Dive Brief:
- Moody’s Investors Service said that the outlook for the U.S. packaged food sector looks positive, although consumer spending is expected to increase just a little, which may lead many companies to face serious challenges, according to Meat & Poultry.
- The credit ratings agency remained upbeat about the food industry, as cost cutting should improve companies’ cash flows and profitability.
- While the report predicted sluggish acquisition activity in the year ahead, Moody’s did identify numerous players — including Tyson Foods Inc., The Kraft Heinz Co., Pinnacle Foods Inc. and Mondelez International Inc. — that could be on the prowl for acquisitive growth.
Dive Insight:
Over the past couple of years, many in the food industry have turned to cost-cutting methods to make up for slower sales and better drive revenue, including big players such as Mondelez, Campbell and Coca-Cola.
Others are restructuring, such as Procter & Gamble, which announced in the summer that it had whittled down its brands from 160 to just 65 in an effort to save money. Moody’s reported that this was a savvy decision as it remained poised to keep strong credit metrics with improved cash flow.
But the change in the White House could affect this projection. Some analysts believe that Donald Trump’s presidency could keep people from spending in the same way. Until he takes office, however, there’s no telling if that will be true.