Nomad Foods is Europe's largest frozen food company. It is not as well known as it should be because it is listed on the NYSE, headquartered in the UK, but the majority of revenues are in Euros.
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There reasons to be LONG:
Sustained Organic Growth
Nomad Foods is well-positioned in the growing freezer category. In Western Europe, the market size is €27bn and has been growing 2% annually with limited cyclicality. Frozen foods are driven by secular trends in wellness, environmental consciousness, and convenience. The company has been outpacing its category.
M&A is a core strategy
Supplementing its organic growth Nomad Foods has been adding Western European frozen food companies, extracting cost savings, investing in growth initiatives, and plugging them into their strategic framework. Even though it has the largest share in the markets it competes in, the categories are fragmented. Nomad could also diversify into European non-frozen packaged foods categories or in the US frozen category. It has very large markets to look for targets while carrying an under-levered balance sheet.
COVID-19 calorie shift
Nomad Foods is well-positioned to benefit from a shift in spending from food away from home to at home. Grocery stores had the biggest stockpiling of food events in decades ahead of government placed restrictions on outdoor movement. Tesco, the UK's largest grocer, recently reported its weekly sales illustrating the impact from the stockpiling in the following chart. Even after the lockdowns are eased consumers will still consume more meals at home due to concerns over COVID-19. In the past month, consumers have had one of the largest trial periods of products in the grocery store and Nomad Foods was well-positioned to reach new customers and re-engage lapsed consumers. Online grocery still has a small penetration of the market, but it received a boost from the stay at home restrictions. Strong brands have greater share online and the company's brands are often #1 or 2 in its markets. Consumers are also more likely to reduce spending on food away from home due to the impact of the recession.
