I went for dinner with six friends last weekend, and we each ordered entrees and desserts, and some side orders. One of our group only eats gluten-free food, so he ordered two starters. We split the bill, and it worked out at $36 each. But our gluten-free friend cried foul, and asked for a separate check to pay $22 for his gluten-free dish. I was outraged — and almost felt physically sick. I kicked my husband under the table, and said under my breath, “Can you believe that?’
Can you believe it? Do you think he should have just paid the $35 instead of asking for a separate check? Adding insult to injury, he left the waiter a $10 tip. Why not just pay $35 like everyone else? I told my husband I was never going for dinner with him again. Don’t you think he should have just paid $35 like everyone else? It was a big crowd. If everyone did that, you’d need a forensic accountant to figure out how many breadsticks someone ate.
We otherwise had a nice evening, and it was a bring-your-own-bottle restaurant. I work as a teacher and my husband works in tech. We own a home together and have three kids. Our gluten-free friend is a freelance consultant, and is divorced with two kids. He had a very privileged upbringing. I worked hard for everything I have. I’m not saying any of us are rich, but when we go out to eat, we like to share and share alike, and split the bill down the middle.
When did eating out become so full of these cringeworthy moments?
Equal Bill Splitter
Dear Equal,
I’m sorry to say that the most cringeworthy moment here happened when you kicked your husband under the table. I’m not a big fan of under-table communication in a group, and while we could debate the pros and cons of asking for a separate check for a $13 difference, I don’t think there’s much of a gray area when it comes to calling someone out at the dinner table, especially when your eye-rolling and disapproval could be picked up by the other guests.
As far as your friend is concerned, $13 is a lot of money to pay when you did not eat all the food that was ordered by the table. Maybe it doesn’t seem like it to you or anyone reading this column, but your friend is divorced with two kids, and works as a freelancer — so let’s assume his income is not always stable. Could he have just split it down the middle and paid $35 and another 15% or 20% for a tip? Sure. But he has good financial boundaries. I applaud him.
The real issue here may go back to your respective upbringings, and could explain your dramatic — and I would argue disproportionate reaction — to your friend asking for a separate $22 check. You’ve worked hard, and maybe your friend had an easier start in life, but that doesn’t mean he’s not entitled to pay for what he ate, and watch every dollar. Divorce is like a recession. You can end up struggling to get back on your financial feet for years.
Perhaps your friend had always intended to pay $22 for his gluten-free dish, and tip the server 50%, or perhaps he has a well-trained side eye and caught your reaction to his paying for his own order, and he decided to pay closer to what everyone else had paid. But ordering separate checks, I suspect, will become more common as prices continue to rise, even at a slower pace, and people feel uncertain about spending money in restaurants.
You believe in equality of bill splitting. I suggest you apply that equality to all dinner guests, regardless of upbringing and dietary restrictions, and allow them to make their own choices about what they pay for at dinner. People often have problems — financial or otherwise — that we are not aware of, so try to leave space for that. And if your friend did see your eye-rolling and under-the-table antics? I’d like to think he made space for your behavior too.
Readers write to me with all sorts of dilemmas.
By emailing your questions, you agree to have them published anonymously on MarketWatch. By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
The Moneyist regrets he cannot reply to questions individually.
A leading global health body has declared that the artificial sweetener aspartame, commonly used as an ingredient in diet soda, chewing gum and vitamins, may cause cancer.
But the World Health Organization’s report late Thursday also noted that people would have to be exposed to extreme amounts of aspartame — whether through diet, occupational exposure or other means — to be at risk.
So how much aspartame is too much?
It’s safe to consume up to 40 milligrams of aspartame per kilogram, or 2.2 pounds, of body weight per day, a WHO and Food and Agriculture Organizations joint committee of experts on food additives said. So, a person who weighs 154 pounds would need to drink nine to 14 cans of, say, Diet Pepsi or Diet Coke per day to exceed that level, assuming there are 200 to 300 milligrams of aspartame in each can.
“We’re not advising consumers to stop consuming [aspartame] altogether,” said WHO’s nutrition director, Dr. Francesco Branca. “We’re just advising a bit of moderation.”
The Food and Drug Administration has an even higher daily aspartame-exposure limit: 50 milligrams per kilo of body weight.
Even heavy aspartame users — Donald Trump, the former U.S. president, for example, drank a reported 12 cans of Diet Coke a day in his White House years — would struggle to consume that much of the sweetener in an average day.
But consumers should also note that a food being labeled “safe” is not equivalent to its being healthy. There has been plenty of research to suggest that sipping too many sweetened beverages, including diet drinks with artificial sweeteners, may be linked to health problems and elevated risk of death.
Aspartame is used in products that millions of people use every day, including Diet Coke and Diet Pepsi, Pepsi Zero Sugar and Coca-Cola Zero Sugar, the Mars Wrigley chewing gum Extra and some Snapple drinks, as well as some protein drinks, among thousands of others, by the Calorie Control Council’s count.
Aspartame was developed beginning in the mid-1960s by Skokie, Ill.–based G.D. Searle & Co., now a Pfizer PFE, +0.72%
subsidiary, which branded the sweetener NutraSweet. It secured ultimate FDA approval, after initial hiccups, for use in dry goods and then in carbonated soft drinks in 1981 and 1983, according to the Calorie Control Council.
The organization that this week labeled aspartame possibly carcinogenic was the World Health Organization’s cancer-research arm, the International Agency for Research on Cancer. The IARC said its aspartame declaration is based on “limited evidence” of cancer in humans, specifically a type of liver cancer called hepatocellular carcinoma.
What should consumers do with this aspartame news? “At least when it comes to beverages, our message is your best choice is to drink water or an unsweetened beverage,” said Dr. Peter Lurie, executive director of the Center for Science in the Public Interest, which previously nominated aspartame for IARC review.
A leading global health body has declared that the artificial sweetener aspartame, commonly used as an ingredient in diet soda, chewing gum and vitamins, may cause cancer.
But the World Health Organization’s report late Thursday also noted that people would have to be exposed to extreme amounts of aspartame — whether through diet, occupational exposure or other means — to be at risk.
So how much aspartame is too much?
It’s safe to consume up to 40 milligrams of aspartame per kilogram, or 2.2 pounds, of body weight per day, a WHO and Food and Agriculture Organizations joint committee of experts on food additives said. So, a person who weighs 154 pounds would need to drink nine to 14 cans of, say, Diet Pepsi or Diet Coke per day to exceed that level, assuming there are 200 to 300 milligrams of aspartame in each can.
“We’re not advising consumers to stop consuming [aspartame] altogether,” said WHO’s nutrition director, Dr. Francesco Branca. “We’re just advising a bit of moderation.”
The Food and Drug Administration has an even higher daily aspartame-exposure limit: 50 milligrams per kilo of body weight.
Even heavy aspartame users — Donald Trump, the former U.S. president, for example, drank a reported 12 cans of Diet Coke a day in his White House years — would struggle to consume that much of the sweetener in an average day.
