“The consumer is clearly trading down.” - Albertsons CEO
But what about the lockup? (ACI)
Albertsons reported FQ1 EPS of $1.00 vs. consensus of $.96. ID sales were 6.8% vs. expectations of 5.7%, improving with accelerating food inflation. Transactions were up, but units declined. Management believes the company gained share in dollars and units. Management also noted that they can see customers trading down, within, and out of some fresh categories due to the higher prices. The company’s private label penetration increased 30bps to 25.8% due to adding more SKUs. Albertsons is seeing store brand gains particularly in categories with low branded presence. Digital sales grew 28% as Albertsons was late in rolling it out across the chain. Gross margins contracted 100bps to 28.1%, 60bps lower than expected. Excluding fuel and an $.08 LIFO charge, gross margins contracted 27bps driven by fewer COVID-19 vaccinations and inflationary pressures on product and supply chain costs. SG&A leveraged 15bps due to lower pandemic expenses.
Management raised EPS guidance for the year to $2.80-2.95, up from $2.70-2.85. ID sales are now expected to be 3-4% from 2-3%. Management expects the core gross margin ex. fuel and LIFO to be down slightly for 2022.
Management said that during the strategic review the company’s real estate value was determined to have increased by $2.5B to $13.7B. A sale-leaseback will absorb some of the shares the controlling shareholders would like to sell, but it will leave the company with higher rents, operating costs, and leverage. Management sounded like they would take an opportunistic approach to unlocking some real estate value without giving up the strategic value across the chain. Albertsons remains on our short list. The company is overearning while the outcome of the strategic review is unlikely to offset the upcoming insiders’ lockup expiration on September 10.
Plant-based milk sales (STKL, OTLY)
According to SPINS, U.S. retail sales of plant-based milk increased 6.4% to $2.3B in the year ended June 12, an acceleration from 4% growth in 2021 and 3.8% growth in the year ended April 17. The SPINS data captures retail sales in most retailers but does not include Whole Foods, Trader Joe’s, and convenience stores. It also does not include blends of various milks.
Almond milk sales decreased by 1% to $1.28B, in the same period, in line with its 1% decrease in 2021. Oat milk was the fastest growing milk with sales growing 50.5% to $527M, lapping 2021’s 66% growth. Soy milk sales were essentially flat at $165M, decelerating slightly from 1% growth in 2021. A decade ago, sales of soy milk exceeded $1B. Coconut milk decreased 8.2% to $82M. Sales growth for pea milk was the second fastest at 27.4%, but are much smaller at $60M. Rice milk decreased by 11.7% to $37M and cashew milk decreased by 13.6% to $29M. Refrigerated plant-based milk grew 6.5% to $2.07B while shelf-stable products grew 6.2%. Unit sales grew 1.9% led by refrigerated oat milk growth of 40%, while soy milk decreased by 4.8% and almond milk decreased by 3.7%. Shelf-stable oat milk unit sales, of which SunOpta has the largest market share, increased by 84%.
In the 12 weeks ended June 12, plant-based milk sales increased 9.5% with refrigerated product growth of 8.7% and shelf-stable growth of 17%. Refrigerated almond milk sales increased 2.8% in the 12-week period while soy milk grew by 3.5%. Despite a significant price increase of 10% oat milk continues to drive the plant-based milk category. Oat milk will overtake almond milk as the leading plant-based milk in the coming years, but some of that growth will come at the expense of the other types. Oatly’s brand is the best known in the category and SunOpta is the leading supplier of plant-based milk brands.
Which passed the tests? (STZ)
Constellation Brands announced that Modelo Oro will expand from its test markets this year to a nationwide launch in March 2023. Modelo Oro is a 90-calorie light beer targeted at the Michelob Ultra market. It is currently sold in Charlotte, Fresno, and Houston. In the test markets, Modelo Oro exceeded benchmarks for velocity and incrementality. Modelo will also launch a variety pack of its Chelada line featuring four different flavors. Modelo Chelada depletions grew 39% in the past four months. Modelo Ranch Water will expand the number of states it is sold in from two to four in the spring. On the other hand, Modelo’s Cantarito will discontinue sales in its test markets. Year to date through July 10, Modelo brand sales have increased 17.6% in the off-premise channel. Constellation continues to be the growth story in beer due to the continued success of Modelo. Modelo was sparing in its use of brand extensions. A low-calorie version has a natural built-in demand, but it was promising to see Modelo Ranch Water expand its test.
