Gut punch for the plaintiffs (PRGO)
A judge ruled for the pharmaceutical companies in the Zantac litigation. GSK, Pfizer, Sanofi, and Boehringer Ingelheim were sued over the cancer risk from ranitidine, a heartburn medication sold for 35 years, but pulled from the U.S. market in 2020. The plaintiffs allege that ranitidine can produce high levels of NDMA which is classified by the FDA as a group 2 carcinogen. The drug companies in response say the level of NDMA is similar to what is found in many types of food.
U.S. District Judge Robin Rosenberg dismissed nearly 2,500 lawsuits saying that the plaintiffs’ case was based on flawed science and that the only scientists that made the connection to cancer were the plaintiffs’ scientists. Judge Rosenberg wrote in a 340 page ruling that there was no scientist outside the litigation who concluded that ranitidine caused cancer and the method the small lab used to show the cancer risk was unreliable. The companies could still face lawsuits in state courts, but the district court ruling was a best case outcome for the pharmaceutical companies.
There will most likely be appeals, but the dismissal will deter lawsuits against Perrigo since the case against it would test the laws establishing the generic industry as well as the science.
Plant-based food shoppers (STKL)
A new survey from Kroger and the Plant Based Foods Institute showed that 95% of plant-based shoppers said they had increased or maintained their plant-based spending compared to the prior year. According to Kroger’s 84.51º research households that buy plant-based foods are continuing to swap more animal-based products for plant-based products over time. The survey measured changes in five plant-based categories: milk, meat, frozen meals, cheese, and yogurt. 43% of plant-based customers that were increasing or new to the category chose plant-based milks over conventional dairy milk. 54% of customers that are buying more plant-based food are motivated by personal health concerns. 49% said they believe plant-based alternatives are healthier than animal-based foods.
Plant-based milk is the largest category within plant-based and it continues to grow with more consumers entering the category than leaving. For plant-based milk 26% of consumers were increasing their purchases in the category compared to 29% decreasing. 20% of consumers were new to plant-based milk while 18% were leaving. At Kroger plant-based food sales increased by 1.5% from 2020 to 2021 after a 24% increase from 2019 to 2020. Plant-based milk continues to grow and oat milk continues to take share within the category providing secular growth visibility for SunOpta.
C-store strength (MNST, STZ, PEP, BJ)
Casey’s General Stores reported inside SSS growth of 7.9% in the quarter ended Oct. 31, a sequential acceleration from 6.3%. Grocery and general merchandise SSS increased 6.9%, a sequential acceleration from 5.5%. The company cited strength in alcoholic and non-alcoholic beverages, snacks, and candy. Same store fuel gallons increased 0.3% with a fuel margin of 40.5 cents per gallon a sequential improvement from a 2.3% decrease, but fuel margins contracted from 44.7 cents. The C-store & gasoline station channel is a critical channel for beverages and snacks. Higher gasoline prices were not as much of a headwind for inside sales as feared, so lower prices are probably not a significant tailwind. Gasoline’s impact on shopping behavior is also different in rural areas from urban areas.
