Adding to the long list (RVAC)
We are adding Westrock Coffee to our long list ahead of its projected de-SPACing in Q3. We are hosting our pre-IPO preview today at 12:30 PM ET. The SPAC price offers a compelling value for an essential player in the coffee channel. Westrock Coffee sits in the nexus between coffee growers and end consumers. It offers a number of services to coffee sellers from sourcing, roasting, brewing, blending, packaging, and formulation. It supplies more than half the largest retailers, QSRs, and C-stores. Westrock Coffee is the largest store label coffee and tea provider to U.S. restaurants. Consumers drink 20 million cups of its coffee daily. The ongoing shift in the consumers' coffee consumption to cold brew, pods, and RTDs underpins the company's investments for expansion.
Coffee consumption is one of the few consumer habits that accelerated during the pandemic and continued to grow as COVID-19's impact ebbed. Not only is Westrock Coffee profitable, but the company's growth drivers in the next few years are highly visible. The company's 20% revenue CAGR and margin expansion are best in class for top and bottom-line growth.
Our investment themes are as follows:
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On-premise driven by check (BUD)
According to CGA on-premise sales velocity for the week ended April 23 accelerated 1% to +17%. Over the last twelve weeks, sales velocity was up 33%. States with more restrictions last year like California, Illinois, and New York are driving the national results. The average check was up 17% while the transactions were flat compared to the prior year.
Online grocery slips (KR)
Online grocery sales fell 3.8% YOY in April, improving from the 6.5% decline in March. The total order volume fell 5.8% according to Brick Meets Click/Mercatus. Ship to home sales decreased 3% with average order volumes down 6% while average order value increased 3%. Delivery sales accounted for half the decline in online sales. Delivery average order value increased 6% to $84, but order volumes fell 11% with MAUs down 9%. Grocery delivery is a more expensive option and consumers may be looking to offset some of the price increases. Pickup sales decreased less than 3% with a slight decrease in average order value to $81, but a 2% drop in order volume. For grocery stores, online orders (pickup and delivery) represented 9.6% of sales, down from 9.9% last year. Inflation is now a larger concern than COVID-19, so further declines in digital grocery sales are expected. That will make it even more difficult to justify the investments in the low-margin offering.
