Strong 2015 Outlook for Food Manufacturers

According to Credit Suisse, the 159 year old Swiss finance giant, lower gas prices, industry changes and other factors should help the retail food sector in 2015.

Robert Moskow, an analyst with Credit Suisse, said the benefits of lower prices and an overall healthier economy will be more broadly enjoyed by all demographics in 2015.”

Moskow said that lower gas prices may not point to more sales for the packaged foods sector, based on 34 years of government data. He said when gas prices go down people eat out more often, and when gas prices rise, people tend to look for grocery savings.

“While not a game-changer for U.S. food,” he continued, “we believe that the stronger economic backdrop will improve fundamental performance in 2015, especially in relation to the unusually weak 2014.

“Lower gas prices, a positive adjustment in SNAP benefits, and the slow but continuous improvement in employment should help improve consumer confidence, especially among lower-income consumers who have yet to enjoy any of the benefits of the broader economic recovery,” Moskow said.

“Wal-Mart estimates that the SNAP cutbacks at the end of 2013 represented a 0.7% drag on its food sales in 2014, and lower gas prices are likely to boost U.S. disposable income by at least $80 billion. These factors aren’t game changers, but they certainly must come as a relief for manufacturers and consumers alike.”

Other trends in the food manufacturing sector include grocers seeking to expand private label and store brands to entice value-seeking shoppers. On the high-end, Moskow predicts more consumers transitioning to organic foods while they also demand more transparency in labeling and a move toward healthier nutrition.