But consumers should also note that a food being labeled “safe” is not equivalent to its being healthy. There has been plenty of research to suggest that sipping too many sweetened beverages, including diet drinks with artificial sweeteners, may be linked to health problems and elevated risk of death.
Aspartame is used in products that millions of people use every day, including Diet Coke and Diet Pepsi, Pepsi Zero Sugar and Coca-Cola Zero Sugar, the Mars Wrigley chewing gum Extra and some Snapple drinks, as well as some protein drinks, among thousands of others, by the Calorie Control Council’s count.
Aspartame was developed beginning in the mid-1960s by Skokie, Ill.–based G.D. Searle & Co., now a Pfizer PFE, +0.72%
subsidiary, which branded the sweetener NutraSweet. It secured ultimate FDA approval, after initial hiccups, for use in dry goods and then in carbonated soft drinks in 1981 and 1983, according to the Calorie Control Council.
The organization that this week labeled aspartame possibly carcinogenic was the World Health Organization’s cancer-research arm, the International Agency for Research on Cancer. The IARC said its aspartame declaration is based on “limited evidence” of cancer in humans, specifically a type of liver cancer called hepatocellular carcinoma.
What should consumers do with this aspartame news? “At least when it comes to beverages, our message is your best choice is to drink water or an unsweetened beverage,” said Dr. Peter Lurie, executive director of the Center for Science in the Public Interest, which previously nominated aspartame for IARC review.
Consumers are still showing signs of being highly sensitive to inflationary pressures and are shopping around to maximize their budgets, according to PepsiCo Inc. Chief Executive Ramon Laguarta.
“ ‘We’re seeing consumers shopping in more stores than before. They’re looking for better deals. They’re starting to look for optimization. They are going to channels that have better perceived value.’”
— Ramon Laguarta, CEO, PepsiCo Inc.
Laguarta told analysts on the company’s second-quarter earnings call on Tuesday that consumers are buying more in dollar stores or buying more in bulk or at wholesale clubs.
“So every segment of the consumer is making adjustments,” he said, according to a FactSet transcript.
Still, PepsiCo PEP, +1.89%
saw better elasticities in the three-month period, he said, referring to consumers’ sensitivity and response to higher prices.
Like many consumer companies, the snacks and beverages giant has been raising prices to combat its own higher costs in the current inflationary period. But, “we’ve been able to raise prices and consumers stay within our brands,’ he said.
One supportive factor is low unemployment, said Laguarta. Unemployment is currently low in developed and developing markets and is trending at a record low in Mexico and certain Asian markets, he said.
“So we’re seeing overall very good consumer behavior, especially when it refers to our categories, and that’s why we raised guidance on our top line and because of the first factor we raised guidance on the bottom line as well,” he said.
PepsiCo earlier posted better-than-expected earnings for the latest quarter and raised its fiscal 2023 guidance.
Some of PepsiCo’s more popular brands, including Lay’s, Doritos, Cheetos, and Ruffles, generated double-digit net revenue growth, along with smaller, emerging brands aimed at consumers seeking healthier choices, such as PopCorners, SunChips, Bare, and Off The Eaten Path, said the company.
The stock was up about 1% Thursday and has gained 2.4% in the year to date, while the S&P 500 SPX, +0.65%
has gained 16%.
Food prices grew at a slower pace in June, but economists remain concerned that prices will reach a level where consumers will make dramatic changes in their behavior.
Food prices rose 3% in June compared to a year ago, according to the latest data from the Bureau of Labor Statistics. After a year of price hikes, consumers continued to see food prices rise, but at a slower rate.
Grocery prices were 5.7% higher in June compared to a year ago, and dining out was 7.7% more expensive. That’s significantly lower than the 13.5% peak inflation for grocery prices last August and the 8.8% peak inflation for dining out.
“Overall, there continues to be a similar narrative of extended upward pressure on food prices as we try to discern whether this stress has led to a tipping point where consumers are struggling to buy the foods that they want,” said Jayson Lusk, the head and distinguished professor of Agricultural Economics at Purdue University.
Reported food insecurity across households of different income levels reached 17% in June, the highest level since March 2022, according to the monthly Consumer Food Insights Report from Purdue University. Although it didn’t deviate too much from the normal range — food insecurity hovered at 14% two months ago — Lusk said the increase is concerning given the amount of pressure on more financially vulnerable consumers.
“Reported food insecurity across households of different income levels reached 17% in June, the highest level since March 2022, according to Purdue University. ”
The pandemic-era expansion of the Supplemental Nutrition Assistance Program ended in March, meaning SNAP recipients are now receiving $90 less on average every month, according to the Center on Budget and Policy Priorities, a progressive policy think tank based in Washington, D.C.
The recent rise in food insecurity could be a lag from households adjusting to the policy change, Lusk said. On average, consumers are spending about $120 per week on groceries and $70 per week on dining out or takeout, the report found.
Middle-income households earning $50,000 to $100,000 a year and low-income households earning less than $50,000 a year cut weekly spending on groceries and dining out by about $10 a week, Purdue found. The average weekly grocery expenditure for low-income households was $103 in June; for middle-income households, it was $118. Households earning more than $100,000 a year spent $141 a week on groceries in June.
Around 47% of low-income households — those earning less than $50,000 a year — said they relied on SNAP benefits in May, up from roughly 40% in February, according to a recent Morning Consult report.
For low-income households, rising food insecurity is often coupled with juggling bills such as utilities and rent, which has also led to rising eviction rates in recent months, according to Propel, an app that aims to help low-income Americans improve their financial health. Propel surveys SNAP users on insecurity around food, finance and their housing situation.
Nearly half of the survey respondents said they cannot afford the food they want. “We were unable to pay bills because we had to buy food. We’re about to lose our home,” a South Carolina user named Anna told the Propel survey.
The share of surveyed households that paid their utilities late rose 11% from May to June, and only 27% of respondents paid their utility bills on time and in full, according to Propel’s June survey.
General Mills the megamanufacturer behind your morning Cheerios, reported a drop in earnings that might make it question whether continuing to raise prices is worth it.
General Mills GIS, +0.52%
CEO Jeff Harmening acknowledged during the company’s fourth-fiscal-quarter earnings call this week that consumers responded to higher prices by making fewer purchases. “As you look at the last 12 weeks, it’s pretty clear that elasticity — volume elasticities have increased,” which may suggest consumer demand is more sensitive to price increases than it had been previously.
In business and economics, price elasticity refers to the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes.
“ ‘Companies have been raising prices pretty aggressively. We’re seeing that trend definitely subside.’ ”
— Richard Moody, Regions Financial Corp.
The manufacturer of the Häagen-Dazs, Pillsbury and Betty Crocker product lineups, as well as its famed breakfast cereals, felt the impact of this phenomenon as it reported a decline in profits and sales volume for its fourth quarter.
Richard Moody, chief economist at Regions Financial Corp., said higher prices are posing an issue for companies more broadly. “Companies have been raising prices pretty aggressively. We’re seeing that trend definitely subside. Sellers of goods just don’t have as much pricing power as they had for most of last year and the prior year,” Moody told MarketWatch.
