General Mills projects North American food retail growing HSD% this Q
General Mills reported organic net sales grew 10%, 3% better than consensus expectations, with price/mix up 2% and volume up 8%. Meals and baking led with sales growth of 31%, while cereal grew 10%. North American retail grew 14% while convenience stores and foodservice declined 12%. Management believes food at home will be elevated for longer. Gross margins expanded by 100bps in the quarter, compared to +80bps in the previous quarter. The company cited fixed cost leverage more than offsetting COVID-19 costs. The results imply a neutral margin environment for the grocers from the supply chain.
Net sales increased 31% in U.S. Meals & Baking, 10% in U.S. Cereal, 5% growth in U.S. Yogurt, and 3% in Canada. Snack bars were the only category in which the company competes that household penetration fell during the quarter. However, it still outpaced the top competitor, as seen in the following chart. General Mills’ snack bar brands include Nature Valley, EPIC, and Larabar. We added Simply Good Foods (SMPL) to our short bias list earlier this week in part to the company’s extensive mix of snack bars.
Beer sales rebound (SAM)
For the week ended September 12, off-premise sales of alcohol grew 22.6%. Spirits grew 30.1% while wine grew 22.9%. The beer category grew 19.9%, as seen in the following chart, up from 12.2% the previous week, with a later Labor Day impacting some acceleration. Beer sales, excluding hard seltzer, cider, and FMB, grew 13.6%. Super premiums increased by 29.3%, and craft grew 22.5%. Mexican imports rose 16.9% compared to 10.3% over the summer, probably indicating better inventory levels for Constellation Brands and Heineken’s brands. In comparison, hard seltzer sales grew 154% over the summer. Year to date, White Claw sales have increased 184% in off-premise channels while Truly has grown 166%. In its first year of launch, sales of Bud Light Seltzer have reached a third of the amount of Truly in the off-premise channel.
Sales of Samuel Adams Boston Lager grew 8.3% over the last month, decelerating from 12.2% growth in the previous 12 weeks and 10.5% year to date. The Samuel Adams seasonal variety pack sales are down 8.3% YTD. Molson Coors’ Blue Moon Belgian White Ale and Leinenkugel’s Shandy grew 11% and 7.2%, respectively, YTD. Anheuser-Busch InBev’s Shock Top Belgian White and Goose Island IPA sales have fallen 14.6% and 2.2%, respectively, YTD.
<chart2>
BUD brand loyalty
The NY Post had an article yesterday about a remarkable case of brand loyalty. Michael Amelotte, who passed away recently, had decorated his 815 square foot home with cans of Budweiser that he drank over 16 years (pictures below). Budweiser is offering a free bar to the buyer of the condo as long as the cans stay intact.
<chart3>
The story brings up several themes for us – the power of marketing, the need for Anheuser-Busch InBev to reach younger consumers, and whether hard seltzer can engender the same type of brand loyalty. With the alcohol bans in Mexico and South Africa behind it, off-premise growing above plan both domestically and internationally, the sale of the Australian business, and most international markets improving sequentially, it is the on-premise business that is lagging. In the U.S., BUD’s on-premise mix is in the high-teens%; in many other countries, the mix is higher, as seen in the following chart. BUD is on our long bias list.
<chart4>
