Oatly goes public (OTLY)
Oatly Group AB priced its initial public offering at the top of a marketed range to raise more than $1.4 billion. The company/investors sold more than 84MM shares for $17. The range was $15 to $17. The most common inquiry we have received about Oatly is the company’s TAM. The 370% revenue growth projections by 2023 imply massive growth in the plant-based milk category or a significant share gain of oat milk within plant-based milk. We think both will happen. Consumers will continue to shift to more plant-based milk from dairy. Other consumers will be lapsed dairy drinkers like the third who are lactose intolerant in the U.S. In several years oat milk will be larger than almond milk in the U.S. Oatly will take more share within oat milk as its in-stock levels and distribution improve in all three continents. We expect that the share gains are from Oatly’s faster growth rate as we still expect the oat milk competitors to grow at high double-digit rates.
The following table has a range of share prices for a quick valuation comparison for today’s trading.
What was weak is strong and what was strong is weak (KR)
Total CPG in the grocery channel was 10% lower YOY in the week ended May 9, improving from -13% in the previous week, as seen in the following chart. The edible category was 10% lower YOY, underperforming the non-edible category, which was 8% lower YOY. The weakest category in edibles was beverage alcohol which was down 15%, which improved from -17% in the previous week. The strongest edible category was beverages which was flat YOY driven by water and sports/energy drinks. The strongest sub-categories were baby food, candy, and snacks in the general food category, while the weakest were shelf-stable vegetables and baking. Produce sales were 6% lower YOY, improving from 8% lower in the previous week. The strongest category in perishables was the deli counter which was up 15% YOY. The weakest category in perishables was meat which was down 16%, improving 7% from the prior week. The deli counter was the weakest in the prior year as many people ate at home last year.
Return to the office (ACI)
Last week the CDC announced that fully-vaccinated individuals do not need to wear a mask in most situations. With the change, many companies are considering adjusting their plans for employees to return to the office and whether mask-wearing will be required. According to Kastle Office Systems, the average office occupancy of the top ten cities in the U.S. was 27.8% in the week ended May 12, up 70bps from the previous week, as seen below. New York City and San Francisco have the lowest occupancy rate of the largest cities. Cities in Texas lead in-office occupancy, with the state having few COVID-19 restrictions, but they are still below half. Many workers are expected to continue a hybrid working model, but the change from the CDC could lead to an accelerating trend in office occupancy. The return of office workers would shift the food at home consumption to away from home, negatively impacting the grocers.