This could be music to the ears of Federal Reserve officials, who are trying to get inflation back down to their 2% target.
St. Louis Fed President James Bullard, during the early days of the fight against inflation in 2022, said inflation would return to the Fed’s target once companies find out that raising prices is harmful to their bottom lines.
In an interview last May with Fox Business Network he observed that “a lot of CEOs have come on TV and said, ‘Oh, I have lots of pricing power, and I can do whatever I want and make a lot of money … but I think some of them are going to get punched in the face here with the fact that consumers have to react.”
Though General Mills’ drop in earnings might not be the punch in the face Bullard warned of, its recent quarterly update could be a sign that continuing to raise prices is now looking harmful to financial results.
A statement from the company attributed the drop in earnings to a trend among retailers toward lower inventory levels. During the pandemic, grocery stores stocked up on Nature Valley snack bars and CoCo Puffs due to concerns about supply-chain complications. General Mills says retailers are holding less inventory now, so there is less on the shelves for consumers to purchase.
CEO Harmening said the majority of General Mills’ price increases are in the marketplace already. Though conditions can change, “we feel good about what we see right now with our pricing and the inflationary environment that we see,” he said, a possible indication that the company might back off of flexing price muscle.
Other economists were uncertain about reading too much into lower earnings for companies like General Mills.
Will Compernolle, macro strategist at FHN Financial, said he detected a bit of a culture change due to grocery-store inflation over the past two years. “People are buying less stuff to eat at home. And that is, you know, a kind of mysterious trend in the sense that this is always considered a necessity,” he said.
As pandemic-era stay-at-home recommendations and other public health measures were eased, there’s been “a temporary surge in food-services spending” as people have chosen to go out to restaurants rather than cook at home, he said.
He said it is unclear how companies like General Mills will respond to consumer spending. In order to determine demand, they will have to see what “the new normal looks like when the dust settles” and ask whether “people going to go back to their old composition of food at home versus food away.”
Robert Frick, corporate economist with Navy Federal Credit Union, said he has observed “consumers are saving more and spending less, perhaps out of caution, as most believe a recession is either here or imminent.”
Lower-income Americans have become particularly sensitive to price increases, Frick said. He shared his “hunch” that there is “kind of a drag on spending because lower-income Americans are being hurt so badly.”
“It seems likely most of the effects of spending plateauing overall has to do with that lower third of Americans [having] really started to, you know, pinch their pennies and run up their debt, and they don’t want to run it up any more,” Frick said.
Income and spending data released by the government on Friday showed people may have more money to spend but are not spending quite as much.
U.S. consumer spending slowed in May, rising just 0.1%, compared with 0.6% growth in consumer spending in the prior month. Consumers saved 4.3% of their disposable income, an increase from April’s 3.4% savings rate.
The World Health Organization’s cancer research arm is poised to declare the artificial sweetener aspartame as “possibly carcinogenic to humans” as early as next month, Reuters reported, citing two sources with knowledge of the matter.
Aspartame is used in products ranging from diet Coca-Cola KO, -0.93%
to Mars’ Extra chewing gum and certain Snapple drinks. The move will be the first by the International Agency for Research on Cancer, or IARC, the news agency reported.
The IARC ruling was finalized earlier this month after a meeting of its external experts. The meeting considered whether something is a potential hazard or not, based on all the published evidence. It did not consider, however, how much of a product can be safely consumed; that advice is made by a separate WHO expert committee on food additives, called JECFA — the Joint WHO and Food and Agriculture Organization’s Expert Committee on Food Additives) — as well as by national regulators.
Industry groups immediately pushed back on Thursday.
“Consumers deserve facts, and the fact is aspartame is one of the most widely studied food ingredients and has repeatedly been determined to be safe by global scientific and regulatory authorities, which is why the Calorie Control Council is gravely concerned about any unsubstantiated assertions that contradict this conclusion,” said Robert Rankin, president of the Calorie Control Council in emailed comments.
The IARC is not a regulatory agency, an ingredient expert or a food safety authority, Ranking added.
“Their sole focus is to find substances that could cause cancer, and they have classified things like aloe vera, low-frequency magnetic fields, and pickled vegetables as possibly causing cancer. Consumers want context and that is what’s missing from these misleading claims,” he said.
Kate Loatman, executive director of theInternational Council of Beverages Associations (ICBA), agreed.
“While it appears IARC is now prepared to concede that aspartame presents no more of a hazard to consumers than using aloe vera, public health authorities should be deeply concerned that this leaked opinion contradicts decades of high-quality scientific evidence and could needlessly mislead consumers into consuming more sugar rather than choosing safe no- and low-sugar options – all on the basis of low-quality studies,” Loatman said in a statement.
The summer haze settling over stocks doesn’t look ready to budge Thursday, with the S&P 500 index SPX, -0.52%
in the throes of its longest losing streak since May.
On the bright side, the index is looking at a 6% gain for the June quarter, whose end is just a few days away.
In other corners of the market, the quarter has been less forgiving. Consumer staples, those things you can’t live without, have lost over 1%, perhaps reflecting the tougher economic times we are living in. Within that sector, though, is beer and one name that has indeed had a quartarius horriblis.
BUD, -0.05%
U.S.-listed shares are down about 15%, as Bud Light sales have tumbled following consumer backlash to a social-media campaign featuring trans activist Dylan Mulvaney in April.
But our call of the day from Deutsche Bank says it’s time to buy this unloved stock, even if those Bud Light sales never recover. A team of analysts led by Mitch Collett have upgraded Anheuser-Busch shares to buy from hold and lifted their price target to €60 euros from €59 euros (they didn’t offer an ADR price target).
Recent underperformance of the stock “implies a permanent reduction in ABI’s U.S. business. Our proprietary survey data suggests these headwinds are likely to fade even if we do not expect the U.S. business ever to fully recover from its current challenges,” said Collett.
The analysts pointed to recent Nielson data that showed ABI’s U.S. business currently down 12%, with Bud Light sales off 24% and the rest of its portfolio down 7%. But an analysis of distribution data shows ABI itself isn’t “losing shelf presence” as sales velocity is the primary driver of the decline, which bodes well if consumer sentiment improves, said Deutsche Bank.
Those declines are about a 12% headwind to ABI’s annual net income, which is in line with European underperformance seen by the stock, added Collett and the team.
Deutsche Bank conducted its own survey that showed 24% of Bud Light consumers are no longer buying that brand, with 18% buying less, but 21% buying more and 37% buying the same amount. Those findings are largely consistent with Nielson;s, said the analysts.
Deutsche Bank’s own survey also showed that 42% of Bud Light drinkers expect to be buying Bud Light again in three to six months, versus 29% who see that as unlikely. And 50% expect that battered beer’s reputation will recover in time, versus 30% who says it won’t. “We believe this bodes well for the brand, recapturing some of its lost share,” said Collett and the team.
Analysts at RBC Capital also recently pushed back on the selloff for the stock, saying the hit to the shares and forecasts for the stock are “excessive,” as they don’t see Bud Light’s troubles hurting AB InBev outside the U.S.. They said AB InBev is a “nerve-racking buying opportunity.”
