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Which FTSE 250 food producer stock will serve up a sound investment?

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Peter Taberner
·3-min read
Multi-ethnic adult family celebrating with champagne, talking and dancing in the kitchen while preparing dinner on Christmas Day
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Tate and Lyle (LSE:TATE) is one of my FTSE 250 top picks from the food producer market.

My interest in investing in them has strengthened this week as the company has made the news, with the potential sale of its primary products division in order to concentrate on its food and beverage solutions.

In effect it’s moving away from sweeteners such as corn syrup, to more health-conscious ingredients that replace sugars.

It’s a move in line with shifting tastes, making the business more competitive, as the consumer is more aware of the dangers of too much sugar, such as type 2 diabetes.

This why its share price should remain a bullish FTSE 250 investment for now.

Its shares accelerated by c.6% soon after the news of the potential restructuring broke on April 26. Yet Tate and Lyle’s stock price has seen an impressive climb of c.30% over the past six months.

The group’s trading statement confirmed an 8% rise in revenue, for the three months up to December 31.

Additionally, a rise in profits up to the end of March for the year is expected, partly due to increased momentum in its food and beverage solutions.

Greencore another FTSE 250 opportunity

Convenience food producer Greencore (LSE:GNC) is another FTSE 250 investment I am keen on in this sector.

This is despite a predictably difficult year due to the pandemic, as the food-to-go market has declined due to lockdown.

Greencore has been hurt as it supplies its products, which range from salads to sushi, to convenience retailers such as coffee shops, and travel related outlets.

Its trading statement revealed that food-to-go business has decreased by 21.7%, for the 13 weeks up to Christmas Day last year.

However, the stock has climbed this year, after falling to 90p per share after the second lockdown began in November.

And this comes as no surprise, as the food-to-go market should grow again this year with lockdown easing.

Analysts Lumina Intelligence has forecast growth of c.32% during 2021, and that the UK food-to-go market will increase in value by £7.3 billion over the next three years.

It’s a market that should remain bullish, providing me with a timely investment – unless there are major setbacks to lockdown easing, such as a dangerous Covid-19 variant.

It’s not all cheer for food producers

One FTSE 250 investment I am less enthused about is in meat provider Cranswick (LSE: CWK), even though, due to increased home consumption, the company produced a resilient response to the pandemic.

Its share price has been very up and down over the past year. Looking ahead, even though meat processing is expected to expand, there are several patterns that are expected to slow down the growth of meat processing.

The pandemic has resulted in the closure of many high-street meat-serving outlets, with damage being caused to many businesses even if they still remain open.

Additionally the popularity of vegetarianism and vegan diets are a threat to sales of meat in the short and longer term.

In contrast, Tate and Lyle and Greencore focus on several markets that are set to develop, which makes them better options to dish up a sound FTSE 250 investment.

The post Which FTSE 250 food producer stock will serve up a sound investment? appeared first on The Motley Fool UK.

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Peter Taberner has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencore. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2021