According to a study by The Food and Agriculture Organization (FAO), the food price index averaged 133.2 points in October, up from 129.8 points in September. This price increase was attributed to manufacturers' increased labor and shipping expenses. According to CNN, the producer-price index increased by 0.6% in October and 8.6% over the last 12 months. In addition, the poor food production caused by climate change-fueled weather uncertainty has raised demand, resulting in higher prices. As a result, top food producers hiked their prices to cover input costs, creating attractive investment prospects.
The finest food firms have potent brands that persuade consumers to pay a premium for their products and economies of scale that keep prices low. With inflation squeezing budgets and supply chain costs growing, pricing power and cost advantages are more crucial than ever. There are several food stocks from which to pick, but not all of them belong in your portfolio. This article examines the ten best food stocks.
Top 10 Best Valued Food Stocks
1. General Mills
General Mills (NYSE: GIS), a food packaging behemoth, owns many well-known brands. The brand portfolio of the corporation includes Pillsbury, Cheerios, Haagen-Dazs, Progresso, Green Giant, and Yoplait, among others.
Due to limits on restaurant eating, the COVID-19 epidemic helped General Mills as customers increased their food intake at home. The company's primary North American retail division did well during the pandemic, led by its strength in organic items, meals, and baking.
Inflation and economic instability are expected to alter consumer behavior, but General Mills has numerous brands for which consumers like to pay a premium. This is beginning to manifest itself in the company's outcomes. Despite a 4% decline in organic sales volume during the third quarter of the fiscal year, better pricing and adjustments in product mix more than compensated.
According to the 2018 acquisition of Blue Buffalo, General Mills' pet division is particularly well-positioned. During the epidemic, pet ownership skyrocketed, and luxury pet food sales increased for years. As pets are increasingly seen as family members, pet owners may be reluctant to purchase cheaper pet food.
General Mills stock has increased significantly over the past few years, yet it is still competitively priced. The stock's projected earnings multiple is about 19, and its dividend yield is approximately 2.85%. There is now a great deal of economic uncertainty, but General Mills' pricing strength should help them weather the storm.
2. Constellation Brands
Constellation Brands will start us off today. The corporation primarily manufactures and distributes beer, wine, and spirits. Regarding revenue, Constellation is the largest beer import firm in the United States. In addition, it has the third-largest beer market among major beer providers. To provide a sense of size, the corporation has roughly 40 locations and employs around 9,000 people. Its portfolio of more than one hundred brands includes Robert Mondavi, Ruffino, Corona, Svedka Vodka, and many more.
Just Monday, the corporation released financial results for the fourth quarter of 2022 above Wall Street projections. The company's net revenues increased 8 percent from the preceding year's total of $1.95 billion to $2 billion. This quarter, Constellation's earnings rose to $395,4 million from $382.9 million the previous year. Consequently, adjusted profits per share increased by 30 percent, from $1.82 to $2.37 per share. Additionally, the business intends to repurchase $500 million in shares during the first quarter of fiscal 2023.
3. Tyson Foods
Meat products will certainly remain a staple in the American diet. Tyson Foods (NYSE: TSN) is a fair investment in the meat market, particularly if you wish to gamble on the continuous consumption of Meat.
Given that beef is primarily a commodity, Tyson lacks the pricing power of a packaged food firm with well-known trademarks. In the United States, meat processing is concentrated mainly within a small number of firms, such as Tyson, which controls a comparatively limited number of enormous facilities. The company's performance is driven by the supply and demand for beef, pig, and poultry, with price significantly impacting profits.
The beef business has mostly recovered from the early pandemic of plant shutdowns and COVID-19 breakouts. Inflation may cause customers to pick cheaper cuts or limit meat consumption, although this has not yet occurred. Despite double-digit price hikes across all its product categories in the second quarter of fiscal 2022, Tyson's sales and profitability were unaffected.
Tyson increased its sales forecast for fiscal 2022 to between $52 billion and $54 billion, indicating that the business expects consumers will not be significantly deterred by rising pricing. Against the backdrop of inflationary pressures and supply chain restrictions, Tyson may sustain its profitability if it implements a strategy to save $1 billion in costs by 2024.
