Campbell pricing in the difficult compares? (CPB)
Campbell Soup reported FQ1 EPS of $1.02, representing 31% YOY growth and beating consensus expectations of $.91. The guidance was $.88-.92. Organic revenue grew 8%, led by meals/beverages. Volumes grew 6%, and prices increased 2% from lower promotional spending. The meals and beverages segment had organic sales growth of 12%. Soup sales in the U.S. grew 21% as retailers rebuilt inventory levels. The snacks segment had organic sales growth of 4%, excluding the sale of the European chips business. Gross margins expanded 100bps due to lower promotional spending and a favorable mix. Pricing was a 120bps tailwind, while inflation and other factors were a 270bps headwind. Supply chain improvements contributed to 150bps. Management shifted promotional plans out of FQ1 to help the supply chain meet the demand. Marketing and selling expenses increased by 1%. Segment operating earnings increased 18% for the meals and beverages segment and 11% for the snacks segment.
Management guided FQ2 to $.81-.83, below consensus expectations of $.84. Sales growth and EBIT growth are both expected to increase 5-7%. CPB shares closed 2% lower yesterday as investors already concerned about lapping the pandemic benefit in the coming quarters were disappointed by the lower FQ2 guidance. Some of the quarter's upside has to be viewed in the context of delayed promotional spending into later quarters.
Grocery sales pullback after Thanksgiving (KR)
Total CPG demand in grocery stores dropped the week of Thanksgiving to +6%, down from +16% in the previous week, as seen in the chart below.
Last week Kroger said the first two weeks of November were above the 10.9% ID sales growth of the previous quarter, but the week of Thanksgiving was below, bringing the three-week period in line with the previous quarter’s growth rate. The frozen category was still the strongest in edibles but decelerated from +22% in the previous week to +12%. Beverage alcohol demand decelerated to +6% from +14% in the previous week. Fresh meat demand decelerated from +20% in the previous week to +8%. Total fresh turkey demand was 5% lower YOY while the smoked ham was down 7% as consumers had smaller Thanksgiving meals. This year's diverging trend in traffic peaking earlier and then falling further than the prior year can be seen in the chart below. The smaller Thanksgiving gatherings led to lower sales over the holiday.
Starbucks will roll out oat milk nationally (STKL)
Starbucks will add oat milk to its menu across all locations nationwide in the Spring. This follows a successful test at 1,300 locations in the Midwest this year. In August, Starbucks added oat milk to its menu across Canada. SunOpta supplies Starbucks with soy, almond, and coconut milk. Oatly is the supplier of oat milk to Starbucks. Starbucks’ national store base could introduce oat milk to many customers who have not tried it. Howard Schultz is an investor in Oatly, which is probably why it has deviated from its usual practice for ingredient sourcing to purchase a more expensive brand in smaller package sizes. Three weeks ago, SunOpta opened an expansion at its Alexandria, MN plant that will quadruple oat base production. This year oat milk overtook soy milk as the second most popular plant-based milk in the U.S.
