Spending more away from home (ACI)
Grocery retail sales increased 8.7% in May, accelerating from 8.3% in April.
Food at home sales now comprises 48.8% of food sales compared to 51.2% for food away from home. The food at home sales mix has been below pre-pandemic levels since February. The decreasing share of food spend at home reflects inflationary price increases. The number of meals consumed at home is still higher than it was before the pandemic.
Not your typical flu season (PRGO)
2.3% of patient visits reported through ILINet were due to respiratory illness that included fever, plus a cough or sore throat, down 0.1% from the previous week. The percentage is just below the national baseline of 2.5% as seen in the chart below. For the past six weeks the flu incidence has been higher than the past seven years, but at a relatively low level as the flu is not “in season.” This year’s flu has been greater 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 7.8 million flu illnesses, 80,000 hospitalizations, and 4,900 deaths this season. 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.
Another infant formula shutdown (PRGO)
Yesterday, Abbott had to shut down its Michigan plant which was at the center of the infant formula shortage. The FDA shut the plant down in February but allowed it to resume production two weeks ago. This time it was shut down for heavy rains. The plant will have to be cleaned and sanitized before production resumes. The cleaning process will delay production for a few weeks. Abbott said its infant formula production in June will be 95% of what it produced in January, prior to the recall. Out of stocks have been made worse by consumers stocking up. Perrigo said yesterday that its production of infant formula is 15% above full capacity. Shipments increased 37% in Q1, but that included the four weeks of inventory the company typically keeps on hand. Q2 sales will be lower than Q1, but the company is selling everything it is making.
SPIRITS-BASED RTDS ATTRACT ATTENTION (MNST)
RTD sales grew 6.2% YOY to nearly $9B in the 52-week period ended June 5. Inclusive of all beverage alcohol bases, RTDs now represent 12% share of total beverage alcohol. Growth was driven by spirits-based hard seltzers while malt-based hard seltzers were nearly flat. Malt-based hard seltzers grew 0.2% to $4.4B in sales while single-serve premixed cocktails grew 51% and approached $500M in sales. Wine-based hard seltzers decreased 35.1%. The Duckhorn Portfolio recently shuttered its wine seltzers to focus on better growth opportunities. The industry is still waiting on Monster Energy’s entry into the RTD category. At the annual shareholder meeting, this week management indicated that the flavored malt beverage space is where the company will likely enter, but that may not include a hard seltzer. Management does not want to “just follow the existing brands and blindly follow hard seltzer, but in the flavored malt beverage category, which I’d rather describe as a broader category, there is opportunity to distinguish ourselves.”
