We are hosting our weekly Consumables Show today, September 5th @ 12 PM ET.
EVENT DETAILS:
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Every Monday at 12 PM ET (but this week Tuesday) our Consumables Team will be hosting a live event where we will go through Timely and Topical events/data that have occurred in our respective industries, as well as preview the week to come. We hope that you can grab your lunch and join us as we break down the Restaurant, Consumer Staples, and Cannabis space.
We will explore a number of topics including recent position monitor changes, top questions from client meetings, most frequent inbounds, pushback on our most recent calls, and updates on some of our best ideas.
Black Book Presentation (HSY)
Hershey is a compounder, a company that generates best-in-class risk-adjusted returns through economic cycles. The company's recurring revenues are built on dominant and durable intangible assets which have demonstrated pricing power. It has lower capital intensity than other consumer staples companies and earns higher margins. Hershey's shares have pulled back since the Q2 results. We are hosting a Black Book presentation on Friday, September 8th @ 12:30 PM ET. Add To Your Calendar: CLICK HERE.
Our investment thesis:
- HERSHEY HAS PRICING POWER: Hershey’s brands have demonstrated best-in-class pricing power during a period of once in a generation inflationary pressure. With continued inflationary pressures in key ingredients, 2023 will be another year of pricing-led growth and margin expansion. Hershey has one of the best secular growth prospects in food. The company has improved its M&A integration process giving it the confidence to seek more targets. Hershey has made a series of acquisitions in the category to grow its platform.
- NEW CONCERNS: A volume miss, concerns over GLP-1 drugs' impact on demand, and new competitive threats have put pressure on the shares. We will examine the concerns, stress test the risks, and outline the opportunities.
- VALUATION OPPORTUNITY: This year will be another year of sales and EPS growth above the long-term targets of 2-4% and 6-8% respectively. Hershey will be differentiated from CPG companies by having gross margin and EBITDA margin expansion while also having volume growth. We expect the margin recovery and sales visibility to be drivers of share price outperformance over a trade and trend duration.
Texas on-premise alcohol beverage tax receipts (BUD)
Texas reports its alcoholic beverages sales tax receipts monthly. In August, alcoholic beverage receipts increased 1.7% YOY, accelerating slightly from 0.3% growth in July. The CPI for alcoholic beverages away from home rose 10.7% YOY in July. Together the tax receipts and CPI imply a significant decline in units in the past four months in Texas.
Canadian Beer (TAP)
Total beer sale volumes in Canada decreased 9.2% in July, decelerating from -3.0% in June. Domestic beer volumes decreased 7.2% in July, decelerating from -1.6% in June. Imported beer volumes decreased 21.9% in July, decelerating further from a 12.4% decrease in June. Beer volumes have been declining for several years in Canada. For Molson Coors, the Canadian on-premise channel is still trailing pre-pandemic levels. Bud Light's current struggles are directly benefiting Molson Coors in the U.S.