Ahead of Thursday’s open, U.S.-listed Bud shares were up about 1.3%, tracking gains from its Belgian shares.
TMUBMUSD10Y, 3.743%
on the rise and oil prices CL.1, -1.82%
also weaker. The Norwegian krone USDNOK, -0.80%
is up 1.5% against the dollar after the country’s central bank hiked interest rates 50 basis points. Switzerland also hiked rates, but the Swiss franc is steady USDCHF, +0.12%.
The British pound GBPUSD,
is higher after the Bank of England also hiked interest rates by 50 basis points. The Turkish lira was falling slightly after the central bank, under new management, hiked interest rate to 15% from 8.5%, against forecasts for a hike to 20%.
China markets were closed for a holiday, with losses elsewhere, such as Japan NIK, -0.92%
and Australia XJO, -1.63%.
Federal Reserve Chair Jerome Powell’s second day of testimony on Capitol Hill kicks off at 10 a.m. Eastern. On Wednesday, he said higher interest rates should be expected , but didn’t offer any clues on timing. U.S. weekly jobless benefit claims and current account data are due at 8:30 a.,m. ET, with leading indicators also at 10 a.m., alongside a speech from Cleveland Fed President Loretta Mester. Richmond Fed President Tom Barkin will speak at 4:30 p.m.
The Bank of England will announce an interest-rate decision at 7 a.m. ET and after worse-than-expected inflation data on Wednesday, a 50 basis-point hike hasn’t been ruled out.
Darden Restaurants DRI, +0.36%
will report ahead of the open, with Smith & Wesson SWBI, +0.52%
due after the close.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
That’s the practice by many S&P 500 food and consumer companies of raising prices to protect what a new report calls their “cushioned corporate profits,” and it has enabled them to boost margins through the current inflationary period.
Companies including Kimberly-Clark Corp. KMB, -0.45%,
PepsiCo Inc. PEP, -0.18%,
General Mills Inc. GIS, -0.88%
and Tyson Foods Inc. TSN, -0.36%
have on recent earnings calls touted their ability to raise prices, earning tidy profits and rewarding their shareholders as they go, according to the report from Accountable.US, a liberal-leaning consumer-advocacy group.
And they have signaled their intention to continue to take “price actions” even as the Federal Reserve has hiked interest rates an unprecedented 10 times in an effort to tame inflation.
“Higher interest rates haven’t stopped S&P companies, especially in the big food industry, from raising consumer prices despite reporting billions in extra net earnings and over a trillion dollars in new giveaways to wealthy investors,” said Liz Zelnick, director of economic security and corporate power at Accountable.US.
“Corporate greed is a stubborn thing and requires serious action from Congress. The Fed has not seen an adequate return on its investment in a policy that has already created fissures in the economy that could lead to recession. It’s just not worth it,” she said.
Accountable.US is not alone in calling out price hikes on essentials including food. Walmart Inc. WMT, +0.73%
is also unhappy with packaged-food companies that have steadily raised prices in dry grocery and consumable goods, according to a recent report from research company CFRA.
“Given Walmart’s enormous bargaining power over its suppliers, we expect the retail giant to push back on further price increases from its packaged-food suppliers,” he said. That is expected to hurt margins, especially if volume growth does not recover.
May inflation data released Tuesday found that food prices were up 0.2% from April, after remaining flat for the previous two months. Food prices are up 6.7% over the last year. The food-at-home index is up 5.8% over the last year, while the index for cereals and bakery products is up 10.7%.
Food prices started to rise about two years ago, when supply-chain issues and higher fuel and commodity prices led companies to pass some of those costs on to customers.
But companies appear determined to raise prices even more, despite a decline in shipping and gas costs. Gasoline was down 5.6% in May from April and fuel oil fell 7.7%, according to consumer-price-index figures.
Kimberly-Clark executives told analysts on its recent earnings call that the company is able to “rapidly implement broad pricing actions” and acknowledged that “pricing has continued to be a big driver behind our top-line growth.”
The company’s first-quarter earnings topped expectations and it raised guidance for the full year. That’s after it raised prices by 10% for a second straight quarter, driving margins wider by 340 basis points.
Shareholders were rewarded to the tune of $425 million during the quarter, the Accountable.US report notes.
However, he said, “obviously, there are some markets, highly inflationary markets around the world, where we might have to take additional pricing. If you think about Argentina, Turkey, Egypt — those kinds of markets where the currencies are suffering. But the majority of our pricing is already done,” he said, according to a FactSet transcript.
PepsiCo’s 2022 earnings rose 16.9% to nearly $9 billion, and it spent more than $7.6 billion on stock buybacks and dividends, with the former up 1,313% from 2021.
General Mills, meanwhile, bragged about “getting smart about how we look at pricing” on its recent call. The parent of brands including Cheerios, Nature Valley, Blue Buffalo pet products and Pillsbury raised its fiscal 2023 guidance in February.
And Tyson executives touted the “significant pricing power of our portfolio with a year-over-year increase of 7.6%.” Tyson’s latest quarter included a surprise loss, as it was hit by weak demand for meat, along with plant closures and job cuts.
But Tyson had net income of over $3.2 billion in 2022, up from $3 billion in 2021, and it rewarded shareholders with $1.35 billion in buybacks and dividends.
For Accountable.US, it’s more compelling evidence that the Fed’s rate-hike strategy “has failed to root out one of the main drivers of inflation and should give the [Federal Open Market Committee] pause before lifting rates again this week to the detriment of jobs and the economy.”
The Consumer Staples Select Sector SPDR exchange-traded fund XLP, +0.36%
has fallen 1.6% to date in 2023, while the SPDR S&P Retail ETF XRT, +1.89%
has gained 4.6%. The S&P 500 SPX, +0.62%
has gained 13% in the same period.
Bud Light’s recent troubles should worsen in the summer, to the benefit of its competition’s brands, enough to turn Roth MKM analyst Bill Kirk bullish on the stocks of Constellation Brands Inc. and Boston Beer Co. Inc.
Kirk raised on Tuesday his rating on Modelo, Corona, Pacifico beer parent Constellation Brands to buy, after being at neutral since January 2021, while boosting his stock price target to $270 from $216.
Kirk said a lot of the market share Anheuser-Busch InBev SA’s Bud Light lost, amid backlash from the beer brand’s partnership with trans influencer Dylan Mulvaney, went to other premium light products, but he expects that to shift to Constellation’s favor.
“As the weather warms, we expect the share gains for Modelo Especial and Corona to accelerate,” Kirk wrote in a note to clients.
Constellation Brands’ stock STZ, +1.79%
rose 1.5% in afternoon trading Tuesday toward the highest close since Dec. 12, 2022, while Anheuser-Busch shares BUD, -4.71%
slumped 4.5% toward the lowest close since Nov. 10.
He noted that weekly scanner data has shown that Constellation’s beer portfolio outperformed the broader beer market by seven percentage points in early 2023, and that outperformance improved to 10 percentage points at the beginning of Bud Light’s market-share losses in April.
