CAGNY Invite
CAGNY, the largest consumer staples conference, kicks off this week. The pricing tailwind in CPG is fading, and management teams are counting on improving volumes. We will make our case for which companies have a real plan for organic growth and which are simply hoping. Our Macro Team is projecting more Quad 3 and Quad 2 ahead (i.e. accelerating inflation), which have different implications for different companies in Staples. We will review which companies are best positioned and which management teams 'get the Macro'. Most companies presenting at the conference will outline their growth plans for the year. We will rank the companies by expected positive or negative earnings revisions and will almost certainly have new calls, pivots, and changes to the ranking on our Position Monitor.
Join us on Monday, February 26, at 2 PM ET to review what was said at the conference, our takeaways, and what is actionable from a stock call perspective. We will also review what was not asked but should have been.
Event Details:
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January PPI (HSY, LW)
The PPI for food manufacturing decreased by 1.4% YOY, decelerating from -0.9% in December. Producer prices have been lower YOY for seven of the past eight months.
The PPI for chocolate manufacturing increased 6.7% YOY, accelerating from 6.5% in December. Chocolate manufacturing costs have been accelerating for the past three months. Higher cocoa and sugar prices are putting upward pressure on the industry. Hershey’s plans do not incorporate new meaningful price increases; the price increases are primarily carryover from 2023. The inflationary +HSD% pressures are expected to pressure gross margins by 200bps in 2024.
The PPI for frozen potato products increased 20.4% YOY in January, decelerating from 22.4% in December. The industry’s producer prices continue decelerating, but the two-year average has been 27% higher for the past three months. Lamb Weston has planned smaller price increases to pass on higher potato costs in 2024.
FLU MONITOR (PRGO, HLN)
Seasonal influenza activity remains elevated and above average for the recent years, as seen in the chart below, with an uptick in the two most recent weeks. Nationwide, 4.5% of visits to a healthcare provider were for respiratory illness during the week ending February 10. The CDC estimates there have been at least 24 million illnesses, 260,000 hospitalizations, and 16,000 deaths from the flu this season. Cough/cold is between 15-20% of Perrigo’s revenues, roughly 15% of Haleon’s, and 2% of Kenvue’s global revenues.
