Buybacks have gotten a bad rap from both Republicans and Democrats. But stocks would be trading at a massive discount without them.Marketsread more
Fiat Chrysler and France's Renault could soon partner up to take on the sweeping changes to the global auto industry, according to a report in the Financial Times. The...Autosread more
Microsoft shares have gained 133% since November 2015, outperforming a tech "basket of unicorns" over that stretch.Technologyread more
The president's state visit comes amid tensions with carmaker Toyota over potential auto tariffs. Trump has repeatedly threatened Japanese and European carmakers with tariffs.Traderead more
The IRS is about to release a new draft of Form W-4, which will more closely reflect the changes stemming from the Tax Cuts and Jobs Act. For workers, that means they'll need...Personal Financeread more
When commercial real estate investor Manny Khoshbin spent $2.2 million on the fastest production car in the world, he had no idea it would very quickly also become the...Autosread more
The Mega Millions jackpot has spilled over $400 million. It would be the ninth largest winning since the game began in 2002.Personal Financeread more
Trump was speaking at a meeting of Japanese business leaders in Tokyo during his state visit to Japan on Saturday.Marketsread more
The biggest U.S. gasoline price surge in years is running out of steam just in time for the start of the summer driving season.Energyread more
The federal minimum wage has remained $7.25 per hour since 2009. But several states, and even some companies, have since taken matters into their own hands to pay employees a...Workread more
Stocks rose on Friday, but notched weekly losses as investors worried the U.S.-China trade war is hurting economic growth.US Marketsread more
Shoppers are increasingly shunning the center of grocery stores and hugging the perimeter as they trade packaged food for fresh food. That's bad news for an industry that's already struggling.
For years, nutritionists have been urging Americans to swap out processed foods for fresh options like fruits and vegetables. People now seem to be listening, and deflation among fresh food products has made eating healthier a more affordable option.
Consumers' quest for fresh is compounded by competition from private-label brands, demands to lower prices and Amazon's impending purchase of Whole Foods — which is seen accelerating both price pressure and the shift to fresher food.
The result? Packaged food sales have declined, and earnings have disappointed. Some companies have cut jobs and shuttered factories.
Wall Street has not been forgiving. The S&P 500 has increased nearly 14 percent over the last 12 months, while packaged foods and meats companies in the index are down more than 11 percent over the same time period. Kellogg, General Mills, Campbell Soup and J.M. Smucker all hit 52-week lows Tuesday.
Despite mounting pressure, legacy brands are not giving up. They recognize the challenges the industry faces, but some companies may not be able to overcome them easily.
The same ingredients that helped propel big brands to the top two decades ago are helping erode trust in them today. Brands are scrambling to scrub their products of fat, sugar and other unwanted ingredients, while convincing consumers they still deserve a spot in their shopping carts.
Packaged food companies have dealt with health trends before. They have survived carb-free, transfat, low-fat and low-calorie movements. This time may be different.
This time, shoppers don't have a defined enemy. They want natural, clean food. It's a broad desire, and it's one that challenges what packaged food is at its core.
Companies can tweak their recipes to make them more desirable to health-conscious consumers, but they can only do so much before the product is unrecognizable.
Even with changes in the center aisle, some shoppers are trying to avoid processed foods altogether and are sticking to the perimeter of the stores, where they typically find bakery, deli, seafood, produce and meat products.
"Overall, there's just a lot of uncertainty in the industry and the old way of business is changing, and the old way was going on for so many years," said Richard Bode, principal consultant at Cadent Consulting and a former marketer at Kraft.
Nielsen data suggest companies that offer more fresh food are growing faster than those who don't. Fresher stores experienced a 4 percent growth in sales last year, compared with 1 percent for other stores.
"There just continues to be growth and interest in fresh that curtails a lot with consumer preference and thought around health- and wellness-type products, organic, natural and clean-label," said Meagan Nelson, client director at Nielsen Fresh.
Even when shoppers do venture down the aisles in the center of grocery stores, they may grab private-label products instead of the name-brand ones. Many shoppers overcame their aversion to store brands during the recession, said Yosi Heber, founder and president of Oxford Hill Partners and a former marketing executive at Kraft and Dannon.
Once they took the risk, they liked what they tasted.
Some companies have fared better than others in the changing industry. The ones that Wall Street likes best right now are those that have the potential to merge with or acquire others.
Analysts agree that merging with and acquiring companies is the best strategy packaged food producers have to turn around sluggish sales. They want to see companies ditch brands that aren't working and grab ones that are.
Nestle announced last month it would explore selling its U.S. confectionery business, which includes brands like Butterfinger and Baby Ruth. Despite Nestle's history with candy, it makes more sense for the company to invest in growing categories like water, said Heber.
Investors salivated at the prospect of a Kraft Heinz takeover of Unilever earlier this year. Shares of Kraft Heinz spiked only to fall again when its bid failed. Unilever shares have climbed ever since.
