- Out of Control Egg Prices
- M&M’s and fake controversy around real issues
- Dangerous Time To Be a Parent
- Retail Media Networks
- Did the fake meat bubble finally pop?
- The rule of law is back
- Kroger and Albertsons Merger Update
- The transforming beer market
- The collapse of grocery delivery—from the inside.
Out of Control Egg Prices
Egg Prices are up 60% since last year, which begs the question: What the heck is going on? The industry claims that it’s a perfect COVID-era storm. An outbreak of bird flu + increased demand + transportation shortage means sky-high prices. Advocacy groups claim price gouging by egg companies. Cal-Maine, the country's largest egg producer, recorded astonishing 40% gross margins last quarter—a four-fold increase from the same time pre-COVID.
One character that has eluded any controversy is major retailers. I'd argue there's a good case that they are driving the bulk of the price increases. Study after study shows that milk and eggs determine where people shop. I think it’s reasonable that Walmart (20% of the nation’s groceries) and Kroger (10% of the nation’s groceries) saw bird flu and panicked. Fearing out of stocks, they bid up the price across the board.
- CNBC provides an overview of the situation.
- Errol Schweizer looks at the retailer's side of the equation—and why local eggs typically cost more.
M&M’s and fake controversy around real issues
- Mars Corporation, the $37 billion candy and pet food manufacturer, has been all over the headlines this month. The general story is this. Like every older company, Mars struggles to attract younger consumers. Mars re-launched its M&M’s mascots with a focus on inclusivity—which it thought would help them win younger buyers. This included a limited edition “female” only pack. The right-wing media, led by Tucker Carlson, picked up the story. After a few days, the company retreated. “The reaction,” Eve Peyser wrote in the New York Times, “reflects a broader trend of legacy brands trying, and often failing, to connect with a new audience of socially conscious young people.”
It looks like all aspects of this were planned and accounted for, just in time for a Super Bowl ad blitz.
Things I wrote this month
- Bed, Bath & Beyond’s Ex-Ceo Got Rich Bankrupting The Retailer, Now Workers Stand To Lose - More Perfect Union
- The Optimization Imperative: Understanding Procter and Gamble's New Strategy - Slotting Fee
- Time for some margin expansion. Conagra Brands starts 2023 off hot - Slotting Fee
- Looking ahead, Colgate plans an advertising blitz for Hill's Pet Nutrition - Slotting Fee
Dangerous Time To Be a Parent
- A combination of flu, RSV and COVID means that sales of OTC pediatric analgesics are up 65%. American manufacturers have not been able to meet demand, which means mass shortages. From personal experience, I can attest that shelves across the Minneapolis area are empty. It begs the question, what are we doing as a country if we can’t even produce enough baby medicine? The Biden Administration didn’t cause this problem, but they need to fix it.
- Bloomberg recently brought 33 baby food products to an accredited lab. They found that 32/33 had at least “two of three heavy metals: lead, arsenic, and cadmium.”
Retail Media Networks
I’ve written a fair amount about Retail Media Networks in the past, for good reason. I do believe they’re kind of a hidden power lever that will become increasingly important. Fat media profits can cross-subsidize almost anything—including lower prices or loss-leading services. With Apple’s privacy moves upending e-comm, established retailers really are the big winners.
- Marketing Brew has a detailed q/a with a consultant who helps manufacturers invest in retailer media networks.
- LinkedIn looks at some really tactical challenges in the space.
Did the fake meat bubble finally pop?
Beyond Meat was founded in 2009 with the lofty goal of transforming the American food chain through plant-based meat. Its backers said it was the future of American food. It was environmentally friendlier and potentially healthier than traditional animal protein. Most importantly, the company held patents that could potentially upend the $1 trillion animal protein market.
In 2019, Beyond’s market capitalization reached $13 billion. According to the press, momentum was everywhere. The company signed a number of agreements with American fast-food chains that proponents claimed were a turning point for the industry. Consumers were ready to make fake meat a part of their lives.
Not everyone was sold.
Here’s what I wrote shortly after:
So it seems to me, that a lot of this overall optimism is built around the assumption that a critical mass of consumers will adjust their consumption habits based on environmental concerns. That logic seems to go against almost all of our lived reality. Tyson leveraged food service contracts to standardize a category that people loved. Beyond Meat is betting on this in a category that no consumers really asked for.
I think the hard reality is that unless Beyond Meat offers a cheaper and healthier product than traditional meat, it will be little more than a curiosity
Today, Beyond Meat’s market capitalization is down nearly 90%.
- Bloomberg covers the spectacular fall. One key insight is that “none of the biggest fast-food chains that had announced partnerships with Beyond—KFC, Pizza Hut and, most important, McDonald’s—have put a single permanent item on their US menus.”
The rule of law is back
- The Federal Trade Commission is using the Robinson Patman Act to investigate pricing at PepsiCo and Coca-Cola. Since we’re dealing with sugar water, it’s hard to imagine a more compelling vilian.
- Here's an explainer I wrote about the FTC’s original announcement.
Kroger and Albertsons Merger Update
- To really no one’s surprise, the Albertsons special dividend payment went through.
- As I wrote last month, the state’s argument to stop the $4 billion payment wasn’t very strong. It was mostly rhetorical. Albertsons' attorneys brought the hard fiscal data.
- The New York Times wrote a nice summary of where the merger stands.
- In the wake of Kroger’s attempted purchase of Albertsons, and the role Cerebus Capital played, it’s time to revisit a nice series by Retail Dive on the abusive relationship between Private Equity and Retailers.
The Transforming Beer Market
- In 2017 Heineken announced the company’s first non-alcoholic beer. Three years later it committed to a $50 million a year marketing budget. Now, the company predicts NA and low alcohol sales will make up 20% of its global beer volume.
The collapse of grocery delivery—from the inside.
- I’ve long been skeptical of the math behind grocery delivery. 15-minute delivery is an almost laughable idea, but investment banks were pushing millions of dollars at the idea that it could be profitable to deliver someone a snickers bar in less than 15 minutes. Modern Retail takes a look at what happened.