Staples Insights | Organic produce (SFM), Slowing comps (WMK), Dairy milk vs. Plant-based (STKL)

ORGANIC VS. CONVENTIONAL PRODUCE INFLATION (SFM)

Sales of organic produce grew 0.2% YOY to $7.8B, according to Circana OmniMarket Integrated Fresh multi-outlet figures for the 52 weeks ending September 10. Volume declined by 2.6%, and price grew by 2.8%. Organic fresh vegetable sales grew by 0.5% while volumes decreased by 3.4%. Price by volume increased by 4% for organic vegetables. Fresh fruit sales were flat, with volumes declining by 1.7% and price per volume increasing by 1.7%. Conventional produce sales grew 2.7% to $68B in comparison with volumes declining by 0.7%. Price per volume for conventional produce grew by 3.4% compared to 3% for organic. Organic produce price increases are lagging conventional price increases, but the price premium is more of a hurdle when consumer household budgets are under pressure.  

SLOWING COMPS (WMK)

Weis Markets reported Q3 SSS of 0.8%, decelerating from 3.5% sequentially. Excluding fuel, SSS increased 1.1%, decelerating from 4.8% sequentially. EBIT margins contracted 20bps YOY compared to a 30bps contraction in Q2. Management cited “a challenging marketplace of ongoing inflation, higher interest rates, and declining government benefits.” Those comments were similar to consumer headwinds cited in Q2. Weis Markets operates 197 grocery stores in the Mid-Atlantic region. The grocery chains have not pulled on the promotional lever yet, but sales trends are slowing with disinflation.

Dairy milk vs. plant-based milk sales (STKL)

In the 52 weeks ending September 10, total milk sales increased by 1.6% but decreased by 3.2% in volume. Price per volume increased by 5%. Dairy milk sales decreased by 1%, while plant-based milk sales grew by 4.3% (units -7.1%). There are sub-categories of dairy milk with growth, including lactose-free milk, up 15.7%, high protein, up 13.8%, and ultra-pasteurized, up 11.8%. Plant-based milk has been more aggressive with price increases, with price per volume up 12% compared to dairy milk’s 4% increase.

• Almond milk sales, the largest plant-based milk, increased by 0.1% while units fell by 9.7%.
• Soy milk sales increased by 10.4%, while units decreased by 5.7%.
• Oat milk sales increased by 14.5%, while units increased by 2.1%. Oat milk’s 12.1% price increase has had an impact on volumes.
• Coconut milk sales increased by 24.2%, while units increased by 6.3%. Coconut milk price increases have also been aggressive at +16.8%.

In volume terms, plant-based milk represents about a tenth of the overall milk category.

Almond milk sales weakened in Q2. We attribute the plant-based slowdown to similar factors as most CPG categories – tighter household budgets and aggressive price increases. We presented our SunOpta Black Book yesterday. Despite the plant-based milk’s volume challenges, additional capacity and oat milk share gains will keep SunOpta’s sales trends outpacing the broader category.