Restaurants
According to the National Restaurant Association’s mid-year state of the restaurant industry report, the two biggest challenges to the industry’s recovery are increased customer hesitancy over the delta variant and the ongoing labor squeeze. Restaurant employment is still one million or 8% below pre-pandemic levels. Six in ten adults have changed their restaurant habits because of the delta variant. In addition, 19% of adults said they have completely stopped going out to restaurants, and 37% have ordered delivery or takeout instead. Food costs are also a challenge, increasing at the fastest rate since 2014.
Sweetgreen's Automation
Ahead of its rumored IPO, Sweetgree's is adding more technology to its story. The company purchased Spyce, a restaurant startup known for its automated kitchen. Both fast-casual companies specialize in salads and bowls, but Sweetgreen is far bigger. Sweetgreen has grown to 130 U.S. locations since launching in DC in 2007. It's currently valued at $1.8B and filed for its IPO in June. Spyce has 2 locations in Boston and has raised $24.9m. But Spyce also has robots. Spyce was founded by a group of MIT students in 2015. It uses recipes from acclaimed chef Daniel Boulud through an automated cooking process. An earlier iteration used rotating works that tumbled and cooked ingredients. Human employees then added toppings and garnishes. Now, Spyce uses an "Infinite Kitchen" that sears, steams and assembles meals by itself in 2-3 minutes. Allie Weinstock, Sweetgreen's P.R. and communications manager, called the acquisition an "investment in our future." For now, Sweetgreen is focusing on updating Spyce's tech and developing a new product and concept that will work with Sweetgreen as it scales.
Consumer Staples
Avocado prices surge (AVO, CVGW)
Mexican grown avocado prices have surged in August and are up 107% YOY. Prices have doubled from the beginning of July. Prices now are only 8% off the high in 2019, as seen in the chart below.
For the six months ended in April, Mission Produce’s average selling price for avocados was down 15%. Household penetration in the U.S. is at roughly 60%, but it varies by region. For example, in California, the average annual spending on avocados is $30. Avocados represent 5-10% of Chipotle’s COGS.
Canada beer sales (TAP)
Total beer volumes in Canada declined 7.5% in July, further slowing from the 4.6% decline in June. Canadian domestic beer volumes decreased 1.0%, slowing from the 2.4% increase in June. Imported beer volume fell 39.3% in July, similar to the 38.5% decrease in June. Export beer volumes increased 29.2% in June. 85% of beer consumed in Canada is made in Canada.
Indoor grow investment (DOLE)
One of the largest fresh-cut produce companies specializing in salads, Taylor Farms, announced investing in Pure Green Farms last week. Pure Green Farms hydroponically grows, packs, and ships leafy greens. Taylor Farms grows leafy greens on 122,200 field acres supplying 16 salad-producing facilities. In comparison, Pure Green Farms’ current location can potentially expand to 300 acres. Taylor Farms brings farming, distribution, and retail relationships to Pure Green Farms. Dole, a market leader in the $6.9B value-added salad category, has five salad manufacturing plants. In addition, Dole grows its produce in numerous countries to grow year-round instead of indoors. We put low odds that the indoor grow companies' margins will be higher than Dole's in the investable future.
