MDLZ - Food inflation is still a big wildcard - these stocks could see a benefit

2023-03-07 11:30:11 ET

Total packaged food retail sales increased 10.2% over a four-week period that ended on February 25, according to the latest tracking by Nielsen. The growth was supported by a 11.3% increase in food prices that easily offset a 1% decline in volume. The gain was an acceleration from the prior retail sales month increase of 8.4% for the good category.

Over the last four weeks, some of the companies seeing notable year-over-year retail sales jumps included FreshPet ( FRPT ) +32.9%, BellRing Brands ( BRBR ) +29.9%, Sovos Brands ( SOVO ) +17.9%, Mondelez International ( MDLZ ) +13.7%, General Mills ( GIS ) +11.7%, and Hershey ( HSY ) +11.2%.

A notable decliner was Beyond Meat ( BYND ), with retail channel sales down 22.8% over the four weeks. Hain Celestial ( HAIN ) and Hormel Foods ( HRL ) also lagged with growth of only 2% despite the food inflation environment.

Over the last 52 weeks, Tyson Foods ( TSN ) and Danone ( OTCQX:DANOY ) stood out with double-digit sale growth, while Dole ( DOLE ) and McCormick ( MKC ) were two of the underperformers.

Last month, Bank of America reminded that food inflation leads to potential upside for conventional grocers like Kroger ( KR ), Albertsons Companies ( ACI ), and Grocery Outlet Holdings ( GO ), as well for discount stores like Walmart ( WMT ) and warehouse clubs like Costco ( COST ) and BJ's Wholesale ( BJ ). The simple thesis from the firm is that food inflation continues into the spring and the vast majority of price increases are passed through to consumers. Other analysts think general macroeconomic pressure is already leading to a higher mix of at-home dining vs. eating out.

The Invesco Dynamic Food & Beverage ETF ( NYSEARCA: PBJ ) has topped the return of the broad market over the last year, although the gap has narrowed.

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