September CPI disinflates (BUD)
Food at home CPI increased 2.4% YOY in September, decelerating from 3.0% in August. The two-year average decelerated 50bps sequentially to 7.7%. If the two-year average remains flat, CPI will reaccelerate for the next several months.
The CPI for alcoholic beverages reaccelerated from 3.7% YOY in August to 4.2% in September, a notable outlier in a generally disinflating month in food and beverages. The acceleration was driven by away-from-home CPI for alcoholic beverages of +6.4% vs. at-home CPI of 2.9%. The CPI for wine at home accelerated from 1.0% in August to 1.4% in September, while away from home CPI was 6.7%. The CPI for beer at home accelerated from 4.2% in August to 4.7% in September, while away-from-home CPI was +5.7%. Distilled spirits CPI at home increased 3.0%, while away from home increased 7.8%. Purchasing ahead of manufacturer list price increases last year could have contributed to the acceleration this year.
Ocean freight (SN)
With ocean container freight rates down as much as 90% since early 2022, carriers are removing capacity. Container capacity has been reduced by 7% in September compared to the prior year, but it has not made up for the modest demand. U.S. shippers (retailers and manufacturers) are seeing their ocean freight rates nearly cut in half this year. Spot rates have fallen below contract rates again. Since the week that ended August 25, the price to ship a container from China/East Asia to the U.S. West Coast has fallen 26%. The latest National Retail Foundation US ocean import report estimates that August was the peak for container volumes for the year, and September volumes fell 1% YOY. The global container fleet is expected to add nearly 9% more capacity next year, which may keep prices lower for longer. SharkNinja and the big box retailers are the largest beneficiaries of lower container rates in our coverage universe.
Online grocery decreases (WMT)
Digital grocery sales decreased 3.1% YOY in September, according to the latest Brick Meets Click/Mercatus survey. The decline was mostly driven by a drop in order frequency, with orders per MAU down 8% to 2.31, the lowest rate since the pandemic began. Mass retailers saw order frequency fall 4%, Amazon saw it fall 7%, and supermarkets saw it fall by nearly 13%.
Pickup penetration rose to 58.7% of MAUs from 53.0%, while delivery and ship-to-home decreased. The average order value decreased by 5%, driven by pickup, particularly pickup in the mass channel, which decreased by 9%. Digital sales across all formats represented 12.6% of total grocery spending, up 160bps YOY. In online grocery, it is pickup and Walmart that are growing. Pickup offers convenience, while Walmart offers the lowest prices.
CFO Departure (STKL, REYN)
SunOpta’s CFO, Scott Huckins is leaving the company to become the CFO of Reynolds Consumer Products. Scott will join Reynolds on October 23 and serve in an advisory role until he becomes CFO on November 13. Scott helped navigate an improved balance sheet, asset sales, and capacity expansions. He leaves SunOpta with a lower share price than when he joined despite progress on multiple fronts.
