In the can

Old-school food brands need to tweak recipes

Old-school food brands need to tweak their recipes. US consumers are shunning food found in boxes and cans in favour of fresher, simpler alternatives. The likes of Kraft, Campbell Soup, and Spam-maker Hormel are responding by shuffling management, cutting costs and buying sexier products, but growth remains elusive. It's a problem that maybe best worked out in private.

The sector's struggles underscore how venerable brands that dominated kitchen pantries for much of the last century have had a hard time adjusting to a new generation of more health-conscious, pickier eaters.

Campbell's soups, Kraft cheeses and Hormel's tinned meats still produce reliable cash flows that feed investors' hunger for steady dividends. But growth looks challenged. Few large food companies are expected to grow sales much faster than GDP over the next few years, according to forecasts compiled by Thomson Reuters.

It's a multifaceted problem, as processed-food producers face rising pressure, not just from rival brands and supermarkets' cheaper private-label goods, but also from new investment in grocers' fresh-food offerings and the increased availability of take-out.

Along with reshuffling management, as Kraft has done, the industry has been knuckling down on costs. Some have also hit the acquisition trail in an attempt to bulk up on more fashionable comestibles, such as Hormel's potential deal for organic pork products specialist Applegate Farms. Others include Hershey's purchase of posh beef-jerky maker Krave Pure Foods last month, and General Mills' $820 million gobble of "natural" mac-n-cheese group Annie's last year.

But competition for the most attractive acquisition targets can be fierce - witness last year's bidding war over sausage-maker Hillshire Brands, ultimately won by Tyson Foods. And "natural" products sometimes aren't as profitable as processed pantry staples, meaning better growth may come at the expense of profit.

Getting the balance right may be a challenge best handled in private. Ketchup-maker Heinz, which was bought out by Warren Buffett's Berkshire Hathaway and a Brazilian private equity group in 2013, is arguably in a better position to make tough decisions about its product mix and cost base than public rivals that need to worry about the next quarter's growth forecast.