Look at What These Food Giants Are Going Through — Do Americans Just Not Want to Eat Anything Anymore?

What new consumer behavior has beaten these long-established food and fast-food companies? Do the changes underway in the US market add up to a trend? There may be lessons here for China.

McDonald's, Burger King, Kraft Heinz, General Mills, Coca-Cola, Hershey — the big American food companies you probably know well are all being run ragged by one group of customers: Americans themselves.

Had it not launched all-day breakfast, McDonald's might be in the headlines for one thing only: its shrinking US same-store sales. That is not an exaggeration. Before the chain rolled out all-day breakfast nationwide in October 2015, same-store sales had fallen for seven straight quarters. Leaf through the first- and second-quarter earnings releases from 2013 to 2015 and the same few phrases keep coming back: "declining foot traffic," "industry stagnation," "intense competition." Former CEO Don Thompson lost his job over it, two and a half years in.

And just as other fast-food brands began copying the move, McDonald's latest quarter came in below Wall Street's expectations — raising the question of whether the glow around all-day breakfast, the supposed breakthrough that would save fast food, is already fading.

Life is genuinely hard in American fast food. The second- and third-largest burger brands, Burger King and Wendy's, along with Yum! Brands' Mexican chain Taco Bell (we leave out KFC and Pizza Hut because the US is not their main battleground), all saw same-store sales growth slow in the most recent quarter, without exception — and at Taco Bell, which had been a star performer in earlier years, same-store sales actually fell. The chart below shows the shadow hanging over the industry.

Packaged food, which takes up so much shelf space at Walmart and other supermarkets, is in no better shape.

Kellogg's, General Mills, Campbell Soup and Kraft Heinz have posted almost no growth in North America for the past four to six quarters. Take Kellogg's and General Mills. Kellogg's revenue and operating profit peaked in 2013 and have slid ever since. General Mills turned down at roughly the same time, hitting its profit peak in 2013 and its revenue peak in 2014.

Both companies' biggest product category is breakfast cereal — which, you should know, was for a long stretch the favorite breakfast of American middle-class families. But according to Nielsen, cereal sales have fallen 3% a year for the past three years.

Chocolate, that reliable placebo, looks glum too. Growth in the US chocolate market began slowing in 2010, and by 2015 average annual sales growth was down to 4.2%. Hershey, one of the country's largest chocolate makers, saw sales fall 0.5% in 2015 and net profit drop 39%. The company has said plainly that American demand for chocolate has fallen.

More surprising still: this year, for the first time, sugary sodas like cola, long the national drink, were outsold by bottled water. Coca-Cola's position at home is awkward these days.

All this gloomy news arriving at once left us curious about one thing: what are Americans eating now?

Though what we really want to know is not that, but what new consumer behavior has beaten these old companies, whether the changes underway in the US market add up to a trend, and whether that trend holds any lessons for China.

These food companies, about 100 years old on average, and the fast-food chains, past 50, once ruled the American diet. After World War II, American society began to change. More women went out to work, and they needed to feed themselves and their families fast. Convenience and efficiency became the main demands.

Salt Sugar Fat, the book on how the food industry has manipulated and shaped American consumers, notes that foods beginning with the letter C — convenience — always sold well, and that the three big food companies, Kraft, General Mills and Kellogg's, fought hard over them. Calling them food companies undersells it; they were more like one giant shopping cart that almost no shopper could get around. In 1958, General Mills' frozen-food brand Birds Eye alone carried 250 different SKUs and sold $1.1 billion worth of food. The big fast-food chains rose in the same years, as Americans moved around more and the highway network spread, reaching national scale through franchising.

These companies grew up alongside the Baby Boomers (Americans born between 1946 and 1964) and Generation X (born 1965 to 1985). Melissa, 51, says she ate a lot of convenience food as a child. "I remember something that was advertised a lot back then, called Hamburger Helper. It was a box of processed food — you add water, stir it up, throw in something on the side, canned tuna or whatever, and it's ready. It really tasted terrible. But my mom bought it all the time, because she had to work."

Melissa began drifting away from packaged food more than a decade ago. "There's basically only one situation now where I'd go back to eating McDonald's — I'm on the highway, there's nothing else, and McDonald's has clean bathrooms."

She is not unusual. Sue, 65, lives in Syracuse, New York, and the only processed food she still buys is turkey for sandwiches. Only on the road does she "indulge in the greasy food of the old days." Sue has largely stopped eating breakfast cereal, too. "That's the biggest change in my diet in the past three years," she said. Breakfast is now oatmeal, smoothies and almond milk.

