Fresh produce sales accelerated for the second week (SFM)
For the week ended August 16, fresh produce demand increased 11.5%, accelerating from 9.5% in the prior week. Fresh vegetable demand increased 14% YOY, as seen in the following chart. Fresh vegetable demand is a key category to assess consumption trends vs. sales trends as the category is not stockpiled and indicates home meal preparation. Produce consumption trends have been relatively steady and elevated. Fresh fruit sales growth improved by 3.1% from the prior week and narrowed the gap to fresh vegetables to 3.6% percentage points, the smallest gap since the pandemic began. Fruit tends to be a basket builder rather than a traffic driver.
U.K. frozen food accelerates (NOMD)
For the week ended August 15, total CPG index levels in the U.K. grew 5% compared to the prior year, as seen in the following chart. Edible categories increased 10%, outpacing non-edibles at +7%. The frozen category increased 25%, accelerating for the third consecutive week. Frozen food even outperformed alcoholic beverages, the strongest category during the pandemic, which was up 21%. The U.K. is Nomad Foods' largest market at 31% of sales. The frozen category has generally outperformed other grocery categories in Western European countries. Still, the magnitude has been less than in the U.S. This is due to a lower share of food away from home consumption pre-pandemic in Western Europe.
Nomad Foods previously said sales in July grew double digits, similar to June. Management's guidance is for organic sales growth of HSD% for the year and MSD% for Q3. July is the smallest month of Q3 for the company, and management expects retail sell-through of frozen food to decelerate in Q3, but trends have remained steady in August. Shipments are still trying to return inventory levels at retail to normal levels because it was unable to meet demand in Q2.
The company's tender offer for $500M of shares between $23 and $25.50 continues through September 9. The company's tender offer highlights the strong cash flow the company is generating, a strong balance sheet, as well as a signal that investors should not expect a sizeable transformative transaction. Investors should be comfortable that they own a European frozen food company with steady organic growth prospects. We don't believe the growth prospects and lower risk profile of the company is reflected in the EV/EBITDA valuation of 10.8x consensus estimates. Nomad Foods remains the Best Idea Long.
Bud Light is launching three new flavors of its hard seltzer (BUD)
Bud Light is launching three new flavors of its Hard Seltzer. The company has said that Bud Light Seltzer, which was released in mid-January, is the "largest and most successful innovation" in Bud Light's 38-year history. The company has increasingly redirected its marketing budget to support the new seltzer products, and it is making a difference. Bud Light Seltzer had a 13.9% share of the seltzer market through the week ended August 16, according to IRI, which is a notable increase from the market share picture just four months ago, as seen in the following chart.
