Flu Monitor (PRGO)
8,707 influenza patients were admitted to hospitals in the week ended November 12, the highest for that time period in a decade. The CDC estimates that there have been at least 4.4 million illnesses from the flu this season. There are multiple respiratory viruses co-circulating currently. The youngest ages represent the largest percentage of outpatient visits. Infants six months and younger are getting hospitalized for RSV at 7x the rate before the pandemic. The Children’s Hospital Association and the American Academy of Pediatrics told the Biden Administration that “unprecedented levels” of RSV combined with increasing flu circulation are pushing some hospitals to the breaking point. They are asking the administration to declare an emergency to provide hospitals with added flexibility to meet the surge. More than 75% of pediatric hospital beds are occupied across the U.S.
A much higher proportion of flu tests are turning up positive than in previous years. During large flu seasons in the past, the positivity rate peaked at ~3.6%, but last week 14.7% of flu tests were positive. New York City’s levels is “very high” according to the CDC along with more than a dozen states, mostly in the southeast, given the same designation. Most of the influenza viruses tested by the CDC are similar to the ones targeted by this year’s flu vaccine. More people who are feeling sick have the flu than in the recent past.
Perrigo’s Q4 is mostly set for the cough & cold season as orders are already in and production is maximized. A larger or longer cough & cold season would be seen in Q1 results as retailers reorder more inventory.
Dry World Cup (BUD)
48 hours before the World Cup was to kick off in Qatar, the emirate changed plans and ruled out the sale of alcohol at the event. FIFA says the decision to ban alcohol was mutual. FIFA President Infantino said, “If for three hours a day you cannot drink a beer, you will survive. Maybe there is a reason why in France, in Spain, in Scotland, alcohol is banned in stadiums.” Fans will still be able to drink beer in the evenings in special zones like the FIFA Fan Festival or in hotels. AB InBev reportedly spent $75M for the sponsorship deal which would have made Budweiser the only brand of beer allowed to be sold.
The World Cup will hardly be beer-free even if none is consumed in the stadiums. It is still the world's most watched sporting event and since it is every four years there is no YOY comparison. While AB InBev will lose out on the sale of beer in Qatar, plenty will be consumed worldwide during the event. During the 2014 World Cup held in Brazil beer consumption increased by 37 million gallons or more than 1% point to annual consumption. The company is expected to seek a reduction for the next World Cup taking place in North America. Budweiser suggests its beer has a shelf life of 110 days and it took 30 days for the beer to arrive in Qatar. Budweiser’s tweet may provide some sense of how much beer was planned to be sold at stadiums during the event. The bigger challenge for Budweiser than moving its Qatari inventory will be maintaining brand engagement without the inside stadium consumption.
The diesel spoiler (WMT)
The national average price of gasoline has fallen 4% since a month ago and is up 8% YOY. In contrast, the national average price for diesel is flat from a month ago and is up 45% from a year ago. A year ago, diesel cost 7% more per gallon than regular gasoline but currently costs 45% more. Without a fuel surcharge, truckers would face financial hardship with freight rates falling 18% YOY in November. The average surcharge rate is currently $.68/mile. Contract rates have pulled back some 5% since the summer, but are still higher than a year ago. However, contract rates take time to reflect spot rates and will be renegotiated soon. Freight costs are set to be a tailwind for CPG companies in 2023, but diesel surcharges could play the spoiler.