People Melissa's and Sue's age were never the core fast-food customers to begin with. But this food has lost its hold on young Americans as well.

College students — low income or none, and plenty of schoolwork to get through — have always been a target for the fast-food industry. Walk around an American university and you will usually find several fast-food outlets on or near campus. Students carrying paper boxes and giant cups of soda between classes, or sitting in an open space working through a group project: a common campus scene.

Not anymore. Ji Rufeng came to the US for high school and is about to start his junior year at Carnegie Mellon University. The "fast food" he and his American roommate Max eat most often is Chipotle, because they think it has "a better restaurant feel." Strictly speaking, Chipotle is fast casual.

Fast food is their last resort. "Places like McDonald's or Wendy's are open pretty much 24 hours, so if it's really late — nothing else is open, and we end up eating fast food." Eating out, he told QDaily, means either a distinctive fast-casual place near school, like Chipotle, or a sit-down restaurant with table service.

"Maybe it's because I study design, but the people around me have high standards for restaurants. Otherwise people think you're low-class. There's always this feeling that you should be a bit cooler."

It is much the same for most food companies: they are losing old customers and have failed to grow a young new base.

That has to do with a shrinking American middle class and widening income gaps. According to a Pew Research Center report, between 2000 and 2014, of the 229 US metropolitan areas studied, middle-class households shrank in 203, while low-income households grew in 160 and high-income households grew in 172. Those who got richer drifted away from fast-food boxes and packaged food; those who got poorer began counting every dollar they spent on food.

On top of that, as in China, Americans now care enormously about health. In a 2014 Nielsen health survey covering people of different ages in 60 countries, those under 20 and those aged 21 to 34 were the most concerned about health, and the most willing to pay a premium for healthy products.

Fortune, citing the research firm Bernstein, reported that US packaged-food sales had fallen more than 1% in each of the past two years. Research by Credit Suisse analyst Robert Moskow found that from 2009 to 2015 — under six years — North America's 25 largest food and drink companies lost $18 billion in market share.

That share went to small brands selling natural and healthy claims, or simply more distinctive products.

"It's just so easy now to get healthy, fresh food." Melissa, who runs staff training at an NGO, says most of what she eats is still cooked at home — about 60% of her diet. "The other 20% is prepared food I buy, and 20% is eating out."

Sejal, 37, is a university administrator in Austin, the capital of Texas. On what she and her husband eat: "We consciously try to eat more whole, fresh food rather than processed food. We're not well-off, we don't have a lot of money, and we're certainly not rich. But we're careful about what we eat. Most of my friends and family are much the same."

"Eating healthy" has become a fashionable way to live. David, who graduated less than a year ago and works part-time as a copywriter at a Los Angeles ad agency, says he eats fewer snacks now, sweets above all. "I've gotten healthier overall — more fruit, less sugar," he says. "I still want to get healthier, I guess."

Juan, who just graduated and is applying to grad school, told me: "I like Flamin' Hot Cheetos. I don't eat as many as I did as a kid. The older I get, the less I seem to eat. I can't even remember the last time I had Cheetos."

Packaged-food companies and fast-food chains have started adapting, each looking for ways to put some distance between itself and an unhealthy image.

McDonald's is ahead of the pack. Last August it said it would use real butter in its muffins instead of margarine. This year it began small trials of fresh beef in place of frozen patties. In early August it said it would take artificial preservatives out of the breakfast menu and Chicken McNuggets, and drop high-fructose corn syrup from its burger buns.

The food companies are doing the same. They have pushed out new versions of old products: dark chocolate, nut-filled chocolate and energy bars billed as healthier; low-sugar popcorn, whole-wheat crackers and sea-salt baked chips to replace the old high-sugar, high-salt and high-fat lines.

PepsiCo launched two new soda lines, 1893 and Stubborn, built around "natural sugar" and "quality ingredients," and set up a product division called "better-for-you." Its product pages promise things "baked instead of fried, lower in fat, made with whole grains, low-calorie drinks, or drinks with no added sugar." In 2015, General Mills cut the sugar in Yoplait yogurt by 25%. Kellogg's introduced a cereal line built on quinoa, the "super grain," with no artificial colors or additives.

Food and soda companies alike have rolled out smaller packages, to shrink the guilt of each serving. They are also betting on smaller, healthier-looking, cooler companies and new brands. Coca-Cola has begun investing in healthier drinks companies such as the aloe juice maker Aloe Gloe and the "tech milk" brand Fairlife. General Mills invests in promising small food businesses through its unit 301 Inc, most recently a small California company that makes yogurt and cheese for strict vegans.

