Restaurants
SBUX
Starbucks to launch on Deliveroo at more than 400 stores across the U.K. The partnership will allow Deliveroo customers to order their favorite Starbucks arabica coffee and signature handcrafted beverages, plus menu options including sandwiches and sweet treats to be delivered in less than 30 minutes. The coffee chain was previously only available on Uber Eats and Just Eat, but fans will now be able to get their orders delivered to even more locations.
2021 IPOs
2021 has been a record year for new public company listings, with total issuance in the U.S. at $257B. The IPO market picked back up after a slow August. The share price performance of the newly issued companies lagged the overall market, as seen in the Renaissance IPO index. The most extensive offerings expected to go public in the coming months in our sector are Instacart and Impossible Foods which would also impact their public competitors. We have recently presented pre-IPO Black Books on Zevia, Toast, Dutch Bros, and First Watch, with replays available for each.
Consumer Staples
Guiding below the long-term plan (NAPA)
The Duckhorn Portfolio reported FQ4 EPS of $.08 vs. consensus of $.01. Revenue grew 35.7%, 18% above consensus estimates driven by the on-premise recovery. Volumes increased 40.4%, while price/mix decreased 4.6% due to the growth in Decoy and Duckhorn Vineyard winery brands. In the 12 weeks ended September 5, Decoy was the best-selling luxury brand in the off-premise channel. By channel, wholesale distributors grew 68.9%, wholesale California direct to retail grew 18.5%, and DTC grew 12.6%. Gross margins contracted 110bps due to brand and channel mix shifts. Inventories were 9% higher YOY. SG&A was up 51% YOY, driven mainly by public company and incentive compensation costs.
Management said the company was not immune to a recent slowdown due to the Delta variant. Management guided next year’s sales to grow between 5 and 7%, below the long-term guidance of HSD to LDD%. Management attributed the slower pace of growth more to difficult comparisons than the pandemic. EBITDA is expected to grow 1 to 4% or 3 to 6% when adjusting last year’s results to include public company costs. EPS is expected to between $.54 and $.57 compared to $.58 in F2021 and consensus of $.50. Management said it was likely that they acquired production assets or a vineyard this year. Providing a decelerating and slower pace of growth than the company’s long-term goal for the first full year since going public does deserve a multiple north of 40x EPS. The company’s IPO roadshow was much more effective in outlining the growth drivers than the conference call.
Fewer avocados from Mexico (AVO)
2021 started with large volumes of avocados from Mexico and relatively low prices slightly above $20 for 48 size two-layer packs. 2021 is currently seeing the most avocado volumes in the last seven years, driven by increases in Mexico. Mexico is reporting over 1.6B pounds growth this year, up 160M more pounds than 2020. Mexico grows more than six times the next largest grower, California. Production in California is down 27% this year. As Mexican volumes imported into the U.S. decreased over the year, prices started to rise in July. Current prices for this size have recently been trading at $70, double the price has seen over the summer, as seen in the chart below.
Canadian beer sales improve (TAP)
In August, total beer volumes in Canada decreased 0.1%, improving from the 6.2% YOY decline in July. Canadian domestic volumes increased 3.5% YOY, accelerating from 0.3% in July. Imported beer volumes fell 19.2% YOY, improving from the 38.4% decrease in July. Export beer volumes decreased 7.5% in July after increasing 29.2% in June.
