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The K-shaped economy necessitates focus on "type" of consumer
SENEA and NGVC are 2 small caps targeting different food consumers
There has been much mention lately of the K-shaped economy as new economic data emerges. The “<” part of the K refers to the divergent directional spending patterns of the upper- and lower-income consumer.
The higher end consumer, buttressed by stock market gains and housing appreciation, seems unfazed by any inflation pressure and continues to spend. While the lower end consumer appears to be increasingly more price sensitive, pulling back in cases or downgrading to cheaper versions of their necessities.
Despite the tale of two cities, the “net-net” effect, at the moment, seems to be a relatively strong economy based on recent GDP numbers.
But the K-shape analogy can also be applied to generational differences on spending. Here we highlight 2 small caps which reflect the K-shape story, both currently with Outperform ratings.
Seneca Foods Corporation (SENEA - Free Report) is a provider of packaged fruits and vegetables. It operates 26 primary facilities across the United States, including packaging plants, a can manufacturing facility, seed production operations, farming ventures and a logistics support network.
SENEA’s core business involves producing and marketing canned, frozen and jarred fruits and vegetables, as well as snack chips, under private labels and owned or licensed brands such as Seneca and Libby’s, among others.
Image Source: Zacks Investment Research
Perhaps most interestingly, for this Gen X-er, Seneca purchased the assets of the Green Giant product line back in late 2023. “The Ho, Ho, Ho, Green Giant” commercials of the 70’s were a staple on TV. And I fondly recall the Green Giant kites which allowed you to yank the string at the ideal height, releasing a Little Sprout parachute. Quite an engineering feat for the 70's, imo.
Seneca Foods (SENEA - Free Report) operates under two main reportable food packaging segments: Vegetable and Fruit/Snack. In FY25 canned vegetables revenues were 83.2% of total net sales, frozen vegetables were 7.9%, fruit products were 5.9%, snack products were 0.9% and the “Other” category (including can and seed sales and aircraft operations) was 2.1%.
Seneca continues to benefit from resilient global demand for shelf-stable foods, with first-half fiscal 2026 net sales rising 3.7% to $757.5 million from $730.2 million. Volume growth of 10.2% in second-quarter fiscal 2026 led to a revenue increase of 8.1%, driven by strong canned and frozen vegetable demand.
Also noteworthy is Seneca’s exposure to agricultural crop yields, which have negatively impacted Gross Margin in the past. The company now reports a “near budget harvest for most crops,” driving normalized per-unit costs and increased pack efficiency.
While Seneca’s products most likely appeal to the more budget conscious food shopper, Natural Grocers (NGVC - Free Report) is targeting the consumer willing to spend up for organic food. And studies suggest this demographic of consumer skews generationally younger, more to Millennials and Gen-Z.
Image Source: Zacks Investment Research
As of September 30, 2025, Natural Grocers (NGVC - Free Report) operated 169 stores in 21 states, with a single reportable business segment: natural and organic retail stores. All of the company’s revenue is derived from this retail segment, encompassing grocery, dietary supplements, body care, pet care, books, household items, and related services.
All grocery items are free from artificial flavors, preservatives, sweeteners, synthetic colors, and hydrogenated oils. The company sells only USDA-certified organic produce, pasture-raised dairy, and free-range eggs, creating a clean label promise that resonates with health-conscious consumers.
With over 900 SKUs under its Natural Grocers brand, the company is steadily growing its private-label presence. Recent additions like organic frozen vegetables, cooking oils, tortillas, and pickles cater to value-focused customers without compromising quality.
Natural Grocers has meaningful whitespace opportunity in high-growth, health-oriented regions like Texas and Florida, and appears confident in its ROI formula of new store openings, targeting more aggressive expansion in FY26 highlighted by increased cap ex spending which is supported by strong operating cash flow.
The company plans to open six to eight stores in FY26, targeting a sustainable 4–5% annual growth rate. Its smaller-store format reduces buildout costs and improves payback periods.
Net sales increased 4.2% year over year to $336.1 million, while net income rose 31.0% to $11.8 million in the latest quarter. Daily average comparable store sales rose 4.2% in the fourth quarter and 7.3% for the full year, contributing to the company's 22nd consecutive year of positive comparable store sales growth.
