U.K. grocery sales accelerate, with some stockpiling (NOMD)
Kantar reported take-home grocery sales in the U.K. grew 9.4% for the 12-week period ended October 4th. In the four-week period ended October 4th, sales grew 10.6%, accelerating from 8.0% in the previous four week period. Beverage alcohol sales accelerated with the end of the “Eat Out to Help Out” program and the 10 PM pub curfew after declining YOY in the previous four-week period. Kantar recorded 107M shopping trips during the week ended September 27, the busiest since March, but well below the stockpiling period’s peak of 175M trips. Sales of toilet paper grew 64% and were purchased by 37% of households vs. a more typical 25%, indicating some stockpiling tendencies. The UK is Nomad Food's largest country by sales, representing 31% of overall sales.
Favorable spread for grocers (KR)
The food manufacturing PPI spread to CPI for food at home is at the widest margin in some five years, as seen in the chart below. Kroger saw some of its best gross margin gains during that period. Retail prices for food at home (a proxy for supermarket inflation) were up 4.1% YOY in September, decelerating from 4.6% in August. The CPI for fruits and vegetables was up 3.0% in September from 2.7% in August. The index for meats, poultry, fish, and eggs fell 0.4% in September, its third consecutive monthly decline. The CPI for food away from home accelerated to 3.8% in September from 3.5% in August.
The spread between the CPI for food at home to food away from home narrowed to 30bps in September, the narrowest differential since the pandemic began in March, as seen in the following chart.
We continue to be constructive on the grocery sector. Grocery Outlet, Sprouts Farmers Market, and Albertsons are Best Idea Longs. We are above consensus expectations on both sales and gross margins.
BioSteel readies for a larger RTD launch (STZ)
BioSteel was co-founded by John Celenza, a former sports marketer, and Mike Cammalleri, a former NHL player. The company began as a powdered beverage maker that promoted a sports drink alternative with zero sugar and amino acids. Last year Canopy Growth took a 72% majority stake with an agreed-upon path to total ownership. BioSteel will use Constellation Brands’ distribution network for its ready to drink product. Earlier this week, two of Constellation Brands’ most important distributors, Manhattan Beer and Reyes Beer, announced they would carry the line with stores displaying the product in one to two months. BioSteel has partnered with several athletes to grow awareness and trial, including the NFL’s Patrick Mahomes. BioSteel got its start in hockey stores, but growth in 2020 will be driven by NFL endorsements and in 2021 with NBA endorsements. I wouldn’t be surprised to see BioSteel sales to exceed Canopy’s THC beverages in 2021.