VITL - Morgan Stanley touts Mondelez BellRing Brands as top packaged food picks

2023-05-16 12:51:12 ET

The pricing power wielded by Mondelez, BellRing Brands ( BRBR ), and Vital Farms ( VITL ) should be safe bets amid inflationary pressures, per Morgan Stanley.

The bank’s analysts noted that the packaged food group raised prices by 11.6% in 2022, which should be followed by another 9% rise in prices for 2023, per the bank’s analysis. The team added that pricing should “stay above historical levels and stabilize in the [low single digits] into 2024.”  Price hikes already signaled by Hershey ( HSY ) were cited as evidence of pricing power in the space.

“Over the last year, MDLZ and HSY have seen robust demand; in Q1, both saw volume growth (+3%) in spite of strong pricing (+12.6% on average). We believe both companies have a newfound sense of their pricing power, with HSY now raising prices into 2024,” the team wrote. “Among smaller caps, [BellRing Brands] ( BRBR ) and [Vital Farms] ( VITL ) have strong pricing power given their share leadership in their respective categories, little private label competition, and favorable secular tailwinds underlying our positive view on the stocks.”

By contrast, the group said that Kraft Heinz ( KHC ), Campbell Soup Company ( CPB ), and JM Smucker ( NYSE: SJM ) are vulnerable to trade-down trends.

Retail sales data also released on Tuesday already reflected some signs of consumer pullback in grocery spending .

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