A good winter for strawberries (STKL)
Berry Farms, a large producer of berries, announced its forecast for a strong winter crop for strawberries led by its Florida and Mexico growing regions. The company said the long-term weather forecast suggests better temperatures than last year. Strawberry inventories are low due to increased demand during the pandemic and heavy rains in October in important growing regions. The company’s strawberry production in Central Mexico, an area known for winter production, is on track to grow this year. The recent decline in prices this year appears to reflect the outlook for a more significant winter crop, as seen in the following chart. Strawberries are the most important harvest for SunOpta and represent the largest volume of any single fruit in its Fruit Based division. Oats are a much more important commodity for SunOpta’s future, but customers' costs are largely passed through.
Go Local (LOCL, APPH)
Gotham Greens operates greenhouses in five states, from New York to Colorado. Last week it opened its first greenhouse on the West Coast. The California greenhouse will open up new retailers for the company. Gotham Greens’ strategy differs from AppHarvest, which centralized production in Kentucky. Gotham Greens seeks locations for its greenhouses close to retail locations to reduce transportation costs. The company says the lower distribution costs are a significant contributor to its produce being at price parity with the competition.
Local Bounti (LOCL), a greenhouse/vertical grow agriculture company, closed on its SPAC merger last month. Local Bounti has focused on the Western states due to fewer competitive openings. The company seeks to reach Western markets with local production and has targeted Montana, Texas, Washington, Colorado, and Nevada for expansion over the next four years. Local Bounti has received a lot of support in terms of debt and equity financing as well as customer relationships from Cargill. Local Bounti’s valuation at $10 was notably below AppHarvest’s IPO valuation, as seen in the following chart. The projected valuation is difficult to compare because it is based on projections in the out years. With the inflationary pressures on transportation costs, it is likely only a matter of time before AppHarvest has to rethink its centralized production strategy and follow the localized approach of the competitors like Gotham Greens and Local Bounti.
November online grocery sales (KR)
Online grocery sales in the U.S. grew 6% YOY to $8.6B, according to Brick Meets Click/Mercato. Ship to home sales decreased $.1B from October and decreased $.6B YOY. Delivery and pickup sales gained $.6B from October and $1.1B YOY. Growth was driven by a larger active shopper base in mass merchants like Walmart and Target. Monthly average users (MAU) grew by 13 million households over the past year, while grocery gained 4 million. Brick Meets Click said, “Even as total online grocery sales increase, some conventional and regional grocers have reported softer sales performance during November….” Nearly 69 million households purchased groceries online in November, up 15% YOY. Pickup sales grew 29% compared to 6% growth for delivery and combined represented 81% of online grocery sales. Ship-to-home sales fell to 27% of online grocery sales. In November, the average number of orders placed by MAUs fell 5% to 2.7. The weighted average order value across all three delivery methods was $71.12. Delivery’s AOV was $86.30, pickup’s was $83.44, and ship-to-home was $42.03. Online grocery sales represented 2% of grocery spend in the U.S. pre-pandemic. In November, online grocery sales were 14% of total spending. Grocers have several competitive advantages compared to mass merchants, but price is not one of them. If online convenience is not an advantage as well it will require further investment spending from the grocers.