4. Conagra Brands
The following company is Conagra Brands. In summary, it is a corporation that markets and sells consumer packaged food products. Generally, it manufactures and distributes items under various brand names. These products are marketed primarily to supermarkets, restaurants, and other food service facilities, including cooking oil, freezer meals, and other culinary supplies. As a prominent food business participant, I understand why CAG stock might appeal to investors. The stock price has increased by around 11% during the previous month.
Yesterday, Conagra announced its financial performance for the third quarter of the fiscal year 2022. Initially, net sales increased by 5.1% year-over-year to $2.9 billion. This quarter also showed a rise of 6 percent in organic net sales. This increase in organic sales was fueled by an 8.6% increase in price/mix. In addition, the business generated adjusted profits per share of $0.58. This is an increase of 11.1% over two years. Financials aside, Conagra also updated its fiscal 2022 fourth-quarter projection. Accordingly, the business anticipates a 7 percent increase in organic revenues. As for profits, the company expects $0.64 a share.
5. Mondelez International
Mondelez International (NASDAQ: MDLZ), like General Mills, has many well-known brands. Cadbury, Chips Ahoy!, Oreo, Philadelphia, Ritz, and Wheat Thins are among them. The firm specializes in snack brands and distributes its goods in over 150 countries.
Mondelez's organic sales increased by 8.6% in the first quarter of 2022, which wasn't simply due to price increases. In every geographic location, unit volumes increased, and the corporation encountered no pushback while increasing total prices by roughly 5 percent. With a collection of popular brands that customers are unlikely to forsake, Mondelez is well-prepared for an inflationary climate.
Mondelez anticipates that its organic sales will climb by at least 4 percent this year, and its adjusted profits per share will expand faster as higher prices offset rising expenses. The conflict in Ukraine harms profitability, but the corporation plans to generate at least $3 billion in free cash flow this year.
Mondelez trades at around 22 times anticipated earnings, which is more expensive than General Mills. However, as economic volatility increases, Mondelez's worldwide variety and robust portfolio of brands are appealing advantages.
6. PepsiCo
PepsiCo (NASDAQ: PEP) is another packaged food firm with a substantial portfolio of top brands. Pepsi, Mountain Dew, and Gatorade are the leading brands in the beverage industry. The company's culinary portfolio includes Lay's, Doritos, Quaker Oats, and Cheetos, to name a few brands.
PepsiCo's first-quarter statistics demonstrate the company's pricing strength. Organic revenue skyrocketed due to a 10 percent rise in effective net pricing and a 3 percent increase in volume. Like Mondelez, PepsiCo consumers have thus far accepted increased product costs.
PepsiCo anticipates an 8 percent increase in organic revenue and adjusted profits per share this year. In other words, the corporation expects to pass on increased expenses to its consumers through price increases. PepsiCo's pricing power has a ceiling, but the business has not yet reached it.
PepsiCo trades for almost 26 times its projected future earnings, which is not exactly a bargain. However, the quality of the firm's brands supports a premium price.
7. McCormick
McCormick is another prominent food stock. It is primarily a food firm that makes, distributes, and promotes flavoring goods. These include, among others, spices, seasoning mixes, and condiments. McCormick primarily sells to retail establishments, food producers, and food service organizations. In addition, its products are offered in several nations. Based on income, it is the world's largest producer of spices and associated culinary products. Despite market volatility, MKC stock has increased by roughly 15% over the past year.
The firm reported its fiscal first-quarter performance on March 29. Compared with the same period last year, sales increased by 3 percent. The net sales for the Flavor Solutions sector increased by 12%, from $534.7 million to $596.3 million. The primary business, new product, and acquisition expansion of McCormick contributed to this remarkable rise. In addition, the firm generated quarterly earnings per share of $0.57. Additionally, McCormick shared their outlook for the year. Notably, it anticipates a 3 to 5 percent increase in revenues. The business expects that brand marketing, new product development, category management, and distinctive customer involvement will drive growth.
8. Starbucks
Starbucks is based in Seattle and has swiftly grown, becoming the world's largest coffee chain. Starbucks will have more than 34,300 company-operated and licensed outlets starting in 2022.
Even after some difficult years, this figure is up 4% from the previous year. Starbucks has created a seamless drive-thru and internet ordering system. The Starbucks app makes it simple to place orders and receive rewards, and the incentives program encourages client retention.
