Meat continues to outpace other grocery categories (TSN)
Retail meat department sales increased 20.7% YOY for the week ended May 24, while volumes grew 5.1% according to 210 Analytics. Meat sales have outpaced overall grocery store sales as well as edible categories during the COVID-19 outbreak, as seen in the following chart.
Year to date through May 24, meat department sales were up 24.7%. That represents a volume growth of 1.2B pounds of meat and poultry and $5.8B in sales. Ground beef sales have grown more than $1B YOY. Pricing has been well above volumes during the COVID-19 outbreak, with the week ended May 24 price/mix 15% points above volumes. Pork and beef dollar share has been elevated while poultry is lower. For volume share, pork is up significantly while poultry and beef are down. Beef volumes were ahead until supply chain shortages pulled it lower. In the four weeks ended April 19, ground beef penetration of US households increased 7% points to 49%, according to IRI. The average household spent $5 or 30% more on ground beef. Millennials were the biggest driver of growth. In 2019 Baby Boomers represented 35% of spending on meat, followed by Generation X at 32% and Millennials at 23%.
FTC obstacle too great for Long Island grocery acquisition (AD-AMS)
Ahold Delhaize’s Stop & Shop banner and Long Island grocer King Kullen mutually terminated their merger this week. The combination of the two largest supermarket chains in Long Island was initially announced in January 2019. The family-owned King Kullen chain currently operates 29 supermarkets and five Wild by Nature natural/organic stores. Stop & Shop has the largest share on Long Island with 51 stores. As recently as last month, Ahold Delhaize said it expected the deal to close in the second half of 2020 after successive delays. Media reports confirm that the FTC had been an obstacle to the merger. There are significantly more food retailers than just supermarkets in Long Island, but the FTC seems to be still looking at the traditional competition. Target and Walmart have two dozen stores on Long Island. Lidl, for example, is a third of the way through converting 24 Best Market stores it acquired in early 2019. It also has plans to operate as many as 50 in Long Island.
June WASDE report is little changed, but China trade war looms over soybeans
The June WASDE report was relatively unchanged from the May report. The soybeans stocks to use estimate was lowered slightly while the corn estimate was raised slightly. Based on the current price for the November soybeans contract of $8.79 per bushel, the market anticipates a much larger ending stocks to use figure than the June WASDE report. Farmers are concerned that China will not purchase the crops; it said it would in the phase 1 trade deal signed in January.
China has continued to purchase soybeans for the second straight week, but the majority of the 720,000 metric tons purchased yesterday were for delivery for the following marketing year. The previous week China bought 337,000 tons, the largest week since February 2019. Brazil set a new record for soybean exports in May with most of that going to China. Brazil has already shipped a majority of its exports, which, along with an appreciating Brazilian currency, could encourage China to shift its purchases to the US. China needs greater soybean imports to rebuild its hog herd, which may explain the recent purchases despite the current tension between the countries. The majority of domestic soybean meal is used for poultry while the foodservice industry uses the oil like soybean oil, two industries that could use lower COGS.
