January CPI (WMT)
The headline CPI accelerated to 0.3% in January compared to December. On an annual basis, the headline CPI slowed by 30bps from December to 3.1% in January.
Food at home CPI decelerated by 10bps sequentially to 1.2% YOY in January. Deflationary sub-categories of food and beverages included meat, poultry, fish, and eggs at -0.8%, dairy at -1.1%, and coffee at -1.4%.
Food away from home CPI also decelerated by 10bps sequentially but remained elevated at +5.1% YOY. The differential between food at home and food away from home remained at a historically wide level of -3.9%. Food at home is more affordable, and with modest inflation in stores, consumers are encouraged to shift more meal occasions to the home.
Walmart has predicted grocery deflation in the coming months. It is difficult to see lower overall prices without more deflationary trends in the center-of-store categories. Deflation is currently limited to the perimeter of the grocery store.
Q4 Can they keep the gains? (TAP)
Molson Coors reported Q4 comparable EPS of 1.19, above consensus expectations of 1.12. Constant currency sales grew 5.0%. Sales dollars grew by 0.8%, while units increased by 4.3%. Sales per hl grew 4.2% on a consolidated basis.
In the Americas, 4.7% sales growth comprised 2.5% price/mix growth and 2.2% financial volume growth. On a per hl basis sales increased 2.4%, comprised of 2.5% price/mix growth and a -0.1% Fx impact. The 8.5% U.S. volume growth was offset by lower contracted volumes, a 5% decrease in Latin American volumes, and shipment timing. Coors Light and Miller Lite gained about 6-7% more shelf space during the summer and fall shelf adjustments.
In the EMEA & APAC segment, 12.6% sales growth comprised a 9.6% increase in price/mix, a 3% decrease in volumes, and a 6% increase in Fx. The price/mix increased by 9.9% on a per-hl basis, and Fx added 6.1% to the 16% growth. The 3% decrease in financial volumes was driven by lower consumption in the U.K. and inflationary pressures on the Central and Eastern European consumer.
Margins
Underlying COGS per hl increased by 1.4% in constant currencies due to inflationary increases in materials and manufacturing and lower contract volumes in the U.S., partially offset by cost savings. In the Americas, COGS per hl decreased by 0.7%, while in the EMEA & APAC segment, it increased by 8.8%. MG&A increased 17.4% in constant currencies.
Guidance
Management guided 2024 sales to grow by LSD%, above consensus expectations of less than 1% growth. EPS was guided to grow MSD%, above consensus expectations of 2% growth. Pricing is expected to be in line with the historical trend. Lower contracted volumes from the Pabst exit are expected to have a 3% impact in the year. Taking advantage of a fortuitous year, the company reduced net debt by over 600M in 2023. In the last two months of the year, the company also repurchased 150M of shares.
Molson Coors has guided conservatively, so it is notable that the initial outlook for 2024 is to be above the Street. Management’s expectations for sales trends, once they lap the Bud Light marketing controversy, are behind most of the variance. The Street has assigned a low probability to retain, let alone build on U.S. market share gains. Management continued to express confidence in winning more shelf space gains in the Spring reset than in the fall. There was a surprising lack of volatility in Bud Light’s share losses, which might suggest there was a thumb on the scale, but on which side?
Not gaining share (BRG.ASX, SN)
Breville Group reported weak sales and profits fell short of expectations in its 1H 2024 results. Breville manufactures coffee and kitchen appliances. It is one of Nespresso’s machine partners. Total revenue grew by 2% “in a period of inflation and widespread market discounting.” In the Americas (Breville’s largest region) sales were flat with the strongest performance in coffee and cooking. In the 2H 2023 the Americas grew 7% in constant currencies, led by the premium end, ovens, and coffee machines. Launching in Target offset lapping Bed, Bath & Beyond sales in the prior year. Management noted that sell-in and sell-through approximated each other and inventory levels are in good position at retail.
Gross margins expanded by 160bps with input cost pressure abating and controlled promotions. The declines in container and freight costs more than offset the increase in promotions. The Red Sea disruptions have created “maybe mild headwinds at the moment.” When the results are tallied up Breville likely lost share to SharkNinja in the 2H, so the read-through is likely positive.
UFC sponsorship (BRCC)
Black Rifle Coffee Company announced a three-year marketing agreement with the UFC. BRCC will become the exclusive “Official Coffee of UFC.” BRCC customers overlap with UFC and would likely reach out to more consumers who have low brand awareness of Black Rifle Coffee. UFC recently signed a 105M sponsorship deal with Bud Light. An average UFC event generates 300,000 to 2 million viewers globally. The UFC is on-brand for BRCC. We do not know the cost, but based on Bud Light’s agreement, it is likely not cheap. We recently added BRCC to the long list. A high-profile marketing agreement should help it win more distribution among chain stores.