“With temperatures warming and substitutability with Bud Light increasing, recent weeks have seen 13 [percentage points] of outperformance,” Kirk wrote. “This trend should continue as Bud Light [declines/peak] over summer holidays.”
For Samuel Adams, Truly, Twisted Tea parent Boston Beer, Kirk raised his rating to buy, after being at neutral for at least the past three years. He raised his stock price target to $386 from $274.
Boston Beer’s stock SAM, +5.37%
jumped 6.8% toward the highest close since Feb. 15.
Earlier this year, Kirk was concerned that Truly hard seltzer’s weakness continued, offsetting Twisted Tea’s success, and that gross margins weren’t improving even after moving more production in-house.
“Now, we believe seltzer and Truly will benefit in the summer from Bud Light share losses (occasion overlap increases with warmer weather) and gross margin lift from production shift will be realized in 2Q (given inventory days timing),” Kirk wrote.
He believes that will shift investor focus away from Truly’s weakness and toward Boston Beer’s brands that are growing.
And while Wall Street expects the trends Boston Beer saw in the first quarter to continue throughout 2023, Kirk now believes the company will beat expectations for shipments and depletions, and sees opportunities for margins to also beat forecasts.
“While we had written at 1Q that the ‘timing of upside surprises remains unclear,’ we now believe the timing is Summer 2023,” Kirk wrote.
Constellation Brands’ stock has gained 5.7% over the past three months and Boston Beer shares have advanced 4.8%, while Anheuser-Busch’s stock has dropped 10.1% and the S&P 500 index SPX, +0.00%
has gained 5.9%.
CHEYENNE, Wyo. (AP) — Declaring a mission to liberate “Taco Tuesday” for all, Taco Bell is asking U.S. regulators to force Wyoming-based Taco John’s to abandon its longstanding claim to the trademark.
Too many businesses and others refer to “Taco Tuesday” for Taco John’s to be able to have exclusive rights to the phrase, Taco Bell asserts in a U.S. Patent and Trademark Office filing that is, of course, dated Tuesday.
It’s the latest development in a long-running beef over “Taco Tuesday” that even included NBA star LeBron James making an unsuccessful attempt to claim the trademark in 2019.
“Taco Bell believes ‘Taco Tuesday’ is critical to everyone’s Tuesday. To deprive anyone of saying ‘Taco Tuesday’ — be it Taco Bell or anyone who provides tacos to the world — is like depriving the world of sunshine itself,” the Taco Bell filing reads.
A key question is whether “Taco Tuesday” over the years has succumbed to “genericide,” New York trademark lawyer Emily Poler said. That’s the term for when a word or phrase become so widely used for similar products — or in this case, sales promotions — they’re no longer associated with the trademark holder.
Well-known examples of genericide victims include “cellophane,” “escalator” and “trampoline.”
“Basically what this is about is you cannot trademark something that is ‘generic,’ ” Poler said. “That means it doesn’t have any association with that particular source or product.”
Basketball legend James — a well-known taco lover — encountered this problem when he tried to trademark “Taco Tuesday” in 2019. The Patent and Trademark Office, in a ruling that didn’t refer to Taco John’s, deemed “Taco Tuesday” too much of a “commonplace term” to qualify as a trademark.
With more than 7,200 locations in the U.S. and internationally, Taco Bell — a Yum Brands YUM, -2.45%
chain along with Pizza Hut, KFC and the Habit Burger Grill — is vastly bigger than Cheyenne-based Taco John’s. Begun as a food truck more than 50 years ago, Taco John’s now has about 370 locations in 23 mainly in western and midwestern states.
The chain’s size hasn’t discouraged big-time enforcement of “Taco Tuesday” as trademark, which dates to the 1980s. In 2019, the company sent a letter to a brewery just five blocks from its corporate headquarters, warning it to stop using “Taco Tuesday” to promote a taco truck parked outside on Tuesdays.
Actively defending a trademark is required to maintain claim to it, and the letter was just one example of Taco John’s telling restaurants far and wide to stop having “Taco Tuesdays.”
Taco John’s responded to Taco Bell’s filing by announcing a new two-week Taco Tuesday promotion, with a large side of riposte.
“I’d like to thank our worthy competitors at Taco Bell for reminding everyone that Taco Tuesday is best celebrated at Taco John’s,” CEO Jim Creel said in an emailed statement. “We love celebrating Taco Tuesday with taco lovers everywhere, and we even want to offer a special invitation to fans of Taco Bell to liberate themselves by coming by to see how flavorful and bold tacos can be at Taco John’s all month long.”
The filing is one of two from Taco Bell involving “Taco Tuesday.” One contests Taco John’s claim to “Taco Tuesday” in 49 states, while a similar filing contests a New Jersey restaurant and bar’s claim to “Taco Tuesday” in that state. Both Taco John’s and Gregory’s Restaurant and Bar in Somers Point, N.J., have been using “Taco Tuesday” for over 40 years.
A Taco John’s franchisee in Minnesota first came up with “Taco Twosday” to promote two tacos for 99 cents on a slow day of the week, Creel told the Associated Press in a recent interview.
The Patent and Trademark Office approved the Taco John’s “Taco Tuesday” trademark in 1989. Even with its many letters, Creel said, the company — established in 1969 in Cheyenne, Wyo. — has never had to go to court over the phrase.
He’s not feeling too picked on, either, by the much bigger Taco Bell. “It’s OK. It’s kind of nice that they’ve noticed,” Creel said.
An experimental skin patch may soon allow increased protection for toddlers who are allergic to peanuts, according to a new study published in the New England Journal of Medicine.
The patch, named Viaskin, is coated with a small amount of peanut protein that is absorbed into the skin and would offer some protection against an accidental peanut ingestion that so many parents fear at birthday parties, in school cafeterias or on play dates.
If additional testing pans out, “this would fill a huge unmet need,” Dr. Matthew Greenhawt, an allergist at Children’s Hospital Colorado who contributed to the study, told the Associated Press.
About 2% of U.S. children are allergic to peanuts, some so severely than even a tiny exposure can cause a life-threatening reaction. Their immune systems overreact to peanut-containing foods, triggering an inflammatory cascade that causes hives, wheezing or worse. Some youngsters outgrow the allergy, but most must avoid peanuts for life and carry rescue medicine to stave off a severe reaction if they accidentally ingest an allergen.
In 2020, the Food and Drug Administration approved the first treatment to induce tolerance to peanuts — an “oral immunotherapy” named Palforzia that children ages 4 to 17 consume daily to keep up the protection.
The new study, which featured work from dozens of medical professionals in the U.S. and abroad, took samples from 362 toddlers with a peanut allergy. The toddlers were initially tested to see how high a dose of peanut protein they could tolerate. Then they were randomly assigned to use the Viaskin patch or a lookalike placebo patch every day.
After a year of treatment, they were tested again, and about two-thirds of the toddlers who used the Viaskin patch could safely ingest more peanut protein safely. One in three of the toddlers who were given the dummy patch also could safely ingest more peanuts, but Greenhawt said it’s likely those children had outgrown the allergy.
