I started web scraping and Natural Language Processing of the news to identify early trends in society. These trends could include investment opportunities, lifestyle opportunities, job and career opportunities and demographic and geopolitical trends.
Often times in trend analysis, you don’t know at first first blush whether you are seeing a bona fide trend, a temporary blip or a deflation in the hype cycle of a particular topic. The true test of an emerging trend, is evidence emerging from diverse sources. As such, one of the trends that shows itself in my data, is the decline of factory foods, or ultra-processed foods. But the overall picture is divided into two contrasting halves based on economics and demographics.
Let’s look at the data. The sector of the European stock markets that had one of the best performance year over year in 2023 is the Consumer Products and Services. The STOXX Sector indices which represent companies in that field have risen 17.1%. The products in this category include hygiene items like soaps, hair care products, dishwashing detergents, laundry products. In the food sub-group of this sector, you would find some food products like staple condiments (spice mixes, salad products) and even dessert brands like Ben & Jerry’s Ice Cream which is owned by Unilever.
If you take a look at what has fallen year over this year, there is a trend. Stocks like Kellogg (ticker: K), General Mills, (GIS), Kraft Heinz (KHC), Conagra Brands (CAG), and Campbell Soup (CPB) are off 15% to 25% in 2023, and a few are back where they stood 10 years ago—or even lower. These are all brands that have processed foods or factory foods in their product repertoires.
One of the biggest market decliners has also been in what was previously considered “the healthy food” sector — fake or plant-based meats. This surprised me because a couple of years ago, they hype cycle was high and venture capitalists were sinking huge amounts of money into these startups. One of the industry’s most prominent brands, Beyond Meat, is in financial critical condition, cutting a fifth of its workforce. It’s stock prices have plummeted by 84% of its previous highs. The UK-based Meatless Farms went into bankruptcy protection. Heck Food Ltd. has reduced its range of non-meat products significantly. The reason is again, is economics and demographics.
First let’s take economics. We have seen inflation, cost of living, wage stagflation and the hollowing out of the middle class with the focus of lower paying service jobs dominating the employment sector. Vegan meats are much more expensive and have become unaffordable in these economically turbulent days of high prices. But the biggest surprise is that the demographic who can afford these products, are turning away from them because these foods are highly processed. Those restaurants who are serving meatless plant-based creations are doing well if they formulate their offerings with minimal processing and identifiable elements in the final product, like a lentil hamburgers.
Are all plant-based foods going to hell in a handcart? Nope. For some reason, society is exhibiting emerging weird medical traits. Statistics Canada, the data collection arm of the Canadian government reports that some 44.2 percent of survey respondents stated that they have a lactose intolerance, whilst some 13.8 percent of respondents said that they have a gluten intolerance. My grandmother had predicted these things. She thought that baby formula powder from a can was an abomination and it would have a negative effect on children. We drank raw milk from my grandfather’s cows. She also insisted that children should play outside in the dirt, and often said that one must actually inadvertently consume a peck of dirt in their lifetime. Today’s crop of children, raised in sterile helicopter-parent environments do not have the immune systems of earlier generations. (They don’t have the same mortality rates either, but that is a different story, and some would say that those mortality rates were a necessary Darwinism for the robustness of our species.) Foods manufacturers that cater to lactose/dairy intolerance and gluten intolerance are doing well. The bright spot is that these specialty grain foods are less processed than say WonderBread. However the same can’t be said for dairy-free ice cream.
The factory food fail picture is clouded by economics as well. With a good majority of the middle class seeing a decline in their bang for the buck, especially in the grocery stores, processed foods offer cheap, filling calories for not a lot of money. In addition, ultra-processed snack foods are a cultural “thing” in the USA, contributing to the obesity epidemic. The US National Institutes of Health reports that snacks are a staple of the American diet, accounting for nearly a quarter (22%) of total energy intake among adults. Currently, more than 90% of U.S. adults report eating one or more snacks on any given day, with an average of between 1.2 and 3.0 snacking occurrences per day. All of these are ultra-processed and relatively cheap compared to natural foods like fruits and vegetables. It’s no wonder, that America is seeing an increase in mortality rates. I am currently on a healthy diet regime because of my relative sedentary lifestyle in front of a computer screen. When I walk through a grocery store, I am amazed that a majority of the food aisles are processed foods that have no place in my current eating regime.
So what is the ultimate end game of this emerging trend? The makers of processed foods are fighting back declines with a variety of tactics. Profit is the almighty king, and to hell with a fat, addicted, diabetic, unhealthy populations who spend this sick benefits on weight-loss Ozempic and insulin. For example Krispy Kreme donuts reported an increase of 12.5% in net revenue. They attribute this to be driven by the continued execution of their omni-channel marketing strategy. They have made it easier to get their unhealthy products into your cake holes in as many different ways as possible. Their biggest growth area is Insomnia Cookies. If you can’t get to sleep, you can have Door Dash or any other delivery service deliver a huge batch of cookies to you within 20 minutes. Soon all of the airlines will have to follow Air New Zealand’s practice of weight passengers before boarding an airplane — and I always seem to get seated beside the inveterate midnight cookie chompers.
This factory food fail trend has been identified by stock analysts and the finance folks. JP Morgan analysts have identified the “Ozempic risk,” namely that the explosive growth of effective diet drugs like Novo Nordisk ’s (NVO) Ozempic and Eli Lilly ’s (LLY) Mounjaro will curb outsize American appetites. This doesn’t bode well because blue chip food stocks now produce dividends of around 4% and short term market debt rates are delivering around 5% returns.
Bottom line: fatso foods don’t appear to be a good long term investment — either for you health or your portfolio.
Thanks for reading.