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2 Small Caps for the K-shaped Economy
Key Takeaways
There has been much mention lately of the K-shaped economy as new economic data emerges. The “<” part of the K refers to the divergent directional spending patterns of the upper- and lower-income consumer.
The higher end consumer, buttressed by stock market gains and housing appreciation, seems unfazed by any inflation pressure and continues to spend. While the lower end consumer appears to be increasingly more price sensitive, pulling back in cases or downgrading to cheaper versions of their necessities.
Despite the tale of two cities, the “net-net” effect, at the moment, seems to be a relatively strong economy based on recent GDP numbers.
But the K-shape analogy can also be applied to generational differences on spending. Here we highlight 2 small caps which reflect the K-shape story, both currently with Outperform ratings.
Seneca Foods Corporation (SENEA - Free Report) is a provider of packaged fruits and vegetables. It operates 26 primary facilities across the United States, including packaging plants, a can manufacturing facility, seed production operations, farming ventures and a logistics support network.
SENEA’s core business involves producing and marketing canned, frozen and jarred fruits and vegetables, as well as snack chips, under private labels and owned or licensed brands such as Seneca and Libby’s, among others.
Image Source: Zacks Investment Research
Perhaps most interestingly, for this Gen X-er, Seneca purchased the assets of the Green Giant product line back in late 2023. “The Ho, Ho, Ho, Green Giant” commercials of the 70’s were a staple on TV. And I fondly recall the Green Giant kites which allowed you to yank the string at the ideal height, releasing a Little Sprout parachute. Quite an engineering feat for the 70's, imo.
Seneca Foods (SENEA - Free Report) operates under two main reportable food packaging segments: Vegetable and Fruit/Snack. In FY25 canned vegetables revenues were 83.2% of total net sales, frozen vegetables were 7.9%, fruit products were 5.9%, snack products were 0.9% and the “Other” category (including can and seed sales and aircraft operations) was 2.1%.
Seneca continues to benefit from resilient global demand for shelf-stable foods, with first-half fiscal 2026 net sales rising 3.7% to $757.5 million from $730.2 million. Volume growth of 10.2% in second-quarter fiscal 2026 led to a revenue increase of 8.1%, driven by strong canned and frozen vegetable demand.
Also noteworthy is Seneca’s exposure to agricultural crop yields, which have negatively impacted Gross Margin in the past. The company now reports a “near budget harvest for most crops,” driving normalized per-unit costs and increased pack efficiency.
While Seneca’s products most likely appeal to the more budget conscious food shopper, Natural Grocers (NGVC - Free Report) is targeting the consumer willing to spend up for organic food. And studies suggest this demographic of consumer skews generationally younger, more to Millennials and Gen-Z.
Image Source: Zacks Investment Research
As of September 30, 2025, Natural Grocers (NGVC - Free Report) operated 169 stores in 21 states, with a single reportable business segment: natural and organic retail stores. All of the company’s revenue is derived from this retail segment, encompassing grocery, dietary supplements, body care, pet care, books, household items, and related services.
All grocery items are free from artificial flavors, preservatives, sweeteners, synthetic colors, and hydrogenated oils. The company sells only USDA-certified organic produce, pasture-raised dairy, and free-range eggs, creating a clean label promise that resonates with health-conscious consumers.
With over 900 SKUs under its Natural Grocers brand, the company is steadily growing its private-label presence. Recent additions like organic frozen vegetables, cooking oils, tortillas, and pickles cater to value-focused customers without compromising quality.
Natural Grocers has meaningful whitespace opportunity in high-growth, health-oriented regions like Texas and Florida, and appears confident in its ROI formula of new store openings, targeting more aggressive expansion in FY26 highlighted by increased cap ex spending which is supported by strong operating cash flow.
The company plans to open six to eight stores in FY26, targeting a sustainable 4–5% annual growth rate. Its smaller-store format reduces buildout costs and improves payback periods.
Net sales increased 4.2% year over year to $336.1 million, while net income rose 31.0% to $11.8 million in the latest quarter. Daily average comparable store sales rose 4.2% in the fourth quarter and 7.3% for the full year, contributing to the company's 22nd consecutive year of positive comparable store sales growth.