Wall Street could be losing its appetite for packaged foods, according to analysts at Credit Suisse.

Investors are "highly skeptical" of the U.S. food group, Credit Suisse found, given margin erosion from reinvestment needs, declining pricing power and increased pressure from Walmart Inc. (WMT) .

"On average, Big Food companies' pricing remains up 1.7% over the prior year at Walmart according to our Nielsen analysis," analysts wrote. "However, we find it difficult to build a bull case around this. Private label market share continues to grow rapidly, reinvestment needs remain high, and companies remain unable to pass through higher freight costs (probably 80-120 bps GM hit) with pricing."

Credit Suisse's packaged food group performed roughly in-line with the S&P 500 last week, analysts noted, down approximately 1%. Kellogg Co. (K) declined 5% "but remains among the outperformers YTD along with Mondelez International Inc. (MDLZ) , the J.M. Smucker Co. (SJM) , and McCormick & Co. Inc. (MKC) ," Credit Suisse said.

Still, the group remains overpriced at 12.6 times an enterprise value/Ebitda multiple basis. The 10-year average has been 10.8 times, analysts said.

"We find that Pinnacle Foods Inc. (PF) and Conagra Brands Inc. (CAG) have enjoyed the strongest growth rate in the mass, club and military channels (MCM) over the past quarter, while the Kraft Heinz Co. (KHC) and Campbell Soup Co. (CPB) have suffered the most from Walmart's pricing pressure and private label expansion," Credit Suisse said. "We expect Walmart to maintain this strategy in the near future."

Analysts noted that private label growth "remains an ever-increasing threat to branded foods," as 12 of the 13 major food categories Credit Suisse analyzes grew in the last quarter despite branded sales declines in eight of the 13 categories and private label pricing declining 3%.

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