February 25, 2024
Finance

The top food and drink stocks in focus, from PepsiCo to Chipotle


This Super Bowl weekend, investor eyes may not just be on football — they will be looking at food and drink stocks for opportunities for their portfolio.

In notes to clients and in conversations with Yahoo Finance, analysts shared their thoughts on companies whose drinks and snacks will be at parties throughout the US this Sunday.

Starting with soda, which market research firm Numerator said is the most popular beverage for Super Bowl celebrations, it’ll be a battle between PepsiCo (PEP), Coca-Cola (KO), and Keurig Dr. Pepper (KDP).

But the two famous brands will be the best picks, said Morningstar analyst Dan Su, who projects that Coke and PepsiCo have long-term competitive advantages over their rivals in the next 20 years.

Bank of America also has Buy ratings on Coca-Cola and PepsiCo, given they are high-quality, multinational businesses that can generate sustainable returns, analyst Bryan Spillane told Yahoo Finance.

Investors are looking for “sales and volume growth” in the space, and though the two tend to be neck and neck, Coca-Cola sales will likely outpace PepsiCo in 2024, Spillane predicted.

While half of Super Bowl watchers will buy soda before the event, according to Numerator, another 37% will get beer, and 22% will stock up on spirits.

The beer industry had an up and down 2023, and the big three producers, AB InBev (BUD), Molson Coors (TAP), and Constellation Brands (STZ), will be looking to play offense.

“It’s this whole dynamic about the three of them colliding at the Super Bowl,” Spillane said. Molson Coors is looking to hold onto the gains it made during the Bud Light boycotts. On the other hand, Bud maker AB InBev has been running an ad campaign with NFL Hall of Famers Peyton Manning and Emmitt Smith as it looks for a comeback.

But Constellation Brands may have already won the battle, as Mexican import beers keep gaining in popularity, per Spillane.

The beverage giant, and others with Mexican import brands, could make further headway this year, said Bump Williams of Bump Williams Consulting.

“We’ve already seen retailers in the back half of ’23 give more shelf space to these brands in this segment,” Williams told Yahoo Finance. “We’re going to continue to see that probably expand more as the spring sets get launched in March, April [2024].”

For those looking at another area of the liquor shelf, tequila has been having a moment.

In a note to clients, Evercore ISI analyst Robert Ottenstein noted volumes for the liquor are seeing “notable” strength, up 7.2% year over year. Diageo (DEO), which owns Casamigos and Don Julio, led the pack with a 15.7% volume growth.

What’s a game without chip and dip? The big brands will likely benefit, as people are “probably not going to buy private label” for the big occasion, Mizuho Securities managing director John Baumgartner told Yahoo Finance.

For Baumgartner, his top picks include Kraft Heinz (KHC), based on its “indulgent snacks,” as well as Mondelēz International (MDLZ), for its cookie and cracker offerings.

Kraft Heinz is also a pick for Bank of America analyst Peter Galbo. One big reason: Velveeta. (Ever try Velveeta with Rotel? This reporter hasn’t but plans to this Super Bowl).

For fans of wings, check out Pilgrim’s Pride (PPC), said Galbo.

“They’re the second largest chicken company in the US. … They produce a lot of wings, as does Tyson, but historically, Pilgrim’s Pride has been a better operator and better fundamentals,” he said.

While the Super Bowl won’t give retailers a meaningful bump, Costco (COST) and Walmart (WMT) are good bets as consumers search for value in 2024.

“Walmart and Costco are two that are well positioned to benefit over the next 12 to 18 months,” Jefferies analyst Corey Tarlowe told Yahoo Finance.

PHOENIX, ARIZONA - FEBRUARY 11: Branding and snacks are spotted at Taste of the NFL Presented by Frito-Lay, Quaker and the PepsiCo Foundation during Super Bowl weekend at Chateau Luxe on February 11, 2023 in Phoenix, Arizona.  The event supports GENYOUth, a national non-profit organization, in its commitment to end student hunger and ensure that all children have access to school meals. (Photo by Tasos Katopodis/Getty Images for GENYOUth)

Branding and snacks are spotted at Taste of the NFL during Super Bowl weekend at Chateau Luxe on February 11, 2023, in Phoenix, Arizona. (Tasos Katopodis/Getty Images for GENYOUth) (Tasos Katopodis via Getty Images)

Ordering in? Morningstar Sean Dunlop suggested YUM! Brands (YUM), which owns KFC, Pizza Hut, and Taco Bell, is the best among pizza and wings chains.

“Chipotle also does surprisingly good Super Bowl business, historically,” said Dunlop, as Chipotle’s takeout and delivery business lends itself to group parties.

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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