TD Cowen: MAHA plan is coming, consumer goods stocks must rise to the challenge.

TD Cowen analysts led by Robert Moscovici stated, "2024 will be a challenging year for consumer goods stocks, and 2025 is expected to be even more difficult," as the economic and business-friendly prospects during the Trump administration are leading investors to shift from essential consumer goods stocks to technology and non-essential consumer goods. Companies in the processed foods, snacks, and alcohol businesses have been under pressure due to consumer behavior seeking value and increased use of GLP-1. The new government's "Make America Healthy Again (MAHA)" plan is expected to further exacerbate this trend and continue to drive consumers towards grocery stores (fresh foods), away from processed and pre-packaged foods. Moscovici stated, "Perhaps market concerns are somewhat exaggerated, consumers will continue to eat, drink, and have fun as usual." He added, "But our business minds cannot accept category growth weakness." He cited data from TD Cowen showing a 6.7% growth in sales in categories surrounding grocery stores, while sales on grocery and frozen food shelves only increased by 1.5%. In his research report, Moscovici stated, "We still believe that many food and beverage brands need to lower prices and profit structures to enhance consumer value perception." For this reason, Moscovici downgraded WK Kellogg's (KLG.US) rating from hold to sell and lowered its target price by $2 to $16, citing concerns about competition in the cereal category, potential disruptions from its supply chain modernization projects, and unnecessary focus on unhealthy foods under the MAHA plan (Kellogg's Apple Jacks, Froot Loops, Frosted Flakes, and Eggo Waffles are likely targets of MAHA's attacks). Cowen also downgraded the ratings of JM Smucker Company (SJM.US) and Kimberly-Clark Corporation (KMB.US) from "buy" to "hold," and upgraded McCormick (MKC.US) and Coca-Cola Company (KO.US) ratings from "hold" to "buy."