Cold coffee is brewing (RVAC)
The working at home trend has shifted the time consumers visit coffee shops. More consumers are visiting later in the day, which has shifted the mix of hot and cold. According to NPD, cold brew coffee servings ordered at QSRs grew 27% to 373 million in the year ended April 2022. Iced coffee grew 11% to 2.8 billion servings. In Q2, handcrafted cold beverages represented 80% of Starbucks’ sales. Visits to coffee shops have also held up better than the overall restaurant category as consumers have curtailed spending in response to inflationary pressures.
Westrock Coffee is the largest store label coffee and tea provider to U.S. restaurants. The ongoing shift in the consumers' coffee consumption to cold brew, pods, and RTDs underpins the company's investments for expansion. 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. Westrock Coffee is expected to de-SPAC in Q3.
June wine sales (VWE, NAPA)
U.S. wine sales increased 12% in the year ended June. Sales in June increased 9% YOY, similar to the growth in May. Off-premise wine sales decreased 4% for the month of June. DTC shipments decreased 13% for June, but for the trailing 12 months grew 9%. Wine sales this year are being driven by the on-premise recovery in restaurants and at wineries. Vintage Wine Estates has good visibility in sales, with a third of sales in the B2B channel, where it has new launches, and a third in the DTC channel, where the growth in its wine clubs and tasting rooms remain robust.
Chinese pork production (PPC, TSN, SAFM)
China’s National Bureau of Statistics reported pork production growth of 2.4% in the three months ended June compared to a year earlier, reaching the highest levels since 2015. Q2 is typically the smallest for pork production. Margins for Chinese pig farmers have been negative this year before turning positive in June. Demand has been impacted by pandemic restrictions. Farmers have been culling their sows since late 2021. Despite the culling, the total pig herd grew to 430.57 million head at the end of June, up from 422.53 million at the end of March. China’s pork imports are at roughly half the levels of 2021 due to the recovery in the herd size. U.S. pork exports are expected to decrease 4.3% in 2022. The USDA estimates the inventory of hogs and pigs has decreased 1% in the U.S., while the amount of pork in cold storage is up 17% YOY. As the largest pork-consuming country, China’s pig herd size impacts the prices of various meats and feeds globally. China’s poultry imports have fallen this year as pork production has recovered. Higher food prices in the U.S. is leading to less meat consumption. With a drop in exports, cold storage inventory is increasing in the U.S., production will need to as well.
