How consumer concerns about ultra-processed foods are impacting food giants: BNP Paribas quantitative analysis

How Consumer Concerns Over Ultra-Processed Foods Are Affecting Food Giants: BNP Paribas Quantitative Analysis

Ultra-processed foods (UPFs) are becoming a focus for consumers, policymakers, and investors, with major US packaged food companies facing increasing pressure to transform.

New York — According to a recent analysis by BNP Paribas, major US packaged food companies are highly exposed to consumer reactions against so-called "ultra-processed foods" (UPFs), with sales data showing shoppers have already begun to move away from foods they perceive as overly processed.

In research reports published on June 10 and June 29 by equity research analyst Max Gumport, BNP Paribas identified Oatly, The Hershey Co., and Flowers Foods Inc. as the packaged food companies with the highest UPF risk within its coverage, with over 92% of their US retail sales coming from UPFs. They were followed by Kraft Heinz Co., Mondelez International, Conagra Brands Inc., General Mills Inc., and The Campbell’s Co., which derive at least 77% of their US retail sales from UPFs.

"This exposure is significant because a growing body of scientific evidence links UPFs to adverse health outcomes, and UPFs have become a target for policymakers, with the latest update to the *Dietary Guidelines for Americans* explicitly recommending avoiding highly processed foods and prioritizing nutrient-dense options," BNP Paribas said in its June 29 research report.

To quantify UPF risk among the companies it covers, BNP Paribas used barcode-level mapping to align US tracked channel data (Nielsen, 52 weeks ending May 16) with the Nova food classification system. The Nova system categorizes foods into four groups: unprocessed or minimally processed (Nova 1); processed culinary ingredients (Nova 2); processed foods (Nova 3); and ultra-processed foods (Nova 4), which are industrially produced items containing five or more ingredients and may include additives and artificial components not commonly used in home cooking.Among the 12 companies covered by BNP Paribas, approximately half or more of U.S. retail sales for all companies come from UPF (Nova 4), while those with the lowest risk are J.M. Smucker Co., McCormick & Co., Hormel Foods Corp., and Smithfield Foods Inc. These companies derive about 50% to 60% of their sales from UPF, which analysts consider to "provide some protection for investors."

"Over the past year, our focus has been on changes in consumer preferences and the shift from large U.S. packaged food companies to healthier categories, natural foods, and disruptive brands—brands that offer products with 'better-for-you' attributes that align more closely with consumer perceptions," BNP Paribas noted in a June 10 report titled "Ultra-Processed Foods: Quantifying the Risk." "We view UPF as central to these shifts and believe portfolios with significant exposure to UPF may continue to underperform the industry. In fact, even in the U.S. tracked channel sales data, there is evidence that consumers are moving away from UPF toward unprocessed or minimally processed foods."

In a June 29 report titled "Ultra-Processed Foods: Demonstrating Consumer Shift," BNP Paribas examined five food categories—yogurt, frozen meals and vegetables, nut butters, fruit snacks and candy, and cereal/granola—that contain both unprocessed or minimally processed (Nova 1) and ultra-processed (Nova 4) products, and correlated them with U.S. tracked channel data.

Although describing consumer awareness of UPF as "nascent," BNP Paribas noted it is "rapidly rising" and could intensify the impact on processed food companies.

"The results are consistent across all categories: consumers are moving away from ultra-processed foods," BNP Paribas stated in the report.

The analysis found that across these categories, U.S. tracked channel data (Nielsen, 52 weeks ending June 13) shows that retail sales growth for Nova 1 products is about 7% higher than for Nova 4 products. Specifically, Nova 1 products saw sales growth of nearly 15% in yogurt, 10% in frozen meals and vegetables, about 2.5% in fruit snacks and candy, and about 2% in nut butters and cereal/granola. In comparison, Nova 4 products grew by about 2% in yogurt, less than 1% in cereal/granola, but declined by about 2.5% in nut butters, 2% in frozen meals and vegetables, and less than 2% in fruit snacks and candy.

"We believe the U.S. tracked channel data clearly shows that consumers are starting to flip over packages and make purchasing decisions based on ingredient lists and degree of processing," BNP Paribas said in the report.Although consumer awareness of UPF is still in its "nascent" stage, BNP Paribas emphasizes that it is "rapidly rising," which could exacerbate the impact on highly processed food companies.

"In other words, according to Google Trends data, since the beginning of 2023, search interest in 'ultra-processed foods' has grown faster than 'artificial intelligence,' but remains far below levels for 'organic food' and 'low-carb diets,'" the investment firm said in its June 29 report.

Consumer reactions to UPF come as state-level restrictions on the purchase of certain "unhealthy" foods and beverages within the Supplemental Nutrition Assistance Program (SNAP) are also beginning to affect packaged food sales. However, the good news, according to BNP Paribas, is that large packaged food companies still have room to address growing consumer and investor concerns about UPF through product innovation and portfolio reshaping, even as some sales impacts are already emerging.

"This leaves room for companies that dare to take more decisive action to improve their portfolios," BNP Paribas said in its analysis. "We see significant opportunities for companies to transform their portfolios through innovation (organic growth) and M&A (inorganic growth)."

Industry Impact

• Agricultural Productivity and Supply Chain: Shifts in consumer preferences toward UPF may prompt food companies to reassess raw material sourcing, increasing demand for unprocessed or minimally processed ingredients, thereby affecting upstream agricultural production structures. For example, rising demand for fresh and frozen vegetables could drive precision agriculture and sustainable production practices.
• Food Processing and Technology: Reducing reliance on UPF requires food manufacturers to develop cleaner-label alternatives, spurring food technology innovations such as natural preservatives, alternative proteins, and novel processing techniques.
• Investment Direction: BNP Paribas notes that significant opportunities exist to transform portfolios through organic innovation and M&A, which could channel capital toward healthy foods, functional ingredients, and sustainable food tech startups.

Future Outlook

• Next 3–5 Years: UPF awareness will continue to rise, and further policy tightening (e.g., expansion of SNAP restrictions, labeling regulations) will accelerate the transformation of food company product portfolios. In agtech, precision agriculture and supply chain traceability technologies will help verify the "minimally processed" status of ingredients.
• Agricultural AI and Data Platforms: Leveraging big data and AI to analyze consumer preference trends, food companies will be able to more precisely adjust product formulations and raw material sourcing, improving supply chain efficiency.
• Sustainable Development: Reducing ultra-processed foods typically means less packaging waste and shorter supply chains, aligning with regenerative agriculture and low-carbon goals.

ConclusionConsumer concerns about ultra-processed foods are no longer a fringe issue but are reshaping the landscape of the U.S. food industry. BNP Paribas' analysis offers a quantitative perspective for investors and the industry, showing that even at an early stage of awareness, sales data already reflect a significant shift. For the agri-food tech sector, this trend presents both challenges and opportunities: driving the food system toward a healthier, more transparent, and more sustainable direction.