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General Mills will raise consumer prices, and McCormick might, too

Tonya Garcia

Supply chain, labor shortages and Hurricane Ida are all named as factors

Grocery budgets will have to be flexible as Credit Suisse analysts turn their attention to food companies and the price hikes that are likely soon.

General Mills Inc. (GIS) was downgraded to neutral from outperform as higher costs and unexpected labor shortages take a toll. Credit Suisse cut its price target to $63 from $68.

"Our sense is that this will lead to another pricing lag and more margin compression in the back half of [fiscal 2022] when the company's hedges roll over and the full impact of inflation flows through," analysts wrote.

Even with these issues analysts say General Mills' e-commerce and category management are strong and its pet business is an advantage.

General Mills brands include Cheerios cereal, Muir Glen organic foods and Progresso soup.

See: Amazon to bring its cashier-less technology to 2 Whole Foods stores next year

And:Kroger raises full-year adjusted earnings guidance

The company's shares were up 0.3% in Monday trading; the stock is down 6.2% over the past three months.

Credit Suisse anticipates that McCormick & Co. (MKC) will also have to raise prices.

"Labor shortages at packaging and ingredients suppliers have increased costs and caused delays," analysts led by Robert Moskow wrote.

"Similar to TreeHouse Foods, management said that they view labor inflation at their suppliers as a structural issue that is likely to require more price increases for consumers in 2022."

Treehouse (THS) makes private-label food and beverage items for grocers, foodservice providers and others.

McCormick is also feeling the effect of Hurricane Ida, which hit the New Orleans area and, Credit Suisse says, could impact production of the company's Zatarain's brand.

Credit Suisse rates McCormick stock outperform with a $100 price target, down from $104.

McCormick stock has tumbled 11% to date in 2021 and is down 4.7% over the past three months.

The benchmark S&P 500 index has risen 4.4% over the last three months.

-Tonya Garcia


(END) Dow Jones Newswires

09-14-21 1557ET

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