SNAP emergency (KR)
According to Numerator, the emergency SNAP benefits that expired on March 1 have led to a 12% YOY decrease in grocery units purchased by SNAP recipients. 32 states ended the benefits at the end of February while 18 states had already ended the program. The reduction is nearly twice the decline for shoppers who are not SNAP recipients. There were approximately 32 million people that were receiving the $95 monthly payments per household since March 2020. Numerator’s surveys showed that every grocery department saw unit declines for recipients after March 1. Units decreased 18% in meats, 21% in shelf stable meals, and 16% in frozen foods.
According to the Census Bureau, a household of four with a monthly income of $2,000 received almost $900 more in SNAP benefits than they did before the pandemic began. Numerator’s survey has reported that SNAP recipients represent nearly a quarter of U.S. spending on consumer packaged goods. Management teams asked about the impact of the SNAP reductions on Q1 conference calls said they did not see anything noteworthy. One possibility is SNAP recipients are using their own funds to purchase food items that were previously covered by SNAP. The fact that not every state ended emergency payments in March also accounts for a varied impact. Food banks have also reported increased demand in March. Kroger built a “meaningful headwind” into their sales expectations for the rest of the year from the SNAP impact.
More float (HLN, KVUE)
GSK sold 240 million shares of Haleon at 335p, for gross proceeds of £804M. GSK still owns 955M more shares which it has said it will continue to sell, but not for at least a 60-day period. When Haleon was spun off one of the largest concerns for the shares was the additional shares coming to market. Haleon has shown the shareholder transition can be managed well and that there is strong investor demand for consumer healthcare companies. There is a similar concern for Kenvue as Johnson & Johnson has 90% of the shares remaining to be divested, but there is a precedent for the process to not be a significant headwind for share performance.
Lower truck rates (KMB)
According to DAT its Truckload Volume Index, which measures loads moved in a month, decreased 12.3% YOY in April for van trucks. April decreased by 15.5% from March. Refrigerated truck volumes fell 12.5% YOY in April and 16.3% from March. Van and refrigerated volumes were the lowest since February 2021, when severe winter storms disrupted activity. The national load-to-truck ratio fell to 1.9 for van and 2.7 for refrigerated, the lowest level since April and May 2020. The lower freight demand has led to lower prices. The spot van rate averaged $2.06 per mile in April, down 25.6% YOY. The spot refrigerated rate averaged $2.41 per mile in April, down 23.0% YOY. The spread between spot and contract rates hit an all-time high of $.62 for van freight. The wide spread reflects where shippers and carriers are in the bargaining power cycle. There is excess capacity in the trucking market currently, benefiting shippers. Higher freight rates in 2021 were one of the largest COGS headwinds for CPG companies, many of which responded by contracting higher rates in 2022. Lower freight rates are a cushion for numerous CPG CFOs, including Kimberly-Clark, and their guidance for 2023.
