Food, Beverage Companies Wrestle With New Economic, Competitive Monsters

Investors are not yet convinced that America’s cereal, soda, and soup companies know how to adapt to the changing food and beverage preferences of today’s consumers. The consumer staples segment of the S&P 500 has slid 13 percent this year, the worst performance in 10 years. Small consumer goods companies grabbed market share from large brands between 2011 to 2016, the first time in 50 years. Sales growth is slowing while oil, freight, raw material, steel, and aluminum costs climb. The pricing power of the big companies is disintegrating as consolidation takes over in the retail and grocery industries, consumer allegiances fade, and cheaper digital advertising lure shoppers. Companies are turning to acquisitions to stem the tide, but acquisitions tend to raise corporate debt and dent profits. And all of this is happening as higher interest rates loom on the horizon.