Rising consumer prices and a cooling U.S. labor market have squeezed household budgets, steering shoppers to cheaper private-label alternatives and pressuring packaged food makers across the region.

The Minneapolis-based company saw quarterly volumes in its North America segment decline 16 percentage points compared with a year earlier and now expects overall category growth to fall below its long-term targets.

Tough environment for food processors

General Mills reaffirmed its annual targets of adjusted profit declining 10 per cent to 15 per cent and organic net sales ranging from down one per cent to up one per cent.

The first-quarter results underscore how tough the current environment is for food makers, who need to invest heavily to reignite volume growth, as consumers remain price-conscious but expect benefits such as added protein and distinctive flavors, Consumer Edge analyst Connor Rattigan said.

Shares were down one per cent in choppy early morning trading. The stock has dropped about 22 per cent this year.

General Mills posted a smaller‑than‑expected quarterly sales decline, helped by volume gains in its North America pet food unit and in international markets including India, China, Japan and Europe.

Net sales in the international segment rose six per cent in the quarter ended August 24, with pricing up six percentage points.

“We continue to see consumers seeking value and prioritize their spending on key benefits like protein, bold flavors, and feelings of nostalgia from brands they love,” said CEO Jeff Harmening in prepared remarks.

Pet food gains support sales

North America pet food net sales increased six per cent, partly due to the recent acquisition of Whitebridge Pet Brands’ North America business, after a one per cent decline a year earlier.

First-quarter sales fell 6.8 per cent to $4.52 billion (C$6.22 billion), slightly better than expectations for a 6.9 per cent drop to $4.51 billion, according to data compiled by LSEG.

General Mills’ adjusted profit of 86 cents per share topped estimates of 81 cents, driven partly by price increases in international and North America pet food segments.

— Reporting by Anuja Bharat Mistry and Sanskriti Shekhar in Bengaluru

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The Virginia-based meatpacker’s sales and adjusted earnings in the three months to June 29 rose year on year, but shares fell about one per cent after a drop in quarterly operating profits at its packaged meats and fresh pork divisions.

Cautious consumers

Similar to peers in the broader retail industry, Smithfield said consumer demand was cautious due to inflation. U.S. consumer prices increased moderately in July, and economists warned that higher prices from President Donald Trump’s sweeping tariffs were still coming.

“Consumer budgets remain tight,” Smithfield CEO Shane Smith told analysts on a call.

Smithfield has reduced risks in its hog business by raising fewer pigs itself and buying more from other producers. It said it expects to produce about 11.5 million hogs this year, down from 14.6 million in 2024.

Livestock feed, often the biggest expense in raising hogs, has also become less expensive owing to low grain prices.

The hog business swung to a quarterly operating profit of $22 million (C$30.3 million) from a $2 million loss a year earlier.

Smithfield projected total 2025 adjusted operating profit at $1.15 billion to $1.35 billion (C$1.58 billion to $1.86 billion), compared with a previous forecast of between $1.10 billion and $1.30 billion. The company, which went public in January, is an indirect, majority-owned subsidiary of Hong Kong-based WH Group.

Last week, Tyson Foods, which sells pork, beef and chicken, raised its annual revenue forecast.

Trump’s trade policies

Trump’s trade policies have forced meatpacking executives to navigate tariff disputes. In April, Smithfield said China, the world’s biggest pork consumer, was not a viable market due to retaliatory duties.

China’s effective duty rate on U.S. pork climbed to 172 per cent earlier this year before declining to 57 per cent in May, according to the U.S. Meat Export Federation, an industry group.

“We navigated the China tariff disruption, minimizing the impact by selling into alternative countries and channels, and subsequently resuming shipments to China,” Smith said.

Smithfield said its 2025 outlook for fresh pork business addressed risks that tariffs could become prohibitive again. Quarterly operating profits for the fresh pork unit plunged by 39 per cent to $35 million as sales rose five per cent to $2.1 billion.

Exports accounted for 13 per cent of Smithfield’s total sales last year, three per cent of which were to China, according to the company.

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The company revived volumes by lowering prices across its product range, from snacks to pet food. However, it warned that higher-than-planned promotional spending would weigh on its annual profit.

Budget-strapped shoppers have shunned pricier branded products for cheaper private label brands in recent years, prompting packaged food companies to increase promotions.

“As we moved through the quarter, it became clear that our product news and media support were not breaking through because we didn’t have the right value,” CEO Jeff Harmening said on the post-earnings call.

The company said its Pillsbury branded refrigerated dough sales were “disappointing” at the start of the key holiday season when customers turn to baking.

As a result, the company is stepping up media investment in the current quarter for the dough brand to attract customers, leading to higher selling and general and administrative expenses.

“Its (General Mills’) investments in brand marketing are necessary to sustain the long-term growth of its brands, but this will also have a negative impact on margins in the short term,” Blake Droesch, analyst with eMarketer said.

General Mills now expects annual adjusted profit to fall in the range of one to three per cent, compared with the prior range of down one per cent to up one per cent.

It is now targeting the lower end of the organic net sales range of flat to up one per cent.

For the quarter ended Nov. 24, the Bugles corn chip snacks maker posted sales of $5.24 billion (C$7.51 billion), surpassing analysts’ estimates of $5.14 billion (C$7.36 billion), according to data compiled by LSEG.

Adjusted profit came in at $1.40 (C$2.01) per share, above estimates of $1.22 (C$1.75) per share.

Its volumes rose 3 percentage points, while prices decreased 1 percentage point.

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Like other U.S. packaged food companies, Conagra has seen demand take a hit from prior price hikes on its frozen meals and Slim Jim beef jerky, with shoppers opting for cheaper private label brands.

The company’s total organic sales volumes fell 1.6 per cent in the first quarter after decreasing 1.8 per cent in the fourth quarter.

Volumes at Conagra’s grocery and snacks unit, which accounts for most of the company’s revenue, fell 1.8 per cent, while its foodservice segment volumes dropped 11.1 per cent.

“Drastic changes in consumer shopping habits seen in the past few years are likely to be more permanent than previously thought,” eMarketer analyst Blake Droesch said.

“Companies such as Conagra will need to innovate to meet the demands of the modern consumer.”

The company reaffirmed its annual forecasts on Wednesday and said it anticipates a challenging consumer backdrop in fiscal 2025.

Temporary manufacturing disruptions during the quarter in the company’s Hebrew National hot dog business resulted in a $27 million (C$36.4 million) hit to its first-quarter results, Conagra said.

The company’s first-quarter net sales fell 3.8 per cent to $2.79 billion (C$3.76 billion). The average analyst expectation was $2.84 billion (C$3.83 billion), according to data compiled by LSEG.

On an adjusted basis, Conagra earned 53 cents per share, missing estimates of 60 cents.

The company’s quarterly gross margin fell 189 basis points to 26.5 per cent.

Last month, peer General Mills GIS.N reported a smaller-than-expected drop in quarterly sales, benefiting from improved demand as the Cheerios maker cut prices for some of its products.

— Reporting for Reuters by Anuja Bharat Mistry in Bengaluru.

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