How are people feeling about food inflation (and shrinkflation, and drip pricing, and dynamic pricing, and…)? Earnings from two major food manufacturers point to a market group still feeling long in the tooth about the economy and short on cash in their pockets.
Hormel Foods, the maker of Skippy peanut butter, SPAM, and Chi-Chi’s salsa beat its first-quarter sales estimates, bolstered by “resilient” demand for its high-priced meat products and ready-to-eat meals. Shares of the Austin, MN-based company rose as much as 16.8 percent.
So good were the results, in fact, that Hormel stock experienced its best day in over 10 years. Hormel head of retail Deana Brady told The Minneapolis Star-Tribune that it had been tinkering with promotions “to really get the right price for the consumer,” and that strategy has paid off in golden peanuts, so to speak.
Jim Snee, Hormel chairman of the board, president, and CEO, said, “We are especially encouraged by broad-based volume growth across our businesses, reflecting the strength of our leading brands, robust demand for our foodservice products, and momentum in our Planters snack nuts business,” noting volume and sales growth for Skippy peanut butter, Chi-Chi’s salsa, Natural Choice Bacon, Corn Nuts corn kernels, and more.
“We are reaffirming our full-year net sales and earnings expectations,” he added. “We expect continued growth in food service, improvement in our international business, impacts from pricing and innovation in retail, and further progress on our transformation and modernization initiative.”
He also highlighted the International Foodservice Distributor Association’s (IFDA) Distributor Choice: Strategic Partner award, which was given to its food service division in January, notable for being recognized as IFDA’s most strategic partner out of more than 70 manufacturers.
JM Smucker, meanwhile, had much to celebrate as well.
“We are pleased to have delivered another quarter of strong financial results, including organic sales and earnings growth, driven by focused execution on our strategic priorities, sustained customer and consumer loyalty to our iconic brands, and volume growth across our business,” said Mark Smucker, chairman of the board, president and CEO.
For its part, the JM Smucker company exceeded its third-quarter estimates due to sustained demand for pet food and frozen snacks. The Orrville, Ohio-based manufacturer of Uncrustables, Jif, Folgers, Dunkin’, and Twinkies-maker Hostess Brands posted third-quarter net sales of $2.23 billion, $1 billion more than estimated.
Pantry Staples Up, Consumer Confidence Down
It’s not hard to understand why these companies have found success in a challenging environment. These are comfort food manufacturers (among other things!) whose identities, infrastructure, and revenue are built upon foods people reach for when they’re feeling down, feeling squeezed, or both, and as consumer confidence dwindles (as noted in the most recent FI newscast, below), many may find their pantries stocked with the comforting, the nostalgic, the downright delicious.
Inflation has abated…a bit. Recent polling numbers suggest the average consumer is more worried about the economy than the market-on-paper would leave many to believe.
U.S. consumer confidence fell in February for the first time in four months as Americans’ views about the economy, job market, and overall financial conditions continue to be seen through less-than-rosy glasses. The Conference Board’s gauge of consumer sentiment dropped four points, trailing all estimates in a Bloomberg survey of economists. Though consumers expressed a little optimism about food prices abating, many have become more jaded than expected about the job market and their own families’ current and future financial situations.
But people have to eat, and a recent poll of over 2,000 adults by OnePoll on behalf of Noodles & Company revealed that most Americans would rather eat comfort food for the rest of their lives than bougie, chef-crafted meals.
“Nothing brings people together quite like the combination of food and family. Fast-casual comfort meals are the top choice for families when dining out and this study validates that sentiment,” said Stacey Pool, CMO at Noodles & Company, of the poll’s results. Per the poll, the perfect forever meal includes chicken wings, mozzarella sticks, Caesar salad, and garlic cheesy bread – all Hormel- and JM Smucker-adjacent if not outright offered by the grocery juggernauts.
From an economic standpoint, people are as brand-agnostic as ever. Food prices have come down, yes, but not that much. Private label is still thriving. A recent report from Placer.ai noted how dollar and discount stores came to the forefront of grocery for many people since the pandemic:
By investing in private label food items and stocking fresh produce at thousands of locations, Dollar General has established itself as a prime low-cost grocery destination. Family Dollar, owned by Dollar Tree, has also made strong inroads into the supermarket scene, with everything from fruits and veggies to cage-free eggs. Dollar Tree has also broadened its grocery selection to include an array of chilled and frozen foods.
The report notes that as recently as January 2024, discount and dollar stores have experienced further gains in year-over-year foot traffic, building upon the category’s post-COVID gains.
So what does it all mean? For many, the advent of inflation coupled with a market tighter than many are prepared to admit has them going to the simple foods they’ve loved for years. Beef is still wildly expensive, so brands like SPAM (pork) and Jennie-O (turkey) are bolstering their parent companies’ prospects.
No need to look to the morning market for answers – the answer, as it so often does, lies at home. The pantry tells a loaded tale in 2024.
