AI Reshaping Food Processing Industry: 4 Stocks in Focus
By Zacks Equity Research
Food processing is a complex industry, encompassing everything, from sorting raw materials, following the right production process, maintaining machinery to ensuring that the final product is on par with standards. But now, food processing can be easily monitored by AI-powered applications that not only do what humans do but also remarkably increase efficiency.
Let us, thus, consider a few stocks that are riding the AI wave to make significant changes in the food processing industry.
AI’s Promising Prospect in Food & Beverage Market
According to a report by Analytical Research Cognizance, AI in the Food and Beverage market is expected to grow at a compounded annual growth rate (CAGR) of more than 65.3% during 2019-2024.
A major reason driving AI implementation is rapidly changing consumer preference. Consumer demand is increasingly shifting toward affordable and easily available food options. Therefore, faster and efficient food processing has become imperative, which can only be offered by AI applications.
First, AI is used to sort different products and ingredients faster. Second, AI monitors and detects any contamination in food on a real-time basis (mostly via AI-enabled cameras).
Third, equipment cleaning accounts for about a third of energy and water supplies of a food processing plant. AI-based sensor technology can save both and ensure proper usage.
In fact, AI applications aren’t just limited to assisting in food processing but realizing the kind of products customers seeks. This not only helps in determining what products a company should come up with but also finding crucial details on consumer preferences across various age groups and regions etc.
This data can help companies manufacture the products in demand and channel them in the right places for increased sales. The Coca-Cola Company KO and Kellogg Company K are already putting this to use.
4 Stocks in Focus
We have chosen four stocks that either implement AI to food processing or offer AI programs that streamline productivity in the food processing industry. All of these stocks carry a Zacks Rank #2 (Buy) or 3 (Hold).
Alphabet Inc. GOOGL is developing AI algorithms that can assist in various functions in a food processing unit. The company’s TensorFlow machine learning is being used by Kewpie Corporation, a prominent Japanese food company, to involuntarily detect anomalies.
Alphabet carries a Zacks Rank #2. In fact, the company’s stock has outperformed the Zacks Internet – Services Industry on a year-to-date basis (+15.3% vs +2.4%). The Zacks Consensus Estimate for its current-year earnings has risen 8% over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Coca-Cola Company has installed self-service soda fountains that allow customers to customize their drinks and in turn help the company learn more about customer preferences. In fact, the beverage giant came up with cherry-flavored Sprite based on this implemented AI.
Coca-Cola carries a Zacks Rank #2. In fact, the company’s stock price has outperformed the Zacks Beverages – Soft drinks Industry on a year-to-date basis (+14.9% vs +13.4%). The Zacks Consensus Estimate for its current-year earnings has risen 0.5% over the past 60 days.
Kellogg Company is using AI-powered applications that allow customers to customize their granola from over 50 ingredients. The company is forming a community for its Bear Naked brand of granola. Kellogg uses IBM’s Chef Watson, which suggests what ingredients to mix and if it would taste good together.
Kellogg carries a Zacks Rank #3. In fact, the company’s stock price has outperformed the Zacks Food – Miscellaneous Industry over the last six months (+16.2% vs +12.9%). The Zacks Consensus Estimate for its current-year earnings has risen 0.5% over the past 60 days.
McDonald's Corporation MCD recently acquired AI company Apprente, which is trying to automate the drive-thru. Apprente uses AI to understand speech, and using it in drive-thrus can significantly reduce service time. McDonald’s said it could use the technology in its self-order kiosks and mobile applications someday.
McDonald's carries a Zacks Rank #3. The company’s stock price has outperformed the Zacks Retail – Restaurants Industry over the last five years (+80.9% vs +55.2%). The Zacks Consensus Estimate for its current-year earnings has risen 0.4% over the past 90 days.
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