Black Book Today (MNST)
Energy drinks have the best secular growth prospects within the broad beverage category. Driven by lifestyle trends, health & wellness, taste preferences, and demographics energy drinks have at least a decade of growth ahead. Behind the category's growth is caffeine and its spreading presence in beverages. Although it is less addictive and habit-forming, caffeine becomes part of the consumers' lives. As a daily consumption choice, consumers actively identify with their brands. Monster Energy is one of the leading brands in the energy drink market.
Monster Energy has missed consensus expectations for the past four quarters. EPS has also declined for four consecutive quarters. We do not expect either to change this quarter. However, we do see a coming inflection in margins and reasons to buy the shares before another re-rating in the multiple.
Monster Energy has entered the beverage alcohol sector for the first time with the acquisition of CANarchy. A merger with Constellation Brands is off the table, but questions remain. The next move up for the share price does not need a successful entry into alcohol, it will be in spite of it.
We will host our Black Book presentation today at 12:30 PM ET.
Webcast & Slides: CLICK HERE
Our investment themes for the presentation:
Online grocery sales slow (KR)
Total online grocery sales decreased 1% in August according to Brick Meets Click/Mercatus Shopping survey. Pickup and ship to home both ceded share to delivery sales this August. Pickup sales had been the dominant form of convenience in online grocery shopping, but in August pickup sales were at the same level as delivery
The number of monthly active users (MAU) decreased 1% YOY to 68 million households. MAUs to mass retailers increased 7%. Overall grocery spending in August increased 14% when the food at home CPI increased by 13.5%. Nearly 60% of consumers started purchasing groceries online during the pandemic. Nearly 20% said they plan on continuing to shop for groceries online into 2023. According to Acosta, an integrated sales and marketing services company, nearly 70% of online pickup shoppers go into the store to pickup their orders and purchase something they may have forgotten. Most online grocery customers shop the same retailers online and in-store. Investing in the digital platform is a necessity for the brick and mortar food retailers with such a high level of cross shopping.
Gotham Greens raises more green (APPH, KAL)
Gotham Greens raised $310M in a new capital round, bringing its total financing to $440M since its founding. The Series E round includes equity and debt. Gotham Greens operates a network of hydroponic greenhouses in North America growing leafy greens and herbs. The company is constructing new facilities in Texas, Georgia, and Colorado and is expanding its facilities in Chicago and Providence. The company expects to own and operate 13 greenhouses totaling 40 acres across nine states. Gotham Greens sells its produce to more than 3,000 grocery stores.
In comparison, AppHarvest’s Morehead, Kentucky facility spans 60 acres. Gotham Greens’s strategy is to build closer to demand rather than in one location and ship nationally like AppHarvest’s strategy. The latter strategy has less environmental benefits when the additional transportation is included. Indoor grow companies continue to find ready access to capital, both a blessing and a curse when barriers to entry are low.
