Trucking rates off-peak (KR)
DAT’s Truckload Volume Index fell 5% in April from March to 225 but was still the second busiest month on record. The index measures dry van, refrigerated, and flatbed loads moved by truckload carriers with the baseline of 100 set in January 2015. The index in April was 39% higher YOY and 26% higher than April 2019. The national average spot rate for van loads was 8 cents lower per mile in April than the March average of $2.59 per mile. The national average spot refrigerated rate was $2.93 per mile, two cents lower than March. The average van contract rate was $2.66 per mile and increased for the twelfth consecutive month. The average contract rate for refrigerated freight was $2.78 per mile. This year has seen an increase in shipments utilizing spot rates. Typically 12-15% of truckload freight is on the spot market compared to 25% currently as the supply channels struggle to meet demand. Higher trucking expenses are being absorbed across a wide range of industries. CPG companies tend to have a lower value per truckload, making the impact greater.
Surging promotions back-off (ACI)
The surge in at-home food consumption drove grocery demand ahead of the suppliers’ ability to keep the shelves stocked. This led to grocers and CPG companies pulling back on promotions for much of the pandemic. Since lapping the grocery stockpiling period last March, the promotional intensity has steadily risen, peaking the week ended April 25 at 62% higher YOY. Since peaking, the promotional intensity has fallen to +51% for the week ended May 9. Non-edible promotional intensity has been higher than in the edible categories +71% vs. +49%, respectively. Within the edible category, promotions were highest in general food +74. Beverage alcohol promotions were lower than most edible categories +33%. In addition to promotions intensifying, CPG suppliers and grocers have seen costs, including labor, shipping, and commodity costs, rise.
Positioned for new growth (LW)
After the market close, Lamb Weston announced that its CFO Robert McNutt is retiring. VP and Controller Bernadette Madarieta will succeed him on August 6th, after the next earnings call. Madarieta has been with the company since the spin-off. Last month Lamb Weston announced a new French fry processing facility in China for $250M. The facility will add about 250M pounds of frozen potato capacity. It is expected to open in the 2H of 2023. The company is also constructing a new chopped and formed products facility in American Falls, Idaho. The facility will make products such as potato patties and potato puffs. It is expected to commence production in early 2022. Local farmers believe the new plant will result in more contracted potato acres while also utilizing smaller potatoes that do not meet specifications for other products. Lamb Weston is on our position monitor as along. The company is one of the few consumer staples companies that was negatively impacted by the shift in food consumption during the pandemic. Lamb Weston is positioned to benefit from the recovery in on-premise dining spreading beyond quick-service restaurants to casual dining and foodservice.
