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FOOD STAPLES LEFT WITH A SOUR TASTE AS GENERAL MILLS WEIGHS

With General Mills GIS.N cutting its annual sales and profit forecasts on Tuesday, shares in other food companies also took a tumble seemingly in sympathy with the Cheerios cereal maker, which is contending with a volatile economic backdrop and evolving consumer tastes.

Presumably not helping also, is the fact that the S&P 500 consumer staples index .SPLRCS has been climbing very enthusiastically recently, having risen roughly 17% between its January 7 close and its close on Friday February 13.

Most recently in the session, the biggest decliner in the group was General Mills, off 7.5%, and closely followed by a drop of 7.1% in Campbell's CPB.O, which tends to report its fiscal Q2 results around the first week of March. Next weakest were Conagra CAG.N and Lamb Weston LW.N, both down more than 5%. Mondelez MDLZ.O, Kraft Heinz KHC.O, and Molson Coors TAP.N were all down more than 4%.

McCormick MKC.N and JM Smucker SJM.N were off more than 3% along with retail favorites for cost-conscious shoppers Walmart WMT.O and Dollar General DG.N.

Year-to-date, the consumer staples index was still the third-biggest gainer among the S&P 500's 11 major industry sectors, up more than 13% and trailing energy's .SPNY 19% gain and materials' 15% advance. In comparison, consumer discretionary .SPLRCD is the weakest of the bunch, down more than 5% YTD.

"General Mills is facing a combined double whammy of consumers being choosy about the prices they pay for goods and they're having some trouble controlling costs and passing higher costs along to customers," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "Many of the consumer product companies are down in response."

"It was a pretty significant cut so there are fears out there that that whole segment of the economy, the branded packaged consumer goods industry, is going to have a difficult year ahead of them."

(Sinéad Carew)

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