Hard seltzer decelerates (SAM)
The scanner data indicates off-premise hard seltzer sales growth has been up ~100% for the last few weeks. That still represents a very robust growth rate, but sales had been up to over 200%+ for nearly the entire year until July. Case volumes have fallen to levels last seen in April, as seen in the following chart. Off-premise dollar sales of hard seltzer reached $1.75B this summer, up to $1.1B from the summer of 2019. The top 5 brands White Claw, Truly, Bud Light Seltzer, Corona Hard Seltzer, and Vizzy, represented 95% of the category’s growth. Only White Claw and Truly were available last year and combined, and they still have a 75% market share. Anheuser Busch InBev is projecting the category to grow 50% in 2021.
Grocery re-accelerates in the UK, boosted by a rise in COVID-19 cases (NOMD)
For the week ended September 26, the CPG Index in the UK accelerated to +10% YOY from +7% in the prior week. Frozen food accelerated to +21% YOY from +16% in the prior week, as seen in the following chart. The frozen category led all edible categories. The recent increases in UK COVID-19 cases, plans for tighter social restrictions, and the expiration of the eating out promotion have led to a reacceleration in sales in September. Recent strength in product categories like canned meats (+33%), canned vegetables (+28%), dry pasta (+25%), and of course, toilet paper (+66) also suggests consumers are likely stockpiling some grocery items. The UK is Nomad Food's largest country by sales, representing 31% of overall sales.
Avocado harvest looks bountiful (AVO)
Mexico is not the world’s largest avocado producer. The Dominican Republic is the largest producer, but the country’s residents consume 105 pounds annually, leaving little for the export market (in comparison, the per capita consumption in the U.S. is 8 pounds). The Dominican Republic is taking steps to change that and export more, but its varieties are the less popular green skin varieties. They are popular in Hispanic markets in the U.S., but not elsewhere, as Hass is dominant. Demand has grown 10% annually in recent years in the U.K. and E.U., while the US has been trending at an MSD% growth rate. All of the imports of avocados from Mexico come from the state of Michoacan, which limits growth. The avocado season is now turning from California to Mexico, where it appears the harvest will be abundant.
Peru is a small but growing significant supplier for the U.S. This year Peru will export 180M pounds to the U.S., similar to the last two years. Mission Produce is producing avocados on 8,300 acres it owns in Peru. The U.S. market only represents 30% of Peru’s production, with the rest going to the U.K. and E.U. The current harvest in Peru, which is just coming to an end, is seen to have outstanding quality, and prices have been increasing from $14-15 per package in September to nearly $22 this week. Colombia grows Hass avocados and could also be a future exporter to the U.S., but its production currently goes to the E.U.
Mission Produce is currently trading at its IPO price of $12, lower than the initial $15-17 range. Single commodity crop companies have not had a great public track record, but avocados are not like other crops. We are on the sidelines due to the inherent commodity risks, but we do appreciate the secular growth story.