Democrats largely have closed ranks behind President Joe Biden ahead of next year’s election, but he isn’t completely without challengers for the party’s nomination.
Author and activist Marianne Williamson has thrown her hat in the ring, pursuing a longshot bid that comes after her 2020 presidential campaign fizzled out before the Iowa caucuses.
Why isn’t she falling in line and supporting her party’s incumbent president? What’s her pitch to people who think she’s not a serious candidate? What are her top economic proposals?
Williamson, 70, tackled those questions and more in a phone interview earlier this week.
Our Q&A with the Democratic presidential hopeful has been edited for clarity and length.
MarketWatch: In a nutshell, could you explain why you’re running for president?
Williamson: I’m running for president because I believe that some things need to be said and some changes need to be made, in order to repair some serious damage that’s been done to our democracy, to our country, to our people and to our environment over the last 50 years.
MarketWatch: You’ve talked about running to address “systemic economic injustices endured by millions of Americans” because of the “undue influence of corporate money on our political system.” What do you see as the top examples of that?
Williamson: During the 1970s, the average American worker had decent benefits, could afford a home, could afford a yearly vacation, could afford a car and could afford to send their child to college. In the last 48 years, there has been a $50 trillion transfer of wealth from the bottom 90% to the top 1% of Americans. That transfer has decimated our middle class. We are now at a point where if you are among 20% of Americans, then the economy’s doing pretty well for you. But, unfortunately, that 20% is surrounded by a vast sea of economic despair. We have 60,000 people in the United States who die every year because they can’t afford healthcare XLV, -1.11%,
one in four Americans living with a medical debt, and 18 million Americans unable to fill the prescriptions that their doctors give to them.
If you are in the club in America, if you are making it in America — and I have sold some books, so I understand the high side of the free market and have benefited, and I’m grateful for that — but no conscious persons wants to feel that they create wealth at the expense of other people having a chance. That is not American. It’s not what the American Dream is supposed to be.
I’m not trying to whitewash and romanticize American capitalism before this era. I’m not saying we were ever perfect, but it does seem to me that when I was growing up, the social consensus is that we were supposed to try. We knew that the higher good was that there would be this balance between individual liberty, including economic liberty, and a concern for the common good. But today concern for the common good has become almost derided as some quaint notion, and that we shouldn’t really give much more than lip service to it. And that’s a lot of human suffering that occurs because of that change in the social contract.
MarketWatch: Here’s kind of a two-part question. What would be your top economic priorities, and how in particular would you address high inflation and the recent banking KBE, -1.65% crisis?
Williamson: I’d like to see universal healthcare. I want to see tuition-free college at state colleges and universities, which is what we had in this country until the 1960s. There should be free childcare. There should be paid family leave. There should be guaranteed sick pay and a livable wage. And I think Americans are waking up to the fact that those things that I just mentioned are considered moderate issues in every other advanced democracy. They should not be considered left-wing fringe issues. They are granted to the citizens of every other advanced democracy.
That was your first question. The second has to do with high inflation. A lot of that high inflation has to do with price gouging by huge corporations, whether it has to do with food companies, transportation companies and so forth. All of those CEOs should testify before Congress and talk about the ways that they have — for the sake of their own profits — gouged the American people, particularly at such a time as this. And this is what happens when we normalize such a lack of conscience and such a lack of ethics within our system.
In terms of what happened with the bank in Silicon Valley SIVBQ, -3.39%,
which is what your third question was, right? I think the depositors should be made whole, but the bank executives who were taking multimillion-dollar bonuses for themselves, both before and right after the crash, they certainly should not get those bonuses. And also it’s concerning that some of the tech investors that would benefit the most from those deposits were the ones who caused the run on the bank. I don’t think that they should receive the benefit of what happens when those deposits are made whole. But the average depositor absolutely should be made whole in such cases.
MarketWatch: You mentioned free tuition and child care. Where would the funding for that come from?
Williamson: The funding should come, first of all, from taxation. The 2017 tax cut in this country was a $2 trillion tax cut, and 83 cents of every dollar went to the highest-earning corporations and individuals. Now that tax cut also included the middle-class tax cut, and the middle-class tax cut was good.
That tax cut for the highest earners should be repealed, but the middle-class tax cut should be put back in immediately.
Secondly, we should stop all the corporate subsidies. Why are we giving subsidies to these companies that are already making multibillions of dollars in profit and often then price gouging the American people?
Third, I believe there should be a wealth tax. If somebody has $50 million, I don’t have any problem with their paying an extra 2% tax. And if they have $1 billion, let them pay another 1%. Somebody with a $50 million portfolio, much less $1 billion in assets, would not even feel that change, but the changes in people’s lives that would be created by those shifts would be huge.
MarketWatch: Your campaign often gets described as a real longshot bid. Why are you running when so many people say you have a low chance for success?
Williamson: Well, certainly Donald Trump was considered a longshot. For that matter, when he began Barack Obama was considered a longshot. Surely we remember when Hillary Clinton was considered a shoo-in.
MarketWatch: A recent Monmouth University poll of Democratic voters found 11% had a favorable view of you, 16% had an unfavorable view, 21% had no opinion, and 52% had not heard of you. How do you win over those voters who have an unfavorable view, and how do you reach the folks who haven’t heard of you?
Williamson: Well, there was a poll that came out last week that put me at 10%, including 18% with independents and 21% with people under 30.
It’s very difficult for someone like myself to get the message out when you have such institutional resistance to my even being in the conversation, and that is displayed in various ways. But there is independent media today. God knows there’s TikTok, where my information seems to be doing quite well.
This early, no candidate should be allowing the polls to determine their path forward. I didn’t go into this expecting the approval of institutional forces. And I, as a matter of fact, expected the kind of resistance that I’ve received, but that doesn’t matter. What matters is that a certain agenda be placed before the American people, and I am providing that option — the option of that alternative agenda.
I believe that agenda is the way for the Democrats to win in 2024. But even more importantly, I think it’s the agenda that will lead to the repair of this country.
MarketWatch: You mentioned TikTok, and that has been a hot topic in Washington, D.C., in recent weeks. Do you have a view on the Democratic and Republican proposals to ban TikTok in the U.S.?
Williamson: I think the United States government does need to be concerned with tech XLK, -1.00%
surveillance, but I wish they were as concerned when it comes to American-run companies as when it comes to Chinese. It’s a serious issue, it’s a valid issue — the whole issue of surveillance. But it’s a gnarly issue as well, and rushing to shut something down, which is so obviously a platform depended on by millions and millions of Americans for information sharing, is never something that should be done lightly.
MarketWatch: Some Americans may know you only for your spiritual work, and these folks may not think you’re a serious presidential candidate. The White House press secretary indicated she’s in that camp. What’s your message to win those folks over?
Williamson: First of all, I don’t think of my campaign as quote-unquote trying to win anyone over. There’s something that I read years ago that has always guided my work: “If there’s something you genuinely need to say, there’s someone out there who genuinely needs to hear it.” I am speaking to people who I know agree with me. I wouldn’t be doing this if I weren’t aware that millions of people agree with me.
