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Articles from 2021 In February


[email protected]: How humans eating insects could save the planet | Plant-based diets reduce risk of heart disease, dementia

Getty Images eating insects

How humans eating insects could help save the planet

Edible insects are, according to the United Nation's Food and Agriculture Organization, the most effective way to cut down on resource-intensive animal agriculture while feeding a growing population. The sustainability halo and health benefits, however, aren't enough to get mainstream consumers to chow down on bugs. According to one expert, the goal is "to find something that people would rather be eating, or would like just as much." Much like alternative meat startups, edible insect companies need to focus on making their products as close in terms of taste and texture to whatever they're trying to replace as possible. Time delves into the potential of species including the "bacon bug" of Madagascar, which is American kid-approved (no small feat!). 

Plant-based diets reduce risk of heart disease, dementia, study finds

A study published Wednesday in the Journal of the American Heart Association that studied more than 100,000 post-menopausal women for nearly 20 years found lower rates of dementia and heart disease among subjects that adhered to plant-based diets. Two theories exist as to why this may be: One of them has to do with inflammatory metabolites in animal products that affect the heart and the brain and our blood vessels, and the other has to do with the gut microbiome and the fact that a plant-based diet can provide better fodder for good bacteria to flourish. ABC reports.

DoorDash exceeded revenue estimates but more than doubled its losses in Q4 2020

While DoorDash exceeded analyst estimates with its 2020 Q4 revenues, the third-party delivery service also more than doubled its losses during that time period. DoorDash also told shareholders it expects “declines in consumer engagement and average order values” as markets open back up and restaurants are able to open their dining rooms once more. Get the details at The Spoon.

NHS warns against Gwyneth Paltrow’s 'kombucha and kimchi' COVID-19 advice

The medical director of NHS England is urging Gwyneth Paltrow to stop telling people that "long-tail fatigue and brain fog" from COVID-19 can be treated with "intuitive fasting," herbal cocktails and trips to an "infrared sauna." In 2018 Paltrow's company Goop paid a substantial settlement over unproven claims about the health benefits of the infamous vaginal eggs it was selling, so hopefully Paltrow takes this warning to heart to stay out of future legal trouble. The Guardian digs into the story.

Why do Coca-Cola, Frito-Lay, and Mars get the best real estate in grocery stores? Because they pay for it

Food manufacturers spend billions of dollars each year to promote and place their products in supermarkets. But now a public interest group says those deals, known as “trade promotions,” are anticompetitive, in addition to being bad for public health. Now, the Center for Science in the Public Interest is asking the FTC to investigate trade promotions within online grocery shopping to prevent the same pay-to-play schemes from spreading there, “with prime placement on shelves replaced by premium placements in search results and targeted marketing.” The Counter has the full story.

Monitor: Pandemic brings great changes in daily life but small shifts in consumer values

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Natural Products Industry Health Monitor, Feb. 25, 2021
 
A global lockdown might make weeks feel like months and months weigh like centuries, but business allows little room for ennui. As distracting as the daily inundation of the negative can be, the time to look forward is always now. In this feature, Informa Health and Nutrition sister properties provide that right-now-right-here update. Look for the Industry Health Monitor every other Friday to learn the major news that is affecting the natural products market immediately and the less obvious insights that could dictate where the market may struggle or thrive in the months to come.
 

Consider this: Consumers not buying into changing what they buy

Early in the COVID-19 pandemic, before Americans trudged into a Blursday routine of homebound monotony, some talked of society emerging from the restrictions less enamored of materialism, more connected to their communities and more conscious of their health.

We’re still waiting on that great enlightenment.

According to New Hope Network consumer research, the consumer of today isn’t all that different from the pre-pandemic consumer. Societal change was massive. Attitudinal change was slight.

This week we look at the results of New Hope Network's consumer behavior index which has been sent out to a convenience sample of 1,000 consumers directionally representative of the U.S. population 24 times since April. So, 24,000 consumers since April, have been asked, on a five-point scale to indicate how strongly they align (or don't align) with core values integral to the natural products industry. Some shifts occurred in the middle of 2020 in the depths of the pandemic, but a year in consumers are largely in a "back to where we started" mindset. Consumers were asked which shopping behaviors related to nutritional quality concerns and social/environmental issues aligned with their values. The results, as seen in the chart below, show us that such behaviors reached a peak in August and then settled down to a benchmark survey from 2017.

As much as things have changed in the wider world, consumers have changed very little.

Breaking the data down into specific beliefs and concerns, we see how small that change was. A significant decline came in concern for animal welfare, but beyond that and a smaller uptick in paying more for socially responsible products only small shifts are seen.

