For generations, Cool Whip topped pies. Tropical punch Kool-Aid was served at children’s birthday parties. And an Oscar Mayer bologna sandwich was a lunchbox staple.

But in recent years, the big packaged food brands that dominated American pantries and refrigerators for decades are struggling as consumers spend less on brand-name cookies, spaghetti sauce and cream cheese.

The companies are grappling with a number of stressors. Shoppers, feeling pinched by higher food prices over the past two years, are cutting back or trading down to less expensive private labels. Others are eschewing highly processed foods for healthier, more natural items. And the continued rise of weight-loss drugs like Ozempic are reducing cravings for sugary and salty snacks.

Among the debates consuming executives in boardrooms of U.S. food companies is which brands consumers are buying and avoiding — and how large and lasting the impact of the weight-loss drugs will be, said Charlie Hadid, Morgan Stanley’s head of consumer investment banking in the Americas.

While the broad S&P 500 index has gained 40% over the last two years, an index of food and beverage stocks has flatlined.

Slimming down

To jump-start growth and satisfy investors, companies are starting to reengineer some of the big deals of the past, banking on a smaller-is-better, or narrower-is-better, strategy.

This month, Italian candy company Ferrero announced that it would acquire cereal giant WK Kellogg in a $3.1 billion deal. Kraft Heinz, a $26-billion-a-year hodgepodge of condiments, luncheon meats and frozen potato brands, is weighing its own breakup, two people familiar with the situation said.

Some of the big food companies are trying to evolve, at least on the margins. Some are acquiring the fast-growing, healthier brands. Many have pledged in recent weeks to dump artificial colors. In mid-July, executives at PepsiCo told Wall Street analysts and investors that it would add protein and fiber to some of its snacks and beverages.

Price increases by the food giants over the last couple of years kept revenues growing. But PepsiCo, which announced plans this year to acquire Poppi, a prebiotic soda brand, for $1.95 billion, has reported flat or falling demand for its snacks, bars and beverages in North America since 2022. General Mills, home to brands like Cheerios and Betty Crocker, recorded four straight years of declines in volume.

“The big brands are going to have to really fight hard to figure out how to stay relevant,” said Kelly Haws, a professor of marketing at Vanderbilt University. “The value of some of these brands has decreased dramatically, and they may have to reinvent themselves.”