Cal-Maine price and cost trends reverse unfavorably during the quarter (CALM)
Cal-Maine reported an 11.5% revenue increase in the quarter ended November. EPS of $.25 beat expectations of an $.08 loss. Cal-Maine reported total dozens sold were up 4.8% YOY. The market price for conventional eggs was up 3.5% YOY while Cal-Maine’s average price was up 5.8%. Cal-Maine’s higher prices were driven by a larger mix of specialty eggs, up 1.5% to 39.7% of egg sales.
“Demand from foodservice customers has been less consistent and remains well below pre-pandemic levels.” The overall supply of eggs reported by the USDA declined 1.5%, and hens were down 4.6%. Farm production costs per dozen declined 2.6% per dozen primarily due to lower feed costs and more favorable conversion. The company noted that feed costs trended higher halfway through the quarter. With higher feed costs looming, Cal-Maine will have to rely on price increases outpacing corn prices. That will require a reversal in trend as price increases stopped during the last quarter, and feed cost increases started.
Albertsons reduces in-house delivery in California (ACI)
Albertsons made a strategic decision to discontinue its in-house delivery fleet and transition in select regions on February 27th to third-party delivery providers, including DoorDash. Albertsons will exit self-delivery and lay off drivers in select locations in Southern California and Texas. In the Bay area, the drivers are unionized and will remain with the company. Unionized grocers have a sizable disadvantage in labor costs. Albertsons must pay it's delivery employees a minimum wage, provide healthcare, and adhere to state workplace regulations. California’s Proposition 22 allows gig-economy companies to classify their drivers as independent contractors rather than employees. The decision to reduce the associated labor, insurance, and CAPEX/depreciation to the companies getting a valuation premium for the costly service makes sense at this point.
Spirits growth in 2020 concentrated in the top brands (DEO)
According to Databank’s initial estimates, all of the top 25 spirits brands in the U.S. had positive volume growth in 2020. Tito’s vodka remained the hottest with a growth of 22% and the largest spirits brand overall at 10.7M cases. Diageo’s Smirnoff grew 3.5% and fell to second with 9.1M cases. Crown Royal grew 12% and was the third-largest by volume. Jack Daniel’s grew 7.5% to 7.3M cases and finished fourth. Tequila brands Jose Cuervo grew 24%, and Patron grew 30%. Globally tequila grew 46% in 2020, according to Patron. Pernod Ricard said its tequila sales grew 60%. Whiskey did not have the level of growth that pre-mixed cocktails, cognac, or tequila did in 2020, but flavored whiskeys were projected to reach 15M cases. According to Nielsen, in the eleven months ended in November, flavored whiskey grew more than 34%. Skrewball’s peanut butter flavored whiskey grew nearly 700%, but Fireball’s 40% share dominated the flavored whiskey category. Combined, the top 25 brands grew an estimated 14% to 109.8M cases, growing at more than double its CAGR of the past five years. The remainder of the spirits category grew by 0.5%. The International Wines and Spirits Record (IWSR) projects the U.S. to be one of the few top 20 countries estimated to consume more alcohol in 2020. The IWSR project's growth to fall 8% in 2020 across those countries mostly due to government shutdowns.
