Food spotlight: Blockbuster M&A as Mars takes Kellanova private, pantry inflation up 1%

The food and beverage sector is set up for a dramatic day after candy giant Mars inked a $35.9 billion deal for snack maker Kellanova (NYSE:K). The tie-up will pair the company behind M&M’s, Snickers and Skittles with the producer of Pringles, Cheez-It and Pop-Tarts. Kellanova (K) was spun off from cereal-focused WK Kellogg (KLG) last year and has since posted a series of strong earnings. The question for investors now is: which additional food or beverage stocks are poised for an acquisition proposal?

Also in the mix, the latest read on inflation was released on Wednesday morning. The Consumer Price Index report for July indicated a 3.2% year-over-year increase in the core rate, compared with the +3.2% pace expected by economists and the +3.3% level seen in July.

The closely watched food category was up 2.2% year-over-year in July, with food away from home up 4.1% during the month and food at home up just 1.1%. The pace of inflation for food at home has now been below the Federal Reserve’s overall target rate of 2% for nine straight months, although the overall level of food prices is still elevated compared to two and three years ago.

Categories showing notable moderating or declining year-over-year inflation included rice (-3.7% Y/Y), ham (-1.9%), milk (+1.2%), cheese (-2.3%), apples (-12.0%), poultry (+0.9%), lunch meats (-0.3%), and coffee (-0.4%). A lower level of transportation and shipping costs in the U.S. has been a factor in the moderating inflation for certain food groups. Consumer pushback on pricing and packaging sizes has also impacted demand for certain food items. Categories with prices still on the rise above the core inflation rate, included butter (+6.1%), pork chops (+7.3%), and baby food/formula (+4.6%).

Food and beverage watch: Kroger (KR), Albertsons (ACI), Kraft Heinz (KHC), General Mills (NYSE:GIS), Kellanova (K), (MKC), Hormel (HRL), (CAG), Campbell Soup (CPB), J.M. Smucker (SJM), Pilgrim’s Pride (PPC), Lamb Weston (LW), ingredion (INGR), BellRing Brands (BRBR), BRF (BRFS), Post Holdings (POST), Lancaster Colony (LANC), Flower Foods (FLO), J&J Snack Foods (JJSF), Simply Good Foods (SMPL), Coca-Cola (KO), PepsiCo (PEP), Keurig Dr Pepper (KDP), Monster Beverage (MNST), Celsius Holdings (CELH), Anheuser-Busch InBev (BUD), and Molson Coors (TAP).