Staples Insights | Can outlook (BUD), Truck vax mandate (L CN), CPG innovation (KR)

Aluminum can outlook (BUD)

Last week Ball Corporation, the largest can manufacturer in the world, reported 7% growth in can volumes in 2021. The company shipped 112.5 billion cans during the year. Last year Ball Corp. built two new plants adding 12 billion cans of capacity. The company plans to build a new plant in 2022 and 2023, exiting 2022 with another 12 billion cans of capacity. Management said they are oversold for 2022 and for nearly all of the 2023 planned capacity. The majority of growth in 2022 is expected to be in North America. In North America energy drinks were up double digits, soft drinks growth were positive, and sparkling water was up slightly in 2021. Domestic beer was down, while hard seltzer and craft beer were down slightly. In 2022, management expects relatively flat commodity costs, but the pricing escalators in customer contracts will see price increases flow through in Q1, Q2, and Q3 of 2022 to recoup higher costs from 2021. Can shortages lead to greater price increases than just the pricing escalators as beverage companies scrambled for alternate supplies. The price of cans has increased ~50% over the past two years.

Trucking vaccine mandate (L.CN)

A new mandate went into effect on January 15 in Canada and a week later in the U.S. requiring truck drivers to be vaccinated before crossing the border. Truckers were previously exempt from federal travel restrictions. The Canadian Trucking Alliance estimates the mandate may block up to 20% of the 160,000 truckers from crossing the border. Last week a convoy of truckers protesting the mandate made their way to Ottawa. True North Compliance Services, an advisory firm that helps truck companies navigate rules and regulations, estimates that as few as 25% of current U.S. truck drivers are vaccinated. Some $45B of goods crosses the U.S. and Canadian border every month, mostly utilizing trucks. Truck rates for produce from the Southern U.S. to Canada have seen rates climb 25%. Fertilizer supplies in the U.S. are already a concern for corn growers. Half of Canadian nitrogen fertilizer production is exported to the U.S. 

CPG innovation (KR)

During the pandemic, there has been a dramatic decrease in new product introductions due to supply chain challenges, input cost inflation, capacity constraints, increased demand, and labor shortages.  According to Catalina, a digital marketing and media company, there were 29,385 new own CPG brand product introductions, down 25.7% YOY and down 53.5% compared to pre-pandemic 2019.

Private brand introductions decreased by 26% YOY in 2021. National brand introductions of 87,149 decreased 28% in 2021 and 67% compared to pre-pandemic 2019. Some private brand categories have seen significant sales growth during the pandemic as seen in the following chart. New product innovations are one way to measure the competitive intensity in CPG. It has fallen during the pandemic and will reverse as the pandemic does.