Reflecting growing pressures on consumer basics going into 2025, TD Cowen analysts have reduced WK Kellogg (KLG, Financials) to Sell and The J.M. Smucker Company (SJM, Financials) to Hold. Changing customer tastes for fresh foods over processed goods combined with expected regulatory difficulties under the "Make America Healthy Again" campaign are redefining the industry's future.

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Analyst Robert Moskow and his colleagues noted that although demand for fresh fruit and perimeter-aisle goods is surpassing poor category growth in processed meals and snacks. TD Cowen research shows that sales in fresh food categories increased 6.7%, much exceeding the 1.5% expansion seen in grocery and frozen food aisles.

Moskow underlined that in order to appeal to ever value-driven customers, basics firms have to change their pricing and profit structures.

The downgrades reflect worries about particular issues facing WK Kellogg, including competitive pressures in the cereal industry, possible interruptions from its supply chain transformation, and regulatory monitoring under the MAHA effort. Products thought to be harmful, like Kellogg's Apple Jacks, Froot Loops, Frosted Flakes, and Eggo Waffles, are anticipated to be targets of the effort.

Due to superior posture to negotiate changing market dynamics, McCormick & Company (MKC, Financials) and Coca-Cola (KO, Financials) were upgraded to Buy from Hold; Smucker and Kimberly-Clark Corp. (KMB, Financials) was lowered to Hold.

With fresh food trends and health-conscious regulations reallocating consumer spending, the research emphasizes the need of flexibility for basics brands.