In this article, we will explore the 7 most profitable food stocks to invest in.
Exploring the Food Industry: Key Insights and Consumer Trends
The food industry plays a crucial role in the global economy, impacting everything from agriculture to retail. As the world population grows, food demand is increasing and driving changes in consumption patterns.
According to The Business Research Company, the global food and beverages market was valued at $6.57 trillion in 2023. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 5.9% during 2024-2028 to reach $8.81 trillion by the end of the forecast period. In 2023, Asia-Pacific was the largest region in the food and beverages market.
The rise of technology in food production is transforming how companies operate. Innovations like AI and robotics are streamlining supply chains and improving efficiency. Recent trends also highlight a shift towards healthier and functional foods that support overall well-being. For instance, many consumers are now looking for products that not only satisfy hunger but also promote health benefits, such as weight management and heart health.
In July 2024, Matter Communications shared insights from its 2024 Food & Beverage Trends survey, which surveyed over 1,000 US consumers about their food and beverage preferences. The findings highlight the significant influence of social media on consumer behavior, with 85% of respondents indicating they have either researched or purchased a product after seeing it posted by friends, family, or influencers. Additionally, 75% of those surveyed expressed a willingness to try viral food or beverage trends after seeing it on social media.
Consumers today are increasingly prioritizing healthier food options. According to the survey results, a significant majority, about 94%, believe that having access to healthier choices is essential when buying food and beverages. Among the nutritional features that shoppers value most, low sugar content ranks highest, followed closely by high protein and low carbohydrate options. This shift reflects a growing awareness of health and nutrition among consumers.
Additionally, the survey results show that many shoppers still prefer to purchase food in physical stores rather than online, with 56% indicating that they are more likely to buy in-store. Price also plays a crucial role in their decisions; 45% of consumers consider an affordable price to be the most important factor when selecting food and beverage products. As inflation continues to affect budgets, consumers are looking for options that provide both value and satisfaction without compromising their health goals.
As the market continues to evolve, understanding these trends will be essential for food companies aiming to remain competitive and relevant in a rapidly changing landscape.
With this background in mind, let’s take a look at the 7 most profitable food stocks to invest in.
A B2B food distributor making sure grocery shelves are fully stocked with food.
Methodology
To compile our list of the 7 most profitable food stocks to invest in, we used the Finviz and Yahoo stock screeners to find the largest food companies. We also reviewed our own rankings and consulted various online resources.
Next, we focused on profitability. From this initial list of more than 20 food stocks, we narrowed our choices to stocks that had positive trailing twelve-month (TTM) net income and stocks that have grown their net income positively over the past 5 years.
To ensure the reliability of our findings, we consulted reputable sources such as SeekingAlpha, which provided insights into the net income CAGR over the past five years, and YCharts, which offered information on TTM net income.
Finally, from this list of the most profitable stocks that met our criteria, we focused on the top 7 food stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 database of 900 elite hedge funds. The 7 most profitable food stocks to invest in are ranked below in ascending order based on the number of hedge funds holding stakes in them as of Q3 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Most Profitable Food Stocks To Invest In
7. The Hershey Company (NYSE:HSY)
TTM Net Income: $1.77 Billion
5-Year Net Income CAGR: 6.75%
Number of Hedge Fund Holders: 33
The Hershey Company (NYSE:HSY) is an American multinational snacks company that is primarily known for its chocolate products. The company has over 90 brand names in around 80 countries. These include Hershey’s, Reese’s, Kisses, Kit Kat, Jolly Rancher, Twizzlers, Ice Breakers, SkinnyPop, Pirate’s Booty, and Dot’s Homestyle Pretzels.
In the third quarter of 2024, The Hershey Company (NYSE:HSY) reported net sales of $2.98 billion, reflecting a slight decline of 1.4% compared to the same quarter in the previous year. Despite facing challenges such as high cocoa prices and a tough consumer market, the company remains focused on driving growth through strategic initiatives. The Hershey Company’s (NYSE:HSY) plans include expanding chocolate offerings, enhancing the sweets category, and maximizing seasonal sales opportunities.