What this could mean for brands and retailers is that any plans to build marketing and product development around visions of a post-epiphany public may be premature, if not misguided. When and if Americans emerge into a new normal they might not be that different than they were before this started. Despite sweeping changes in how we live—and where and how we shop—the values and beliefs we bring into the purchase decision may not be that different.

The biggest differences are rooted in how consumers identify as shoppers. In a survey from December 2020 based on a nationally representative sample of 1,000 consumers, we asked “progressive” and “mainstream” shoppers where they would buy products aligned with a selection of trends. The biggest difference came in organic where 42% of natural shoppers said they would be inclined to buy products with that claim while only 12% of mainstream shoppers said the same. Other notable differences were healing diets with 32% of natural shoppers indicating they would buy products making that claim compared to 22% of mainstream shoppers and products making food access claims where the difference was 29% to 20%.

As it long has, the difference between natural and mainstream shoppers likely still presents the best focus for marketing and product development. A pandemic-driven reboot in consumer values does not appear to be happening.

The more things change, the more shoppers stay the same.

Enjoy this: Bored or board?

Getting a coronavirus vaccine is a waiting game for most Americans, but a North Carolina teen has turned it into a bored game. Now you can buy COVID19: A Race to the Vaccine. covid game

Beyond Meat announces 3-year partnership with McDonald's

mcdonalds mcplant

Beyond Meat will supply McDonald's restaurants with plant-based patties for the McPlant, as well as plant-based chicken, pork and egg products for the next three years, the California company announced Thursday.

In addition, Beyond Meat will provide KFC, Pizza Hut and Taco Bell—all owned by Yum! Brands—with plant-based proteins "for the next several years," according to the announcement.

Beyond Meat CEO Ethan Brown tried to stay calm during the afternoon's earnings call, but when analysts began asking questions, his fervor broke free.

"We're downplaying the 2021 impact of these two deals we announced because these deals are enormous. They are the biggest deals you could possibly put together in food, in our sector," Brown said.

In a released statement, McDonald's Executive Vice President and Chief Supply Chain Officer Francesca DeBiase said, "Our new McPlant platform is all about giving customers more choices when they visit McDonald's. We're excited to work with Beyond Meat to drive innovation in this space, and entering into this strategic agreement is an important step on our journey to bring delicious, high quality, plant-based menu items to our customers."

In November, McDonald's announced it was going to offer a plant-based burger but did not mention a partnership with Beyond Meat. That same day, Beyond Meat hosted its Q3 earnings call, although the fast-food giant used Beyond Meat's product to create and test the P.L.T. in Canada in 2019.

During Beyond Meat's call, Brown said his company was working closely with McDonald's "on a number of matters," and said he would not accept a restaurant using Beyond Meat products without that brand name being on the menu.

The McPlant is being tested around the globe, and McDonald's will work with Beyond Meat to co-develop other plant-based foods.

The Yum! Brands announcement didn't come out of the blue, as Brown reported in June that the restaurant company was selling Beyond Beef products in Asia. In November, Pizza Hut began offering the Beyond Italian Sausage pizza and the Great Beyond Pizza. KFC also tested Beyond Fried Chicken in Nashville, Tennessee, and Charlotte, North Carolina in January 2020.

"Today's announcement builds on our strong relationship with Beyond Meat and, given the consumer response during recent tests with Beyond Meat, we're excited about the long-term potential plant-based protein menu items have to attract more customers to our brands, especially younger consumers," Chris Turner, Yum! Brands CFO, said in a released statement.

During the earnings call, Brown said the agreements likely won't have much effect on Beyond Meat's FY2021 results, as products will be rolled out over time.

Beyond Meatballs from Beyond Meat

Beyond Meat still hurting as second surge shut down foodservice

Despite the negative effects of the COVID-19 pandemic—specifically, the restrictions on restaurants and the closings of schools and sports arenas—Beyond Meat saw its net revenue increase 36.6% in fiscal year 2020 compared with fiscal year 2019. However, the company lost money for the year:

  • Net revenues were $406.8 million, an increase of 36.6% year-over-year.
  • Gross profit was $122.3 million, or gross margin of 30.1% of net revenues; Adjusted gross profit was $133.7 million, or adjusted gross margin of 32.9% of net revenues, reflecting exclusion of expenses attributable to COVID-19.
  • Net loss was $52.8 million, or $0.85 per common share.
  • Adjusted net loss was $37.1 million, or $0.60 per common share, reflecting exclusion of expenses attributable to COVID-19.
  • Adjusted EBITDA was $11.8 million, or 2.9% of net revenues.

