Corporate maneuverings alone can't solve the problem of shifting consumer food tastes

 Kraft Heinz (KHC) is splitting up. Keurig Dr Pepper (KDP) is unraveling into a coffee company and a separate beverage company. And Elliott Management is agitating to shake up PepsiCo (PEP).

While the maneuverings in the food world each have their own stories and contours, what the developments have in common is a struggle to keep up with shifting consumer preferences.

Shoppers are drifting to cheaper grocery store brands after years of higher prices. And a heightened aversion to processed foods has pressured iconic brands, as has the MAHA (Make America Healthy Again) movement. Where food executives used to lean on synergies and combinations, the strategy of the day appears to be price consciousness and product focus.

"Food stocks have just not really done well this year," Crossmark Global Investments chief market strategist Victoria Fernandez said in a live Yahoo Finance appearance. Snack foods in particular have taken a hit as the explosion of GLP-1 weight-loss drugs has led people away from food products, she noted.

But if weakening demand for marquee brands is at the heart of the problem, how can companies manage and market their way out of it? And can corporate reengineering even keep people interested in the engineered American staples?

Creating narrower, more thematically focused operations is one way to tackle the problem of shifting tastes. But there are other considerations alongside catering to health-conscious consumers that can move a ticker.

In explaining the Kraft Heinz breakup, the company said the two entities will be better positioned to focus on what they do best, investing in individual brands and lessening the complexity of their large array of food products. The grocery staples business, for instance, will center on a smaller geography, while the sauces and spreads unit will look to expand internationally.

Keurig Dr Pepper offered a similar justification for its unwinding, which will also involve the acquisition of the parent company of Peet's Coffee for $18 billion. Two entities, each optimized for their business, will be able to chase opportunities, the company said, like energy drinks for the cold beverage unit and growth outside the US for the coffee business.

Breakups aren't always the answer, either.

With PepsiCo, Elliot Management stopped short of calling for a food and beverage split. Instead, the activist investor encouraged Pepsi to cull its weakest products and lay out specific plans for a turnaround, among other recommendations. Elliot said Pepsi's shares could rise more than 50% if it follows through on a turnaround. Shares of Pepsi are roughly flat for the year, while rival Coca-Cola (KO) is up close to 11%.

If nimbleness to cater to trends is what food executives are after, shedding the baggage of a conglomerate or legacy operation sounds like a fine remedy. Over time, cultures change, people change, and companies follow or try to anticipate the next turn. But even the savviest corporate shake-up isn't a cure-all.

https://finance.yahoo.com/news/corporate-maneuverings-alone-cant-solve-the-problem-of-shifting-consumer-tastes-100037026.html