Miscellaneous Food Industry Outlook: Costs Raise Concerns

The Zacks Food-Miscellaneous industry consists of companies manufacturing and selling cereals, natural and organic products, bakery items, spices and condiments, frozen items and a wide range of packaged food delicacies. Some companies also provide comfort food items such as chocolates as well as ready to serve meals, soups and snacks. Firms operating in this space sell their products mostly through wholesalers, distributors, large retail organizations and grocery chains.

Let’s take a look at the industry’s three major themes:

  • Rising input costs are a lump in the throat for the miscellaneous food industry. In this respect, high freight expense is a significant worry. Tight trucking capacity stemming from driver shortages is a prime culprit behind raised freight costs. Moving on, inflationary trends for supplies like edible oils, vegetables, dairy items as well as animal feed, to name a few, have also raised the cost burden. Companies in the food space that operate internationally, are also bearing the brunt of higher tariffs stemming from U.S.-China trade war on food items such as soybean and pork.

  • Food companies are streamlining their operational structure to enhance savings. Efforts in this context include optimization of manufacturing capacity and supply networks as well as adherence to financial management techniques like zero-based budgeting. Moreover, companies are indulging in efficient pricing to strike a balance between volumes and profits.
     
  • Some of the industry participants are engaged in frequent portfolio refinement, through strategic buyouts and divestitures of non-core elements. In fact, a number of miscellaneous food companies are also enriching their portfolio by adding more natural and organic foods to keep up with consumers’ growing inclination for healthy offerings. No wonder, companies are adopting digital marketing techniques and pushing sales through e-commerce channels.

Zacks Industry Rank Indicates Gloomy Prospects

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this ...

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