"Dems $3T 'stimulus' bill uses word 'cannabis' 68 times (more than the word 'jobs.' Not terribly surprising, since we know smoking pot can make you repeat yourself...." – Senator Ted Cruz
Similar sentiment in the Senate is one of the reasons we don't think it is likely the SAFE Banking Act will be passed in the next stimulus bill.
Tyson answers where the beef is
Tyson Foods said it would discount certain protein products the remainder of this week. Tyson is the largest U.S. meat company by sales and processes about 20% of the country's beef. Tyson announced some beef items sold to grocery stores and restaurants could be discounted by 20-30%. Management said, "We're doing this because we want to help keep beef on family tables across our nation, especially as our beef plants return from reduced levels of production." The Department of Agriculture estimates that the production of beef, pork and other red meat last week was 28% lower than the same week the previous year. The agency forecasts that beef production in Q2 will be 20% lower than Q1. Tyson's six plants that were off-line last week have all since resumed production at varying levels.
The drop in production has resulted in much higher prices. Wholesale ground beef prices have tripled since the beginning of March, while many cuts of steak have doubled in price. What is unusual about this price spike is that cattle prices have fallen. The move by Tyson is probably an attempt to head off an inevitable regulatory inquiry into the price movements.
Beer celebrates Cinco de Mayo
Off-premise beer category sales grew 28.1% to $967M during the week ended May 2, according to Nielsen. Sales growth continued to accelerate week over week, as seen in the following chart. Dollar sales nearly reached the level of last year's Fourth of July week driven by Cinco de Mayo, but still trailed the week ended March 21. Beer category sales since March 8 (pre-pandemic) have grown 22.6% while volumes have grown 16.2%. As strong as that growth is, total alcohol volumes would have to grow 22% to compensate for the loss of on-premise sales according to Nielsen. Anheuser-Busch InBev and Molson Coors grew a combined 20% for the week. Hard seltzers grew 367% for the week accounting for 30% of the beer category's growth off-premise. Craft beer grew 30.5%, spirits sales grew 38.6%, and wine grew 35.8% for the week ended May 2. The convenience channel posted its strongest sales week to date, with 24.2% growth. Hard seltzers grew 490% while Mexican imports grew 35.8%.
Nomad Foods post Q1 updates
Greenyard is the #2 frozen vegetable and fruit processor in the E.U., but its fresh vegetable and fruit business is more significant. Greenyard raised EBITDA guidance earlier this week from €88-93M to €96.5-98.5M adjusted. The company had previously raised revenue guidance due to the increased demand from COVID-19 for its fruits and vegetables.
Nomad Foods also reported strong sales of its frozen food had continued into April. The third week of April had decelerated from the +30% level of the previous three weeks to +12%, but the Easter comparison likely drove that. In the fourth week of April, sales re-accelerated to the +30% level. We are not modeling 30% growth for Nomad Foods in Q2, but we do expect an elevated level of spend in grocery stores and frozen food to continue, driven by more consumption of cooking at home.
Last week the USDA announced that it would purchase $20M of Alaska pollock, a critical food source for Nomad Foods, to support the fishery industry. Not only does COVID-19 provide unique challenges for fishing crews (have you tried to social distance on a fishing boat?), but the drop in restaurant sales particularly hurts seafood as 60% of seafood in the U.S. is consumed at restaurants.
