Dairy, meat companies gain muscle in times of protein diets

Europe's dairy and poultry producers are having a moment as the global trend toward high-protein diets intensifies, in a stark contrast with Big Food's struggle to revive volumes. British meat producer Cranswick recently said its premium ranges outperformed thanks to consumers' growing appetite for protein while Swiss dairy manufacturer Emmi boosted its sales guidance as it benefited from the global drive toward "healthy nutrition, naturalness and high-quality proteins," with the high-protein category growing more than 20% a year.

Glanbia, an Ireland-based maker of nutrition products, also raised its guidance, citing sales of protein powders, healthy snacks and vitamins for both athletes and health-conscious everyday consumers. "If you look at the underlying performance of beef, even with that fairly significant inflation in the sector, consumers are still continuing to demand protein," Cranswick chief commercial officer Jim Brisby said on a call with analysts earlier this year. "Meat's very much back on trend from a health perspective."

Upbeat outlooks from those smaller companies stand at odds with recent updates from Europe's biggest snack, chocolate and alcohol makers, which are contending with weakening volumes even as food inflation normalises. Just in the past six months, Nestle shares have dropped 14%, Heineken has lost 17% and Diageo has slid 7.6%. Glanbia is up 40% and Cranswick is 3.8% higher.

The rising adoption of anti-obesity drugs is a "major headwind" and "more of a challenge than an opportunity" for companies like Nestle, chocolate maker Lindt & Spruengli, Heineken and Smirnoff-owner Diageo, Bloomberg Intelligence strategists Laurent Douillet and Aditya Khanduja wrote in a note.

While companies like Nestle have introduced new products to cater to this growing consumer segment, including smaller pack sizes and high protein content, the effect on profit remains limited so far, according to the strategists. Smaller rival Danone is faring better, having emphasised dairy categories such as its Activia yogurt to drive growth.

At least 30% of GLP-1 users cut back on sweets, snacks and alcohol both during and after treatment, a Bloomberg Intelligence survey of 2,327 patients found recently. "If a big portion of those companies' revenue faces a headwind of 20% or 30%, happening over maybe five or 10 years, that's going to be very difficult to offset even with new products," Douillet said in an interview.

Volumes declined over the second quarter for companies like Nestle and Heineken. In a sign of further weakness down the road, organic sales growth estimates for European consumer staple companies in 2025 have been cut to 3.2%, compared with 4.1% earlier this year.

The retreat from indulgence isn't just confined to users of weight-loss drugs, with younger generations as a whole embracing healthier and more sober lifestyles. "Alcohol is under pressure because younger people drink less while GLP-1 users also cut consumption," Kepler Cheuvreux analyst Jon Cox said.

"A shift toward protein-based diets for quite a few years is now accelerating," he added. "This is having a major impact on certain categories, not least dairy and yogurt, which a few years ago was declining, but is now having a reboot."