Worth repeating?
58 – The number of times “inflation” was said during CAG’s earnings call yesterday.
36 – The number of times “inflation” was said during CAG’s FQ3 call on April 8th.
That's a lot of repeating, but we're going to hear "inflation" a lot this earnings season. Still, it's better than "COVID-19."
Food CPI trends change direction (KR)
The headline CPI was 5.4% YOY in June, accelerating 0.9% from May. The CPI for food at home was 0.9% YOY in June, accelerating 20bps from May. The CPI for food and beverages in June was 2.4%, accelerating 30bps from May. The inflation rate for food has been decelerating for the past year. June’s figures point to a reversal in trend, as seen in the chart below.
The CPI for cereals and bakery products was the only sub-category to see decelerating inflation at 0.2%, down from 0.6% in May. Meats, poultry, fish, and eggs inflation was 0.7% YOY. Dairy and related products inflation was 0.8%, accelerating from 0.1% in May. Alcoholic beverages inflation was 1.9% YOY in June, up from 1.6% in May. The accelerating rate of food inflation in June against more difficult (higher) comparisons makes it more likely that inflation will accelerate in the coming months as the comparisons ease. Many CPG companies have also stated their intention to raise prices in the 2H of the year.
On-premise draft beer improves (BUD)
According to BeerBoard, which tracks $1B in draft beer sales nationwide, for July 8-11, the percentage of establishments open and pouring beer was 92%, similar to the percentage two weeks prior, as seen in the chart below. The 8% that are closed may represent businesses that have closed permanently during the pandemic. In June, the restaurant industry gained 194,300 jobs, but that is still nearly 1.3 million jobs or 10% fewer than pre-pandemic levels.
Nationally the volume of beer poured compared to 2019 was 30% lower, up from -36% for the previous June 17-20 reporting period. The volume poured ranged from -51% in Minnesota to -19% in Nevada. The volume share for imports increased from 16.3% in the June 17-20 period to 17.0% in the July 8-11 period. The volume share for craft beer decreased 20bps to 34.0% in the same time period. The volume share for domestic beer decreased 0.5% to 49.0%
New Coke Zero (KO)
Coca-Cola announced yesterday that it was updating its Zero Sugar beverage to taste more like regular Coke. CEO James Quincey previewed the change on the last conference call in April. The company has said the new version should taste “more refreshing and delicious.” The new version has already been introduced in Europe and Latin America. The new version will replace the current version seen below this month in the U.S. and in September for the Canadian market. In the U.S. and Canada, the same ingredients, aspartame and acesulfame K are used to sweeten the product. Other markets use different sweeteners. There are plenty of negative comments on social media from international customers, but the company has said the new version had been tested with consumers and non-consumers. Coke Zero was launched in 2005. In 2017 the recipe was modified, and it was rebranded as Coca-Cola Zero Sugar. At the time, it also received negative social media comments when the recipe was changed, but it grew 4% by volume in 2020 and 8% in Q1. Coca-Cola Zero Sugar is still “a relatively small percentage of the trademark.” According to Euromonitor, the product has 7.9% of the U.S. carbonated cola market. The new recipe and packaging are targeted to make the switch from sugar visually and by taste even less noticeable. Zevia is targeting its IPO next week. Zevia’s strongest brand message is that it has zero sugar. Coca-Cola’s challenge is to convert its consumers to the Zero Sugar product before they leave for other brands and beverages without the benefit of implying the product being healthier or better for you.
