Quad 3 is no friend (TSN)
Tyson reported FQ4 EPS of $.37, beating consensus expectations of $.29. Revenue was below expectations, but margins were better. Results improved in the chicken and beef segments, weakened slightly in pork, and missed in prepared foods. Total volume decreased by 0.6% while the average price decreased by 1.4% compared to +0.3% and -2.6%, respectively, in FQ3. Beef prices accelerated sequentially from +5.2% to +10.2%. Chicken prices decelerated sequentially from -5.5% to -9.2%.
Management cited the USDA projections for beef production to decrease by 5%, pork production to increase by 2%, and chicken production to increase slightly. Tyson anticipates the beef segment to lose between 400M and be breakeven, the pork segment to be breakeven, the chicken segment to have operating income between 400-700M, and the prepared foods segment to have operating income between 800M-1B.
2023 was a very difficult year for Tyson. 2024 should be an improvement off an easy comparison. Consumer demand for protein remains stable. The outlook for Tyson’s beef segment is more challenging due to the tight supply of cattle and a tighter spread. The outlook for chicken and pork has improved sequentially. Chicken plant closures are behind the improving outlook for the segment. It is a difficult environment to pass on higher prices to the consumer. Demand is not robust enough to respond to lower prices either. There just aren’t a lot of initiatives the company can do between deflation and the headwinds facing the consumer.
Hot Ramen (2897.JP)
Nissin Foods announced it is building its third manufacturing plant in the U.S. in South Carolina. The 640,640-square-foot facility will cost 228M to construct and is expected to be completed by August 2025. The company recently expanded its Pennsylvania plant by 15%. Nissin Foods makes Cup Noodles and Top Ramen and has a 40% share in the instant ramen category. The company’s revenue in the U.S. grew 15% in constant currencies in the six-month period ending September 30. Volumes have declined in the U.S. this year (-LSD% in the Sep. Q) due to price increases implemented last August. Management has attributed the strong sales trends to premium and spicy offerings, while sales have been steady for affordable products. Management’s revised operating profit margin outlook for its international segment was raised from 12.5% to 16%.
Ramen is one of the cheapest and easiest meals (as college students can attest). Nissin Foods’ growth is not happening in a vacuum. The spicy flavor varieties appeal to Gen Z and millennials, too.
Low-calorie and non-alcohol (HEIA.AMS)
Heineken USA said at its annual business planning meeting that its Heineken Silver brand will get another 100M investment. Heineken Silver is priced at the premium end in the low-carb, low-calorie segment. In the year ending September 9, sales of Heineken Silver were 16M in the off-premise channel, according to NIQ. The company is aiming to serve ten times the number of samples it did in 2023 because the repeat rate is encouraging.
Management is attempting to replicate the success of Heineken 0.0. Its 6-pack bottles and 12-pack cans are the #1 and #3 best-selling non-alcoholic SKUs. According to Circana, Heineken 0.0 sales have grown 12.2% to 62M YTD through October 8. The non-alcoholic segment has had the strongest growth rate this year, with sales up 29.9%, but off of a small base of ~0.78%.
The low-carb, low-calorie, and non-alcoholic segments are among the few segments of beer that project to be growing over the mid-term. Still, a 100M investment seems aggressive when the growth in marketing spend reinforces the consumer perception that Heineken, the second largest brewer in the world, is light on taste and alcohol.
