Executive summary
August was the month the hoped-for normalisation didn’t arrive. The June 17 memorandum of understanding to reopen the Strait of Hormuz — which drove July’s optimism — collapsed almost immediately over disputes about which routes vessels could use. Iran attacked tankers, the US resumed airstrikes and reimposed its naval blockade, and through August the Strait stayed largely closed, with only single-digit-to-low-teens daily transits against a pre-war norm near 130. Oil settled back into the high-$80s, and the EIA now says Middle East output won’t return to near pre-conflict levels until early 2027. (This is a genuine walk-back of the “staged reopening” framing that looked reasonable a month ago — the deal broke, and the disruption has proven more protracted than the July rally implied.)
Against that backdrop, the Q2 earnings season finished telling a consistent story: international and emerging markets are carrying the industry while the US consumer is visibly strained. McDonald’s capped it — US same-store sales up just 0.8% with falling guest counts, a new US president installed, and management conceding an execution miss. Nestlé, by contrast, leaned on emerging markets (+7.1% ex-China) and coffee to keep growing.
Two structural currents also hardened: North American trade friction (the USMCA review opened to duties rather than a clean renewal, including new 50% tariffs on listed Canadian goods) and the steady value/health reshaping of demand (eggs cheap, beef and coffee dear, protein and functional everywhere).
1. The macro story: the reopening that unravelled
The single most important correction to last month’s picture: the Hormuz deal did not hold.
- The MoU collapsed. The June 17 agreement fractured within days over transit routes. Iran launched attacks on tankers moving along Oman’s coast under US protection and insisted vessels transit its territorial waters; the US answered with airstrikes and re-imposed its naval blockade.
- The Strait stayed shut. Ship-tracking through early August showed roughly 8–15 vessels a day crossing — a fraction of the ~130 pre-conflict norm. Iran and Oman are negotiating a route split (inbound via Iranian waters, outbound via Omani), but Iran’s published draft is highly restrictive: bar US/Israeli ships, penalties up to 20% of cargo value, and war reparations as a precondition.
- Oil re-elevated. Brent traded roughly $82–90 through the month (October futures near $89.53 on 12 August, ~24% above pre-war levels), swinging on alternating deal hopes and breakdowns. The EIA lifted its 2026 Brent average to ~$87 (from ~$79 in July) and pushed the regional production recovery out to early 2027.
Read-through for F&B: the input relief the sector penciled in for the second half is being deferred. Freight, packaging, energy and fertiliser costs stay elevated longer, and the Gulf food-security exposure that eased in late June is back on the table. For operators in the region, this is now a protracted condition to plan around, not a passing shock.
2. Q2 earnings wrap: international carries a strained US consumer
The war-quarter results are now largely complete, and the pattern held with unusual consistency — strength abroad, weakness in the US:
- McDonald’s (reported 4 August) was the clearest tell. Revenue rose ~4% to $7.1bn and EPS grew ~6% to $3.32, but US same-store sales rose only 0.8% (down from 2.5% a year earlier) on declining guest counts — growth came from check, not traffic. Global comps were +1.3%; international operated markets +1.5% and developmental licensed +1.9% did the work. The company named Skye Anderson president of McDonald’s USA (succeeding Joe Erlinger), with CEO Kempczinski framing it bluntly: “We don’t have a strategy problem… we simply didn’t execute.” Notably, its FIFA World Cup campaign underperformed — a sharp contrast with Coca-Cola’s win on the same tournament — and the 50,000-restaurant target slipped to 2028.
- Nestlé (H1, reported 23 July) showed the other side: organic growth +3.6% (RIG +1.5%, pricing +2.1%), led by emerging markets +7.1% ex-China and by coffee, food and snacks; developed markets grew a steadier +2.3% with “robust” US sell-out and Europe holding up. Reported sales fell 2.5% to CHF 43.1bn purely on a ~6% currency drag; UTOP margin held at 16.4%. Portfolio pruning continued (a new waters/premium-beverage JV, VMS and ice cream moved to “held for sale,” Blue Bottle divested).
- Recap: Coca-Cola (beat and raised, World Cup tailwind, +5% volume) and PepsiCo (revenue beat but US food/snacks soft, guided to the low end) framed the same split earlier in the cycle.
The signal: the spring energy shock did lasting damage to the price-sensitive US consumer — traffic is now actually falling at the value end (McDonald’s) — while beverages, coffee and emerging markets remain the sector’s engine. Expect more US-specific interventions (leadership changes, value architecture, execution pushes) into the back half.
3. Commodity & input-cost watch
A two-sided month: energy re-elevated, several food inputs easing, and a widening gap between farm-gate and retail prices.
| Input | Direction | Notes |
|---|---|---|
| Crude / energy | Elevated, volatile | Brent ~$82–90 on the failed reopening; EIA 2026 average lifted to ~$87; regional recovery pushed to early 2027. The swing factor for freight, packaging and fertiliser. |
| Eggs | Sharply lower | USDA now forecasts ~-30.8% for 2026 as flocks recover — a farmer-margin problem, not a shortage. |
| Beef | High | Remains a top driver of grocery inflation on tight cattle supplies and firm demand. |
| Coffee | Elevated | Still pushing US non-alcoholic beverage prices up (~+4.3% forecast for 2026); also a growth driver for Nestlé. |
| Wheat | Firm | Farm-level prices forecast up ~17% in 2026 on reduced US output. |
| Cocoa / sugar | Low-to-mixed | Cocoa remains well off its 2024 peak (a margin tailwind); sugar and sweets retail still running above trend. |
| Fresh vegetables | Farm-vs-retail gap | Farm-level veg prices fell ~29% June→July, yet retail stayed ~6% above a year ago — a reminder that commodity relief reaches shelves slowly. |
Takeaway: US grocery inflation is moderating in aggregate (all-food ~3.0% year on year in July; food-at-home ~2.5% forecast for 2026), but the visible basket — beef, coffee, soda, candy — keeps perceived inflation high and is steering shoppers toward private label, discounters and value formats. Energy is the wildcard that could re-firm the whole complex if Hormuz stays shut.
