JaguarConsumer Weekly Callouts – June 25 (MNST, RCL, MCD, QSR, SBUX, WEN)
Monster Beverage (MNST), this past week, hosted its Annual Meeting with JPMorgan noting that management sounded upbeat on its overall business trajectory. A couple of key takeaways from the event included:
-Management noted that there is likely to be increased promotional activity upcoming, although it is largely in-line with the historical cadence of higher promotional levels in 2Q/3Q relative to 1Q/4Q. Commentary around commodities was largely in-line with that during the Q1 earnings call — aluminum and freight costs are now deflationary Y/Y and the company is for the most part shipping in its typical orbits, although some costs remain sticky (e.g., ingredients, co-packing fees) and there could still be some lingering higher cost aluminum cans to work through.
-The company announced that it is planning to launch Nasty Beast, a 6% ABV hard iced tea in 4 flavors, in the latter half of 2023. Nasty Beast will be the company’s second new product into the alcoholic beverage following the phased launch of The Beast Unleashed in Q1. Management noted that the hard iced tea category is the fastest growing segment within FMBs and the company decided to leverage the “Beast” name rather than introducing a new brand. “On The Beast Unleashed, management sounded quite pleased with the initial rollout and is now completing the second phase with the product now available in around 40% of states representing about ⅔ of consumers. Repeat rates and sales per point of distribution are healthy for the brand and we note that in recent weeks tracked channel trends suggest The Beast Unleashed could be adding roughly 2 points to the company’s total U.S. measured channel top-line.”
Stifel analyst Steven Wieczysnki, in a June 22nd Cruise Line note, asked the question: If you had to pick which bottled water you could drink, would you rather have Evian or Deer Park? That might sound like a strange question, but it’s a question/analogy Stifel thinks is perfect for the different cruise operators right now. “No offense to Carnival Cruise (CCL)/Norwegian Cruise (NCLH) management teams (you know we love you guys!), but when you think about Royal Caribbean’s (RCL) management team and what they are doing operationally as well as how they weathered the pandemic, you would have to say they are the industry gold standard right now (like Evian).” With Royal Caribbean shares up nearly 100% YTD, investors are now asking themselves how much share expansion is left for the name? Well, Stifel actually thinks a lot.
“We believe investors are taking RCL’s Trifecta Program and assuming that is a best case scenario.” However, when its all set and done, this could wind up being a $150-$210 stock, so plenty of upside left. So why does Stifel think there could be significant upside to RCL’s Trifecta Program?
“Couple things that could materially push those target metrics higher would be the return to China which isn’t embedded in the Trifecta. Second, we suspect Icon of the Seas (January 2024 debut) is booking well better than what was initially embedded in the Trifecta Program. Demand for this asset has been incredibly strong, and it seems booking levels aren’t slowing any time soon. Third, onboard spend metrics should remain healthy. We believe RCL embedded some softness in their Trifecta Program around onboard spend levels. While the strength in onboard can change at any minute, based on pre-booking levels, we don’t see this metric slowing anytime soon. RCL noted that when a customer pre-books an onboard amenity, the company is now getting an additional $0.70 for every dollar that was pre-booked. This is up from $0.50 for every dollar about a year ago.”
Wolfe Research’s Consumer team recently surveyed 1,000 U.S. consumers to evaluate value perception across grocery stores and restaurants. Amid stubbornly high food inflation and broad macro pressures, they think value will likely play a big role in “share of stomach” in the back-half of the year. Some findings include:
• The survey suggests slightly better value perception for restaurants relative to grocery stores. Value scores for quick-service brands were particularly high.
• Household income appears to be a key driver for shifts in food spend—e.g. restaurant visits versus grocery—with high-income households increasing restaurant visits over the last few months.
• Low- and middle-income consumers reported an increase in grocery frequency vs 3 months ago. They also saw an increase in middle-income grocery frequency relative to 2022.
• Wendy’s (WEN), McDonald’s (MCD), and Domino’s Pizza (DPZ) received the highest “value for money” scores in the survey. Alternatively, 18% of respondents felt Starbucks’ (SBUX) value-for-the-money today was meaningfully worse than 3 months ago.
