Notable trends:
- Coffee prices continue to rise, ticking up +0.9% over the past week. Despite the recent upward trend, coffee prices remain down -28.7% on a year-over-year basis. We expect coffee prices to remain low in 2014, but a continuation of the recent upward trend could, on the margin, negatively affect sentiment around SBUX, DNKN, GMCR, KKD, THI and other coffee retailers in 2014.
- Cheese Block and Milk prices were up +0.8% and +0.1% over the past week and are up +14.9% and +2.3% on a year-over-year basis, respectively. High dairy prices are, to varying degrees, a negative for TXRH, CAKE, DPZ, PZZA, and CMG.
- Corn and Wheat prices are down -2.0% and -1.2% over the past week and are down -30.3% and -27.1% on a year-over-year basis, respectively. Grain costs continue to provide retailers, restaurants and consumers with lower food costs than a year ago and should benefit 4Q margins for companies with large exposure to this group.
- Beef prices have been trending up YTD and should continue to pressure margins for BLMN, TXRH, CMG, MCD, JACK, SONC, WEN and others with significant exposure. We expect some restaurants, mostly fast food providers, to feature chicken products on their menus in 2014 if the rise in beef prices persists.
- Gasoline prices ticked up 150 bps over the past week and are now up +0.6% on a year-over-year basis, despite being down for the majority of the 2013. We will continue to monitor this trend, as any sustained increase or decrease in gas prices could have a significant impact on the direction of discretionary spending.
Howard Penney
Managing Director
