Consumer goods company Kraft Heinz’s (NASDAQ:KHC) Lunchables offerings are on the table for debate as the company seeks to make them a popular school food option. The company has long focused on its retail offerings business, which accounts for most of its revenue base. But now, the company seeks to tap the lucrative $25 billion school food cafeteria segment to boost revenues from its food-service unit.
As per a Wall Street Journal report, KHC’s North American food-service unit accounted for 9% of total sales last year, while retail generated 66%. By promoting its food-service business, KHC aims to increase its organic sales by 5% this year. Kraft Heinz is also targeting the travel and leisure segments, such as through food sales in airports, to increase sales from its food-service unit.
Kraft Heinz is a decades-old consumer packaged food and beverage company well known for its sauces, meats, meals, beverages, coffee, and other grocery items.
Why Are Lunchables Being Debated?
Lunchables is a pre-packaged meal that comes in a wide variety of combinations, including cheese, meats, crackers, pizzas, burgers, nachos, and juices, among others. Parents and some child nutrition advocates have opposed the inclusion of Lunchables in schools. They argue that processed foods carry a lower nutritional value and can be considered unhealthy for regular consumption by kids. Meanwhile, a few argue that Lunchables could be included in school menus occasionally.
School meal programs feed some 30 million children across the U.S. and are considered a good source of nutrition for kids, especially in the underprivileged sectors. School cafeterias are facing acute labor shortages post-pandemic. Some schools even undergo rigid scrutiny of what’s included in the reimbursement and what’s not, leaving them with little scope to offer healthy lunches. A few proponents of Lunchables see it as a good option for schools that remain underfunded under the program and those that are already resorting to heat-and-serve prepacked meals.
Is KHC Stock a Good Buy Now?
Following Kraft Heinz’s mixed second-quarter results, analysts remain cautiously optimistic about the stock. Five analysts reiterated their Hold views on KHC, while two assigned a Buy rating to the stock.
Overall, with four Buys versus eight Hold ratings, KHC stock has a Moderate Buy consensus rating on TipRanks. The average Kraft Heinz price target of $41.33 implies 22.8% upside potential from current levels. Meanwhile, KHC stock has lost 15.7% year-to-date.