The appointment of Robert F. Kennedy Jr. as America's Secretary of Health and Human Services under the Trump administration has sent tremors through the food and beverage industry.
His longstanding criticism of ultra-processed foods (UPFs) could signal a major policy shift that places ingredient suppliers and packaged food manufacturers under significant pressure.
Central to the challenge is the increasing scrutiny of UPFs, which are defined by the NOVA classification system as industrial formulations made mostly from ingredients not typically used in home cooking—such as preservatives, emulsifiers, and artificial flavours.
While convenient, these foods have been implicated in a range of health issues, from cardiovascular disease to metabolic disorders.
The US currently leads global UPF consumption, with such foods accounting for 57% of average caloric intake. Even a modest reduction in UPF’s dietary share—to 47% by 2028—could lead to a contraction in sales growth, according to investment research by Barclays.
The political viability of an outright ban on UPFs within SNAP, however, remains questionable.
As the Barclays analysis notes, defining UPFs for regulatory purposes is fraught with complexity.
The NOVA framework, while widely adopted in academic studies, has been criticised for its broad categorisation.
Products with strong nutritional profiles, such as fortified cereals or certain infant formulas, are often classified as UPFs due to their additive content.
Moreover, the report underscores the social and economic challenges: many SNAP beneficiaries rely on processed foods due to affordability and convenience.
Kennedy’s alternative policy approach—mandatory front-of-pack warning labels—may be less contentious but still disruptive for the industry.
Inspired by measures adopted in Latin America, such labelling could spur a wave of reformulation among US food manufacturers. In countries like Chile, graphic warnings about high levels of salt, sugar, or fat have driven significant product overhauls, boosting demand for alternative ingredients.
For suppliers like Kerry and Tate & Lyle PLC (LSE:TATE), the opportunity to provide lower-calorie, lower-sodium solutions could offset some of the damage inflicted by tighter regulations.
Barclays estimates that such reformulation trends in the US could deliver a potential 10% EPS boost for ingredient companies with the right product portfolios.
The backdrop to these policy debates is an ongoing shift in consumer behaviour.
Fresh food sales have begun to outpace packaged food growth, reflecting growing health consciousness among shoppers.
According to NielsenIQ data cited by Barclays, fresh produce categories have consistently outperformed processed food over the past year. This trend aligns with Kennedy’s stated goal of “fixing the broken food system” and encouraging healthier eating habits nationwide.
For investors, the duality of risk and opportunity is evident. While Kennedy’s appointment as Health and Human Services Secretary has already weighed on the share prices of major ingredient companies, the market appears to have priced in the worst-case scenario of SNAP reforms.
However, should the administration pivot towards labelling requirements or incentives for reformulation, the industry could witness a recovery.
As Barclays analysts conclude: “The initial market reaction may underestimate the potential for regulatory measures to drive innovation and demand within the ingredient sector.”
Kennedy’s proposed policies mark a crossroads for the food and beverage industry, one that could either reshape it towards a cleaner-label future or impose costly constraints.
Whether the Trump administration opts for a radical overhaul or incremental reforms, ingredient suppliers and packaged food companies will need to adapt swiftly to survive this paradigm shift.