Inflation looks like a mixed bag for the food sector
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Food prices rose 4.3% year-over-year in August and edged up 0.2% month-over-month as inflation proved sticky in the sector. Food at home prices were 3.0% higher, while food away from home prices rose 6.5%. Overall, CPI rose 3.7% year-over-year in August vs. the consensus mark of 3.6% and the 3.2% pace in July. The biggest concern in the food sector is if consumers pull back or trade down to pressure the ability of companies to keep up with their inflation costs.
Food categories that showed prices higher in August than a year ago included cereal (+4.3%), beef and veal (+6.3%), cookies (+8.5%), apples (+8.5%), frozen vegetables (+14.7%), candy and chewing gum (+9.4%), and salad dressing (+12.1%). Categories with prices lower than a year ago, included bacon (-6.4%), eggs (-18.2%), and milk (-3.5%).
The biggest gainer in the food and beverage sector on Wednesday morning trading was Hain Celestial (HAIN) +6.5% after its strategy update. Utz Brands (UTZ) +2.4%, BRF S.A. (BRFS) +2.2%, and Whole Earth Brands (FREE) +1.6% were also ahead of the pack. B&G Foods (BGS) was the biggest decliner after Cowen downgraded the stock to an Underperform rating due to concerns that the company is not keeping up with the investment spending of big food competitors.
The Invesco Food & Beverage ETF (NYSEARCA:PBJ) rose 0.33% in early trading on Wednesday, but traded near its 2023 low amid concerns on consumer spending trends. The top ten holdings in the food and beverage ETF are Chipotle (CMG), PepsiCo (PEP), Mondelez International (MDLZ), Kraft Heinz (KHC), Constellation Brands (STZ), Monster Beverage (MNST), Coca-Cola (KO), Archer-Daniels Midland (ADM), Vita Coco (COCO), and Adecoagro SA (AGRO).

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