Target launches private label oat milk (OTLY)
Target is launching the Good & Gather Plant-Based brand. It is an extension of the private label Good & Gather brand. The new extension will feature more than 30 products in the meatless and nondairy categories, including an almond milk creamer and oat milk. Good & Gather is Target’s largest private label brand with sales exceeding $2B. Most consumer staples CEOs are looking at their product portfolio to determine which can be reformulated as plant-based. Private label is small in oat milk, but not in the other plant-based beverages. This is due to the relative newness of oat milk and the limited oat extraction capacity. Costco launched Kirkland oat just a couple of months ago. Oatly is correct in its thinking that it should not be overly concerned about private label. Oatly is growing the category, and the private label will take its fair share.
Oatly is going public next week, and we are hosting a Black Book preview on Monday at 12:30 PM EST.
Treasury Wine Estates pivots to U.S. (BSPE)
At the company’s investor day yesterday, management laid out their plans to grow the company over the next five years. Treasury Wine Estates is pivoting to the U.S. with the Chinese market closed to Australian wine. China placed 200% tariffs on Australian wine last year in retaliation for disagreements with the Australian government. At the time, 30% of Treasury Wine’s earnings came from China. After the tariffs, the company shifted its focus to growing its U.S. divisions, growing its Penfolds brand in other markets, and expanding into other Asian markets. At the investor, day management expressed confidence in its strategy and set growth targets for each division. The U.S. is the second-fastest-growing premium wine market in the world. The retail channel is currently 77% of the market, with premium price point wines growing at 20%. In the U.S. Treasury is shifting its focus away from wine brands below $10 per bottle. Management’s EBITDA target for 2021 is $495-51M, above expectations, with an improvement in the second half of the year. Treasury Wine Estates is adopting the same premiumization strategy that Constellation Brands and Vintage Wine Estates have implemented. The premiumization trend is not exclusive to the U.S., as the following charts from the investor presentation show.
Fresh produce sales fall (ACI)
Fresh produce sales at retail decreased 3.6% in April YOY. Compared to 2019, sales were still up 10.3%. According to IRI, fresh fruit sales were up 1.5%, while fresh vegetables were down 8.8%. Fresh fruit purchases are often discretionary depending on traffic, price and appearance. Fresh vegetable sales are a good proxy for home meal consumption because they are not stored. Consumers are eating out more often, which will reduce retail vegetable sales. According to IRI, 68% of consumers say they will do all of their grocery shopping in-store, up 4% from the previous month.
Lower shrink from increased produce sales velocity was the biggest tailwind for grocers during the pandemic.
