“We are encouraged also by what we’ve seen in regards to the bounce back in certainly the brewing segment in Mexico.” – Jame Zallie CEO of Ingredion, a supplier to breweries in Mexico 11/2/20
Oatly’s valuation premium (STKL)
Oatly launched “Oatgurt,” oat-based yogurt last month. Oatly reports that it has a 64% share of milk alternatives in the U.K. In the U.K., oat has the largest share at 32% of the dairy alternative category, and Oatly’s sales are up 109% (for the year ended Aug. 15). In the U.S., oat milk recently took over the #2 spot from soymilk but grew at a faster 304% rate (for the year ended Sept. 6).
Most people had not heard of Oatly until several years ago, but it was founded in 1994 by a Professor in Sweden. The company’s mission was to shift people from dairy to oats and not tax the planet. Oats use 80% less land than required for diary, and the oat drink uses less water than cow’s milk. In 2012 Oatly appointed a new CEO who restructured the company with the creative department at the business center. There was a boycott call when the company received an investment from Blackstone for 7% of the company. Oatly’s General Manager of the UK said, “We haven’t seen any significant drop in sales within our data reads (grocery) nor account losses. We are tracking it ongoing. Foodservice is harder to track, but again, we had our strongest month last month, and it looks like October will also be a record month.” Starbucks recently reported that alternative milk' sales doubled in one quarter (Starbucks currently carries soy, almond, coconut, and oat). Allied Market Research published a report last week sizing the global oat milk market at $360.5M in 2019, reaching $995M by 2027.
Oatly had revenue of $200M in 2019 and is said to be on track for $350M in 2020. The last investment round in July valued the company at $2B or 5.7x current year sales. In comparison, SunOpta’s $700M market cap is 1.7x the Plant-Based division’s revenues. One big caveat is the much slower growth rate for SunOpta’s division, as it includes revenue from other alternative milk besides oat milk. We recently added SunOpta to our Best Idea Long list.
Organic produce outperforming (SFM)
According to Organic Produce Network, total organic fresh produce sales grew 16% in the three months ended in September with volumes up 15%, outpacing conventional produce. Organic fresh produce dollars had a 12% share compared to 6% of the volume share.
Packaged salads were the bestselling organic produce item in Q3, followed by strawberries, apples, blueberries, lettuce, herbs and spices, carrots, bananas, grapes, and tomatoes. Those top ten categories accounted for 70% of all organic dollar growth. Organic food’s share of fresh produce dollars reached 12% in Q3. Organic sales were strongest in the West, where dollar sales in Q3 were up 20%, and volume sales were up 17%, as seen in the following chart. Sprouts Farmers Market’s 4.2% SSS increase in Q3 underperformed the organic category.
Weis Markets’ elevated Q3 grocery trends (WMK)
Weis Markets reported Q3 EPS of $1.16 compared to $.53 last year. SSS increased 14.8% in Q3, decelerating from 24.1% in Q2. E-commerce grew 160% in Q3, decelerating from 243% in Q2. Weis Markets is a Mid-Atlantic food retailer operating 197 stores. Weis Markets’ 14.6% in the quarter ended Sept. 26 compares to Albertsons’ 13.8% in the quarter ended in August, and Kroger’s 14.6% in the quarter ended July.
