UTZ “IPO” Greenlights more SPACs
Utz, the fourth largest snack manufacturer (as seen in the below chart), had its first day of trading on the NYSE yesterday. Shares in the former SPAC increased 40% over the past week, which should keep the light green for other offerings. Several SPACs could come in the consumer staples sector, including Gores Metropoulos (GMHI), Pershing Square Tontine (PSTHU), Yucaipa (YAC), and PMV Consumer Acquisition.
Snacking has been a habit Americans have participated more of during the pandemic. Salty snacks have been among the best categories of CPG, with annual growth of 4.3% from 2010-2019. 95% of the country snacks at least once per day, and private label penetration is low (5-6%) and not expanding. Utz sales grew 11% in the Q2 pandemic. Utz has been a family run business for the past 100 years. The Rice and Lissette families will retain their 90% equity stake, now comprising half of the company. The current CEO has been more acquisitive, adding ten companies since he took over as CEO in 2012. Last year Utz acquired Snyder of Berlin from Conagra Brands. The company has a demonstrated history of extracting synergies from its targets, as seen in the following chart. The proceeds were used to pay down debt from the acquisitions and $60M to the family ownership.
The company intends to grow sales 3-4%, increase marketing spend from 1% currently to 3-4% in the future, raise EBITDA margins from 13.3% to the mid-teens, and grow EPS 8-10%. A 2% dividend yield and future acquisitions will enhance returns further. The company appears to check many of the boxes for investors, and we are happy to welcome it to the public markets.
Food inflation decelerates 1% at grocery (SFM)
Consumer prices for food sold at grocery stores declined 1% from June to July, but prices are still running 4.6% above last year. The USDA’s Food Price Outlook also said prices of restaurant food rose 0.5% in July and are now 3.4% above last year. YTD, the USDA said grocery food prices had increased by 3.1%, and restaurant food prices have increased by 2.4%. The beef category has seen the largest increase of 10.6%, while fresh fruit has had the largest decrease of 1.5%. The USDA projects grocery prices for food will increase between 2.5% and 3.5% this year. The USDA’s projection for 2021 is between 1% and 2%. The USDA projects fresh produce prices will rise between 0 and 1% this year.
Labor Day reopening – postponed (ACI)
Many companies had planned to reopen office after Labor Day, but more delays seem likely. In an August WSJ survey of 15 major employers that collectively employ 2.6M people, 57% said they had decided to postpone their back-to-work plans because of recent increases in COVID-19 cases. Several tech companies, including Google, Uber, Facebook, and Salesforce, have extended work from home policies until next summer. A study by Burbio, which aggregated school and community calendars nationwide, found that 52% of students will go to school virtually only, and just 25% will attend daily. The largest 200 districts were two-thirds virtual.
Fifty of the largest employers in the U.K. questioned by the BBC said they have no plans to return all staff to the office full time in the near future. Twenty-four of the firms said they did not have any plans in place to return workers to the office. One of the main reasons given for the lack of a substantial return to the office was that they could not see a way to accommodate large numbers of staff while social distancing regulations were still in place. Without a return to the office, food consumption at home will remain elevated.