I think it’s very sad that the president would allow a presidential press podium to be used to mock a political opponent, and I think that many people were and are offended by that. This is a democracy. We should have as many voices out there as possible. We should have as many people running in an election as feel moved. Nobody has a monopoly on good ideas. There are ideas on the left and ideas on the right. There are ideas all across the spectrum, and this is a point in American history where we as Americans should hear them all.
MarketWatch: What do you think are some of the main things that President Biden has gotten right, and in what areas has he gone wrong?
Williamson: Well, the first thing he did right was he defeated Donald Trump. The president has taken an incremental approach to America’s problems, and I believe that he does wish to alleviate the suffering of many people whose lives are affected by some deeply unjust systems. But I don’t think that the alleviation of stress is enough right now. We need fundamental economic reform.
We also need a serious answer to climate change, and the president’s approval of the Willow project is not that. The president has said that he recognizes that climate change is an existential crisis, and yet he has given more oil CL00, +0.34%
permits than even Donald Trump did, and he has approved the Willow project.
The Democratic House and Senate — they did cut child poverty in half with the child tax credit, but then, when that expired six months later, they didn’t bother to permanentize it.
These are the kinds of half-measures and incremental measures which are not enough to change the fundamental economic patterns in this country that lead to so much chronic economic anxiety and despair.
Joe Biden is shown in conversation in August 2019 with Marianne Williamson during an event for Democratic presidential candidates in Clear Lake, Iowa.
AFP via Getty Images
MarketWatch: One thing that comes up often with President Biden is his age, which is 80, while you’re 70. Do you think his age should be a concern, or is it ageism to bring it up?
Williamson: I think the individual has to consider this themselves. I have a problem, of course, contributing to the conversation because of the issue of ageism. But on the other hand, everybody can see for themselves what they can see for themselves.
I can only say if I were 80, I wouldn’t be running. But you know, I will not take potshots at the president, and I think that veers into potshots.
MarketWatch: Let’s talk about taking on Donald Trump, Ron DeSantis or whomever the Republican nominee ends up being. Why do you think you’re the Democrat who could end up beating one of them?
Williamson: Republicans are going to throw some big lies at the Democrats in 2024, and the only way that we’re going to defeat them, in my opinion, is to tell some big truths. Franklin Roosevelt said we would not have to worry about a fascist takeover in this country as long as democracy delivered on its promises. Democracy has not delivered on its promises. The only way to beat Donald Trump or Ron DeSantis in 2024 is to propose an agenda in which democracy once again delivers on its promises to the majority of the American people. And that would mean the issues I mentioned before: universal healthcare, tuition-free college, free child care, a guaranteed livable wage and paid family leave. Those are given to the citizens in every other advanced democracy, and there is no good reason whatsoever why they are not delivered to the average citizen in the United States.
MarketWatch: There are Democrats who could be challenging President Biden for the party’s 2024 nomination, but they aren’t and instead they’re supporting him. Why aren’t there more efforts in the party to get people to run for president?
Williamson: Well, you’d have to ask them why they’re not running. But there’s clearly a trope that the field should clear, and everybody should simply get in line with the opinion of the Democratic establishment that Biden is the man because they have decided so. I don’t see it that way. I believe the Democratic primary voters — and independent voters and anyone else, if it’s an open primary — they should decide who the Democratic candidate is. To me, that’s what democracy is. That’s what elections are about.
MarketWatch: The Democratic Party is not expected to hold presidential primary debates for 2024. What can you do to change that and get some time on a debate stage?
Williamson: Well, I hope to have a successful campaign. I hope to have high poll numbers. I hope to have a lot of people in those primary states yelling foul. It’s a government of the people, by the people, for the people. The American people should hear what their options are, and that’s what a debate would be. If enough people realize that and believe it and make laws about it, then that is what will happen.
I think sometimes there’s a kind of learned powerlessness on the part of the American people today. We forget the radicalism of the American experiment, which is that the governance of this country is supposed to be in our hands. But the American people have been trained to expect too little and almost trained to give up the power of independent thought. I hope that my campaign and other things that occur in this campaign season will awaken people, and I think a certain kind of awakening is happening already.
MarketWatch: We’re a financially focused publication, so here’s a question along those lines. I looked at your financial disclosure from your 2020 presidential run. It showed some investments in big public companies like Apple AAPL, -0.58%
and Mastercard MA, +0.27%
…
Williamson: Wait, what are you talking about?
MarketWatch: That’s from your 2019 executive-branch personnel public financial disclosure report. It shows investments in various stocks and funds. The question — for our readers who are investors or people saving for retirement — is could you describe your own approach to investing and preparing for retirement?
Williamson: Socially responsible investing, and that’s why I said, “Whoa, what?” Because I believe in investing in socially responsible companies.
MarketWatch: One last question: What else would you like people to know?
Williamson: America has some serious problems, but we have infinite potential to solve those problems. We need to revisit our first principles, as John Adams said, and find that place in our hearts where, as Americans, as adults in this generation, we recognize that this profound idea of American democracy is put in our hands for safekeeping. And that doesn’t just give us rights; it gives us responsibilities. The political system in the United States speaks to us too often like we’re children, like we’re seventh-graders. Our public dialogue is too often on this kind of seventh-grade level. This is not a time to be an immature thinker, and it’s not a time to get into mean-spiritedness or cynicism either. If we allow ourselves to rise to the occasion, no matter what our politics are, we’re going to repair what has been broken, and we are going to initiate a new beginning. I think that’s possible. Other generations have done it, and we can do it, too.
MarketWatch: Thank you for being available to chat.
Tobacco giant Altria MO, +0.15%
on Friday said it had exchanged its minority stake in embattled e-cigarette maker Juul for “a non-exclusive, irrevocable global license to certain of JUUL’s heated tobacco intellectual property.” Altria Chief Executive Billy Gifford said in a statement that “We believe exchanging our Juul ownership for intellectual property rights is the appropriate path forward for our business. Juul faces significant regulatory and legal challenges and uncertainties, many of which could exist for many years. We are continuing to explore all options for how we can best compete in the e-vapor category.” Altria said it estimated the value of its investment in Juul at $250 million. It said it would book the financial impact of Friday’s decision in the first quarter. Shares finished 0.2% higher during regular trading on Friday, and were up 0.1% after hours.
Tyson Foods Inc. stock slid 5.5% in premarket trade Monday, after the meat processor and parent to brands including Jimmy Dean and Hillshire Farm missed consensus estimates for its fiscal first quarter by a wide margin.
“We faced some challenges in the first quarter,” Chief Executive Donnie King said in a statement. “Market dynamics and some operational inefficiencies impacted our profitability. We expect to improve our performance through the back half of fiscal 2023 and into the future, as we strive to execute with excellence and work to become best in class in our industry.”
Springdale, Arkansas-based Tyson posted net income of $316 million, or 88 cents a share, for the quarter to Dec. 31, down from $1.121 billion, or $3.07 a share, in the year-earlier period. Adjusted per-share earnings came to 85 cents, well below the $1.31 FactSet consensus.
