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Highlights:
- High food and energy prices have hit household budgets in the UK as inflation continues to break previous records.
- Ex-Sainsbury's boss has claimed that people should be ready for higher grocery bills in the longer term.
The COVID-19 pandemic and Brexit had already stressed the economy and the situation was further aggravated by the Russia-Ukraine crisis. Supply chain disruptions have increased the input costs and pushed up the prices of most items, and high energy and food prices have hit household budgets. As a result, people are now spending less on things than they were a year ago, with the inflation rate in the UK touching new highs month over month.
Experts have warned that the situation is unlikely to change in the coming months, and the Bank of England has predicted that inflation rates may reach as high as 10% in the second half of the year. Meanwhile, Justin King, the former CEO of supermarket chain Sainsbury's (LON:SBRY), has warned that households should be ready for higher grocery bills in the long term as the UK's 'golden era' of cheap food is coming to an end.
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In an interview with BBC Radio 4, King said that despite reporting higher profits, supermarkets could not be expected to bear the extra input costs completely. He further claimed that people now spend less money on food in terms of proportion of household budgets than they ever did, and this proportion may rise in the longer term.
Amid concerns about the impending rise in food prices, let us look at some food-related stocks listed on the London Stock Exchange and analyse their investment prospects.
Kerry Group (LON:KYGA)
The Ireland-based company develops taste and nutrition solutions for the food and beverages industry as well as pharmaceutical markets. It claims that over one billion people globally enjoy food and beverages that contain its taste and nutrition solutions. The company posted strong business growth for the first quarter of 2022, with a group volume growth of 5.6%.
Kerry Group holds a current market capitalisation of £14,810.17 million, and its shares were trading at EUR 100.66, 2.49% up at 10:55 am GMT+1 on 13 May. The share value has depreciated by more than 8% over the last one year, while the year-to-date return is currently at -11.27%.
Associated British Foods Plc (LON: ABF)
Associated British Foods is a diversified food processing and retailing company and operates in five segments, including grocery, sugar, agriculture, ingredients, and retail. For the 24 weeks ended 5 March 2022, the company reported a revenue of £7,882 million, while its adjusted operating profit rose by more than 90% to £706 million.
Shares of ABF were trading at GBX 1,671.50 at 11:15 am GMT+1 on 13 May 2022, with a market cap of £12,951.79 million. The company's one-year return stands in the negative territory at -26.86%, and the year-to-date return stands at -16.95%.
Premier Foods Plc (LON: PFD)
The FTSE 250-listed company manufactures and distributes food products and owns several popular brands like Mr Kipling, Bisto, Angel Delight, etc. It has 16 manufacturing sites and offices across the UK and employs over 4,000 people.
The company has a market cap of £888.89 million, and its share price appreciated by 4.13% over the past one year. At 11:27 am GMT+1 on 13 May 2022, its shares traded at GBX 104.77, up 1.72%.
Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
