Potato growth (LW)
Potatoes USA said potatoes remain the most popular vegetable in the U.S. for the seventh year in a row. 80% of Americans eat potatoes every week, and 33% eat potatoes at least three times a week. In Q3, frozen potato sales grew by 31.8%, fresh potatoes grew by 5.9%, instant potatoes by 17.1%, potato chips by 50%, and canned potatoes by 45.1%.
Canada’s potato crop this year is the largest on record, up 3.7% YOY. Combined with the U.S., crop production is up 7.7% YOY. Early season potato consumption is estimated to be 155.6 million cwt, up 7.8% YOY. The large increase likely reflects higher capacity utilization with a large crop. Lower-priced potatoes will be more quickly reflected in raw form than processed frozen products or French fries. Lamb Weston enters potato contracts with farmers and French fry contracts with customers. Domestic french fries will not be the product type that absorbs the excess potatoes.
Inflation concern stable (KR)
According to 84.51°, a Kroger-owned data analytics company, 83% of shoppers said rising grocery prices were the biggest financial concern. Inflation was the #2 concern at 77%, followed by monthly bills at 72%.
- The percentage of consumers who are worried about inflation has fallen from its peak in June 2022 at 73% to 65%.
- 55% of shoppers said they are cutting back on snacks, candy, and other non-essential items.
- 53% of shoppers said they switched to a lower-cost brand.
- 47% of shoppers said they purchased fewer items.
- 36% said they were cooking from scratch or with limited prepared foods.
- 27% of shoppers said they would increase their grocery shopping online, while only 9% said they would reduce it.
- 62% of SNAP recipients said the reduction in benefits has caused them financial strain. 51% of SNAP recipients said they reduced their grocery spending due to the cut. A similar amount said they cut back on other expenses to afford groceries.
Disinflation has stabilized inflation concerns among consumers, but they remain elevated.
Flu monitor (PRGO, HLN, RKT.LN)
Seasonal influenza activity started slowly but has picked up. Nationwide, 4.0% of patient visits reported through the CDC were due to respiratory illness. Respiratory illness is now above the national baseline, with multiple viruses co-circulating, as seen in the cart below. The CDC estimates that there have been at least 2.6 million illnesses, 26,000 hospitalizations, and 1,600 deaths from the flu so far this season. Reckitt and Perrigo recently acknowledged the difficult comparisons in the U.S. from last year’s cough and cold season. They both expressed confidence in reaching their targets, which was still early in the season. Last year’s cough and cold season started off strong but tailed off. We are more likely to hear about difficult comparisons in the first half of the season, but there is potential for Q1 to have higher illness incidences. Cough/cold is between 15-20% of Perrigo’s revenues, roughly 15% of Haleon’s revenues, and 2% of Kenvue’s global revenues.
