General Mills, Kraft Heinz stocks trade at decade-low as shoppers turn away from legacy brands

Conagra halves dividend as food companies contend with falling sales and rising costs

America’s largest packaged-food companies have tried cutting prices, ramping up marketing and adding protein to legacy brands such as Cheerios and Goldfish, according to the Journal. Profits are falling at flagship names including General Mills and Kraft Heinz as consumers turn away from their core products. Management has mostly blamed a strained consumer and insisted conditions will improve, but the Journal’s analysis concluded that the businesses are shrinking and do not know how to stop.

Dividend yields at several companies sit at “unsustainably high” levels, the Journal reported. Conagra halved its dividend last week and guided to an earnings decline in the new fiscal year that was steeper than Wall Street expected.

The group now trades at its lowest multiples in years. Conagra fetches about 9.8 times forward earnings, a nearly 60% discount to the S&P 500. General Mills, Campbell’s and Kraft Heinz all trade around 11 to 12 times forward earnings.

Investors “should be careful,” according to the Journal, which described the stocks as like “stale food on a grocery shelf with a big discount sticker: cheap for a reason.”

More than 1 in 10 American adults now take a GLP-1 drug, according to the report, a figure that keeps climbing. Use of appetite-suppressing medications is part of a broader dietary shift: Americans are reading ingredient labels more closely, gravitating toward protein and fresh ingredients, and fleeing calorie-dense, ultraprocessed staples that fill the center of the grocery store.

The K-shaped economy compounds the pressure, according to analysts cited by the Journal. Affluent shoppers are becoming more health-conscious and trading up, often to smaller brands, while lower-income households are counting every dollar and trading down, increasingly to private-label alternatives — including premium private-label offerings at the higher end. The pressure has intensified as food-stamp aid has been cut, the Journal said.

Even U.S. population growth, a tailwind the food industry has historically relied on, has slowed as the Trump administration cracks down on border crossings and steps up deportations, the Journal reported. “What had been an advantage for this group throughout its history is now gone,” Max Gumport of BNP Paribas told the Journal.

Store brands now make up about 24% of grocery unit share, according to the Private Label Manufacturers Association. The figure is higher at the largest chains: store brands constitute 31% of units at Walmart and 34% at Costco, according to data from Numerator cited by the Journal.

Retailers’ growing leverage through their own brands means they are unlikely to accept price increases from food makers. Alexia Howard, an analyst at Bernstein, told the Journal that the prolonged Iran conflict has pushed oil higher, dragging up fertilizer, packaging resin and freight costs. Traditionally, food companies pass those costs on to consumers, as they did in 2021 when shoppers had stimulus checks. This time, Howard said, Walmart and its peers are expected to refuse.

When shoppers are stretched, retailers “push the food companies even harder on price,” Kunaal Kanagal, a portfolio manager at Bahl & Gaynor, told the Journal. He argued that owning stock in the retailers is a better bet than owning stock in the brand manufacturers.

The fixes available to food companies are real but slow and expensive, according to analysts cited in the report. Gumport pointed to General Mills’ fresh refrigerated dog food launched under Blue Buffalo, the pet-food brand it bought in 2018, as an example of a product that works. Slapping protein into old brands does not work, analysts said.

Bigger structural moves — breakups, mergers, and take-private deals to remove troubled companies from public markets — have a mixed record but remain on the table, the Journal reported. McCormick’s tie-up with Unilever’s food business, announced earlier this year, was cited as an example of a combination that can force focus or add scale.

Real innovation requires years and investment, according to Howard. Most of these companies carry heavy debt while their payout ratios sit at unsustainably high levels, she said. Conagra’s dividend cut last week represents what that pressure looks like.

The sector faces a “long road back to the American shopper,” the Journal concluded, and “getting back into investors’ good graces will be an even longer journey.”