"Our ability to grow in 2020 was largely driven by strong retail performance," Brown said during the earnings call.

Net revenue from U.S. retail grew 104.1% compared with fiscal year 2019, to $264.1 million, while U.S. food service revenue fell 13.7% to $60.8 million. Internationally, retail increased 136.4% to $36.5 million. Food service dropped 45.1% to $45.4 million.

For the 52 weeks ending Dec. 27, 2020, Beyond Meat had a 220 basis point increase in market share, according to SPINS/IRI, he said.

"Despite the challenging macro-economic backdrop and highly variable consumer buying patterns, more U.S. households continue to buy our products; they're buying  them more frequently; and, on average, they're spending more per household on our products," Brown said after detailing household penetration, frequency and repeat sales data.  

In the fourth quarter, category sales increased 29% while Beyond Meat's sales rose 46%.

The company's fourth-quarter results included an increase in net revenue but an overall net loss:

  • Net revenues were $101.9 million, an increase of 3.5% year over year.
  • Gross profit was $25.4 million, or gross margin of 24.9% of net revenues.
  • Adjusted gross profit was $29.1 million, or Adjusted gross margin of 28.5% of net revenues, reflecting exclusion of expenses attributable to COVID-19.
  • Net loss was $25.1 million, or $0.40 per common share.
  • Adjusted net loss was $21.4 million, or $0.34 per common share, reflecting exclusion of expenses attributable to COVID-19.
  • Adjusted EBITDA was a loss of $9.5 million, or 9.3% of net revenues.

Beyond Meat announces 3-year partnership with McDonald's

mcdonalds mcplant

Beyond Meat has entered into a three-year global strategic agreement with McDonald’s Corporation. As part of the agreement, Beyond Meat will be McDonald’s preferred supplier for the patty in the McPlant, a new plant-based burger being tested in select McDonald’s markets globally. Additionally, Beyond Meat and McDonald’s will explore co-developing other plant-based menu items–like plant-based options for chicken, pork and egg–as part of McDonald’s broader McPlant platform.

The agreement will bring together McDonald’s iconic global brand with Beyond Meat's leading expertise in plant-based protein development to create and market innovative new plant-based menu offerings. This announcement further solidifies the relationship between McDonald’s and Beyond Meat, which began in 2019 with the Canadian test of a sandwich made with Beyond Meat’s plant-based patty.

“Our new McPlant platform is all about giving customers more choices when they visit McDonald’s,” said Francesca DeBiase, McDonald’s executive vice president and chief supply chain officer. “We’re excited to work with Beyond Meat to drive innovation in this space, and entering into this strategic agreement is an important step on our journey to bring delicious, high quality, plant-based menu items to our customers.”

“We are proud to enter into this strategic global agreement with McDonald’s, an exciting milestone for Beyond Meat, and look forward to serving McDonald's as they bring expanded choice to menus globally,” said Ethan Brown, Beyond Meat founder and CEO. “We will combine the power of Beyond Meat’s rapid and relentless approach to innovation with the strength of McDonald’s global brand to introduce craveable, new plant-based menu items that consumers will love.” 

Source: Beyond Meat

Sprouts Farmers Market: FY2020 net income almost doubled from FY2019

Sprouts Farmers Market new logo 2020 moving forward with strategies

Sprouts Farmers Market reported Thursday that net sales in Q4 and in FY 2020 showed double-digit increases from a year earlier.

"As the calendar has turned and we reflect on the year, the events of 2020 have only made Sprouts stronger," CEO Jack Sinclair said during the afternoon earnings call. "We generated a robust top line with sales up 15%, record earnings, and operating cash flow of nearly $500 million—while absorbing costs associated with an increase in e-commerce sales, the opening of 22 new stores, and the payment of record bonuses to frontline team members."

The company's move to digital advertising and focusing on the "core customers"— health enthusiasts or experience seekers—is paying off, he said.

"Our transaction and basket performance with our target customer are stronger than similar metrics for our non-target segments, particularly those coupon clippers," he said. "While we are still early in our strategy execution, this reinforces our conviction of our focus on target customers that represent approximately $200 billion of food and beverage grocery sales."

Sinclair noted that 68% of Sprouts' products have attributes that consumers seeks, such as keto, paleo, plant-based or organic. Organic accounts for 23% of Sprouts' total sales, and sales of alternative meats such as Beyond Meat and Impossible Foods, and alternative dairy have increased 45%, Sinclair said.

