America's biggest food companies have tried everything to win shoppers back. They've cut prices, ramped up marketing and added protein to everything from Cheerios to Goldfish.
It hasn't worked.
Profits are falling at flagship names such as General Mills and Kraft Heinz as consumers turn away from their legacy products. Management mostly blames a strained consumer and insists conditions will improve. The market has reached a harsher verdict: These businesses are shrinking and don't know how to stop.
Big Food stocks are now trading at their widest discount to the market in at least two decades. Dividend yields are unsustainably high.
Investors hunting for bargains should be careful. These stocks are like stale food on a grocery shelf with a big discount sticker: cheap for a reason. And with the Iran war pushing costs higher, the industry's problems might get worse.
Why have things gotten so bad? Weight-loss drugs are the most visible reason. More than 1 in 10 American adults now take a GLP-1, and that number keeps climbing. But the drugs are only part of a broader shift.
Americans are reading ingredient labels more closely. GLP-1 users and everyone else are gravitating toward protein, fresh ingredients and cleaner labels. They are fleeing calorie-dense, ultraprocessed staples that fill the center of the store.
Then there's the K-shaped economy, which squeezes from both ends. Affluent shoppers are getting more health-conscious and trading up, often to smaller brands. Meanwhile, lower-income households are counting every dollar and trading down, increasingly to private labels. (Premium private label is also a competitive threat at the higher end.) The pressure has only intensified as food-stamp aid has been cut.
Even U.S. population growth, the one tailwind these companies could always count on, has slowed to a crawl as the Trump administration cracks down on border crossings and steps up deportations. "What had been an advantage for this group throughout its history is now gone," says Max Gumport of BNP Paribas.
General Mills has resorted to cutting prices even when it hurts earnings, just to stop consumers from walking away. Organic sales -- which strip out the effects of acquisitions and currency swings -- fell 2% in fiscal 2026, and the company is guiding to another year of flat-to-declining sales.
Last week, Conagra halved its dividend and guided to an earnings decline in the new fiscal year that was steeper than Wall Street expected. Kraft Heinz and Campbell's are under similar pressure.
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. Over the past decade, each has lost roughly 50% to 70% of its respective value even as the S&P more than tripled.
At these levels, the worst might well be priced in. But the setup still looks worrisome. The prolonged Iran conflict has pushed oil higher, dragging fertilizer, packaging resin and freight up with it, notes Alexia Howard, an analyst at Bernstein.
Traditionally food makers pass those costs on, as they did in 2021, when shoppers had stimulus checks from the government. This time, Howard expects Walmart and its peers to refuse.
Retailers have increasing leverage through their own brands, and they don't want to hit a struggling consumer with higher prices. Store brands now make up about 24% of grocery-unit share, according to the Private Label Manufacturers Association. The figure is higher at the chains that matter most: Store brands consist of 31% of units at Walmart and 34% at Costco, according to Numerator.
When shoppers are stretched, retailers "push the food companies even harder on price," says Kunaal Kanagal, a portfolio manager at Bahl & Gaynor. That leaves food makers with two bad options: lose volume or lose margin. Better, he argues, to own stock in the retailers than the brands.
The fixes are real, but slow and expensive. These companies have little choice but to invest in brands people actually want, whether by building them or buying them. Gumport points to the fresh refrigerated dog food General Mills recently launched under Blue Buffalo, the pet-food brand it bought in 2018, as the kind of thing that works. What doesn't work are gimmicks like slapping protein into old brands.
Bigger deals -- breakups and combinations alike -- have a mixed record. But they're also on the menu because they can force focus or add scale, as with McCormick's tie-up with Unilever's food business announced earlier this year. Take-private deals to remove more of the troubled sector from public markets are also a possibility.
Real innovation takes years and money, though, and most of these companies carry heavy debt while their payout ratios sit at unsustainably high levels, Howard notes. Conagra's dividend cut last week is what that pressure looks like.
This all leaves Big Food facing a long road back to the American shopper. Getting back into investors' good graces will be an even longer journey.
Write to David Wainer at david.wainer@wsj.com
(END) Dow Jones Newswires
July 19, 2026 05:30 ET (09:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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