We are hosting our weekly Consumables Show today, September 25th @ 12 PM ET.
Event Details:Date & Time: Monday, September 25 at 12 PM ET. Webcast & Slides: CLICK HERE (refresh shortly before the call). |
Every Monday at 12 PM ET, 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 and preview the week to come. We hope you can grab your lunch and join us as we break down the Restaurant, Consumer Staples, and Cannabis space.
We will explore several 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.
Adding to the long list (K)
Kellanova is a new Best Idea Long. The Kellogg Company will soon split WK Kellogg, its North American cereal business, from Kellanova, its global cereal, snacking, frozen foods, and emerging markets portfolio. We are hosting a Black Book presentation on Thursday, September 28th @ 12:30 PM ET.
EVENT DETAILS:
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The spin-off of WK Kellogg will enhance the growth rate of the Kellanova business by removing low-growth businesses, realigning corporate strategy, and reinvesting in growth.
Spinning Off WK Kellogg Will Amplify Growth. The spin-off of WK Kellogg will optimize Kellanova for growth. The remaining portfolio grew 9% from 2019 through 2022, while the spin-off portfolio had little growth. Kellanova’s LT growth formula is 3-5% organic revenue growth, 5-7% EBIT growth, and 7-9% EPS growth. Operating margins are expected to exceed 15% over a medium-term duration, putting it into the top quintile among its food manufacturing peers.
Poorly Timed Spin-Off Or An Opportunity? Kellogg initially planned to spin off its cereal and plant-based units separately. However, the window closed on the plants-based unit with the declines in the sector best seen in Beyond Meat’s retreat. Is Kellanova’s plan to overweight its portfolio towards snacking poorly timed, and the market’s current concerns about GLP-1 drugs? Has the market assigned weaker food volumes to the weight loss drug instead of increasing price elasticity?
Will The Spin-Off Create Value? Will Kellanova be “a compelling opportunity for value creation, marked by a more growth-oriented portfolio, better profit margins, and faster sales and profit growth”? Or will industry headwinds of higher interest rates, tighter household budgets, increased price elasticity, and concerns over a structural headwind in unit demand lead to underperformance for the shares?
Freight rates up only on fuel (HSY)
Truckload freight volumes increased in August, boosted by shipments of retail goods and fresh food, according to DAT Freight & Analytics. Van volumes increased by 8% from July but were down 8% YOY. Refrigerated volumes increased by 4% from July but were down 5% YOY.
Van spot rates ticked up 2 cents per mile to $2.09 in August, but excluding the fuel surcharge fell six cents from July. The contract rate, which has not increased month over month since May 2022, was flat compared to July. The gap between the spot and contract rate narrowed to $.48 per mile, the smallest difference since April 2022.
Lower freight costs are a tailwind for consumer staples companies in 2023. The wide spread between spot and contract rates will benefit shippers who decreased their reliance on contract capacity in 2023 after most shippers increased their use of contracts in 2022. Companies shipping lower-value products like Hershey have a larger benefit from lower freight costs.
COLLEGE BEER (TAP)
Michigan State sold 16,500 cans of beer during its first home game, with alcohol sales the previous weekend. The 72,000-seat stadium featured Coors Light, Bud Light, five Michigan craft beers, and a hard seltzer. Coors Light was the top-selling beer. The ten other Big Ten universities with in-stadium alcohol sales have not seen increases in alcohol-related incidents. School officials believe there is less binge drinking outside the stadium. College stadiums represent a growth opportunity for on-premise beer sales, perhaps gaining some share from off-premise wine and spirits.