Even though its primary goods are beverages, Starbucks is arguably one of the best fast-food stocks. It also provides a variety of dining alternatives, and the business continues to try new items and increase earnings. And if you want to understand more about the coffee sector, look at these leading coffee stocks.
9. Domino's Pizza
Domino's has acquired a market share in the U.S. pizza industry, which is a massive business. Some estimates place its market share at close to 50 percent, outperforming rivals and enabling more significant economies of scale.
Additionally, Domino's has benefitted from the epidemic. Pizza delivery has expanded as more individuals have been confined to their homes. As the world continues to reopen, there may be a decline in demand. Domino's, though, is planning.
Domino's employs the fortification approach, which began in 2012. It adds stores to already-established marketplaces. This is an effort to reduce delivery times and be closer to clients who want carryout. There is a possibility of congestion, but it has been successful thus far and can enhance the consumer experience.
10. Chipotle's
Chipotle has recently had several food safety concerns. During that period, its consumer base plummeted. However, the firm has resolved these difficulties. It is now expanding into other territories.
Chipotle is not as widely distributed as McDonald's or Starbucks, and it runs around 2,800 restaurants in the United States. However, this provides more excellent room for expansion. The burrito giant is seeking to fill 20,000 positions at its restaurants, and the corporation has also boosted its minimum salary to recruit staff.
This growth includes a significant push toward online ordering and delivery. The epidemic has taken its toll, and Chipotle is adjusting accordingly. The corporation is increasing its investment in delivery services and has also launched its first ghost kitchen lately. These restaurants only accept pickup and delivery orders.
1. Celsius Holdings Inc.
Celsius is a holding company that creates, markets, and distributes a variety of beverages that burn calories. For example, it may be purchased at supermarkets and health and wellness establishments like health clubs and sports clubs.
2. The Chefs' Warehouse Inc.
The Chefs' Warehouse is a wholesaler of specialized foods. It supplies artisanal foods of the highest quality to fine-dining restaurants, hotels, caterers, and gourmet stores across the United States and Canada. At the end of December, the company stated that it had bought the majority of the assets of CGC Holdings Inc., a producer of premium produce and seafood doing business as Capital Seaboard. The specifics of the transaction's finances were not disclosed.
3. Whole Earth Brands Inc.
Whole Earth Brands is a multinational food company that offers premium plant-based sweeteners, taste enhancers, and other health-oriented foods. Whole Earth Sweetener, Wholesome, Swerve, Pure Via, Equal, and Canderel are among the brands in its portfolio. The business announced Duane Portwood's promotion as CFO in January. Portwood has more than thirty years of expertise in corporate finance management and senior positions and was previously CFO of Tegra Global.
Other Types of Food Industry Stocks
General Mills, Tyson Foods, Mondelez International, and PepsiCo are excellent choices for the food business, but firms in more specific industries are also worthy of consideration. The following are some categories to consider.
Plant-Based Food Stocks
Most calories consumed by U.S. consumers are already derived from plant-based sources, and the firms listed above provide an abundance of plant-based alternatives. These years, it has been famous for plant-based foods to resemble and taste like MeatMeat and other animal-based foods.
Beyond Meat (NASDAQ: BYND) is a plant-based food stock that offers a variety of pea protein-based products. In addition to late pandemic difficulties, the corporation has faced an influx of competition. In the fourth quarter of 2021, declining revenue and growing expenses led to a significant financial deficit. Beyond MeatMeat is a company to explore if you believe in the long-term promise of plant-based protein despite the stock's massive decline.
Grocery Store Stocks
In general, grocery retailers have little opportunity to pass on increased prices to customers. There may be some inflationary pressure on grocery business earnings, but this is not a cause to completely ignore the industry.
Sprouts Farmers Market is an intriguing food shop stock (NYSE: SFM). Sprouts is a tiny business with a few hundred locations that focuses mainly on specialized goods. About two-thirds of the company's revenue is generated by "attribute-based" items, such as organic, paleo, keto, and plant-based options. This distinction from traditional grocery stores and the company's ability to significantly grow its store network make Sprouts a food stock to keep an eye on.
Final Thoughts
It is possible to make money by purchasing food stocks, but as with any investment, the risk is involved. The market and the convenience food industry might alter at any time. Therefore, you should do an extensive study before investing in these firms. Comparing brokers may also help you find the best features for your trading account if you're new to investing or haven't looked at it in a while.
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