Stress-eating has, unfortunately, become the therapy of choice for Americans who have been forced to stay at home during this crisis. Malls, offices, and parks are closed, and events are canceled, so what are we to do? We eat.
One silver lining to this COVID-19 cloud is that investors are particularly bullish about the food and beverage stocks that are related to at-home consumption.
COVID-19 formed new eating trends
According to the International Food Information Council, 85% of Americans have changed their eating habits due to COVID-19. They either changed the food they eat or change the way they prepare food.
The same study found that 60% of consumers are cooking food at home more often. One out of three people said they eat snacks more, and one out of four said they are thinking about food more.
The IFIC also concluded that people under the age of 35 are snacking more than usual.
These changes resulted in increased individual spending on food and beverages, which in turn meant more opportunities in the food and beverage market for investors.
Food and beverage stocks
Here are some of the food and beverage stocks to consider. These stocks have benefited from the lockdowns and the ensuing stress and boredom of people staying at home.
- Treehouse Foods (THS)
TreeHouse Foods remains one of the biggest private label food product manufacturers of a wide variety of products. Demand for at-home consumption has offset their distribution losses and pricing pressures in the first quarter.
With its continuous growth, TreeHouse is poised to generate steady revenue growth and better its supply chain.
- Kellogg Co. (K)
The world’s leading breakfast cereal maker is also the owner of top brands in the snacking category. Kellogg’s is now focused on increasing its capacity to meet the growing demand. They even delayed their planned brand-building investments to capitalize on the spike in demand for their products.
- Mondelez International (MDLZ)
Mondelez International is a giant in the snack food industry. It owns highly popular brands like Oreo, Cadbury, and Trident. As big as it is, Mondelez still stands to benefit from the rise in demand for at-home snacking. Today, the company's product categories are some of the strongest in the food industry.
- Coca-Cola Co. (KO)
The world’s biggest soft drink company has captured a 50% market share of the global soft drink market. While Coca-Cola’s business has been hit by the lockdowns, the company has a robust balance sheet. As the smoke clears after the pandemic, they probably will emerge in a stronger position.
- PepsiCo (PEP)
PepsiCo is not just a soda giant, it is also a global snack leader with top brands like Frito-Lay, Mountain Dew, and Gatorade. They are doing better than their rival, Coca-Cola, during the lockdown due to the high demand for snacks.
- Keurig Dr. Pepper (KDP)
Keurig Dr. Pepper is well-known for its specialty coffee and single-serve brewing systems. It is the third biggest carbonated beverage maker in the United States. Keurig benefited from work at home employees who consume lots of coffee, and analysts expect them to increase their revenues throughout this pandemic.
Food and Beverage Exchange Traded Funds
Food and beverage ETFs are simple transactions and can give you instant exposure to the food and beverage industry with just a single trade. You can either target the whole industry or focus on a specific type of food product with the help of ETFs.
Aside from being simple, ETFs offer some other advantages, like tax benefits and savings on commissions and fees.
If you are interested in food and beverage ETFs, look at the list below for exchange-traded funds that target the industry.
- Broad Food Industry ETFs
- RGRA - RBS Rogers Enhanced Agriculture ETN
- BARN - Global X Farming ETF
- Coffee ETFs
- CAFÉ - iPATHPure Beta Coffee ETN
- Wheat and grains ETFs
- WEET - iPath Pure Beta Grains ETN
- WEAT - Teucrium Wheat Fund
- Sugar ETFs
- SGAR - iPath Pure Beta Sugar ETN
- CANE - Teucrium Sugar Fund
- Cocoa ETFs
- CHOC - iPath Pure Beta Cocoa ETN
- Livestock and Cattle ETFs
- LSTK - iPath Pure Beta Livestock ETN
How to analyze food and beverage stocks
- Operating Margin
Operating margin is one of the first things to look at when you want to know the company’s operational efficiency. It presents useful information on the effectiveness of a company’s management in terms of handling costs to earnings.
You can evaluate almost any business using operating margin but is especially vital in assessing businesses that operate in very competitive markets.
- Net Profit Margin
Next is the businesses’ net profit, or bottom line. You can see this in the firm’s net profit margin. Publicly traded companies normally present their net margins through annual reports.
- Debt levels
You can determine which businesses are in the best financial health by comparing relative debt positions between companies. You will be able to predict which ones will probably survive economic downturns. A business’s debt position is also crucial if the company wants to make significant capital expenditures to weather volatile market conditions.
Now may be a good time to increase your exposure to the food and beverage sector as Americans are consuming more food as they stay home with nothing else to do. You may choose from the stocks mentioned above and there are many more. Even with the current growth in this arena, be sure to do your due diligence and choose carefully.