Goldman Sachs Sees 5% Growth in Premium Pet Food, Backs Colgate-Palmolive and General Mills

Goldman Sachs has maintained its "buy" ratings for colgate-palmolive (CL.US) and general mills (GIS.US), highlighting the resilience of high-end pet consumer goods companies. The investment bank's analysis suggests that these companies' high-quality products will exhibit elasticity and drive growth in the coming years, mitigating the impact of broader consumer challenges.

For Colgate-Palmolive, Goldman Sachs' bottom-up model indicates that the Hill’s Pet Nutrition business will continue to drive sustained organic sales growth. This growth is expected to be fueled by category and market share expansion, along with productivity savings. These factors are anticipated to support ongoing margin expansion and profit growth for Colgate-Palmolive, despite continued reinvestment. The firm's focus on innovation and quality is likely to maintain its competitive edge in the market.

General Mills, on the other hand, is expected to see a recovery in its pet business, which is a key driver for the company's return to its long-term organic sales growth algorithm of 2-3% in fiscal year 2027. The firm's recent acquisition of Whitebridge is seen as a significant step in expanding its distribution, particularly in the pet specialty and e-commerce sectors. goldman sachs is encouraged by General Mills' recent sales acceleration and stable market share, despite growth in private-label brands, which underscores the greater elasticity of the high-end market. However, the firm remains cautious in the short term as General Mills continues to reinvest to improve its bottom line.

Goldman Sachs' analysis of Colgate-Palmolive highlights the Hill’s Pet Nutrition business as a key growth driver. The firm expects the global premium pet food category to maintain strong median growth of 5% through 2030, with balanced contributions from volume and price growth. While dry dog food growth is expected to slow, wet dog food growth is anticipated to accelerate. The firm is particularly optimistic about the cat food market, expecting growth in both dry and wet cat food categories. Despite more moderate category growth in the future, Goldman Sachs believes that Colgate-Palmolive's investments in innovation and advertising will enable its pet food business to outperform the category. Increasing household penetration rates and additional capacity will further support strong revenue growth and margin expansion, driving Colgate-Palmolive's steady growth in the coming years.

For General Mills, Goldman Sachs identifies the recovery of its pet business as a critical factor in returning to its long-term organic sales growth algorithm of 2-3% in fiscal year 2027, with fiscal year 2026 primarily being a year of reinvestment. The firm's strong performance in the high-end market is expected to support mid-single-digit category growth, driven by the ongoing humanization of pets, including balanced contributions from price/mix and volume. General Mills' previous acquisitions have significantly expanded its market share, and the recent acquisition of Whitebridge is expected to have a similar impact. The firm's focus on the pet specialty and e-commerce sectors, where household penetration is low, presents a long growth runway. Despite continued reinvestment to enhance revenue performance, Goldman Sachs is encouraged by General Mills' recent sales acceleration and stable market share, which highlights the greater elasticity of the high-end market. The firm's pet business exposure partially insulates it from the challenges faced by the packaged food sector.