"(Mergers and acquisitions are) a big part of the story, particularly because it's easy to underestimate the influence these large packaged food companies within the grocery store — even if some of their products are a little bit out of step with where their target consumers seem to be settling," said Zain Akbari, an analyst at Morningstar.
Wall Street expects Kraft Heinz to pursue another acquisition, most likely Mondelez, the snack company and Oreo producer that was spun off from Kraft in 2012. Mondelez CEO Irene Rosenfeld sidestepped questions about the possibility in an interview with the Chicago Tribune this week. She said Kraft Heinz is likely to buy something, but that Mondelez's focus would remain on growing its business.
Wall Street considers both Kraft Heinz and Mondelez moderate buys. RBC Capital's David Palmer recommends buying Kraft Heinz because it has "unapologetically cut and innovated its way" to growing its margin to 29 percent within three years.
"By most if not all metrics we as stock analysts observe, we believe Kraft-Heinz is unequivocally 'the best" today,"' Palmer wrote in a note in May.
Pinnacle Foods is another Wall Street favorite. The company discussed a possible merger with Conagra earlier this year. Talks ended last month, with sources saying the two companies did not plan to revisit them. Rumors are still bubbling about the possibility, and Pinnacle is considered a strong buy.
Aside from the merger speculation, Pinnacle has been successful in shopping around for healthier brands. In 2009, the company picked up Birds Eye Foods, which offers frozen vegetables and meals. In 2015, it acquired Boulder Brands, whose portfolio includes healthier lines such as Evol and Earth Balance.
Neither acquisition was in the fresh realm, but both aligned with shoppers' desire for products with a healthier image. In 2016, Pinnacle's health and wellness portfolio represented 55 percent of the company's sales, according to its annual report. Investors have rewarded Pinnacle; its stock has risen 22 percent over the past year.
The strategy is not isolated to Pinnacle. Kellogg acquired natural food producer Kashi in 2000. General Mills bought organic food company Annie's in 2014. Unilever purchased fancy ketchup maker Sir Kensington this year.
Acquisitions like these may have broader implications on companies than simply profit.
"For someone that's been at a big company for say, 20 years, has a certain way of doing things that almost becomes a sixth sense," Bode said. "When they see a smaller brand that's very creative and moves very fast, of course they're going pick up some of that."
Big food is facing a reality that numerous other industries have already experienced: business as usual simply isn't enough to succeed anymore. Legacy brands are still selling. But they're not growing, and that's a problem.
"It isn't too late, but they really need to get the ball rolling because what's happening is instead of growing at 5 to 10 percent, many of them are flat or are declining 1 percent. And that's not acceptable to shareholders," Heber, the consultant and former food exec, said.
General Mills is one company that some on Wall Street have lost confidence in. The company's sales dropped 11 percent between fiscal 2015 and 2017, as key categories began to struggle.
Chobani's Greek yogurt growth decimated General Mills' Yoplait sales. Since 2015, General Mills' yogurt sales are down 24 percent, according to an SEC filing. General Mills rolled out its own Greek yogurt, but it didn't gain much traction.
Last month, the company released a new French yogurt called Oui in an attempt to capitalize on shoppers' Greek yogurt fatigue. Time will tell if this helps its sales.
At its investor day Wednesday, General Mills outlined how it segmented its brands into "foundation" and "growth" categories. It displayed confidence in the foundation businesses, which include Pillsbury refrigerated dough, Betty Crocker baking mixes and Progresso soup.
At the same time, General Mills is investing more resources into its natural and organic businesses. By 2020, General Mills expects its portfolio of nine such brands to generate $1.5 billion in net sales.
But the plan wasn't encouraging enough to change analysts' recommendations.
Stifel Nicolaus analyst Christopher Growe maintained his $3.11 earnings per share estimate, or 1 percent growth, for fiscal 2018 after attending the investor day.
"And, with the stock trading at just 17x on a P/E multiple basis and 11x on an EV/EBITDA basis (slightly below its peers) we continue with our Hold rating as we foresee limited upside for the shares until a sustainable level of sales growth improvement takes hold," Growe wrote in a research note.
Wall Street casts even more doubt on Kellogg, J.M. Smucker and Campbell Soup. Many analysts recommend holding shares of all three, and one even suggests selling Kellogg and Campbell. The three companies sell products that are almost exclusively in the center of the grocery store.
Former marketers Heber and Bode say it's possible for companies to attract shoppers down their aisles, but it will require a completely new approach.
Traditional media like television and newspaper ads used to be the main focus. Heber and Bode said companies should now focus on grabbing shoppers' attention when they're actually at the grocery store.
Regardless of what strategy big food companies deploy to start growing again, they need to do something soon. Amazon's deal to purchase Whole Foods has shaken already weary investors.
No one knows exactly what to expect. But if history is any indication of what could happen, legacy brands likely know to expect something. They ought to be ready for whatever that something is.