New Wild Bird Feeding Industry - Chamber Nation Survey Results... · 2012. 11. 27. · • 20 years...
Transcript of New Wild Bird Feeding Industry - Chamber Nation Survey Results... · 2012. 11. 27. · • 20 years...
WBFI Research Survey Results
November 2012
Wild Bird Feeding Industry
Tom Mahoney, CFA Research Associate
Cleveland Research Company [email protected]
216-649-7269
1
Cleveland Research Company - Background
• Cleveland Research Company is an independent investment research firm headquartered in Cleveland, OH.
• Our core focus is to establish Cleveland Research Company as the best equity research firm in the business.
• Our clients are investment management firms. Our product is truly value-added to them, as it is only distributed to 125 firms.
• Our discipline includes establishing relationships with key participants in the businesses we cover.
• We are talking to suppliers and customers, developing contacts, and conducting time-series surveys allowing us to spot trends and inflection points in the end markets we cover.
• We cover four sectors: – Consumer – Industrial – Technology – Healthcare
2
Cleveland Research Company - Background
History with Home Depot and Lowe’s • 20 years of writing research on large suppliers (Sherwin-Williams, Stanley Black &
Decker, Whirlpool, etc) • 15 years of writing research on Home Depot and Lowe’s Broad Relationships Across the Channel • Maintain ongoing discussions with over 100 suppliers at Home Depot and Lowe’s • Also have broad network of retailers, distributors, dealers, and farm & fleet chains • Many 10+ year relationships • Specific insights tightly protected Our Focus and Discipline • Networking across the channel gives our contacts a better picture • Also allows us to fill in more of the puzzle ourselves
3
Process of Survey
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
• Needed an efficient, independent perspective on the industry • Sent internet-based survey to WBFI members in early October • Collected responses on such topics as…
• Size of the market • Mix of sales by product category and package size • Sales growth year/year • Profit trends
• Results are strictly confidential and presented here in aggregate only • Output:
• Timely, independent perspective on market size from a supplier’s perspective
• Benchmarking tool for your business versus peers (sales, profits, hiring/firing)
4
Product Category Exposure Of Survey Respondents
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
30% 28%
27%
7% 5%
3% 0%
0%
5%
10%
15%
20%
25%
30%
35%
Economy Mixes Straight seed Premium Mixes Suet Nyjer (R) Bird seed cakes or bells
Nectar
Category Sales by Product Category
5
Sales by Size – Survey Respondents
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
35%
39%
26%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
25lbs+ 10-25lbs < 10lbs
Category Sales by Size
6
Market Size Estimate
Source: WBFI Executive Trends Survey, US Census
Wild Bird Feeding Industry
Market Size • Estimated at $800mm • Survey respondents account for roughly half the packaged bird food market • Census participants - 12mm (songbirds)
• Average spend of $65 annually in respondents’ categories
Comparison to Census Survey • Census survey indicates $3bb market in 2011 • Implies average spend of $150-200+ annually per participant
7
Category Sales Growth Year/Year – Survey Respondents
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
5.9%
7.6%
3.3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
2010 2011 2012 YTD
Category Sales Growth
8
Category Sales Growth by Quarter Year/Year
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
5.9%
7.6%
-1.3%
0.8%
3.7% 4.3%
5.6%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
2010 2011 1Q12 2Q12 3Q12 4Q12E 2013E
Category Sales Growth
9
Volume Growth and Price Increase Impact
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
0.6%
5.0%
0%
1%
2%
3%
4%
5%
6%
Volume Price
Volume and Price Contribution to Sales Growth
10
Sales Below Expectations in 2012 – Survey Respondents
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
0%
20%
47%
27%
7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Much better than expected
Better than expected In-line with expectations Worse than expected Much worse than expected
2012 Sales Versus Expectations
11
Key Drivers of Sales Below Expectations in 2012
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
• Mild winter weather
• Better natural food sources after mild winter • End of drought leading to better 2H sales
• Price increases
• Share movements
12
Profits Well Below Expectations for Survey Respondents
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
0%
13%
33%
47%
7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Much better than expected
Better than expected In-line with expectations Worse than expected Much worse than expected
2012 Profits Versus Expectations
13
Key Drivers of Profit Pressure in 2012
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
• Commodity prices
• Retail price increases
• Timing • Pushback by retailers
• Volume
• Market volume below expectations • Share movements
14
Trends Respondents Are Seeing at Mass Merchants
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
13%
38% 31% 31% 31%
56%
0%
10%
20%
30%
40%
50%
60% A
ddin
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Shift
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prod
uct m
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hig
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Shift
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Acc
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ice
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Push
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pric
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ses
Seeing at Mass Merchants...