So far, none of it has done much. From our interviews, local sourcing and green, healthy eating are what Americans increasingly want — and more of them are cooking at home.

The first reason is that cooking at home has gotten cheaper. According to price-index data from the US Labor Department, the price of groceries (cooking at home) fell 1.6% over the past 12 months, while the index for eating out rose 2.8%. (The rise may have something to do with Obamacare, which requires restaurants to pay more for employee insurance. Minimum-wage increases in various places have added costs too.)

That is also why fast-food brands are fighting a price war in the US. Take North America's three biggest beef-burger chains — McDonald's, Wendy's and Burger King. All have rolled out value meals. McDonald's launched a second version of McPick: $5 for any two of several signature items. Wendy's and Burger King simply went cheap: $4 for four items and $4 for five items respectively, drink included. Taco Bell put out a $5 Craving Deal: a drink, three tacos and a bag of chips.

"For us, cooking our own food is the cheapest." Sejal often makes something simple, a sandwich or a salad. "I eat a lot of eggs, quinoa and some vegetables."

Rachelle, 25, lives near Albuquerque, New Mexico's largest city. She finished her master's last year and works in marketing at an architecture firm. Lunch is usually a salad she makes herself; dinner is pasta or a sandwich. "When I eat out I can't help ordering steak or a cheesy pasta — none of which is really healthy," she says. "I like having more control over my food. And of course, eating out less saves money."

Fast-food companies with weak earnings like to blame "supermarket fresh food that's too cheap." And supermarket deli counters and made-to-order food sections do look like a real trend.

According to the US supermarket association, more than 40% of Americans have bought prepared food at a supermarket. Revenue from in-store dining, deli food included, has risen 30% since 2008, reaching $10 billion in 2015. NPD data show that total US spending on supermarket deli food rose 2% in each of March, April and May this year.

Unlike the deli counters in Chinese hypermarkets, mid- and upper-range American supermarkets set aside a good amount of seating so shoppers can eat in the store and stay longer — and perhaps pick up a few more things on the way out. Upscale supermarkets in China, such as City'super, use a similar format.

Melissa told QDaily that Central Market, the mid-range supermarket she goes to, offers plenty of prepared food: meatloaf, pizza, quesadillas, sushi and barbecue meats like flank steak. The Texas chain also changes its prepared-food themes with the season's vegetables.

Sejal often packs up prepared food when she stops at a supermarket on her way to or from work. There is a Whole Foods Market near David's place, and when he is too lazy to cook, or has no time to shop and cook, he buys prepared food there.

Americans have not abandoned fast food outright, and they have not given up fries, burgers and fried chicken. The booming growth of Shake Shack, and of regional chains like Chick-fil-A and In-N-Out Burger, is proof enough.

For burgers and fries, Melissa picks small local restaurants. One she likes is called Phil's Ice House; she told us its burgers are made from organic ingredients, fresh, with no hormones or additives. Phil's costs more than McDonald's, and she thinks it is worth it.

It is not only in fast food. The arrival of these local, independent restaurants is making American dining a long tail. Behind it lie government support and policies that favor local small and midsize businesses, and the influence of the Farm to Table movement.

"Farm to Table" means restaurants buying ingredients straight from local farmers and producers, sourcing their food nearby. Farmers markets — where growers take a small patch of ground in the city and sell the vegetables, honey and other produce they raised directly to shoppers — are one form of it.

Beyond supporting the local economy, Americans' preference for local food has an environmental reason: buying local cuts out some of the logistics and puts less strain on the environment. It also reflects a growing concern with quality. Shorter trips can mean fresher food, and shoppers feel that ingredients they can trace to a local source — and the restaurants that use them — are more trustworthy.

Both Sejal and Melissa say they prefer restaurants labeled "Farm to Table," where the food comes from nearby farms. Melissa told me: "My friends and I have this local trend in how we eat — ideally the ingredients are local and the food is made locally too."

Ji Rufeng, who lives in Pittsburgh, has noticed it as well. "Around here," he says, "local restaurants and chain restaurants compete hard."

New consumer behavior does not appear overnight, but by the time big companies notice it they have usually missed their moment. Adapting to a new trend always takes them time — and time is what they do not have.

Charts: Wu Lingwei

Header image: Visual China Group, General Mills' official site, shawndimantha.com, Kite Hill and others