The company is focusing on continuing to expand its Sweets portfolio with exciting new products like Shaq-a-licious Gummies and Jolly Rancher Ropes. These additions aim to boost growth in the sweets category through 2025 and beyond. On November 8, 2024, The Hershey Company (NYSE:HSY) announced its acquisition of Sour Strips, a rapidly growing sour candy brand known for its vibrant flavors and strong social media presence. This acquisition will enhance Hershey’s offerings in the sweets category and help the company reach new consumers looking for exciting snacking options.
Additionally, the company is investing in international markets. For instance, in Mexico, the company is enhancing the presence of its popular brands such as Hershey’s and Kisses. By optimizing its market strategies, The Hershey Company (NYSE:HSY) seeks to engage more consumers in key regions like India and Latin America.
With a strong emphasis on innovation and targeted investments, The Hershey Company (NYSE:HSY) is well-positioned to adapt to changing consumer preferences and maintain its competitive edge in the snacks industry. HSY ranks among the most profitable food stocks to invest in. According to Insider Monkey’s Q3 database of 900 hedge funds, 33 hedge funds held stakes in The Hershey Company (NYSE:HSY).
6. Yum! Brands Inc. (NYSE:YUM)
TTM Net Income: $1.52 Billion
5-Year Net Income CAGR: 6.01%
Number of Hedge Fund Holders: 34
Yum! Brands Inc. (NYSE:YUM) is an American multinational fast food corporation that operates well-known brands like KFC, Taco Bell, Pizza Hut, and The Habit Burger Grill. With restaurants in over 155 countries and territories, it is one of the largest restaurant companies in the world.
In the third quarter of 2024, the company reported a modest growth in worldwide system sales of 1%, with Taco Bell showing a strong performance at 5%. Yum! Brands Inc. (NYSE:YUM) also increased its unit count by 5%, adding 1,029 new restaurants in the quarter. In the third quarter, Yum! Brands Inc. (NYSE:YUM) reached an important milestone by surpassing 60,000 restaurants around the world. This achievement highlights the company’s strong growth and expanding presence in the global fast-food market.
Yum! Brands Inc. (NYSE:YUM) reported that digital sales exceeded $8 billion, representing over 50% of total sales, highlighting the effectiveness of their digital initiatives. The company is making significant strides in its digital and technology efforts. In Q3 2024, Yum! Brands Inc. (NYSE:YUM) launched personalized marketing campaigns powered by artificial intelligence (AI). These campaigns have shown impressive results, boosting customer engagement, increasing purchases, and reducing customer churn.
YUM ranks among the most profitable stocks in the food sector. According to Insider Monkey’s Q3 database of 900 hedge funds, 34 hedge funds held stakes in Yum! Brands Inc. (NYSE:YUM) in the third quarter of 2024.
5. Archer-Daniels-Midland Company (NYSE:ADM)
TTM Net Income: $1.79 Billion
5-Year Net Income CAGR: 8.60%
Number of Hedge Fund Holders: 34
Archer-Daniels-Midland Company (NYSE:ADM) is a major American company that specializes in food processing and trading agricultural commodities. It manufactures and distributes a wide range of ingredients used in foods, beverages, supplements, and animal feed. Archer-Daniels-Midland Company (NYSE:ADM) plays a crucial role in the global food and agricultural supply chain by connecting farmers and crops with consumers and markets around the world.
The company is currently facing challenges in its grain business. In the third quarter of 2024, which ended on September 30, Archer-Daniels-Midland Company (NYSE:ADM) reported earnings before income taxes of $108 million, reflecting a significant decline of 90% compared to the same quarter in the previous year. This drop was largely due to falling prices for key crops like corn and soybeans, which have reached near four-year lows. Additionally, the company recorded a non-cash impairment charge of $461 million related to its investment in Wilmar.
Despite this less-than-ideal performance in Q3 2024, the company remains a strong contender in the market. Archer-Daniels-Midland Company’s (NYSE:ADM) Board of Directors declared a cash dividend of 50 cents per share on November 8, 2024, marking the company’s 372nd consecutive quarterly payment. This impressive record of over 93 years of uninterrupted dividends demonstrates ADM’s commitment to returning value to its shareholders.
To navigate current market conditions, Archer-Daniels-Midland Company (NYSE:ADM) is focusing on enhancing productivity and operational efficiency. In Q2 2024, the company advanced numerous projects aimed at achieving $500 million in cost reductions over the next two years. These strategic efforts are expected to yield significant savings by the end of 2024.
