Restaurants
PEP/BYND
BYND is a SHORT
PepsiCo (PEP) and Beyond Meat's (BYND) joint venture titled The PLANeT Partnership aims to release its products made from plant-based proteins in early 2022. "This is only the beginning of what I think is going to be a game-changing J.V.," said Pepsi CEO Ramon Laguarta on CNBC. Laguarta added that brands that speak out on environmental issues in direct marketing and advertising are performing better. Sustainability is becoming an increasing focus at Pepsi. The company recently announced a company-wide program to reach zero net emissions by 2040 and hopes the movement will provide it with a competitive advantage. The move puts pressure on competitor Coca-Cola (NYSE: KO), which has also been promoting environmentally sound practices, including moving towards 100% recycled plastic bottles.
MCD/BYND
MCD is a LONG
McDonald's debuted its first-ever plant-based burger, featuring Beyond Meat, at an exclusive tasting event ahead of its trial release at the end of this month in the U.K. and Ireland. McDonald's debut new McPlant burger Co-developed with vegan meat giant Beyond Meat, the launch will add to the McPlant range. Moreover, the plant-based burger features a vegan sesame bun, ketchup, mustard, and vegan sauce. It also includes onion, pickles, lettuce, tomato, and 'bespoke' vegan cheese. McDonald's confirmed it would be cooked separately from other offerings with 'dedicated' utensils. And the company is confident it will appeal to all customers. It is set for release in 10 select restaurants in Coventry from September 29. And in more than 250 sites from October 13, intending to roll it out across the nation next year. Plus, it'll be available at the exact cost as a Big Mac of £3.49
DASH
DASH is a LONG
DoorDash sues NYC over data sharing law that could allow customers to bypass the app. DoorDash (DASH) sues New York City over a law requiring delivery companies to share customer information with restaurants. A recently-approved NYC council bill would require third-party delivery services to provide a customer's name, phone number, e-mail address, delivery address, and their orders' contents to restaurants. Customers would be allowed to opt-out of the data-sharing or request that it be deleted. The law will go into effect in December if DoorDash is unsuccessful in arguing that it violates consumer privacy rights. DoorDash asserts that the rule would give out the company's trade secrets and allow restaurants to market directly to consumers, bypassing platforms like DoorDash. The three food delivery companies recently sued NYC for permanently installing third-party delivery fee caps.
Consumer Staples
The fastest growth in food (SOVO)
Sovos Brands is expected to IPO next week. Sovos Brands owns premium food brands including Rao’s – an Italian sauce brand, noosa – a yoghurt brand, Michael Angelo’s – an Italian frozen meal brand, and Birch Benders – a pancake and waffle brand. The company is targeting a $430M offering valuing the company at $1.5B. Sovos Brands was formed by Advent International. Rao’s and Michael Angelo’s were acquired in 2017, noosa was acquired in 2018, and Birch Benders was acquired in 2020. Management is targeting unique disrupters in food. In the year ended June 30, 2021 it had sales of $650M. Sales grew 34% for the first half of 2021.
Management has been adept at growing the small brands it acquires, something the large CPG companies have had difficulty doing. Many small potential targets have high asking prices. The company’s future success does not rely solely on identifying additional brands for the portfolio. Without acquisitions the company’s organic growth rate would still be among the fastest in CPG. The organic growth rate since 2018 has been 26% driven in part by increased shelf space and category expansion. Rao’s, which is 55% of total sales, has successfully entered the soup and frozen categories with plans to enter pizza. By going public the financial success of its brands will likely attract future targets.
Online grocery accelerates in August (KR)
Online grocery sales accelerated in August to $8.6B, up 28.4% from July and 4.9% YOY according to Brick Meets Click/Mercatus Grocery Shopping Survey. August was the largest month for online grocery sales since March. Delivery sales increased 24.5% compared to July while pickup sales increased 15.8%. Ship to home sales (delivered by parcel carriers) grew 42.9% from July, but were down 20% YOY. Order frequency and average spend per order decreased 13% YOY while the number of households going online accounted for the growth. Monthly Active Users (MAU) grew 4% from July. MAUs placed an average of 2.7 online orders in August, down 3.7% YOY. The ship to home MAU based decreased 10% in August while pickup increased 50% and delivery grew 30%. The likelihood that a MAU will order again in the next month rose by 3.5% points compared to July. 26% of online customers used both a grocery service and a mass market service to purchase groceries, up 1% from July.
Distributor acquisition (STZ)
Reyes Beer Division announced an agreement to acquire the brand distribution rights for several beer companies from Brown Distributing in West Palm Beach, Florida. The deal is expected to transfer 1.1 million cases to Reyes. The brands include Dogfish Head (SAM), Funky Buddha (STZ), and Cigar City (CANarchy). Reyes already had the distribution rights to other Boston Beer and Constellation brands. Brown Distributing sells 11 million cases across Florida and Virginia. Reyes distributes more than 26 million cases in several southern Florida counties.
There have been many discussions recently that the Biden administration’s executive order to address overconcentration in the economy will take a hard look at beer distributors. The Treasury Department was asked, along with the FTC and Justice Department, to submit a joint report on “patterns of consolidation in production, distribution of retail beer wine, and spirits markets.” Reyes does not appear concerned about making acquisitions despite the heightened regulatory attention. Constellation Brands forced the sale of rights to distribute its brands in many California markets to Reyes in the last few years. Reyes has been a strong partner to Constellation Brands as well.
