Packaged food stocks will face tricky sales growth comparisons after a year of inflation
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The most recent data from Nielsen and Numerator showed that packaged food sales are in an accelerating trend as pricing continues to help offset volume weakness. 
UBS analyst Cody Ross noted Kraft Heinz (KHC), Campbell Soup (CPB), Mondelez International (MDLZ), General Mills (NYSE:GIS), TreeHouse Food (THS), and Hostess Brands (TWNK) all saw accelerating sales growth on a 2-yr CAGR basis as well.
Looking ahead, the outlook is not so positive for the food stocks. Ross thinks the biggest question facing the sector is whether there will be a soft landing to lower organic sales growth or a hard landing with a period of flat to negative growth.
"A soft landing likely requires companies to step up investments in the form of innovation and marketing to drive volume growth as price gains wane. A hard landing will likely be the result of accelerating elasticity (to more normalized levels) coupled with private label share gains."
Ross thinks the strong May Nielsen and Numerator data tilts the scale to a soft landing, although the issue is not seen being settled until, but acknowledges this debate will likely take many ups and downs before it is ultimately late 2023 into 2024 when the price contribution to sales begins to roll off significantly. For now, UBS recommends stocks with the highest quality portfolios and the greatest visibility to earnings beats. The UBS list of top food sector picks includes Hershey (HSY), General Mills (GIS), and TreeHouse Foods (THS).
More on packaged food stocks:

Campbell Soup: Buy The Drop On This Consumer Staple
General Mills: A Decent Year, But Seems Overpriced
Hershey: America's Lockdown Sugar Binge Is Unsustainable
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