According to Insider Monkey’s database, 34 hedge funds held stakes in ADM in the third quarter of 2024. This brings Archer-Daniels-Midland Company (NYSE:ADM) to the 5th spot on our list of the most profitable food stocks to invest in.
4. McCormick & Company Incorporated (NYSE:MKC)
TTM Net Income: $792.6 Million
5-Year Net Income CAGR: 2.42%
Number of Hedge Fund Holders: 36
McCormick & Company Incorporated (NYSE:MKC) is an American food company that specializes in flavor, seasonings, and spices. The company manufactures, markets, and distributes herbs, spices, seasonings, condiments, and flavors to the food and beverage industry including retailers, food manufacturers, and foodservice businesses. McCormick & Company Incorporated (NYSE:MKC) operates in over 150 countries and markets a diverse range of products through its portfolio of brands.
In the third quarter of 2024, the company reported stable sales compared to the same period last year, with a slight volume growth of 1%. Operating income increased to $287 million from $245 million year-over-year, while adjusted operating income rose to $288 million from $251 million. Earnings per share also improved, reaching $0.83 compared to $0.63 in the prior year.
The company is focused on driving growth through strategic initiatives such as brand marketing, new product development, and innovative packaging. During its Investor Day on October 22, McCormick’s (NYSE:MKC) leadership team outlined plans to achieve sustainable growth by leveraging its competitive advantages and executing proven strategies. The company aims for net sales growth of 4% to 6%, operating income growth of 7% to 9%, and earnings per share growth of 9% to 11% on a compounded annual growth rate basis over the next five years. McCormick & Company Incorporated (NYSE:MKC) is targeting at least $8 billion in annual net sales by 2028.
With a strong commitment to investing in core categories that generate the most value, McCormick & Company Incorporated (NYSE:MKC) is well-positioned for future success. MKC ranks among the most profitable stocks on our list of food stocks. As of the third quarter of 2024, McCormick & Company Incorporated (NYSE:MKC) was held by 36 hedge funds, according to Insider Monkey’s Q3 database of 900 elite hedge funds.
3. US Foods Holding Corp. (NYSE:USFD)
TTM Net Income: $575 Million
5-Year Net Income CAGR: 7.91%
Number of Hedge Fund Holders: 50
US Foods Holding Corp. (NYSE:USFD) is a leading food service distributor in the United States, serving around 250,000 restaurants and food service operators. The company offers a wide variety of food products, including frozen and dry foods, non-food products, and a comprehensive suite of e-commerce, technology, and business solutions.
In the third quarter of 2024, US Foods Holding Corp. (NYSE:USFD) reported a strong performance with net sales increasing by 6.8% to reach $9.7 billion. Total case volume also grew by 3.8%, with independent restaurant case volume rising by 4.1%. The company has successfully executed its strategy-driven operating model and leading digital solutions, resulting in continuous market share gains for 14 consecutive quarters with independent restaurants.
The company’s gross profit increased by 8.1% to $1.7 billion, reflecting effective pricing strategies and operational efficiencies. Notably, net income was $148 million, while adjusted EBITDA saw a significant increase of 13.2%, reaching $455 million. The company’s focus on digital solutions has enhanced its service offerings, including the MOXē platform that allows customers to manage orders and inventory seamlessly. Additionally, the introduction of a food cost calculator within MOXē now provides valuable insights to help customers optimize menu pricing and product selection.
The company has also been proactive in capital deployment, repurchasing $580 million worth of shares in the third quarter of 2024. Since starting its buyback program in late 2022, US Foods Holding Corp. (NYSE:USFD) has repurchased over $1.1 billion in shares, reflecting confidence in its valuation.
These initiatives and strong financial results position US Foods Holding Corp. (NYSE:USFD) as an attractive investment opportunity in the food sector, making it a compelling stock to consider for investors seeking growth potential. USFD has received a favorable outlook from analysts, who have a consensus buy rating for the stock. The 1-year median price target of $75.00 set by analysts indicates a potential upside of 12% from current levels.
