Consumer behavior is baffling food companies

When consumers are financially stressed they typically dine out less and buy more groceries, giving food companies a boost.

Why isn’t that happening now?

“If I could give you an emoji, the shoulder-shrug, we’re-not-quite-sure emoji would be what I would use,” Post Holdings CEO Rob Vitale said Friday.

The nation’s third-largest cereal maker should be reaping the rewards of consumers “trading down,” since Lakeville-based Post Consumer Brands is also the country’s biggest manufacturer of store brand and private label cereals and owns the value brand Malt-O-Meal.

Those lower-cost offerings are doing well enough, but the Fruity Pebbles and Honey Bunches of Oats maker is selling fewer products overall, as branded cereal declines offset the boost from private label.

“We continue to see shoppers be more selective,” Vitale said, and pointed out the end of expanded SNAP benefits has left lower-income Americans with less to spend on food.

Edward Jones analyst Brittany Quatrochi said last year consumers are “selectively splurging,” throwing a wrench in traditional cycles food companies have come to rely on.

Cereal as a whole benefited from the pandemic-fueled pantry stocking and at-home eating habits, but the category — led by Golden Valley-based General Mills — is expected to return to slow or negative growth over the next few years. Almost all recent revenue growth has come from price increases, which has caused shoppers to buy fewer boxes and bags of cereal.

Beyond promotions and short-term deals, those prices may not be coming down soon. As Vitale and other food company CEOs have said, consumers will just have to get used to the new prices.

“Consumers are still trying to find that historical reference price, and are changing behaviors until they gain some familiarity with the new pricing environment,” Vitale said.

Post Consumer Brands, which had a $132 million profit for the fiscal quarter that ended in December, is no longer so reliant on cereal to drive business. Nearly half of the quarter’s $988 million in sales came from pet food. The company acquired a number of brands, including Nutrish and Kibbles ‘n Bits, from Smucker last year for $1.2 billion.

Post’s stock shot up 5% Friday morning and was heading into record territory just shy of $100 per share after the company raised its outlook for the rest of the fiscal year.