 5 percent. The S&P 500 has gained
1.5 percent in 2015 so far.
Not all investors, however, are seeing enough of what they are
looking for in the food business when it comes to catering to
millennials and healthy eaters.
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"I look at food companies hoping to find the buzzwords I think the
millennials are looking for (but) they're not offering fresh,
artisanal, that kind of stuff," said Kim Forrest, senior equity
research analyst at Fort Pitt Capital Group in Pittsburgh.
She said lack of time is key and convenient foods are a fact of life
for many people. "I think some company that cracks that, the
prepared foods for the next generation, that would be a real
winner."
NEXT WEEK'S EARNINGS
One of the shifts in consumption is gearing more toward protein,
where Tyson and - on a smaller scale - Hormel, dominate.
"It is part of the healthier eating, diets are shifting to more
protein, less carbohydrates," said Timothy Ramey, analyst at Pivotal
Research Group in New York.
Of course it's not all about the food when it comes to investor
interest. If it announces an increase in its dividend for next year,
Hormel will join a select club of companies that have upped
dividends for 50 straight years.
U.S. markets will be closed Thursday for the Thanksgiving holiday
and Friday will be a half-session day.
(Additional reporting by Ross Kerber and Jonathan Stempel; Editing
by Dan Grebler)
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