The company also added more than 5,100 new items, both branded and private label, in 2020; these generated 35% of the grocery's sale growth, he said.

"While there is much more to do to bring our brand promise to life, we are pleased with our progress in 2020. In particular, I am pleased with our strengthened leadership team, which is combining the best of the original Sprouts team with experienced executives brought in from the outside," Sinclair said.

The fresh financials

In both the fourth quarter and FY2020 as a whole, Sprouts saw positive results in sales, net income and earnings per share. Fiscal 2020 ended on Jan. 3 and was 53 weeks long compared with 52 weeks in FY2019. The extra week was in the fourth quarter.

"This extra week added approximately $122 million to sales, $16 million to EBIT and $0.10 to diluted earnings per share," Chief Financial Officer Denise Paulonis said during the call.

"There are four key points I want to highlight today to reinforce the strength of Sprout's strategy. One, our top line growth remains robust, fueled by new stores. Our new stores opened strong, with low cannibalization, and are taking market share where they open," Paulonis said. "Two, our margin structure has structurally changed for the positive. Three, we have created a full omnichannel offering. And four, our cash generation remains top-notch, even outside the pandemic rush early in the year, fueling our ability to drive growth."

E-commerce sales increased 340% for the year and 290% in Q4, compared with last year. That channel accounted for 11% of Sprouts' Q4 sales, she said. Sales via shop.sprouts.com—a platform that allows the company to gather consumer data—made up nearly 15% of the company's online sales.

"Our customers now have a full omnichannel choice to shop how they like in store, pickup or home delivery. Trends show that this choice changes throughout the month. One week they stop our store and others they shop online, and our omnichannel ecosystem allows them this freedom of choice," Paulonis said.

Q4 sales and net income stayed high:

  • Net sales of $1.6 billion, a 17% increase from the same period in 2019.
  • Comparable store sales growth of 3.7% and two-year comparable store sales growth of 5.2%, both on a 13-week basis.
  • Net income of $68 million, compared with $32 million from the same period in 2019.
  • Adjusted net income of $70 million, an increase of 119% from the same period in 2019.
  • Diluted earnings per share of $0.58, compared with $0.27 per share a year ago.
  • Adjusted diluted earnings per share of $0.59, compared with $0.27 per share.
  • Adjusted diluted earnings per share of $0.49, estimated on a 13-week basis, an 81% increase from the same period in 2019.

As Sinclair said, FY2020 generated record earnings for the company. The other financial results weren't bad, either:

  • Net sales of $6.5 billion; a 15% increase from 2019.
  • Comparable store sales growth of 6.9% and two-year comparable store sales growth of 8.0%, both on a 52-week basis.
  • Net income of $287 million, compared with $150 million in FY2019.
  • Adjusted net income of $294 million, a 96% from FY2019's $150 million.
  • Diluted earnings per share of $2.43, compared with $1.25 from a year earlier.
  • Adjusted diluted earnings per share of $2.49, compared with $1.25 from FY2019.
  • Adjusted diluted earnings per share of $2.39, estimated on a 52-week basis, a 91% increase from 2019.

"The impact that pandemic will have on the U.S. economy, food at home demand and consumer habits remain uncertain. Given this, the company is planning for fiscal 2021 based on a range of potential outcomes," Paulonis said.

"Underpinning our assumptions are negative comps in the first and second quarter as we lap the height of COVID with an improving two-year comp sales stack each quarter. Adjusted EBIT is expected to be in the range of $295 million to $315 million, adjusted diluted earnings per share in the range of $1.78 to $1.91."

Sprouts is still growing

As of Jan. 3, Sprouts had 362 stores in 23 states; the company opened 22 stores during  2020. The company plans to open 20 stores this year.

"A handful of these stores will be in our new format. And the majority will be built with a smaller footprint of 25,000 square feet less providing improved box economics as they grow," Sinclair said. "As we look through the year, we will remodel an existing store with parts of the new format early in the summer and our first ground-up new store format will open later in the summer in Phoenix."

The company also will open two distribution centers soon. A Colorado location is scheduled to open in March, while a Florida site will open in the summer.

"We're also partnering with some young and expanding indoor and vertical growers to provide local micro greens and lattices, which provide farm to fork in hours not days," Sinclair said. "With the addition of these two DCs, our fresh product network will increase to seven DCs. And the new DCs will include additional features such as ripening rooms to serve our stores with a fresher selection."

