Couch dining to withstand restaurant reopenings, Jefferies says

Katrina Lewis, Bloomberg News

Guests wearing protective masks looks at disposable paper menus as a waiter wearing a protective mask pours a beverage on an outdoor patio of a restaurant in San Francisco, California, U.S., on Monday, June 15, 2020. San Francisco restaurants opened their patios Friday for the first time in three months. , Bloomberg

The thrill of eating out at newly reopened restaurants still won’t trump the comfort of kitchen tables and couches.

That’s the prediction by Jefferies, which anticipates the lift experienced by packaged food is here to stay as consumers choose to save money by dining in. The firm’s recent survey found that about 80 per cent of consumers expect to eat at home as much or more than they did during the pandemic after stay-at-home orders are lifted, according to analyst Rob Dickerson.

Dickerson upgraded Conagra Brands Inc. and Campbell Soup Co. to buy from hold on Monday. For Conagra, the focus on eating at home helped boost its Birds Eye, Duncan Hines and Wish-Bone brands -- all names that weighed on the company’s sales before the pandemic.

Even before COVID-19 hit, Campbell Soup tweaked its strategy to focus on top-selling brands. The at-home consumption lift seen at the end of March accelerated those efforts at the Camden, New Jersey-based company, which also slashed promotional activity, the analyst said.

Dickerson also raised spice manufacturer McCormick & Co.’s rating, but only to hold based on valuation. He said a lift in the consumer segment’s cooking and baking ingredients will help insulate the company from headwinds posed by emerging markets and food service demand. Compared to U.S. food peers, McCormick draws a higher percentage of sales and profit from those two areas.

Not everyone is as bullish on the stay-at-home trend as Jefferies. Goldman Sachs, alongside other firms, is more confident that consumers are good and ready to exit their dining rooms and revel in the attention of waiters and sommeliers. Analyst Jason English said the demand for packaged food has peaked.

“We expect further moderation of category growth ahead as restaurants reopen across the country and consumers shift a portion of their consumption back to away-from-home,” English wrote.

Yet a full reversion to pre-pandemic demand appears unlikely. He expects “a degree of crowd-avoidance behavior and higher unemployment to continue to benefit food-at-home.”