Beer distributors high purchase intent (SAM)
U.S. brewers shipped 12.3M barrels in November, a 0.8% YOY decline, according to the Alcohol and Tobacco Tax and Trade Bureau. November represented the first YOY decline since May. October had a 0.6% YOY increase with 13.25M barrels shipped. YTD through November, brewers have shipped more than 151.9M barrels of beer, a 0.8% YOY decrease.
According to the National Beer Wholesalers Association (NBWA), the monthly Beer Purchasers’ Index was 77 in November. Readings over 50 indicate expansion and below 50 indicate contraction. Flavored malt beverages had the highest reading of 87. Premium light beer had a purchase intent of 70. Imports had a purchase intent of 65, while craft beer was at 55. “We’re still seeing beer distributors around the country trying to rebuild their inventories that got seriously depleted after the COVID pantry rush,” said NBWA chief economist Lester Jones. The NBWA expects beer industry volume to be down 0.5% by volume in 2020. The high purchase intent by distributors can be taken out of context by investors for bullishness on future sales expectations instead of what it is – restoring inventory levels. We see the same optimism in hard seltzer.
More environmentally friendly tomatoes (NOVS)
Agros Produce, one of Mexico’s top greenhouse growers, and IFCO Systems, a leading manufacturer of reusable plastic containers, have formed a partnership. Tomatoes present several challenges to grocers due to the complexities of growing and harvesting the delicate fruit. Reusable plastic containers will use less energy and water and produce less CO2 and solid waste. The packaging will also keep the produce fresh longer while being easier to handle and protect the produce.
AppHarvest is going public via a SPAC merger with Novus Capital. AppHarvest is an indoor farming start-up, an ag-tech company. AppHarvest operates a 60-acre facility in Kentucky, and its first harvest of tomatoes is anticipated in early 2021. The company’s strategy is to grow to produce centrally in the U.S., closer to where it is consumed through environmentally friendly methods utilizing technology while also saving on transportation costs. The company’s first crop will be tomatoes.
One of the competitive challenges for AppHarvest is that there is no competitive moat or definitive arbiter to being better for the environment. Novus Capital is on our short bias list.
Frozen food, a pandemic winner (CAG)
Frozen food sales grew 17.4% in November YOY, according to IRI. The frozen food category outpaced the broader all food category, which grew 9.3% in the month. In comparison, fresh food grew by 7.8% in the month. 7% of consumers who previously rarely or never purchased frozen food pre-pandemic were purchasing the category during the pandemic, according to a survey from the American Frozen Food Institute. Retaining the new entrants to the category will be important for the brands. Before the pandemic, the most frequently purchased frozen foods were meat, snacks, and beverages. In November, frozen meat excluding poultry and seafood volumes (both were up more than 27%) were down 10%. Sales of frozen fruits and vegetables were up 15.6%, outpacing the 8.2% for the fresh varieties. Fresh produce sales still represent 76% of all retail fruit and vegetable sales while frozen represented 8.5% in November. Fresh vegetable sales are a good indicator of at-home meal consumption, which has remained relatively stable for the past four months, as seen in the chart below.
Conagra’s Refrigerated & Frozen division is slightly greater than 40% of total sales. Nomad Foods revenues are entirely from frozen food sales in Europe.
