CAGNY Review Today
With over 30 companies presenting, CAGNY is the largest Consumer Staples conference of the year. Join us today, 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 introduce our Consumer Staples Outlook scorecard. The scorecard ranks each company's sales and margin drivers by the visibility they provide for the company's growth plans.
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'.
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Position Monitor Changes
We are making numerous changes to our position monitor as we prepare for the last months of Quad 4 and accelerating inflation. We are going long companies that have the strongest or most improving growth formulas that we think will beat the plan for 2024, including CHD, CLX, and MDLZ. On the flip side, we are going short the weakest growth formulas with a higher propensity for disappointments, including CAG, IFF, HSY, SJM, and KHC.
Fry production falls (LW)
Potato processors used 35.3M cwt of potatoes in December and January, 2.6% less than the prior year. Dehydrators used 8.9% more potatoes in the two months than the prior year, while potatoes used for other purposes (mainly French fry production) were 28.1M cwt, down 5.2% YOY. Season-to-date usage for frozen processing is 96.2M cwt, up 2.4% YOY.
Potato growers in storage states held 12.4% more potatoes than a year earlier, the most on February 1 since 2001. Despite the abundant supply of potatoes, processing use has not increased. With strong demand and a decrease in domestic production, imports from Europe increased 7.1% in December. The decline in the last two months may reflect some slowing in demand.
