We are hosting a live Restaurants & Consumer Staples Q&A call today at 10 AM ET.
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CLICK HERE for a live webcast and materials at the time of the event. |
Position monitor changes (UTZ)
We are making several changes to our position monitor:
We are adding Utz Brands (UTZ) to our long list. We are taking advantage of a recent pullback in the stock price to add the company as a long. We believe management can create value for shareholders with the flywheel effect of organic growth funding future acquisitions. In addition, the market’s current concerns over inflationary pressures and lapping pandemic comparisons provide an opportunity to invest in a long-term mid-teens growth compounder. For more details on Utz Brands, please see our separate note.
We are removing Simply Good Foods (SMPL) from our short list. The valuation remains extended, but we do not have enough of a catalyst to keep the company on the short list. While the return to the office and travel has been slower than the market has expected, it extends the tailwind.
We are removing Reynolds Consumer Products (REYN) from our long list. We remain attracted by the company’s projected organic growth and free cash flow. However, we were unable to increase our conviction or our visibility in upside to consensus expectations. We also have less confidence management can narrow the company’s valuation to peers.
On-premise recovery (BUD)
On-premise velocity increased 68% compared to the same time last year in the week ended June 26. Compared to the same week in 2019, velocity was 34% higher. As seen in the chart below, sales velocity has been trending higher than 2019 levels for six of the last seven weeks. Across all states, the dollar velocity is well above 2020 levels, and all key states are ahead of 2019 levels for the first time. For example, new York has seen four consecutive weeks of growth, and California is in its fifth consecutive week. In addition, 92% of states are completely open, while 8% of states like New Mexico, Oregon, and Washington have capacity measures in place.
State of the Canadian food retail industry (L-TSE)
The USDA recently published a report on the Canadian retail industry. Food and beverage retail sales in Canada grew by 10% in 2020, reaching $109B. Beverage alcohol sales reached $20B. The U.S. exported nearly $17B of high-value, consumer-oriented products in 2020 to Canada. The recently implemented trade agreements with the EU and the Trans-Pacific Partnership will increase competition for U.S. agricultural exports. Loblaws & Shoppers Drug Mart was #1 in market share with 27% in retail sales. The top five retailers have more than 75% grocery market share.
