Plant-based milk Consumer (STKL)
The Brightfield Group hosted a call on plant-based dairy insights. Their survey showed that 57% of Americans believe plant-based foods are better for the environment and 55% believe they are healthier. Only 64% of the people who believe that plant-based milks are healthier are currently buying plant-based milk.
There is a lot of crossover between plant-based milk drinkers and dairy milk drinkers. According to International Flavors & Fragrances’ research, 70% of consumers drinking plant-based milk also consumed regular dairy milk. It’s even higher for other plant-based products like cheese, yogurt, and dairy. Only 10% of plant-based milk purchasers identify as following a plant-based or vegan diet. It varies slightly by type of plant-based milk. Only 8% of almond milk drinkers follow a plant-based or vegan diet compared to 30% of hemp milk drinkers at the high end of the range.
The high crossover purchase habit for plant-based and dairy demonstrates the competitive intensity in the broader milk category. The plant-based industry should view the share of wallet of existing customers as a further opportunity. Oat milk is a major driver for SunOpta with growth from $1M in 2019 to $120M in 2022, but it is hardly the only one. SunOpta also has other areas of growth including food service, fruit snacks, creamers, and non-oat plant-based milk. The company is targeting EBITDA growth of 50% from 2023. SunOpta is a Best Idea Long.
Grocery slowing (WMT)
Target said sales slowed throughout Q1. Food & beverage grew HSD% and was the second strongest category. Household essentials grew LSD% with strength in pet and health. Out of stocks were at three year lows for Target’s most important food & beverage and essentials items. Lower freight and transportation costs were the primary driver of more than a 100bps improvement in gross margins. It has been our expectation that competitive intensity will pick up in food retail when sales slow. Looking at the Q1 reports for the companies that have reported in food retail shows that sales are indeed slowing as seen in the table below.
Trader Joe’s says no (KR)
During its monthly podcast Trader Joe’s said it would never enter e-commerce. The executives said that adding another sales channel would “only just add cost” and that “free shipping doesn’t really exist.” Dan Bane has been the CEO of Trader Joe’s for the past 22 years. He announced his retirement earlier this week and will be replaced by the COO, Bryan Palbaum. Public food retail companies felt more pressure to have an e-commerce offering. There has been less eagerness for the private competition to offer digital shopping. The late adopters have opted for the lower cost and less capital intensive offering from partnering with Instacart than following Kroger and Amazon. Digital grocery is margin and return dilutive, someone has to bear the additional costs if the customer is not.
