Consumers and regulators want food to be healthier and Barclays analysts think that makes the ingredients sector a valuable place to be for stock investors.
Makers of specialty ingredients, producing everything from basic commodities such as sugar and cocoa to substances to enhance flavor or nutritional value, are in a sweet spot, analysts led by Arthur Reeves wrote in a report.
While consumers want their food to be healthier, with less fat and sugar and more protein, regulators are demanding that food producers make more wholesome and nutritious products to tackle obesity. Food companies, therefore, are looking to ingredients companies to help meet those demands.
Thanks to these twin pressures of the “food revolution,” specialty ingredients “have never been more valuable and provide pricing power and growth,” the Barclays analysts said. Their top pick is Denmark-based Chr. Hansen which makes probiotics, cultures and enzymes that should position it well to benefit from a push for cleaner, healthier eating.
The broker also likes UK-based Tate & Lyle. A business made famous for its sugar business, Barclays says the company’s non-sugar sweeteners and texturizers should help it benefit from reduced sugar diets.
The big turn-off is UK exposure, where higher costs and the threats posed by Brexit could put pressure on margins. As such, the bank’s least-preferred names are Greencore Group and Bakkavor Group.
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