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Below is a complimentary research note from our Consumer Staples Analysts Howard Penney and Daniel Biolsi. If you are an institutional investor interested in accessing our research email sales@hedgeye.com |
GROCERY WORKERS ARE EXTENDED FIRST RESPONDERS
Kroger (KR) is asking federal and state officials to classify its 460,000 workers as "extended first responders" or "emergency personnel." The designation would improve the worker's access to PPE. The UFCW kicked off the campaign last week. Most people have found a deeper appreciation for essential workers during these times. The grocery store is one of the few stores open during a stay at home restrictions.
The grocery supply chain is struggling to keep up with the changes in demand, and several costs have risen. Consumers are also the least price-sensitive in the grocery aisles than they have been in a very long time. We added Kroger to our Long bias list last week.
The Trouble In Seafood
At least 90% of the seafood eaten in the US is imported. Two-thirds of the domestic seafood market is sold in hotels and restaurants. Frozen fish is faring somewhat better than fresh, but there is a limit to frozen storage, and it competes with cheaper imports. The grocery channel primarily sells frozen imports, so the increased demand there has not helped US fishermen. The export market has collapsed with demand for crab and lobster disappearing. Most fishermen are on land waiting for demand to come back.
Marder Seafood, a New England wholesaler, said demand had fallen 95% in the past month. If the current environment continues forcing restaurants to close, it will lead to a shakeout in the domestic fisheries industry. Providing some relief is the $300mm in the CARES Act directed towards fisheries.
The UK fisheries industry has many similarities to the US. Typical British favorites cod, haddock, and salmon are primarily imported, and 80% of what is caught locally is exported. Frozen fish imports are mostly unaffected by the drop in restaurant demand from COVID-19 directly. Frozen fish is about 40% off Nomad Foods' (NOMD) sales. We presented our Black Book on NOMD earlier this week.
