Restaurants
DNUT
Krispy Kreme (DNUT) to take the majority controlling interest of its Canada business to expand its omnichannel strategy in the region. The company says it has signed a definitive agreement to partner with franchisee and operator Krispy K Canada, which owns and manages 10 points of access throughout Ontario and Quebec. The terms of the transaction were not disclosed. Following this transaction, Krispy Kreme will control 75% of sales across its global network. However, Canadian operating partners Christopher Lindsay and Kelcey Hamaker will remain as co-CEOs of the entity post-transaction. They will continue to manage the day-to-day operations of shops. "We are extremely excited to partner with Chris and Kelcey to help them deliver on their vision and expand our reach in Canada, tapping into their local experience to accelerate our growth," says Mike Tattersfield, CEO of Krispy Kreme. The closing of the transaction is expected in Q4 2021. Stock is up 1.5% in premarket trading.
QSR 3rd party delivery (DASH)
Purchase frequency of in-store QSR trips fell from 36 trips per household in the 13 weeks ended February 2020 to 26 trips in the 13 weeks ended June 2020. QSRs benefited from average spend and drive-through trips increasing. In the 13 weeks ending August 2021, average trips are projected to be 35 per household. Household penetration of 3rd party delivery from QSRs increased from 6% pre-pandemic to a high of 12% earlier this year. -However, third-party delivery penetration has been steadily declining since April 2021, as seen in the chart below.
Consumer Staples
Outpacing industry wine sales (VWE)
Total U.S. sales of all wines increased 5.5% for the year ended June 30, 2021. However, excluding vermouth and flavored wines from Mexico, growth was only ~2%. The flavored wines have seen sales growth of 81% in the past year and have been similar to hard seltzer, which has slowed. With on-premise restaurant closures at an estimated 10%, the on-premise mix for wine will likely be capped at 15%, down from 16%. In the past six months, case shipments of California wines increased 3.6% and in the past year increased 2.5-3%. Vintage Wine Estates laid out a much more robust growth outlook for its next fiscal year during its Q4 earnings call earlier this week. Vintage Wine Estates expects its revenue to grow between 10 and 15%. The company's on-premise sales mix is only 5%.
New milk alternative launches (DANOY)
Danone is launching two new dairy-like milk alternatives in North America in January. Silk Nextmilk and So Delicious Wondermilk blend oat milk, coconut milk, coconut oil, soy protein, and other ingredients. Nextmilk will be distributed through conventional grocery stores, while Wondermilk will be distributed through natural grocers. When the company first announced its plans, Danone said it saw an opportunity to challenge the "ingredient analog of almond, oat, soy." Danone used a blend to create similar attributes and mouthfeel as dairy milk. The alternative dairy category will continue to become more crowded as more consumers switch from dairy milk. Taste, nutrition, and ingredients are the most important. Few brands have taken a blend of different plant bases. The simplicity of the ingredient label will be even more critical when making a blend.
Planting update (APPH)
AppHarvest announced that it completed its summer refresh, the replanting of its indoor farm. The company planted 700,000 plants that are expected to be producing in a couple of months. The company expects a modest $.3-.4M of tomato sales in Q3 before harvesting in Q4. The update confirmed the progress management outlined on the last conference call. One of the benefits of an indoor farm is supposed to be its year-round or alternative growing seasons ability. AppHarvest said it is on schedule for revenue of $4.2M in the first three quarters of 2021 and $3-5M in Q4. However, the projected Q4 run rate would still put the company below its original target of $20-25M in 2021.
