Will the Oatly boycott benefit SunOpta (SKTL)
Some fans of Oatly have started to boycott the company after hearing it had received an investment from a “Trump-supporting, anti-sustainability equity firm.” Oatly is a Swedish company that makes oat-based versions of milk, ice cream, and cream cheese. It entered the US four years ago and saw sales double to $200M last year and are currently projected to double again this year. In July, Blackstone led the purchase of a 10% stake for $200M in Oatly. The boycotters cite Blackstone’s CEO Steven Schwarzman’s ties to President Trump. The boycotters also mention a Blackstone investment in a Brazilian company that has been accused of contributing to the deforestation of the Amazon rainforest. Oatly has responded numerous times on Twitter to people’s objections over the investment. Oatly is vulnerable to these objections as the company has said it is on a mission to combat climate change by replacing cow’s milk. I could point out that Oatly’s lead investors include China Resources, which owns large coal resources in China among other non-environmentally friendly businesses, but cancel culture is emotionally driven. Oatly fans are likely to remain oat milk fans even if they do not purchase the company’s products. SunOpta sees significant demand growth for its oat milk, so it is currently quadrupling capacity.
Campbell dodges a COVID-19 benefit (CPB)
Campbell beat FQ4 EPS estimates of $.60 by $.03, driven by better sales growth. Taking away some from the beat was $.03 of upside from a lower tax rate, $.06 from lower interest expense, and $.04 from the extra week. Management also guided FQ1 EPS to $.88-$.92, a range mostly ahead of consensus expectations of $.89. Nonetheless, shares fell 7.5% yesterday and are relatively flat year to date as investors were not impressed by the company’s positioning and profitability during the pandemic. Organic net sales grew 12% with Meals & Beverages up 19% and Snacks up 7%. Soup sales grew 41%, excluding the extra week, but supply constraints held back the Snacks business.
Management was upfront in saying they expect a return to the typical promotional environment in a couple of months. The valuation at less than 17x this year’s EPS estimates is not demanding, but EV/EBITDA at ~12x limits upside without more visibility into lapping the benefit from elevated grocery sales.
Bud Light Platinum Seltzer launch (SAM)
Ahead of the Labor Day weekend, Anheuser-Busch launched Bud Light Platinum Seltzer nationwide. The Platinum Seltzer has an ABV of 8% compared to 5% for Bud Light Seltzer as well at Truly and White Claw. The new seltzer will come in three flavors (citrus, wild berry, and blood orange), two size variety packs (6 oz and 12 oz), single flavor 6-packs, and 16 or 25 oz cans. Platinum Lager’s off-premise sales are up 21% through the first seven months of the year. One of our concerns for Truly is the growth in competitive launches. Bud Light Seltzer is now the third-largest hard seltzer brand. Coors Seltzer will also launch soon.
White Claw and Truly have maintained their combined share over the past year despite torrid growth in the category and a myriad of competitive launches, as seen in the following chart. COVID-19 was a significant reason why we did not see a share shift. Investors are likely not looking any further than the category’s growth, 113% in the latest week. We made our case last month in our Hard Seltzer Black Book For webcast and materials: CLICK HERE
