Needing more capacity (BRBR, STKL)
Management cited better-than-expected FQ1 results coupled with strong sell-through and confidence in the capacity expansion as the reasons for raising sales growth guidance to 12-17% and EBITDA growth guidance to 11-18%.
The Michael Foods (POST) co-man facility came online during the quarter. The new plant will scale up over the next 12 months, similar to SunOpta’s capacity. BellRing’s plans continue to be for production growth to be above 20% in F2024. Management’s initial plans for 2024 were for the company’s own inventory levels to rebuild safety stock by a few weeks. The plans now call for less inventory to be built as sell-through levels are expected to be higher. “We are talking to every single one of our co-man to see if we can get incremental supply… We are pushing our co-mans to get more to supply demand.”
The overall convenient nutrition category grew 10% during the quarter. RTD grew 16%, while ready-to-mix grew 6%. Premier Protein’s 29% growth was driven by higher in-stock levels in the mass channel and distribution gains, as well as promotional activity in eCommerce. RTD consumption growth of 34% in January compares favorably to the 29% RTD growth in FQ1. Premier Protein powder growth of 50% in January slowed from the 66% growth in FQ1. Dymatize consumption growth of 16% was across the board, with double-digit growth in nearly every channel except specialty.
Perhaps the biggest question from the quarter was the extent to which shipments in FQ1 took from FQ2. Management does not believe they shipped ahead of demand, but “there will be a modest de-load in Q2 because we did ship some promotional volume in the first quarter, which we expected. But we expect a modest de-load and a smaller de-load than we saw last year.” Management also said hitting the high end of guidance depends upon the build-out of capacity. Building out another production line of Premier Protein would require about 40M in capex for SunOpta.
Beverage shelf space wars (BUD)
Total beverage sales grew 5.1% in the off-premise channel, according to NIQ, in 2023. Total beverage alcohol off-premise sales fell 0.2% in January, while volumes decreased 1.9%. The month's final week saw sales pick up 2% from the previous week.
Total beer sales were flat in January, while volumes decreased 1.7%, similar to growth of 0.1% in 2023. Beer is the leading beverage by sales, with a share of 23.9%, but lost 0.6% share in 2023. Non-alcoholic beer sales grew 32% during the Dry January month, similar to the 29% growth over the last 52 weeks. Spirits (#6 with a 6.1% share) outperformed beer with sales growth of 3.7% and volume growth of 4.7%. Wine underperformed with sales declines of 3.4% and volume declines of 6.4%. Wine lost 0.3% share of beverages to 7.2% in 2023.
Beer is at risk of losing shelf space to the faster-growing categories of soft drinks (#2 with 20.1%) and energy drinks (#3 with 10.3%), which gained 0.7% and 0.6% share in 2023. Bud Light is the most at risk of losing shelf space in the spring resets, while Celsius is positioned to be the largest gainer.
Eating at home in California (GO)
The minimum wage for restaurant workers in California is set to increase to 20 per hour in April. The new wage rate represents a 25% increase from the current 16 per hour. The higher wages apply to companies with more than 60 locations nationally. Restaurants in California are expected to raise prices to offset the increased expense. Chipotle said it would raise prices by 5-9% in its California restaurants to offset the higher costs. Nearly 60% of Grocery Outlet stores are in California. Could the higher prices of restaurant meals in the state push more people to eat at home?