15
Trends Respondents Are Seeing at Independent Retailers
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
31%
19%
38% 38% 31%
63%
0%
10%
20%
30%
40%
50%
60%
70% A
ddin
g sq
uare
foot
age/
disp
lay
spac
e
Red
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g sq
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Shift
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uct m
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hig
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Shift
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uct m
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Acc
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ice
incr
ease
s
Push
ing
back
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pric
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crea
ses
Seeing at Independent Retailers...
16
Net Headcount Reductions Over Last 12 Months
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
24%
41%
35%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Net increase No change Net decrease
Headcount Over Last 12 Months
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Headcount Increases Suggest Optimism Last 90 Days
Source: WBFI Executive Trends Survey
Wild Bird Feeding Industry
35%
59%
6%
0%
10%
20%
30%
40%
50%
60%
70%
Net increase No change Net decrease
Headcount Over Last 90 Days
WBFI Research Survey Results
November 2012
Wild Bird Feeding Industry
Tom Mahoney, CFA Research Associate
Cleveland Research Company [email protected]
216-649-7269
19
Housing Market Drives Home Depot, Lowe’s
0.0
0.5
1.0
1.5
2.0
2.5
3
4
5
6
7
8
Jan-
99
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Jan-
10
Jan-
11
Jan-
12
Housing Turnover
Existing Starts Source: US Census, NAR
20
Home Depot and Lowe’s Sales Productivity
$220
$240
$260
$280
$300
$320
$340
$360
$380
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E
HD and LOW Sales per Square Foot
HD LOW Source: Company reports
HD up 14% from trough
LOW up 5% from trough
21
Home Depot and Lowe’s Store Growth
(50)
(25)
0
25
50
75
100
125
150
175
200
225
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Home Depot Store Opens
(50)
(25)
0
25
50
75
100
125
150
175
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Lowe's Store Opens
Source: Company reports
22
Most Interesting Things Heard on HD and LOW
Source: CRC channel research
Private label emphasis growing • HD increasing private label penetration – targeting 20% in some line reviews • Quality focus at HD a change versus the past – effort focused on mid-tier
price points and comparable quality (brand development) HD getting more aggressive • HD proactively reaching out to suppliers for incremental 2013 promotions • HD more willing to see margin erosion on promotional deals (more willing
to fund promotions on their own versus support from suppliers previously).
LOW struggling with internal initiatives • Line review changes leading to inferior product and supply issues • Eliminating key brands for margin benefit - accelerating share losses to HD • Store resets and remodels pushed out to 2013 as LOW looks to trim expenses
23
Consumer Confidence
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
2020
3030
4040
5050
6060
7070
8080
9090
100100
110110
120120
72.23
US Consumer Confidence Launch full data release
24
Unemployment
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
-1,000
-800
-600
-400
-200
0
200
400
600
4%
5%
6%
7%
8%
9%
10%
11%US Change in NonFarm Employment & Unemployment Rate Launch full data release
25
Compare to Pet Category Retail Sales Data
26
Tractor Supply and PetSmart Store Growth
Source: Company reports
0
20
40
60
80
100
120
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Tractor Supply Store Opens
0
20
40
60
80
100
120
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
PetSmart Store Opens
27
Most Interesting Things Heard on Tractor Supply
Source: CRC channel research
Sales trends • 3Q core demand accelerated 1-2 points following somewhat soft 2Q (drought
impacted). • Cooler weather year/year expected to benefit 4Q comps
• October sales well above forecast (3-5 points ahead of plan)
Private label and category resets • Category resets focused on growing sales versus growing margin
• Brands • Regionalization
• Private label penetration set to grow in 2013 on the back of 2H 2012 resets: • Seasonal category a focal point (including categories 100% private label) • Sales results better than prior assortment
Long-term store target • Seeing less cannibalization from new stores opened in existing markets (Northeast) • TSCO target could be 2,300-2,500 versus 2,100 publicly announced
28
Most Interesting Things Heard on PetSmart
Source: CRC channel research
Sales/Orders • Sales growth through mid-3Q sounded consistent with strong 1H 2012 against tougher
comparisons • Category resets at PetSmart showing category boost (small animal, toys, treats) • Inventory orders for holiday season up nicely year/year, company likely better
prepared for holiday season 2012 Structural shift to natural/super-premium foods • Focus for company driven by higher average sale and better margin • Natural category growth rate in 30% range year/year in 2012. Expected to slow to
20% growth in 2013, still well above category average. • Marketing for national brands likely to convert more consumers in 2013 vs 2012 Pet category growth fairly stable • 5% dog/cat adoption growth in 1H 2012 better than trend in 2011 up 1-2%. Seeing
growth after flattening out during the downturn.
WBFI Research Survey Results
November 2012
Wild Bird Feeding Industry
Tom Mahoney, CFA Research Associate
Cleveland Research Company [email protected]
216-649-7269