A Financial Look at Companies Dependent on Ultraprocessed Foods
While most discussions of ultraprocessed foods (UPFs) are about ingredients and processing steps, two June reports from French multinational bank BNP Paribas looked at how deeply some of the biggest publicly held U.S. food & beverage companies are dependent upon UPFs and what that exposure might mean in business risk.
“Our analysis suggests the group is highly exposed to UPFs,” says a June 29 report from BNP Paribas Equity Research. According to a bar graph, the most “exposed” are, in order, Oatly, Hershey, Flowers Foods, Kraft Heinz, Mondelez, Conagra, General Mills and Campbell’s. All appear to get 90% or more of their sales from ultraprocessed or highly processed foods.
“Smucker, McCormick, Hormel and Smithfield [offer] the most insulation,” reads a related June 10 report – meaning those companies appear to be the least dependent on UPFs.
We took a deep dive into ultraprocessed foods with this May magazine cover story "Carving Out a Definition."
“While consumer awareness of ultraprocessed foods is still nascent, it is growing rapidly and our analysis indicates the consumer is already starting to turn around the package and make purchasing decisions based on ingredient lists and perceived levels of processing,” wrote senior analyst Max Gumport.
“This exposure is important because there is a growing body of scientific evidence linking UPFs to adverse health outcomes, and UPFs have entered the crosshairs of policymakers, with the updated Dietary Guidelines for Americans explicitly advising to avoid highly processed foods and prioritize nutrient-dense foods.”
Using the Nova classification system – which rates food products from 1 (unprocessed or minimally processed) to 4 (ultraprocessed) – Gumport figured 92% of Oatly’s sales would fall in Nova Category 4. Hershey through Campbell’s all appear to be above 78% dependent on Nova 4 foods with additional exposure in Nova 3 (processed) foods.
At the far end of the spectrum, Smucker appears to be about 50% exposed in Nova 4 foods, has very few Nova 3 foods and is the “cleanest” of the group, apparently due to its heavy dependence on coffee and pet foods.
“Google Trends suggest [an approximate] 12x rise in interest [in UPFs] vs. the start of 2023,” Gumport wrote. “Put differently, based on Google Trends, interest in ‘ultraprocessed food’ has risen faster than that of ‘artificial intelligence’ since the start of 2023 but remains at a markedly lower level than that of ‘organic food’ and ‘low-carbohydrate diet.’ ”
After analyzing several food categories (including yogurt, frozen meals & vegetables, nut butters, and fruit snacks & candy) that contain a mix of unprocessed or minimally processed (Nova 1) and ultraprocessed (Nova 4) products, “The results are uniform across the board,” he wrote. “Consumers are shifting away from ultraprocessed foods. On average, within these categories analyzed, Nova 1 products are outgrowing Nova 4 products by [approximately] 7 pts.
“We believe UPFs are at the nexus of these shifts [toward healthier categories, natural food and disruptor brands] and see a portfolio with meaningful exposure to UPFs as likely to continue to lag the industry,” Gumport concludes.
“Still, that leaves room for portfolio improvement for those companies bold enough to take more decisive action. We believe there is a sizeable opportunity for companies to transform their portfolios both organically through innovation and inorganically through [mergers and acquisitions].”
About the Author
Dave Fusaro
Editor in Chief
Dave Fusaro has served as editor in chief of Food Processing magazine since 2003. Dave has 30 years experience in food & beverage industry journalism and has won several national ASBPE writing awards for his Food Processing stories. Dave has been interviewed on CNN, quoted in national newspapers and he authored a 200-page market research report on the milk industry. Formerly an award-winning newspaper reporter who specialized in business writing, he holds a BA in journalism from Marquette University. Prior to joining Food Processing, Dave was Editor-In-Chief of Dairy Foods and was Managing Editor of Prepared Foods.