Dairy milk’s secular decline (STKL)
Fluid milk consumption has been declining since the 1970s, but it rose in 2020, with consumers eating more often at home. According to Nielsen, retail sales of dairy milk grew 7.1% in the 52 weeks ended Jan. 2, 2021. According to USDA ERS data, commercial sales of dairy 1% milk and non-fat milk declined 4.3% and 14.1%, respectively, in the year ended August 2020. Whole milk sales grew 4.1% over the same time period. Retail volume sales of milk, which accounted for 75% of 2019 volumes, grew 2%. Volumes in restaurants and schools declined 21%. Historically 30% of milk sales have been tied to cereal consumption. The fluid milk category has seen success in value-added milk innovation like ultra-filtered (Fairlife), lactose-free, hybrids, indulgence, high protein, cold brew with milk, energy, and full-fat offerings. Between 2015 and 2018, spending on premium milk innovation grew $250M and has continued to grow in 2021. Dairy milk is competing against more beverages than just plant-based milk. As consumers return to the workplace and school, conventional dairy milk sales will likely continue their decline.
Groceries delivered inside your garage (ACI)
Yesterday Amazon (covered by Brian McGough) expanded its Key by Amazon service to let delivery people drop off groceries inside shoppers’ garages. Prime members in more than 5,000 cities (everywhere Amazon offers grocery delivery) in the U.S. will be able to use the service. Prime members can receive groceries ordered from Fresh and Whole Foods. This expands the eligibility from Chicago, Dallas, Los Angeles, San Francisco, and Seattle. Pete Gerstberger, head of Key by Amazon, said, “Customers who tried Key In-Garage Grocery Delivery have loved the service, which is why we’re expanding it to everywhere Amazon offers grocery delivery.” Prime members have to purchase a smart lock and camera or a smart garage door opener to get packages or groceries dropped off inside their residence or garage. Installing new hardware and allowing a delivery person into part of your house will limit its appeal, but more will likely consider it after a pandemic. Albertsons admitted that grocery delivery costs do not work for conventional grocers, which provides Amazon with a competitive advantage.
Kalera opens its third farm (APPH)
Kalera (KSLLF) announced it had its first harvest in its new Atlanta area vertical farm. The 77,000 square foot facility is the largest in the Southeast. It has the capacity to produce over 10M heads of lettuce annually. The farm was built in 11 months. Planting at the facility began in early March, and the harvest began last week. Kalera said it was ramping up production faster than originally planned due to strong sales indications. Kalera is partnered with one of the largest produce distributors in the state, various food service companies, and Publix.
Kalera operates two growing facilities in Orlando and is building additional ones in Houston, Denver, Columbus, Seattle, Minnesota, and Hawaii. Kalera’s business strategy differs from AppHarvest by building closer to demand centers instead of one location, which saves transportation costs and has the appeal of supporting local farms. The other main difference is growing lettuce instead of tomatoes grown by AppHarvest. A tomato requires about 25x more energy to grow than the 22 food calories it provides. Kalera also recently added Sonny Perdue, the former governor of Georgia and former Secretary of Agriculture, to its board.
