US Meals outlook for 2025 – M&A, GLP-1s and RFK Jr

Investing.com — The US meals sector seems very cheap relative to the broader market, elevating questions amongst buyers whether or not this can be a good entry alternative, Bernstein analysts mentioned in a observe.

The sector, which underperformed the market by greater than 30% in each 2023 and 2024, is now buying and selling at its most reasonably priced degree in comparison with the S&P 500 in over twenty years. This valuation is regardless of the sector’s buying and selling figures aligning with its 20-year common on an EV/EBITDA foundation, based on Bernstein’s evaluation.

However regardless of the engaging valuation, the funding financial institution cautions buyers of potential quantity headwinds that would render the sector a worth entice. The uptake of GLP-1 medicine and a shift away from closely processed meals are major issues.

Nonetheless, a silver lining seems within the type of improved shopper sentiment amongst low-income households, which can cut back the “value-seeking behaviors” that negatively impacted corporations in 2024, analysts mentioned.

Bernstein highlights the significance of monitoring the FDA scarcity lists in 2025, as GLP-1 drug uptake continues to affect volumes. Capsule variations of those medicine are anticipated to hit the market in 2026.

Exterior research point out that GLP-1 adoption is considerably affecting the consumption of processed meals, which may notably influence the gross sales of candy and salty snacks, in addition to fries and burgers within the quick-service restaurant (QSR) channel.

Regulatory challenges may additionally come up, Bernstein notes, particularly if Mr. RFK Jr. is appointed to a place the place he may affect meals coverage. His potential insurance policies may embrace banning sure meals components or limiting a broader set of components already banned within the European Union.

“At face worth the businesses may reformulate their merchandise pretty simply at a comparatively low price to reply to such regulation,” analysts led by Alexia Howard mentioned.

“However it’s the influence of higher media deal with the hyperlinks between wholesome meals selections and continual well being situations within the minds of shoppers that would have an even bigger influence on meals consuming traits, a lot because it did again in 2012 across the time of the GMO labeling invoice in California,” they added.

Past these key factors, analysts additionally level out surging prices for commodities like cocoa and low, whereas different enter prices stay comparatively steady. To assist volumes, corporations may have to extend promotional actions.

When it comes to mergers and acquisitions (M&A) exercise within the sector, analysts anticipate it to proceed all year long, with Merely Good Meals (NASDAQ:SMPL) recognized as a possible acquisition goal. Activist involvement may additionally drive broader consolidation amongst bigger trade gamers.

The analysis agency concludes with its prime picks within the sector, favoring Mondelez (NASDAQ:MDLZ), McCormick (NYSE:MKC), Merely Good Meals, and Hain Celestial (NASDAQ:HAIN) for lengthy positions.