Thanksgiving dinner deflation (WMT)
According to Numerator’s survey of 4,500 consumers, 91% of respondents said they plan to celebrate Thanksgiving (5% were undecided). 88% of respondents said they plan to purchase food, and 33% plan to purchase alcohol. 61% of consumers said they planned to cook or bake, more than the 54% last year. The number of people who said they plan to attend or host gatherings was similar at 61% this year vs. 63% last year. 76% said they plan to purchase their Thanksgiving items at grocery stores, followed by 37% at mass retailers like Walmart and Target, followed by 29% who plan to purchase their items at club stores. The most popular item is turkey at 59%, followed by bread/rolls at 54%. The price of turkey has fallen about 5.6% this year. The brands with the highest spike in customer penetration for the holiday include Stove Top at 4.5x, Cool Whip at 3.4x, Jiffy at 3.3x, Butterball at 3.2x, and Ocean Spray at 2.6x.
According to the American Farm Bureau, the average cost for ten people for the Thanksgiving meal decreased 4.5% to $61.17 this year from $64 last year. However, the cost of the meal is still 25% higher than in 2021, as seen in the chart below. Walmart's management said they expect food deflation in the coming months. Walmart continues to gain share in groceries and likely welcomes food deflation, expecting consumers to increase their general merchandise purchases. For most other food retailers, deflation will bring margin pressure.
Another Teamster win (BUD)
AB InBev agreed to restore retirement benefits for active and retired members and permanently end the tiered healthcare structure. Retiree health benefits were lost under the two prior contracts. The Teamsters broke off negotiations two weeks ago until the health care benefits were addressed. AB InBev will put $50.7M in a fund over four years to secure benefits for Teamsters retiring under the new contract and for contracts in the future. The Teamsters eliminated the two-tier structure at UPS as well earlier this year. Negotiations between the two parties began in September for a new contract covering 5,000 brewery workers nationwide. Now that the healthcare benefits are settled, the contract negotiations will resume in the first week of December. Unions have been on a roll in winning higher pay and benefits this year. Unlike a lot of other manufacturing jobs, food and beverage manufacturing is difficult to outsource overseas.
Milk shortage (STKL)
There is a shortage of milk for schools and food service companies in numerous states. Milk sold to institutions like schools, correctional facilities, and nursing homes comprises between 7-7.5% of fluid milk. The shortage isn’t due to a smaller supply of dairy milk. It’s due to a shortage of cartons.
There are only a few U.S.-based suppliers of the types of 8- and 4-ounce cartons used for milk. In March, Pactiv Evergreen closed its mill in Canton, because the company determined it would be too expensive to upgrade the 115-year-old mill after a fire. Based on market projections that continued to point downward in future years, the company thought it could meet the market need without the plant.
Pactiv Evergreen has notified its customers that it can only meet less than half of their needs for several months. The shortage has left dairy companies around the country scrambling. Tetra Pak has been described as the only other carton supplier in the U.S., but it is no longer accepting new customers due to the increased demand from existing customers. Tetra Pak said it continues to meet its contracted order commitments with existing customers.
The USDA has relaxed rules for schools in states with shortages so that they can serve other types of milk besides fat-free, 1%, or flavored milk. Serving shelf-stable milk is an option many schools are choosing in the interim. The plant-based milk industry has been attempting to break into the school market for years. The higher price of plant-based milk and the strength of the dairy lobby have prevented any foothold for the plant-based milk industry despite the large population of lactose-intolerant children.
