Removing Albertsons from our Long Bias list (ACI)
Despite the stock price movement over the past week for the conventional grocers, we have not seen any fundamental news that would account for the stock price increases. Total CPG demand in the grocery channel was up 13% YOY in the week ended January 17, up from +10% in the week prior, as seen in the chart below. Edibles +14% outperformed non-edibles +6% during the week. The edible category was driven by frozen food +20%.
We are removing ACI from our long bias list. Our higher than consensus estimates imply shares are trading at undemanding 6.5x EBITDA estimates. Since the IPO, we have been constructive on the shares as we viewed the upside in our estimates to improve very poor sentiment. The company passed its two most important tests since becoming public – surpassing expectations and insiders not looking for a quick exit when the first lock-up expired. As we see it, the third test is lapping the pandemic comparisons, and with the recent run in the share price, we will opt to watch. Our updated position monitor is below.
Plant-based beverages and jerky (BYND)
Anything Beyond Meat and PepsiCo can develop in plant-based snacks and beverages, other snack and beverage companies can offer. If there’s excitement over an unknown plant-based beverage the two companies can develop together – there is a better investment, SunOpta. As the largest plant-based milk producer, SunOpta has the expertise and capacity in the category. PepsiCo and Beyond Meat would find it difficult to produce anything plant-based milk-related without working with SunOpta. Beyond Meat probably does not generate significant consumer interest in beverages as ‘meat’ and beverages are an unnatural pairing. The brand has not spent enough in advertising to mean much to consumers outside of plant-based meat.
In snacks, Frito-Lay does not have a big presence in beef jerky. The idea that beef jerky consumers (consumers who like the taste of meat so much that they are eating meat in between meals and on the go) are looking to reduce their meat consumption seems like selling decaffeinated Red Bull. Organics by Red Bull does exist, just as plant-based jerky does. It does not mean oxymorons have any real addressable market. Just as yesterday’s announcement of a JV with PepsiCo does not represent a realistic/probable TAM change. To view our Beyond Meat Black Book update, CLICK HERE.
Sproud raises funding for pea milk (STKL)
Sproud, the Swedeish alternative milk start-up raised £4.8M this week from VGC, an early-stage investment firm. Sproud launched in Sweden in 2018 and has raised £8.7M to date. Pea milk has many of the attributes that oat milk has including being better for the environment, gluten, and dairy. It also has double the protein and less sugar than oat milk. Sproud uses yellow split peas that are said to have a neutral taste. In the U.S. it is carried by Amazon and Sprouts Farmers Market. Sproud is distributed shelf-stable, which reduces its carbon footprint. However, plant-based milk and meat have sold at much higher velocities when sold alongside the conventional product. In the U.S., most consumers that have tried pea milk have tried Ripple Foods’ pea milk. Ripple Foods has raised a total of $186.3M to date, with $56M in a Series D round in October 2020. To learn more about the growth and competitive environment for plant-based milk, CLICK HERE to view our SunOpta Black Book.
When Oatly can complete a successful IPO, even more competing for plant-based milk will likely be launched, but it will probably be even more difficult to catch up.
