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The Scores Recreation: Basic Mills will increase shopper costs, and so may McCormick

Grocery budgets need to be flexible as Credit Suisse analysts focus their attention on food companies and the likely price increases.

General Mills Inc.
GIS,
-0.10%
was downgraded from outperformance to neutral as higher costs and unexpected labor shortages take their toll. Credit Suisse has lowered its target price from $ 68 to $ 63.

"In our view, this will lead to further price lag and greater margin compression in the second half of fiscal 2022 when the company's hedges overflow and the full inflationary impact flows through," analysts wrote.

Despite these issues, analysts say General Mills' ecommerce and category management is strong and the pet business is beneficial.

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

See: Amazon is bringing its cashierless technology to 2 Whole Foods stores next year

And: Kroger raises adjusted earnings forecast for the full year

The company's shares lost 0.4% in early Monday trading; the stock is down 6.5% in the past three months.

Credit Suisse assumes that McCormick & Co.
MKC,
+ 0.85%
will have to raise prices too.

“Work bottlenecks at packaging and ingredients suppliers have increased costs and led to delays,” write analysts working with Robert Moskow.

"Similar to TreeHouse Foods, management said it viewed labor inflation at its suppliers as a structural issue that is likely to require further price increases for consumers in 2022."

tree house
THS,
+1.49%
manufactures food and beverage products under its own brand for grocers, food service providers and others.

McCormick is also feeling the effects of Hurricane Ida, which hit the New Orleans region and could affect the company's production of the company's Zatarain brand, according to Credit Suisse.

Credit Suisse rates McCormick shares above average with a target price of USD 100, compared to USD 104.

McCormick stock is down 10.5% so far in 2021 and is down 3.7% over the past three months.

The benchmark index S&P 500
SPX,
+ 0.26%
has increased by 5% in the past three months.

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