WSJ What’s News Episode: “What’s News in Earnings: Tough Times Come for Big Food”

Release Date: August 6, 2025
Host: Jesse Newman
Guest: Aaron Back, Editor of the Wall Street Journal's "Heard on the Street" Column

Introduction

In this episode of WSJ What’s News, host Jesse Newman delves into the recent earnings reports of major food companies, unveiling the multifaceted challenges facing the sector. Joined by Aaron Back, editor of the Wall Street Journal's "Heard on the Street" column, the discussion sheds light on declining sales, shifting consumer behaviors, and the broader economic pressures impacting the food industry.

Declining Earnings and Consumer Stress

Aaron Back opens the conversation by highlighting the disappointing performance of major food companies. "The results are pretty poor, and the performance of those stocks reflects that," he remarks at [01:42]. Analyzing the organic sales of five leading companies—Kraft, Heinz, General Mills, Campbell, Conagra, and J.M. Smucker—Back notes a downward trend: "It was down at four of the five in the last quarter, and across all five, it was down an average of 2%." This decline underscores significant consumer anxiety and cautious spending habits amidst economic uncertainties.

Cost Pressures and Loss of Pricing Power

The discussion moves to the financial strains food companies are enduring. Rising tariffs and surging costs for raw ingredients like cocoa and coffee have squeezed profit margins. Back emphasizes a critical issue: "These companies have lost pricing power... they're finding they can't do that because consumers are just fed up with the cumulative inflation of the last several years," at [02:50]. Previously, companies could pass increased costs onto consumers through higher prices, but this strategy is now faltering as consumers become less tolerant of price hikes, leading to decreased profitability in the sector.

Segment Performance: The Struggle of Snack Foods

When dissecting the food sector, Aaron Back points out that not all categories are equally affected. "Snacks is under pressure... snacks was identified by the industry not too long ago as the biggest growth driver that they were all chasing, and that has now just hit a wall," he states at [03:13]. Using Campbell as a case study, Back illustrates the shift: while grocery-related sales like soups and sauces saw a 6% increase, snack sales declined by 5%. This unexpected downturn raises questions about the current consumer priorities and behaviors.

Impact of Health Trends and GLP-1 Drugs

A significant factor contributing to the decline in snack sales is the rising popularity of GLP-1 drugs, such as Ozempic, which aid in weight loss. Back speculates, "One definite possibility is GLP drugs... one of the first things that you cut back on when you're on GLP drugs is things like sweet cakes and snacks" at [04:36]. Additionally, the resurgence of health and wellness trends, complemented by political movements like "Make America Healthy Again," is pressuring companies to reduce artificial additives. Back explains, "They have the ability to adapt to that, but when that is happening at the same time as these other pressures... companies may not have the resources to address all those simultaneously" [05:20].

Outlook: Short-Term Challenges and Long-Term Possibilities

Looking ahead, Aaron Back expresses a pessimistic short-term forecast for the food industry. "For the next couple quarters, I'm quite pessimistic now," he admits at [06:22]. Companies like Kraft Heinz are absorbing increased costs without significantly raising prices to avoid alienating cost-sensitive consumers. However, Back remains cautiously optimistic about the long-term prospects: "Some companies are going to find a way to feed them... there will be some winners that emerge" [06:45]. He anticipates a period of consolidation, with successful companies adapting through strategic adjustments such as shedding underperforming segments or focusing on growth areas.

Conclusion

The episode concludes with a balanced view of the food industry's current struggles and future potential. While immediate challenges from inflation, tariffs, and changing consumer behaviors pose significant hurdles, the fundamental necessity of food ensures that companies will continue to innovate and adapt. The key will be identifying which companies can effectively navigate these complexities to emerge stronger in the evolving market landscape.

Notable Quotes:

• "The results are pretty poor, and the performance of those stocks reflects that." — Aaron Back [01:42]
• "These companies have lost pricing power... they're finding they can't do that because consumers are just fed up with the cumulative inflation of the last several years." — Aaron Back [02:50]
• "Snacks is under pressure... snacks was identified by the industry not too long ago as the biggest growth driver that they were all chasing, and that has now just hit a wall." — Aaron Back [03:13]
• "One definite possibility is GLP drugs... one of the first things that you cut back on when you're on GLP drugs is things like sweet cakes and snacks." — Aaron Back [04:36]
• "For the next couple quarters, I'm quite pessimistic now." — Aaron Back [06:22]
• "There will be some winners that emerge… figuring out who's going to figure out that formula for what people want and how to give it to them at an acceptable cost." — Aaron Back [06:45]

This comprehensive overview captures the essential insights and analyses from the podcast, providing listeners with a clear understanding of the current state and future trajectory of the big food companies amidst economic and social shifts.