Restaurants
Merck's party
Last Friday, the restaurant sector rallied after the company's COVID treatment pill was seen as a potential turning point. The Merck update also follows improving COVID hospitalization trends in critical parts of the U.S. Restaurant gainers, including LUB +11.2%, BLMN +6.6%, EAT + 6.4%, PLAY +8.5%, CAKE +5.9%, DIN +6.9%, and RUTH +5.7%. Driving top-line sales is not an issue for the industry., its profitability.
Delivery Hero acquired the rest of Danish food delivery service Hungry after previously holding a 44% stake in the company. Hungry was started in 2012 by old employees from Delivery Hero's biggest rival, Just Eat (GRUB). It describes itself as an "online food delivery marketplace with "a fast-growing, profitable business and a strong leadership team." The company operates in Denmark, the Netherlands, and Ireland and partners with over 200 restaurants. The acquisition will boost Delivery Hero's presence in the Nordic region as it competes with Just Eat and Uber (UBER.) Uber says that the fuel shortage hasn't affected its business, but drivers are having trouble filling up.
Consumer Staples
Fresh vs. frozen (CAG)
Deloitte released a report this past week, "Fresh vs. Frozen: The Future of Fresh in a Changing Competitive Landscape." The report highlighted that frozen foods are gaining a larger share of at-home consumption despite the growth in fresh food sales. Deloitte surveyed 2,000 U.S. adults about their food purchases for the report. Fresh food sales grew 10% in 2020, while frozen foods grew 21% (13% in units). The report pointed to three factors that have improved the perception of frozen food – perishability, price, and preference. First, 60% of respondents believe fresh food's shelf life has declined, making frozen food more preferable. Second, 72% of consumers think about the amount of food they discard as a purchasing decision. Third, 90% said the price was the top purchase driver for fresh food. The lower price of frozen food has made it more appealing during a time of inflation. Finally, younger consumers are more favorably disposed towards frozen foods. 57% of 18 – 34 year-olds think frozen vegetables are just as good or better than fresh foods compared with only 39% of consumers 55 years and older.
The report also said half of the consumers surveyed had purchased plant-based foods, and interest in it has risen 6% since 2020. 72% of those who tried plant-based foods said the taste has dramatically improved in recent years. Of those who have tried plant-based foods, 65% believe it is as good or better than animal-based milk, while 59% felt that way about the animal-based meat.
Brewing better coffee at home (SJM)
According to NPD, consumers brewed about 73% of their coffee servings at home before the pandemic and sourced 27% from the foodservice channel. During the pandemic that shifted towards 81% of coffee was sourced from home and 19% from food service. According to IRI, coffee sales in the supermarket channel increased 3.6% in the year ended May 16 to $5.9B. Consumers also shifted toward higher-quality coffee while brewing at home. Sales of single-serve brewing systems, including pod coffee makers, increased 11% in the year ended May 2020 and accelerated to 26% growth in the year ended May 2021. Sales of non-electric coffee presses, including French presses, increased 7% in the year ended May 2020 and accelerated to 12% in the year ended May 2021. Sales of non-electric pour-over coffee increased 17% in the year ended May 2020 and accelerated to 23% in May 2021. In recent weeks, price increases of 10 to 20% have started to flow through the coffee bean category. J.M. Smucker has been a notable beneficiary of more consumers brewing coffee at home.
Texas on-premise alcohol beverage tax receipts recover (BUD)
Texas reports its alcoholic beverages sales tax receipts monthly. In September, alcoholic beverage receipts increased 56.5% YOY. Compared to August, receipts decreased 9.7% month over month. August represented the second-highest month of tax receipts since January 2020, as seen in the following chart. In Texas, bars were shut down in mid-March and allowed to re-open on May 22. In late June, bars were shut down again, then re-open again in October by county. Bars were also allowed to reclassify as restaurants since June as long as food sales exceeded alcohol sales.
