Idea Hunt (THS)
We are hosting our Q2 Idea Hunt on Thursday, April 28 at 2 PM ET.
We will vet two Consumer Staples companies in our Idea Hunt. The first company is Monster Energy. The second company is TreeHouse Foods. This year, shares have come under pressure over concerns about inflationary cost increases, supply chain challenges, and lowered forecasts. We will seek answers to the following questions:
- Can price increases offset the cost increases and when?
- Will consumer headwinds become a tailwind for private label?
- What is the likely outcome of the strategic review?
- When will volumes grow?
- When will THS start a positive earnings revision cycle?
More coffee consumption (BRCC)
Coffee consumption and especially at-home coffee consumption has increased during the pandemic. 66% of the U.S. are now drinking coffee daily, the most in about five years, according to a National Coffee Association survey in January. In 2021, 58% of Americans said they were daily coffee drinkers, and 63% in 2020. The largest increase has been driven by consumers aged 40 and up who are drinking more coffee at home as opposed to specialty drinks at cafes favored by millennials. 84% of respondents said they had consumed coffee at home in the past day. 43% of coffee drinkers had a specialty brew in the last day, up by 20% from January 2021.
A USC study published this month researched the effect of fatigue vs. habit of coffee consumption. Respondents said fatigue was twice as important as a habit for prompting their coffee consumption, but the study showed it was similar. The study found that “participants strongly overestimated the effect of tiredness on their coffee consumption and underestimated the effect of habit.” At-home consumption will likely remain strong as a way to save money and increasingly because it has become more of a habit. Black Rifle Coffee company’s DTC sales benefited from the shift to at-home consumption. However, the largest contributor to BRCC’s sales growth for at least the next two years will be RTD coffee drinks.
Flu season not receding yet (PRGO)
2.1% of patient visits reported through ILINet were due to respiratory illness that included fever, plus a cough or sore throat, flat from the previous week. The percentage is below the national baseline of 2.5% as seen in the chart below, but it has been steadily increasing for the past two months as seen in the chart below. This flu season is higher than last year’s nearly non-existent season and in the middle of the previous six years. The CDC estimates there have been at least 4.7 million flu illnesses this season. The national flu, pneumonia, and COVID-19 mortality rate is 7.1%. This year’s flu season would be a disappointment if it did not compare to last year. It pushes out the cough & cold upside to next year for PRGO, but we still have three other investment themes.
