Q&A Call Today
We are hosting our monthly Q&A call today. Email your questions to and we will answer them on the call.
We will explore the following topics:
- Discuss the pushback and feedback from our recent Black Book calls.
- Review the 3Q22 earnings period: what changed, what stands out to us, and where we have more or less conviction.
- Discuss trends that we are seeing during 4Q22 ahead of earnings.
- Discuss the most common and noteworthy inbounds we have received in the past month.
- Revisit changes to our Position Monitors.
- Provide updates on some of our best ideas.
- Discuss recent trend changes in consumer spending.
Still finding holes on the infant formula shelves (PRGO)
Nine months after the closure of Abbott’s infant formula manufacturing facility in Michigan, stores remain unevenly supplied. The closed plant was responsible for nearly 20% of the U.S. supply. Product from Abbott’s reopened plant has been reaching store shelves for the past month. In-stock levels are within a couple of percentage points of where they were before the product recall, yet many parents report difficulty finding the infant formula brand they are looking for. The hypoallergenic formulas seem to be the most difficult as manufacturers have focused on making fewer varieties in order to maximize production. Infant formula production is now higher than it was before Abbott’s plant was shut down.
Perrigo purchased Nestle’s Gateway infant formula plant. The purchase and subsequent expansion will enable Perrigo to meet all of its own production needs. The $170M acquisition and capex for the plant will contribute $50M in expected operating profit beginning in Q4. Despite the surge in demand in 2022, Perrigo’s infant formula business will grow ~75% in 2023.
Wine sales (NAPA, VWE)
Domestic wine sales including bulk imports increased 4% YOY in October, decelerating slightly from 6% in September as seen in the chart below. In the year ended October wine sales increased by nearly 9%. Domestic wine sales in the off-premise channel decreased by 4% in the month of October. DTC shipments increased by 1% during the month. The off-premise channel has more difficult comparisons than the on-premise channel.
Food banks (WMT)
When donations to food banks drop, the charities purchase food themselves. In the year ended in June donated food decreased 7% from the prior year. At the same time demand has not receded. Feeding America’s food banks have purchased 18% more pounds of food from July to September 2022. Food inflation has made it more costly to purchase food.
Among Feeding America’s network of 200 food banks, more than 40% are running a budget deficit in order to have enough food. Feeding America distributed 5.2 billion meals in 2021, up 24% from 2019. The latest published estimate for the number of food insecure people living in the country is 53 million, which may be low as 53 million people received some kind of charity food assistance in 2021. 41 million currently receive SNAP benefits. This year’s COLA adjustment was much larger than in previous years due to the high rate of inflation.
