Leading Food&Bev Companies Close in Ukraine

Last Week’s Moves

BLS Cash Index  622.95 (+2.71%)                  BLS Industrials Index 664.51 (+2.12%) 

BLS Foodstuffs Index 567.02 (+3.58%)         BLS Fats and Oils Index 798.57 (+0.98%)   

BLS Livestock Index 690.69 (+1.27%)

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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, we look into how Russia’s invasion of Ukraine is impacting the world, Ryan and Kristyn dive deeper into what’s going on with inflation, and plant-based growth within the food and beverage industry stalls. 

Russia’s attack on Ukraine has continued, and the world is feeling its impact

In efforts to focus on employee safety, many international food and beverage companies have shut down operations in Ukraine following the Russian invasion. Skyrocketing commodity prices, far-reaching sanctions, and a halt on many areas of European supply chains are likely to hit businesses hard. 

• Closing down… Companies deciding to close Ukrainian plants include Coca-Cola (KO), Grupo Bimbo (BMBOY), Mondelez International (MDLZ), ADM (ADM), and Bunge (BG). Other companies with Ukraine locations are just now trying to establish how they’ll react to the ongoing situation in the region.
• Ballistics in the Black Sea… An ocean vessel chartered by Cargill, which has a majority stake in a deep water grain terminal located in the port of Pivdenny in the Black sea, was hit by a missile at the start of the invasion. Cargill has since reported all crew members to be safe.

Many food and beverage establishments are taking steps to avoid any perceived association with Russia during the invasion of Ukraine, either by changing the names of menu items or refusing to serve products made in Russia. Some businesses have even done away with language or items that ‘sound’ Russian in a show of solidarity with Ukraine. 

• Revoking Russia… Some politicians are advocating for boycotts of Russian products in their states, preventing even remotely ‘Russian-sounding’ vodkas from getting to shelves (which has ultimately done little to hurt the Russian economy).
• That’s (not quite) the spirit… Less than 1% of vodka consumed in the US is produced in Russia. Brands such as Smirnoff and Stoli are actually produced in Illinois and Latvia, respectively.

Inflation is making headlines as prices continue to increase at rates not seen since the 1980s

Off-brand price hikes… The Russian-Ukrainian conflict isn’t the only reason to expect food prices to continue to rise. Even discount stores like Dollar Tree (DLTR) have been forced to raise their prices (in this case, up to $1.25) to keep up with the financial hardship the past year has brought to the food industry. So what gives?

• Chain reaction… Although cost troubles aren’t new, they are getting worse… Increased commodity and energy costs create overall more expensive supply chains, all the way from manufacturing and packaging to transportation and distribution.
• Setting records…. Resulting from record-high quit rates, there are 10.9 million job openings across the US. If left unchecked, the US worker shortage will lead to even higher inflation, reduced incomes, higher taxes, and a smaller economy.

Concerned consumers… According to findings by Dunnhumby’s Consumer Pulse Survey, consumers are perceiving inflation to be significantly higher than it actually is. 32% of surveyed consumers are buying private label when available, and 27% are buying larger pack sizes since they’re viewed as better value, both in efforts of combating high prices. 

• Inflated beliefs… The poll found that the average consumer believes inflation has hit an annual rate of 17.7%, which is more than twice as high as the number actually is. Self-ascribed ‘value seekers’ believed inflation to be higher than people outside of the category.
• Value over virus… Survey participants overwhelmingly selected Walmart (WMT) as the best value location for groceries. Consumers are officially less concerned about the pandemic, with that worry shifting to rising prices.

While you’re here, check out the latest episode of our podcast The Food Biz, streaming across all podcast platforms. If you have any feedback or input, reach out to us at news@barchart.com. We’d love to hear what you think!

Other stories…

• Pausing plant-based… February earnings reports for both Beyond Meat (BYND) and Maple Leaf Foods (MLFNF) showed flat or negative growth. Even their CEOs don’t know what to think
• NotDetered… Despite the above^, NotCo will be entering the North American Plant-Based meat category with the launch of their NotBurger (following the launch of NotMilk in 2021). 
• Sustainable growth?... PepsiCo (PEP) is hitting a newfound stride by doubling its revenue growth thanks to its ambitious pep+ plan announced fall of 2021, centering focus around sustainability.
• Strategic shifting… With commodity prices running rampant, Nestle (NSRGY) has shifted its portfolio towards premium products. Premium products currently represent 35% of Nestle’s sales, compared to 11% in 2012.

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.