Grocery traffic and vaccines (KR)
Sequentially the grocery channel has seen traffic fall in Q2 while all other food retail channels have increased, as seen in the chart below.
Consumer mobility has increased in Q2, as consumers have ventured to other stores beyond supermarkets. The biggest growth in the purpose of the shopping trip has been “quick trips,” while “pantry stocking” and “fill-in” have decreased sequentially. Consumers’ shopping behaviors, in many ways, are returning to pre-pandemic habits. Consumers consolidated grocery purchases to large, once-a-week trips during the pandemic but recently have grown more comfortable stopping by for smaller, purpose-driven visits. There is a direct correlation between when consumers were vaccinated and the number of in-store trips they make, as seen in the following chart.
More frequent visits have benefited the perimeter departments, prepared meals, deli, and bakery departments. While the grocers have lost traffic share this year, CPG demand has remained more elevated than expected. The share prices of grocers Albertsons, Kroger, and Sprouts Farmers Market are mostly higher in Q2 than Q1 as investors are more focused on top-line trends and EPS than margins and share. We see this changing in the 2H with further top-line and margin headwinds.
Tetra Pak investments (STKL)
Tetra Pak announced a €100M investment at its Chateaubriant facility specializing in caps production. The investment will support the plant's transition to the production of tethered caps by 2024. Tethered caps help reduce litter because the cap stays attached to the package. The plant’s capacity will also increase by 30%. The plant has a production capacity of 5 billion caps. Elopak, a competitor of Tetra Pak, launched its TwistFlip (a tethered cap) earlier in the month, as seen below.
Tetra Pak has committed to investing €100M per year over the next five to ten years to develop more sustainable packaging solutions. The investments are necessary to prepare for Europe’s Single-Use Plastics (SUP) Directive. Tetra Pak has also pledged to incorporate a minimum of 10% recycled plastic content across carton packages sold in Europe by 2025. Tetra Pak is a dominant food packaging supplier. It is the preferred packaging supplier to the plant-based beverage industry, so making progress on the environmental aspect is important to many of its customers.
Sugar commitments (ZVIA)
UNESDA announced a new commitment to reducing the average added sugars in beverages by another 10% across Europe. The continent’s soft drink industry association says an overall reduction in average added sugars in soft drinks across Europe will reach 33% by 2025 compared to last year. From 2015 to 2019, the industry reduced the sugar by 14.6% compared to a 13.3% average reduction from 2000 to 2015. The commitment encompasses all soft drink categories, including energy drinks, fruit drinks, sports drinks, iced tea, coffees, and flavored water. The industry association is also adjusting its advertising policy against soft drink ads to children younger than 13 years from 12 years. A similar industry effort seems likely to cross the pond. Zevia may have timed its IPO well for the increasing attention paid to sugar or its absence.
