JaguarConsumer Weekly Callouts – June 19 (BWMX, SAM, Chocolate, Consumer Wallet)
Looking back to the May 7th Consumer Callouts report, the first stock mentioned was Betterware de Mexico (BWMX), a leading direct-to-consumer retailer in Mexico. It was analyst Eric Beder of Small Cap Consumer Research that flagged a number of items within the company’s May catalog. Since being mentioned on May 7th, shares of BWMX are up close to 8% (+102% YTD) and this analyst was out last week after reviewing the company’s June catalog.
“After a record May, June saw even further SKU and category expansion, with the addition of a tenth category (Better Pets) and a further 14 SKUS (or 4%) from what was a record May SKU level, as new categories (Kids, Wellness) and expansion of the With You category and the addition of items such as bedding, reflect a material push for Betterware to become an even greater part of their core customer’s lives.”
“After the introduction of Wellness and Better Kids in 2023, this month the company launched their 10th category, Better Pets, with a small (5 SKU) capsule collection. According to the National Institute of Statistics and Geography, Mexicans own approximately 5.4 million dogs (versus a human population of approximately 129 million in 2022). Dogs are, by far, the most popular pets; according to Statista, almost 80% of Mexicans who own a pet own a dog. As such, we believe Pets could be an impressive add-on purchase.“
After getting sliced by more than half in 2021, shares of Boston Beer (SAM) continue to have absolutely no pulse. However, is a favorable trend starting to emerge? According to Beer Business Daily, they reported that Boston Beer notified wholesaler partners that they “are working to increase capacity and supply nationwide as quickly as possible to catch up to the incredible demand” they are seeing for Twisted Tea. In the report, Boston Beer said its “priority is to ensure wholesalers remain in stock on the primary Twisted Tea 12pk can SKUs.” They acknowledged the “excitement around new and expanded distribution SKUs,” like 18 packs, Light Party Pack 12 packs, and Pineapple 24oz cans, and told distributors they’ll do their “best to make and ship” these products “as quickly as possible.” Will these comments finally light a spark under the stock? Only time will tell.
One of my favorite reports to look at comes from RBC Capital’s Nik Modi, who puts out his “Picture of the Week.” In his latest installment, he talks about the immense power social media can have and how one of the more recent examples in the consumer/packaged goods space has been the launch of the Mr. Beast Chocolate bar. For those not aware, Mr. Beast is a popular social media influencer with around 160M subscribers on YouTube, 83.4M on Tik Tok, and 38.4M on Instagram. This immense following has enabled Feastables to get distribution into prominent C-stores and the brand is off to a strong start.
“According to IRI, in the last 12 weeks, the Feastables chocolate bar (< 3.5oz) has reached $22.5M in retail sales which is larger than well established brands (of the same pack size < 3.5 oz) like Milky Way and Almond Joy. In the latest 4-weeks, the Feastables chocolate bar is also up to $11M sales, with M/M sales up nearly 70% in tracked channels. This is particularly impressive given the brand’s ACV is just ~32%, materially lower vs brands generating similar sales like Almond Joy at 91%, Milky Way 83%, and Three Musketeers 88%. What Mr. Beast Chocolate lacks in terms of ACV % it makes up for in shelf space with 243 pts of distribution or ~70% more than those brands in the last 4 weeks.”
On June 14th, JPMorgan’s Matt Boss was out with a 13-page Wallet Spending Analysis note where he went through a few upcoming consumer scenarios. First off, and one that flies under the radar, is with gasoline prices at ~$3.58/gallon today, or down 27% Y/Y, JPMorgan’s math points to a $37.8B consumer spending tailwind in Q2 comprised of $11B tailwind in May, $15.5B tailwind in June, and $11.3B tailwind in July.
“Translating the $37.8B Q2 gas spending tailwind Y/Y into spending intentions, we expect decisions to be increasingly weighted towards experiences/services with the today’s Services share of personal consumption expenditures (PCE) remaining ~250bps below 2019 levels noting Services consumer spending growth of +8.4% Y/Y in April (& +8.5% in 1Q) well outpacing apparel and footwear spending growth of +2.7% Y/Y in April (& +3.4% in 1Q). Supporting this view, a key takeaway from our March Spending survey: ~70% of US consumers ranked “experience-related” or “Services” categories within their top 4 spending priorities despite the higher cost of living when asked to rank priorities across 12 non-essential spending priorities in the coming 12 months.”
This is why you’ve seen such strong reactions of late to cruise lines (i.e. CCL, NCLH, RCL). A couple weeks ago in Consumer Callouts, I highlighted strong checks from Truist. Meanwhile, according to the latest BAC aggregated credit and debit card data, monthly cruise spend in May increased +17.3% vs 2019 and compared to +14.5% in April.
But of course, I can’t mention the consumer wallet without mentioning the 2H headwind that is “Student Loan Payment Resumption.” On exposure, JPMorgan highlights that approximately 20% of student loan debt is owed by 18 – 29 year olds ($320B), and 32% of debt is owed by 30 – 39 years old ($510B) equating to approximately 50% of total U.S. student debt ($829B) owed by U.S. consumers under the age of 40 noting only 9.7% of all U.S. student loan debt is tied to consumers 60+ years old.
Taking a more optimistic stance, across their Retail coverage, the analyst sees Ollie’s Bargain Outlet (OLLI) as uniquely positioned with approximately 25% – 30% of OLLI’s customer base historically more than 60 years old and average age of 50-55 years old. Going back to the leisure side, analyst Matt Boss said that a key takeaway from their recent “Come Cruise w/ Us” note is that baby boomers are increasingly booking luxury trips and are also contributing to multi-generational travel with the older demographic valuable as it pays up for the cruise and brings the rest of the family.
