Baby formula stockpile (PRGO)
The FDA Commissioner proposed a national stockpile of baby formula that authorities could use in case of future shortages. Commissioner Robert Califf appeared in a hearing before the Senate Health, Education, Labor, and Pensions Committee on Thursday. He projected the current shortage to be a surplus in about two months. The Abbott plant that was closed in February is expected to reopen on June 4. It represents 40% of Abbott’s capacity. It will take numerous weeks before production at the plant will hit retailers’ shelves. Despite the recent government actions shortages are widespread. It was reported by Bloomberg that Houston’s stock of baby formula was 90% missing. Baby formula does expire, so a national stockpile would likely increase demand. Four domestic manufacturers – Abbott, Mead Johnson, Nestle, and Perrigo produce 98% of the baby formula purchased in the U.S. About half of baby formula is purchased through the Special SNAP WIC program subsidies. Each state chooses one baby formula manufacturer for its WIC program. Abbott is the chosen provider for 34 states and Washington D.C. The infant formula category represents ~15% of Perrigo’s overall sales before the HRA acquisition.
The future in oat milk (STKL)
In 2021, plant-based milk sales grew 4% while animal-based milk declined 2%. Plant-based milk sales represent 16% of all retail milk sales. 36% of consumers in the U.S. are lactose intolerant in comparison. Plant-based milk is still dominated by almond milk accounting for 59% of the category, but oat milk has been rapidly gaining share. In just three years oat milk has grown from 0.5% of the category to 17%. Plant-based milk has also grown in adjacent categories. In yogurt, plant-based grew 9% in 2021, growing 3x faster than dairy yogurt to reach 4.5% share. In cheese, plant-based grew 7% while conventional cheese decreased 2%.
Plant-based milk sales have continued to gain share in 2022. Alternative milk sales grew 3.8% in dollars and 1.5% in units in the year ended April 17 while dairy refrigerated milk grew 1.7% in dollars and declined 4.2% in units. Oat milk will overtake almond milk as the #1 plant-based milk, it’s just a matter of time. SunOpta’s sales of oat milk grew 59% in the most recent quarter. The growth in oat milk is the driver behind SunOpta’s revenue growth and margin expansion which the company will outline at its first investor day on Thursday.
Beer Purchasers’ index (STZ)
The National Beer Wholesalers Association’s Beer Purchasers Index fell two points to 53 in May from April. The imports category was the only one to have a reading above 50 denoting expansion. Imports were 71, up 1 from April and 4 points from March. The FMB and hard seltzer category had a reading of 37, down from 40 in April. Premium lights had a reading of 48, down from 52 in April. Premium regular had a reading of 37, down 1 from April. Craft beer fell from 48 in April to 37 in May. Below premium had a reading of 40. The inventory at-risk reading was 46, down 1 from April indicating inventory is not an issue. Constellation Brands continues to be the growth story in beer. Boston Beer recently said hard seltzer sales are trending at the low-end of plan of flat to +10%, but guidance is still achievable behind Twisted Tea.
