Last Week’s Moves
BLS Cash Index 573.92 (-0.09%) BLS Industrials Index 597.06 (+0.95%)
BLS Foodstuffs Index 541.66 (-1.56%) BLS Fats and Oils Index 802.67 (-0.32%)
BLS Livestock Index 719.98 (+0.93)
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Welcome to your weekly food & beverage report, where we cover everything you’ll need to know for the week ahead. This week, drastic weather events hurt Latin American harvests, recession worries stirred new strategies from food and beverage companies, and earnings reports fell short. Let’s dig in.
Poor harvests in Latin America caused by climate irregularities threaten to further spread food insecurity
Heat, drought, and floods, all exacerbated by climate change, severely damaged crops in Latin America over 2021. According to the World Meteorological Organization’s most recent report, Latin America’s poor harvest has led to thousands of people falling victim to food insecurity and impacting global markets. Research from the United Nations’ Food and Agriculture Organization cited in the report stated that below-average rainfall in key agriculture countries like Chile, Brazil, Paraguay, and Uruguay led to a 2.6% decline in South America’s 2021 cereal harvest.
- Extreme weather, extreme consequences… “Droughts, heatwaves, cold waves, tropical cyclones, and floods have unfortunately led to the loss of hundreds of lives, severe damages to crop production and infrastructure and human displacement,” said Petteri Taalas, WMO Secretary-General.
- One step forward, two big steps back… Mario Cimoli, the acting executive secretary of the Economic Commission for Latin America and the Caribbean, stated that “Worsening climate change and the compounding effects of the Covid-19 pandemic have not only impacted the biodiversity of the (Brazilian Amazon), but have also stalled decades of progress against poverty, food insecurity, and the reduction of inequality in the region.”
As rumors spread of a recession on the horizon, companies in the food and beverage industry take steps to strengthen their positions
Better together… Cargill and Continental Grain Company have officially completed their $4.53 billion acquisition of Sanderson Farms (SAFM). The purchase was initially expected to close by early 2022, however the Department of Justice stepped in to review the details, delaying the deal.
- Poultry gone private… The terms of the transaction include combining Sanderson Farms with Wayne Farms, which is a subsidiary of Continental Grain, establishing a new privately held poultry business: Wayne-Sanderson Farms. The Current CEO of Wayne Farms, Clint Rivers, will run the company.
- Monopoly money?... This acquisition has created the third-largest poultry processor in the nation. Together, the two companies control about 15% of chicken production in the US, trailing only Tyson Foods and Pilgrim’s Pride. Democratic lawmakers have criticized the deal, citing “significant antitrust concerns.”
Uncertainty is the new normal… Defined by Forbes Advisor as periods of economic decline caused by negative GDP, rising unemployment, and lower consumer spending, some are arguing the US economy is currently in a recession. The food and beverage companies that have navigated two tumultuous years of a pandemic and supply chain problems may not be out of the woods yet, and in the face of a looming recession, their strategies are changing in preparation.
- Price hikes and packaging… Kraft Heinz (KHC) has raised prices over this past year, however the company is also experimenting with other strategies. One such strategy is offering more variations in package sizing and assortments across its portfolio’s top performers.
- Hit hard… Due to price hikes across the supply chain and Covid-19 restrictions in China, McCormick & Co.’s (MKC) earnings numbers were way down. The company is considering lowering prices on smaller item sizes and aims to have products that appeal to consumers across all price points.
Other stories…
- Going green… PepsiCo (PEP) has announced a new $1.25 billion 10-year green bond as the company looks to further accelerate its pep+ (PepsiCo Positive) agenda.
- Privately profiting… Many private brand categories are benefiting from inflationary concerns as shoppers become more price-sensitive and value-driven, with sales of private label baking mixes up 40% year-to-date.
- Coca-Co-val office… The Coca-Cola Company (KO) has announced the appointment of John Murphey as its new president and CFO. Murphy will assume the position on October 1.
That’s all we have for you this week, do you have anything for us? We’d love to hear from you with stories or recommendations for new sections to include! Drop us a line at news@barchart.com with any feedback or input.
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