4. Corporate strategy & M&A
- McCormick–Unilever Foods integration planning continued toward a mid-2027 close — the ~$44.8bn combination remains the defining structural bet of the cycle, and the pre-close window still leaves buyers two competing flavor suppliers for now.
- Pilgrim’s agreed (19 August) to acquire the Walkers Deli & Sausage business in the UK, adding premium-pork capacity — an example of the bolt-on, regional-scale logic driving mid-market deals.
- Nestlé kept reshaping: the waters/premium-beverage JV (≈CHF 2.8bn proceeds expected H1 2027), VMS and ice cream flagged for sale, and Blue Bottle divested — a continuation of Big Food’s “focus the portfolio” theme.
- Kraft Heinz / Berkshire remains the unresolved watch item on the deconglomeration question.
- Product signal: protein and functional launches proliferated (collagen protein chips, high-protein snacks, organic functional beverages), underscoring where innovation capital is going.
5. Beverages
With the FIFA World Cup concluded in mid-July, the summer tournament tailwind faded, leaving the underlying picture: soft-drink and coffee resilience (Coca-Cola’s volume strength, Nestlé’s coffee-led growth) against continued alcohol weakness (persistent beer/wine/spirits volume softness, GLP-1-driven moderation, NA/RTD share gains). The hemp-THC beverage category stayed a live regulatory wildcard. Functional positioning — protein, fiber, prebiotic, electrolyte, collagen — remained the dominant innovation frame.
6. Foodservice & restaurants
The month’s foodservice headline was falling US traffic at the value leader: McDonald’s guest counts declined even as check rose, and the company reorganised its US leadership to respond. That crystallises the 2026 foodservice problem — pricing has carried sales, but volume is now under real pressure as budget-conscious diners cut visits. Expect intensified value activity and execution focus into Q3, with the new US leadership’s early moves worth watching.
7. Consumer & regulatory: trade friction moves to the front
The July 1 USMCA review did not deliver the clean 16-year renewal the sector hoped for — instead it opened a period of active friction:
- New tariffs. Three Section 338 proclamations imposed an additional 50% duty on listed Canadian goods, including dairy, effective 19 August — expressly independent of USMCA origin. The US–Canada dynamic is strained; US–Mexico bilateral rounds have progressed, with Mexico prioritising preservation.
- Other trade actions: USTR issued FY2027 sugar tariff-rate-quota allocations, and USDA scheduled a phased reopening of southern cattle ports from 24 August — relevant to beef supply. A pending Supreme Court ruling on the administration’s IEEPA tariffs hangs over the whole regime.
- Food safety: the FDA expanded a Cyclospora outbreak investigation tied to iceberg lettuce sourced from central Mexico — a live produce-supply and cross-border story.
- Ongoing threads: SNAP candy/sugary-beverage restrictions continue expanding (ten more states by year-end); the synthetic-dye phase-out holds to its 2026 (school foods) / 2027 (full supply) timeline; avian flu in commercial poultry has eased (hence cheap eggs), though H5N1 in dairy herds stays on watch.
The consumer underneath: value/affordability remains the dominant driver, with the visible-inflation basket pushing shoppers toward private label and discounters. GLP-1 continues to steer demand toward protein-dense, functional and better-for-you products, with artificial ingredients and ultra-processed foods topping the worry list.
8. Regional snapshot
- Middle East / GCC: the reopening hopes of June/July were dashed; the Strait remains largely closed and oil elevated, making this the most protracted risk in the report. Import-dependent economies stay exposed, and the Iran–Oman transit negotiations are the key thread.
- North America: trade friction (USMCA duties, IEEPA uncertainty) now compounds a visibly strained US consumer — the region carrying the most bad news this month.
- Europe: demand holding up (Nestlé), with inflation still tilting purchases toward smaller, cheaper formats.
- Asia-Pacific / emerging markets: the growth engine — Nestlé’s EM ex-China +7.1%, and international strength across Coca-Cola, PepsiCo and McDonald’s.
9. What to watch into September
- Hormuz / Iran–Oman transit talks — whether a workable (if restrictive) route deal emerges, and where oil settles; the EIA’s early-2027 recovery assumption is the base case to test.
- USMCA fallout — the effect of the 19 August 50% Canadian-goods duties (dairy especially), the cattle-port reopening, and any Supreme Court IEEPA ruling.
- US foodservice turnaround — early moves from McDonald’s new US president and whether traffic stabilises.
- Back-half US consumer — whether moderating aggregate grocery inflation translates into restored spending, or the visible basket keeps trade-down entrenched.
- Egg-price farmer stress — a ~30% annual decline is now a supply-side risk into 2027.
- Cyclospora outbreak and any produce-supply or cross-border trade knock-ons.
Sources include company filings and statements (McDonald’s, Nestlé, The Coca-Cola Company, PepsiCo), the EIA, USDA Economic Research Service (August Food Price Outlook), USTR/CBP and USMCA review tracking (ICPA, CSIS, BSI), FDA, MarineTraffic/Kpler shipping data, and trade and financial press (CNBC, Reuters, Bloomberg, Al Jazeera, FoodNavigator, Food Ingredients First, CareersInFood). Oil and commodity levels are point-in-time readings and move daily.