[email protected]: Herbalife's pandemic makeover | Oatly seeks $10B US stock market listing

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Herbalife CFO looks to change investor views after years of activist pressure

Herbalife executives are taking the company's revenue climb of 15.6% to $1.41 billion during the quarter ended Dec. 31 and running with it. They plan to use tools including virtual roadshows, investor conferences and conversations with analysts to rebrand Herbalife as a growth company (instead of a pyramid scheme), as well as attract long-term, international investors that can help stabilize its share price. The Wall Street Journal has the story. 

Swedish alt-milk brand Oatly seeks $10B US stock market listing

This week Oatly submitted a confidential filing for an initial public offering with the U.S. Securities and Exchange Commission; the company is rumored to value itself at $10 billion. Oatly's sales nearly doubled to $200 million in 2019 and were expected to do the same in 2020 as plant-based dieting for health and environmental reasons skyrocketed in popularity. The Guardian reports.

Grocery stores continue to push back against hazard pay for workers

On the same day that the Los Angeles County Board of Supervisors voted 4-1 to give grocery workers a short-term $5 per hour pay increase, the California Grocers Association filed for a preliminary injunction against the city of Long Beach. The group argues that the ordinance preempts federal labor and equal protection laws and violates both the U.S. and California constitutions. Should the ordinance stand following the lawsuit, it could set a precedent for hazard pay in more areas, higher wages and better working conditions. Learn more at Civil Eats.

What's the verdict on plant-based fish?

A new report from FMI finds that 46% of seafood consumers are "likely" to try plant-based seafood. Shoppers interested in plant-based seafood were also concerned about nutritious and healthy eating (57%), in addition to sustainability (62%). Curiousity was also a driving factor for 35% of seafood consumers to test out emerging plant-based options.

Freshwater fish are in 'catastrophic' decline with one-third facing extinction, report finds

And the need for plant-based seafood has never been clearer: One-third of all freshwater fish now face extinction, new research shows. Freshwater biodiversity is declining at twice the rate of that in forests and oceans, despite their importance to millions of people around the world. Freshwater ecosystems face threats including habitat destruction, hydropower dams, overfishing, the introduction of invasive species and ongoing climate change. Read the details at CBS News.

CEO: Hain Celestial learned lessons that will stick

Hain Celestial Group Inc.

Hain Celestial CEO Mark Schiller made a case Wednesday that he not only turned around the company he heads, he improved it.

"This can be a robust growth company, given the strengths of our brands and the strengths of our categories," Schiller said during a fireside chat discussion with Bill Chappell, a senior equity analyst at Truist Securities. The financial company hosted a virtual consumer symposium on Tuesday and Wednesday.

When Schiller started at Hain in November 2018, he had a clear edict: Fix the U.S. division of the global health and wellness company, he said.

Eliminating SKUs—even as it cost the company space on retail shelves—and streamlining the company have turned the company toward growth, he said.

A new attitude of productivity and innovation resulted in a broad variety of new teas as well as trendy snacks such as Screamin' Hot Garden Veggie Straws. These products and others generated incremental sales that will, in turn, lead to retailers giving Hain Celestial products more space when they reset their stores this year, Schiller said.

The company also streamlined its sales force, ordering system and distribution centers to improve efficiencies and the relationship with retailers. Those moves paid off when the pandemic struck and Hain Celestial could fulfill retailers' orders.

"Certainly, we brought in a lot of new consumers during the pandemic who will stick with us," he said.

"We've learned a lot as a company, in terms of how we operate. You throw adversity at companies during a pandemic and you see who sinks or swims. The fact that we've thrived—that we've serviced the business well, that we've been able to get innovation out—we've learned a lot about how we operate more efficiently and effectively, how we prioritize better. And those benefits will stay with us because they are embedded in our culture," Schiller said.

Growth in Europe, UK will exceed expectations

"If we can really replicate the playbook from North America. in Europe, you will see much greater growth out of that business than we originally contemplated on Investor Day," Schiller said.

Looking ahead to the next three years, Hain Celestial will transform into a more successful global company, not just a successful North American company, he said.

"We have great opportunities there," Schiller said. He expects to divest of less profitable brands and invest more in the strong brands, as Hain did in the United States. "It's a pretty darn good portfolio with a lot of potential. It just needs a little bit of juice and a little bit of nurturing on the right brands to get that into a growth mode as well."

When Chappell asked why Hain Celestial should continue the effort to expand in Europe, Schiller quickly replied, "Because if we can do it profitably, we should."

For example, the Linda McCartney brand of plant-based foods, which is sold in the United Kingdom, should be available in Europe because that category is experience double-digit growth, Schiller said.

The company also will consider bringing those products to the U.S., but probably not under the Linda McCartney brand. The McCartney name has more cache overseas than it does here, he said.