- As the pandemic subsides, analysts predict major changes for financials of food and beverage companies whose portfolios have been impacted by consumers' sudden switch to cooking and eating at home more frequently.
- With the vaccine rollout inching forward, analysts downgraded the stocks of Coca-Cola and PepsiCo as the closure of foodservice channels weighs on their businesses, The Street reported. Meanwhile, a Credit Suisse analyst posted a dim long-term outlook for Conagra Brands and B&G Foods, expecting them to underperform in 2021 as consumers return to pre-pandemic meal preparation patterns after the coronavirus passes, Food Business News reported.
- The closure of restaurants, stadiums and other venues during the last year has left companies scrambling to adapt to a new food and beverage environment. Corporations that are reliant on consumers dining out have seen their sales figures contract, while revenue for companies such as B&G and Conagra, which produce meal components and frozen offerings, have soared.
The roll out of a vaccine has analysts reevaluating what it means for food and beverage companies across the industry. Conagra, which sells brands like Hunt's, Chef Boyardee and Duncan Hines, had about 35% of its growth in 2020 came from brands that were out of favor with consumers before the pandemic, according to Credit Suisse. Kraft Heinz, another major purveyor of at-home cooking staples, said in its most recent earnings report that U.S. sales were up 7.4% in the quarter ended in September compared to a year ago.
While the pandemic has been a boon for these legacy companies that have struggled to remain relevant in recent years, Credit Suisse research analyst Robert Moskow said in a research report he expects “major sales declines” as consumers revert to pre-pandemic eating habits. He noted B&G Foods' October purchase of Crisco from J.M. Smucker increased its reliance on "normalcy," and projected its sales to decline by 8% in 2021 and 3% in 2022.
Coca-Cola and PepsiCo have been hit with several downgrades this week. In the case of Coca-Cola especially, analysts warn the away-from-home environment the beverage giant is heavily dependent on will be slow to rebound from the pandemic. PepsiCo will feel it as well, but its Frito-Lay business popular with people staying at home means it hasn't been hit as hard. Coca-Cola, which is culling its portfolio to focus on its growing and high-volume brands, announced in December it is cutting 2,200 jobs globally through buyouts and layoffs as part of a restructuring plan accelerated by the ongoing pandemic.
However, not all major CPG brands agree with the analysts’ pessimistic outlook. Mondelez told Food Dive in November that demand for its snack offerings will remain robust as demand returns in channels hit hard by the pandemic, such as convenience stores. Similarly, Kraft Heinz CEO Miguel Patricio said during the company's third-quarter earnings call he expects consumers will continue to gravitate toward big brands. Sanjiv Gajiwala, the company's U.S. Chief Growth Officer, told Food Dive last year consumers have "rediscovered new occasions at home," and that "some of those behaviors will continue to stick and be a part of their lives going forward."
In its report on 2021 food trends, the International Food Information Council (IFIC), which has been tracking the changes in consumer eating habits during the pandemic, indicated many will remain for the foreseeable future. CEO Joseph Clayton said “some of the changes we’ve undergone are proving durable, even many months later.”
Big Food has largely invested in these trends as companies look to not only capture today’s demand but also retain it for the foreseeable future. They have prioritized the most popular products to ease pressure on the supply chain. Other businesses have invested in their frozen food brands and repositioned themselves to appeal to households looking for convenient and healthy options that are easy to prepare.
Despite the preparations companies are taking to weather the return to normalcy, many analysts are convinced that some trends sparked by the coronavirus cannot easily supplant consumer habits established in the past few years. Going forward, food and beverage companies will have to work to retain the momentum they gained in 2020 and appeal to consumers who are becoming increasingly tired of always cooking at home.