Restaurants
AMZN/Deliveroo
Deliveroo and Amazon have struck their first partnership since the AMZN invested in the company two years ago, offering Prime customers free deliveries on certain orders. The move comes despite UK regulators examining the risks of just such a tie-up when considering whether to allow Amazon’s investment in Deliveroo, which was originally agreed in 2019. Subscribers to Amazon Prime will be able to have a year of unlimited free deliveries on Deliveroo orders from grocery stores and restaurants, as long as they spend more than £25 per order. The offer is equivalent to the “silver” tier of Deliveroo Plus, which normally costs £3.49 a month. Lisa Leung, director of Prime and marketing at Amazon UK, said the company was “always looking for ways to offer even more value to Prime members.” As well as free shipping, discounts, and its video streaming service, Prime perks beyond Amazon’s own network of products have previously included a year’s free Nintendo Switch Online membership and discounted wireless contracts. During its investigation last year, the UK’s competition regulator fielded concerns that tapping into Amazon’s Prime network might give Deliveroo an unfair advantage over rivals such as Just Eat Takeaway.com and Uber Eats. However, the Competition and Markets Authority ultimately concluded that such a collaboration would not present a “substantial” enough risk to warrant intervention. @hedgeyeretail covers AMZN.
Food away from home vs. at home
Food away from home CPI increased 4.7% YOY in August, accelerating 10bps from July. Food at home prices increased 3.0%, accelerating 40bps. The differential between food away from home and at home narrowed 20bps sequentially to 1.8%.
New pricing tiers for Uber Eats (DASH)
Uber Eats introduced a new tiered pricing plan for restaurants. Restaurants can choose to pay 15%, 25%, or 30% per order, with the higher fees providing additional marketing support. DoorDash introduced similar pricing tiers in April. The plans also come with a 6% commission on pickup orders.
Consumer Staples
August CPI – food prices accelerating
CPI for food at home increased 3.0% YOY in August, accelerating 40bps from July. The comparison in September is 50bps easier while at the same time CPG companies are implementing additional price increases setting up for further acceleration. The meat, poultry, fish, and eggs sub-category had an 8.0% increase YOY, accelerating 210bps from July. Dairy prices decreased 0.5% YOY, a 230bps deceleration from July. Overall, food and beverages prices increased 3.7% YOY, accelerating from 30bps sequentially. Fats and oil prices increased 5.5% in August, accelerating 150bps sequentially. Alcoholic beverages prices increased 2.6% YOY, accelerating 20bps from July.
Starbucks oat milk needs (STKL, OTLY)
At an investor conference, yesterday Oatly said the demand from Starbucks was more than double their original projection. As a result, Starbucks added SunOpta as a secondary supplier to make up for the 1/3 shortfall from Oatly. Oatly explained that it remains the exclusive oat milk brand at Starbucks in the U.S. and China. In contrast, SunOpta remains the unbranded supplier for all the plant-based milks except oat milk, where it is a secondary supplier. When asked if Oatly will meet its target of fulfilling all of Starbucks’ oat milk needs this fall, it demurred from answering. Starbucks represented 27% of Oatly’s U.S. sales in Q2 and is SunOpta’s largest customer.
Kroger in 30 minutes
Kroger and Instacart are launching a “Kroger Delivery Now” nationwide to deliver in as little as 30 minutes. Shorter delivery times require higher levels of staffing to meet the shorter deadlines. By using Instacart, Kroger reduces the number of employees required to fulfill the
One of the challenges with short delivery time orders is the basket size tends to be smaller than less time-sensitive orders. Delivery orders have averaged higher than in-store baskets during the pandemic, which has marginally improved the profitability. Smaller orders with quick turnarounds will have higher fixed costs and lower profitability per order, but to reach scale, Kroger is pushing further into e-commerce.
