In the midst of summer, people gather and often think about the past including the foods they ate. When they talk about the food they will often say a brand name which everyone refers to as the food group, for example Cool Whip for a topping on pies. For the food companies when this happens, it tends to mean steady income streams leading to profits for decades.

In an article by Julie Creswell and Lauren Hirsch of the New York Times News Service, it recent years something is changing as consumers are changing. People are still eating and spending, but they have either cut back on the brand names or trading down to the less expensive private labels. Others have gone to what they consider healthier among the many stressors.

As growth in the packaged food industry stalls, its stocks have lagged. While the broad S&P 500 index is up 40% over the past 2 years, the packaged food industry stocks have flatlined.

If there is no growth, what can food packaged companies do? re-engineer themselves. Italian candy company Ferrero is buying WK Kellogg for $3.1 billion. Kraft Heinz a $26 billion company is considering breaking up into smaller companies.

Kelly Haws, a professor of marketing at Vanderbilt University, said the big brands are going to have to really fight hard to figure out how to stay relevant. The value of some of the brands has decreased dramatically and they may have to reinvent themselves.

An example is Kraft, in 2012 it spun out its snack business and called it Mondelez. In 2015, Kraft merged with Heinz to become the 3rd largest food country in the US. A decade later, the stock has lost 60 % of its value and the last 3 years revenue has been falling. The company had many things going for it, legendary investor Warren Buffett owned it, they brought in Brazil’s 3G who were very good at cost cutting. At the end of the decade, 3G sold its holdings and no longer has a board seat and they have their 3rd CEO Carlos Abrams-Rivera. The focus is now on new products for the changing consumer preferences.

Linking to dividend paying stocks, while we all do generic things such as eat, where and how we spend our money changes over time. What was once a license to print money, is a bit harder now and as everyday consumers you can see these things. If you invest in packaged good companies, are you buying the same amount? when you look at what others are buying, is it consistent or are they changing? If you are changing, then you can do your homework to see if others are changing and perhaps that investment will need to seek alternatives.

There are more questions than answers, till the next time – to raising questions.