The packaged food industry is already one of the most ill-starred segments in the U.S. economy today, and as host Chris Hill and Motley Fool Asset Management's Bill Barker discuss in this segment from the MarketFoolery podcast, the latest news from Kellogg's (NYSE:K) only adds to the pain quotient.

The company has been compelled to recall a massive quantity of Honey Smacks cereal due to its connection to, so far, 130 cases of salmonella. The Fools discuss the many issues plaguing Kellogg and its peers and the stock's place in a healthy, balanced portfolio.

A full transcript follows the video.

This video was recorded on Sept. 5, 2018.

Chris Hill: We've talked before about the packaged food industry being, perhaps, the most troubled industry in 2018. Certainly, if you look at the turnover in the executive suite at packaged food companies, it's getting pretty grim out there. It gets even grimmer with the news today that Kellogg's has issued a massive recall of its Honey Smacks cereal. They had already had salmonella concerns earlier this year. The Center for Disease Control and Prevention says now, the number of cases of salmonella linked to the cereal is up to 130, spread out over 36 states. If I'm Chipotle, as discreetly as possible, I am pushing this story to as many people in the media as possible. If you're Chipotle, you're like, "Hey, we had one location in Ohio. Just one. The monsters at Kellogg's are blanketing this country with this death cereal of theirs." I shouldn't say death cereal, there's not actually --

Bill Barker: It wouldn't be as funny, would it, if it were a death cereal.

Hill: If people were actually dying.

Barker: Joking would be inappropriate.

Hill: Yes. Instead, people are just getting sick from Honey Smacks.

Barker: Salmonella can kill you, but it has not. Therefore, we feel that there is license to make jokes about this. Yeah, it is tough times for cereal, although Kellogg's stock has rebounded a little bit lately. But it's mostly a flat place to invest over the last half decade.

Going back to what we were talking about with Restoration Hardware and the margins being a big part of their story, that's a big part of the problem for packaged foods. They just don't really have the pricing power that they used to. The private label options are better. They're coming much closer to the quality of your classic branded cereals. Inflation is showing up in the input costs for Kellogg and others. They're also wedded to a lot of things which are not exactly healthy, which is part of the reason that I've always loved eating their cereals.

Hill: Right! I mean, you and I are old enough to remember when the name of this cereal in particular was not Honey Smacks, it was Sugar Smacks.

Barker: Yeah, that sounds better.

Hill: It certainly was.

Barker: Better than Salmonella Smacks, which I recommend they do not pursue.

Hill: To go back to the stock, you talk about how it's rebounded a little bit. But this is already a troubled industry. This is just one more headline that makes me as an investor... it just reminds me, "Oh, right, I don't want anything to do with investing into this industry right now."

Barker: Well, it can be part of a completely nutritious portfolio, as they would tell you. That's how they would phrase it. It's not going to be the sugary part. It's more like the wheat bread part of your completely nutritious breakfast.

Hill: Which is ironic, given the amount of sugar in these cereals. In terms of your investment portfolio, it's like, "No, you don't have to worry about us, we're not going anywhere. We're going to be the blue chip. We're going to give you a little dividend," that kind of thing.

Barker: I feel like I was blessed with more sugary cereals in my youth than you were.

Hill: Oh, I don't think that's a feeling. I think that's a fact, based on conversations we've had.

Barker: Part of my proof of this is, when we discussed the Mount Rushmore of cereals, and I decided you could have two sugary and two non-sugary cereals, and that was the right way to divide up Mount Rushmore, you were trying to place Rice Krispies as one of the sugary cereals. Which is ridiculous.

Hill: And yet. I'm a product of my own upbringing.

Barker: What sugary cereals were you allowed?

Hill: Rice Krispies was kind of pushing the envelope there. On Christmas Day, one of the things I would get was, they have the individual boxes. They sell them in eight packs. I would get an eight pack of sugary cereal. And that was glorious. First of all, it's Christmas. Second of all, no school. Third of all, for the next eight days, I've got all the sugary cereal I want.

Barker: This explains your addiction to Pop-Tarts now. You weren't allowed --

Hill: I think that's an overstatement on your part. They're an indulgence. Every now and then.

Barker: But you'll make a trip specifically to get some Pop-Tarts. Or, you used to, before the place closed that had them.

Hill: Yeah, but here's the thing. I don't go crazy with Pop-Tarts. I'm not one of these people who's like, "I'm going to have the chocolate s'mores, cookie dough Pop-Tarts." No. I'm old school. I'm going fruit.

Barker: Yeah, there's no sugar in those.

Hill: There's sugar. But you know what else there is? A little something we like to call eight essential vitamins.

Barker: [laughs] And iron.

Hill: Exactly. all the good things.

Bill Barker has no position in any of the stocks mentioned. Chris Hill has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.