It’s fair to say that many Americans snacked during the pandemic, and now that restrictions have been lifted, those habits have persisted. This is good news for branded food companies amid growing concerns about consumer shopping habits.
There is no shortage of academic literature indicating an increase in snacking during Covid-19 shutdowns. As has been the case in many areas of the consumer space, “the pandemic has accelerated a trend that was already there,” says
International (symbol: MDLZ) Chief Financial Officer Luca Zaramella. Mondelez research shows that nearly 90% of people around the world snack daily, with frequency steadily increasing. “It is something that is allowed, in these [uncertain] Sometimes a little chocolate can be rewarding.
This has certainly been the case for companies that sell snacks. Mondelez stock has risen 1% over the past year, a period that has seen the
decrease of more than 10%;
(PEP), which derives a quarter of its business from Frito-Lay North America alone, climbed 11%.
(UTZ) has more than doubled in the year since the first pandemic restrictions were announced, with its CEO previously saying Barrons that the structural change of spending more time at home had led to longer-lasting snacking tendencies.
The pandemic has sparked a surge in demand for comfort foods and familiar flavors, and that trend has been bolstered by online shopping: Grocery was one of the last parts of retail to go digital, but once it did, it greatly benefited brand companies. As Barrons noted, name recognition and consumer loyalty have been a continued tailwind for consumer staples companies.
Many of these stocks have also outperformed during the recent market turmoil, given investors’ flight to safety. Yet many investors questioned the ability of commodities to continue to outperform at a time when inflation remains stubbornly high and only marginally below multi-decade highs; With consumer budgets tight and fears of a potential downturn or recession to come, the risk of shoppers turning to cheaper generic offerings is real.
That said, the snacks category in particular may be more resilient in this regard. In a large-scale survey this spring,
found that while 77% of respondents said they would buy a cheaper option if the price of their favorite brand increased, meat and grains were the top categories they said they would shop for, at 26 % and 18%, respectively. Only 12% named cookies and crackers, 10% chips and 4% candies.
Analyst Michael Lavery noted that historically,
) “was the best of the bunch in the recession,” with
(TSN) having had the worst performance during the Great Recession of 2008-2009.
Similarly, the local chain
Casey General Stores
(CASY) noted earlier this week that while consumers have shifted to private label in some categories, it wasn’t their only response to inflation.
Casey CEO Darren Rebelez noted that in the beer category, for example, “people aren’t turning away from super premium and imports to cheaper types of beer. They are just moving from larger pack sizes to smaller pack sizes in the beer category. »
As Mondelez CFO Zaramella said Barrons, the penetration of private label products in its main categories is relatively low, for example less than 5% for chocolate. He, too, says that instead of switching, consumers are finding other ways to continue buying the company’s brands, such as through discounters.
This brand loyalty gives Mondelez pricing power, he says, especially since customers see the company raise prices “fairly, while delivering value…it’s rare to see higher prices and higher volume together, but we’re seeing it.”
The company is confident enough to seek to accelerate sales of its core chocolate and cookie categories, including through acquisitions that strengthen its position in the United States and abroad, the latter accounting for three-quarters of its activity.
Zaramella says Mondelez’s famous Oreo brand has at least three loyal consumers, her daughters. Yet, as recent data suggests, they’re not the only ones sticking to their favorite indulgences.
Write to Teresa Rivas at email@example.com
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