New Event | Plant-Based Food Call
We are hosting a speaker series call on Monday, Sept. 14, at 11 AM ET. To give us the perspective of a grocery chain buyer, we are hosting a discussion with a buyer and category manager for plant-based foods for a 250 store grocery chain.
For event details (includes video and materials link), CLICK HERE
Nomad Foods buys back 10% of shares (NOMD)
Nomad Foods announced the preliminary results of its modified Dutch tender would result in the purchase of 18.9M shares at $25.50 for $483M. The repurchase represents 9.6% of the company’s outstanding shares. We would like to see management create more value through acquisitions, but the repurchase does not signify acquisitions are off the table. Management said the M&A focus will now be targeted toward European frozen food. As Nomad Foods has matured and invested in the frozen category, management’s confidence in the long term growth prospects and their ability to extract synergies through further consolidation has led them to maintain that sector focus in the future. Our interpretation is that it signifies that the next acquisition will not be large or transformational, but below $500M. That is a range we prefer due to lower risk. The repurchase also highlights the cash flow the company is generating in the current environment (it has generated more FCF through half of 2020 than all of 2019). It also takes advantage of a valuation that continues to be lower than its peers, despite the consistent results. The winning growth formula for the company is LSD% organic sales growth, cost leverage, acquisitions, synergies, and financial leverage, driving EPS growth of LDD%. It is not premised upon the current HSD% organic sales growth or large acquisitions.
Nomad Foods is the best idea long. For a replay of our Black Book video and materials, CLICK HERE
Truly to launch an iced tea hard seltzer (SAM)
Boston Beer announced that Truly would launch an iced tea hard seltzer in January 2021 with four flavors. They will each have 100 calories, 5% ABV, and one gram of sugar like other Truly hard seltzers. Truly Lemonade has sold $137M in the off-premise channel according to IRI this year, reaching a 10% share of the hard seltzer market.
Later in 2021, Truly plans to launch Citrus Squeeze, replacing the orange flavor in the citrus variety pack. Truly’s top four SKUs are all variety packs. Hard Tea is not new to Boston Beer, which owns both Twisted Tea and Wild Leaf. Twisted Tea is the beer category’s 14th best selling brand family in off-premise channels with $304M in sales year to date through Aug. 9. It’s a natural product extension for Truly given the in-house knowledge of hard Tea, but cannibalization seems likely. For a replay of our hard seltzer black book, CLICK HERE.
Sysco, a vaccine bet (SYY)
Sysco presented an investor conference yesterday. Management said after a July where trends were stagnant, August had seen consistent sequential week on week improvement. The company’s share price had followed a similar trend – increasing when sales improved week over week. The company’s sales to urban markets where restrictions on dining are more significant have lagged rural areas. Management did admit that the $1B in new business is in the QSR sector, a less profitable customer. A large amount of the gains could have come from the bankruptcy of a distributor that focused on QSRs.
As seen in the following chart, management believes spending on food away from home will return to pre-pandemic levels just as foot traffic to grocers vs. restaurants has returned to previous levels. Where sales are still well below pre-pandemic levels – hospitality, schools, and urban markets management believe a vaccine will be very instrumental in closing the gap. So when sales stagnate again, shares of Sysco are a vaccine bet? What about all of the restaurant customers that have closed in the interim?