2. McDonald’s Corporation (NYSE:MCD)
TTM Net Income: $8.24 Billion
5-Year Net Income CAGR: 7.04%
Number of Hedge Fund Holders: 60
McDonald’s Corporation (NYSE:MCD) is an American multinational fast food chain that ranks among the most profitable food stocks to invest in. With over 40,000 locations in more than 100 countries, it is one of the world’s largest food service brands. Around 95% of McDonald’s restaurants around the world are owned and operated by independent local business owners.
In the third quarter of 2024, McDonald’s Corporation (NYSE:MCD) reported consolidated revenues of nearly $6.9 billion, reflecting a 3% increase from the previous year. The company also reported that systemwide sales to loyalty members exceeded $28 billion over the trailing twelve-months, with nearly $8 billion generated in the quarter. This growth is driven by strong value offerings and menu innovations that resonate with customers.
The company has increased its quarterly cash dividend by 6% to $1.77 per share, demonstrating its commitment to returning value to shareholders. McDonald’s Corporation (NYSE:MCD) is focused on enhancing its value proposition in response to competitive pressures, introducing initiatives such as €4 Happy Meals in France, 3 for £3 in the UK, and C$1 coffee in Canada. These strategies aim to provide customers with affordable options while maintaining quality.
The company continues to invest in menu innovation, with plans to expand the McCrispy Chicken Sandwich to over 70 markets by the end of 2024. Additionally, McDonald’s Corporation’s (NYSE:MCD) pilot launch of the Big Arch burger in Portugal, Germany, and Canada has shown promising results, indicating strong consumer interest. The company is planning to work with franchisees and partners to deploy the Big Arch into more international markets in 2025.
Over the past five years, McDonald’s Corporation (NYSE:MCD) has achieved a compound annual growth rate (CAGR) of 4.22% in revenue and 7.04% in net income.
With its solid financial performance, commitment to innovation, and focus on delivering value, McDonald’s Corporation (NYSE:MCD) has positioned itself as a compelling investment opportunity in the food sector. The combination of consistent revenue growth and strategic initiatives makes MCD a strong candidate for investors looking for reliable food stocks.
As of the third quarter of 2024, McDonald’s Corporation (NYSE:MCD) was held by 60 hedge funds, according to Insider Monkey’s database. Carillon Tower Advisers stated the following regarding McDonald’s Corporation (NYSE:MCD) in its “Carillon Eagle Growth & Income Fund” third quarter 2024 investor letter:
“McDonald’s Corporation (NYSE:MCD) performed well as it met the expectations of investors looking for improvements in relative market share trends. The company’s introductions of menu items at premium- and medium-price tiers are picking up pace, allowing it to capture value more effectively.”
1. Chipotle Mexican Grill Inc. (NYSE:CMG)
TTM Net Income: $1.48 Billion
5-Year Net Income CAGR: 36.81%
Number of Hedge Fund Holders: 69
Chipotle Mexican Grill Inc. (NYSE:CMG) is a restaurant company that operates a multinational chain of fast-casual restaurants specializing in burritos, burrito bowls, quesadillas, tacos, and salads. As of September 30, 2024, there are more than 3,600 Chipotle restaurants in the US, the UK, Canada, France, Germany, and Kuwait.
CMG has demonstrated strong financial performance and strategic growth, making it an attractive food stock to consider. In the third quarter of 2024, Chipotle Mexican Grill Inc. (NYSE:CMG) reported a 13% increase in total revenue, reaching $2.8 billion, alongside a 6% rise in comparable restaurant sales. This growth is indicative of the company’s effective strategies in enhancing customer experience and expanding its market presence.
In Q3 2024, the company opened 86 new company-operated restaurants, of which 73 included a Chipotlane, and one internationally licensed restaurant. Chipotle Mexican Grill Inc. (NYSE:CMG) continues to prioritize expansion and it is on track to open between 285 and 315 restaurants in 2024. In 2025, the company expects to open between 315 and 345 new restaurants. Notably, over 80% of these new locations will feature Chipotlanes, the drive-thru lanes designed for digital orders. This format has proven successful in increasing sales and improving operational efficiency.
With strategic investments in technology and innovation, Chipotle Mexican Grill Inc. (NYSE:CMG) is well-positioned for continued growth and success. Chipotle’s robust financial results, strategic expansion plans, and commitment to quality make it a compelling investment opportunity in the food sector.
Overall, CMG ranks first among the 7 most profitable food stocks to invest in. While we acknowledge the potential of food companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CMG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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