Winn-Dixie comps make a case for IPO (SEGR)
Southeastern Grocers, the parent company of Winn-Dixie, reported SSS growth of 16.2% YOY in Q3, decelerating from 21% sequentially. Conventional grocers have reported the strongest sales growth of the food retailers during the pandemic due to their one-stop offering. The only grocer to report stronger SSS of the food retailers we track is Publix. Publix reported SSS just slightly better at 16.5% in Q3. This month, Winn-Dixie opened four new supermarkets in Florida and has another four planned for early 2021. Among other offerings, the four stores have a produce department with more than 100 organic varieties and plant-based proteins made in-store. The company is still planning on an IPO. It would seem to be good timing with another outbreak of COVID-19 cases.
Danone sets its course (BN-FR)
Danone hosted an investor update yesterday that focused on how the company has reshaped itself for the future with COVID and changing consumer preferences. COVID-19 has been a challenge to the business, and comparable sales have declined in both quarters of the pandemic so far. The company sees three growth accelerators in the business: plant-based, healthy aging, and e-commerce. Danone said plant-based foods are growing 15% YTD in the U.S. and Europe. The company sees the immune system and mobility-focused products as the next big opportunity for the aging population. Management gave the e-commerce team it's own functional reporting. Management has also targeted a 20% reduction in SG&A over three years as the headquarters will be reduced in favor of management in the field. Management wants to reduce €1B from its cost base. One example of successful portfolio management was Horizon milk in the U.S. After a 30% reduction in half-gallon SKUs; the brand has seen double digits LFL sales growth YTD and a 250bps gain in market share. Management’s target is returning to growth and expanding margins in the second half of 2021. Their “mid-term ambition” is 3-5% LFL sales growth and mid to high teens operating margins. Clearly, it takes time to change the direction of very large global food companies.
Hard seltzer new product introductions (SAM)
The pandemic benefited the growth of hard seltzer by limiting the shelf placement for new hard seltzer products in the early months of the pandemic. Packaged goods stores struggled to keep up with consumer grocery demand, and resetting shelves was pushed out. The pandemic also drove a shift to off-premise alcohol purchases, which benefited the hard seltzer category, which has a lower on-premise mix. In 2021, we should see the number of new products gain share as the category matures. The growth in seltzer/spritzer products was explosive in the beer category in 2019, but in 2020 the number of spirits-based seltzers has overtaken the beer category, as seen in the chart below. Spirits-based products have seen the largest increase in product approvals, with 150 new products YTD through October 2020 (vs. 55 in 2019). There have been 128 new beer-based products YTD (vs. 102 in 2019). Wine-based products have seen a slight uptick to 71 new products (vs. 41 in 2019). In many states, the distribution of spirits-based seltzers is limited to liquor stores, but spirits-based drinks have a small nutritional advantage. Liquor based seltzers do not have any carbs and sugars because it is not brewed like hard seltzers. Beer Business Daily says “ranch water” could be the next big thing in alcoholic beverages. The drinks are basically tequila/agave themed seltzers made popular by Topo Chico drinks. Anheuser Busch InBev is betting on the trend with Ranch Water Hard Seltzer.