Sales rose to $13.260 billion from $12.933 billion, also below the $13.515 billion FactSet consensus.
The company, the biggest U.S. meat supplier measured by sales, said beef prices fell by an average of 8.5% in the quarter, while chicken prices rose 7.1% and pork prices were up 1.4%. The company’s prepared foods division’s sales rose 7.6% and international and other food sales were up 4.9%.
Beef sales rose 2.9% to $4.723 billion, while pork sales fell 7.4% to $1.529 billion. Sales of chicken rose 2.5% to $4.263 billion, while prepared foods sales rose 1.2% to $2.538 billion. International and other food sales were up 6.4% to $612 million.
The U.S. Department of Agriculture is expecting domestic protein production — beef, pork, chicken and turkey — to be flat in fiscal 2023 versus year-earlier levels, said Tyson.
Tyson said it is expecting fiscal 2023 sales of $55 billion to $57 billion, while FactSet expects $55.2 billion. Tyson expects capex of about $2.5 billion and net interest costs of about $330 million.
The stock has fallen 27% in the last 12 months, while the S&P 500 SPX, -1.04%
has fallen 8%.
General inflation is easing, but the prices of some food items are not going down anytime soon. And the reasons are largely out of the Federal Reserve’s control.
The consumer price index cooled in December, falling to an annualized 6.5% from the 7.1% annual rate recorded in November, according to government data. Still, the annualized inflation rate in food was 10.4% in December, significantly higher than the overall inflation rate even as it represented a slower rate of increase than November, when food prices were 12% higher than in November 2021.
Inflation running at nearly 40-year highs over the past year has put a squeeze on American wallets. Through a series of jumbo rate hikes, the Federal Reserve has sought to tamp down inflation. Its target interest rate was lifted from a negligible level to a range of 4.25% to 4.50% by the end of 2022.
But a few factors impacting food prices are not going away. War is still ongoing in Ukraine, which affected the prices of fertilizers and animal feeds; the avian flu continues to impact the egg supply; and extreme weather conditions are adding complexities to food production.
The following is a look at how a few popular food items are affected.
Eggs
The price of eggs surged 59.9% on the year in December, up from 49% in November, according to the most government data. That means a carton of Grade A large eggs on average more than doubled in cost with prices reaching $4.25 in December 2022, compared to $1.79 a year earlier. In some parts of the country, consumers could pay up to $8 for a carton of organic eggs.
Avian flu, which has forced millions of chickens to be culled and caused a shortage of eggs, is the main reason behind the price increase. In a change from previous breakouts that faded as summer ended, this time the avian flu lingered into winter.
The holiday season is usually the peak for consumer egg demand, which means that we could see egg prices tick down a little in the new year, experts said.
But it will not be a significant drop given the ongoing flu and high cost of feed. If input costs continue to increase and the bird flu continues to kill large quantities of hens, the costs will most likely be passed on to consumers, said Curt Covington, senior director of partner relations at AgAmerica Lending, a financial services company providing agriculture loans.
Experts, including the biggest egg producer in the country, Cal-Maine, said the avian flu will be hitting egg supplies for the long term. “More than 43 million of the 58 million birds slaughtered over the past year to control the virus have been egg-laying chickens, including some farms with more than a million birds apiece in major egg-producing states like Iowa,” the Associated Press reported this week.
“I suspect it will take much additional effort to ‘stamp-out’ HPAI this time around and we may very well be dealing with the reality that this will be a year-round issue,” said Brian Earnest, lead economist for animal protein at CoBank, a national cooperative bank serving industries across rural America, in an email to MarketWatch.
The weekly supplies of eggs on hand has also reached a historic low, he told MarketWatch. For the week ended Dec. 19, cases on hand reported by the USDA totaled 1.176 million. That’s a 20% drop year-over-year, and the lowest level for the same week since 2014, he said.
Butter prices rose by 31.4% on the year in December, up from 27% in November, making the average price for a pound of butter $4.81 nationally. It was $3.47 a year earlier.
Extreme heat and smaller cow herds are the main reasons behind that, experts told MarketWatch. Cows eat less and produce less milk in the heat, and the cost of maintaining milk production skyrocketed last year, making farmers unwilling to expand their herds.
Going forward into 2023, the price of butter could soften, but year-over-year price increases could still stay high, said Tanner Ehmke, lead economist of dairy and specialty crops at CoBank.
Cows are approaching their prime milk-producing season, which usually runs from March through May, although customer demand usually peaks during the recently completed holiday season, he said.
But the increase of supply will not be much, Ehmke said, because costs are staying at record highs for farmers to maintain and expand their herds. Drought in the Western part of the country and the war in Ukraine continue to impact the supply and costs of feed.
“It’s [going to be] a very modest increase,” said Ehmke.
About 58% of the U.S. is at least “abnormally dry,” according to the National Integrated Drought Information System. It’s likely this year will see more drought-inducing La Niña weather conditions, according to National Weather Service’s Climate Prediction Center.
“If so, the third dry year in a row would signal the worst drought since at least 2011- 2013,” said Rob Fox, director of CoBank’s knowledge-exchange division in a 2023 preview released in December. “But this time it is more concentrated in the Western states, and it would be even more devastating to their already precarious water supplies and desiccated pastures,” he added.
At the same time, butter production is competing with the growing production of and appetite for cheese in the U.S., Ehmke told MarketWatch last September. U.S. cheese consumption per capita is growing around 1% to 2% each year, according to the USDA. U.S. cheese exports also increased, particularly to countries like South Korea and Japan.
Margarine, which is largely made of vegetable oil, is also seeing a huge price increase. The price of margarine, the substitute for butter in the old days, rose by 43.8 % in December, down slightly from 47.4% in November compared to a year before.
While soybeans, corn and sunflower oil are among the food items that have been hugely impacted by the war in Ukraine, another dynamic is at play here, analysts suggested: A large quantity of vegetable oil is being used for the production of renewable diesel.
In 2021/2022, 38.4% of soybean-oil supplies were used for biofuel production — biofuel is a broader category than renewable diesel — up from 35.6% the year before, according to USDA data updated in October 2022.
Transitioning to a green economy laid out in the Inflation Reduction Act will require more soybean supply. The expected growth in soybean oil-based renewable diesel will require considerably more soybean bushels for domestic production, wrote Kenneth Scott Zuckerberg, CoBank’s lead economist for grain and farm supply, in a report in September.
At the moment, global grain and oilseed supplies are tight, and the combined global stocks of corn, wheat and soybeans are forecast to decline for the fifth straight year in 2023, according to the CoBank report.
It may not have been a surprise to see the consumer discretionary sector of the S&P 500 get hammered last year amid talk of a looming recession while the Federal Reserve jacked up interest rates to push back against inflation.
But the stock market always looks ahead. Following a decline of 19.4% for the S&P 500 SPX, +0.42%
in 2022 and a 37.6% drop for the benchmark index’s consumer discretionary sector, this may be the time to begin looking for bargains.
And now, analysts at Jefferies have lifted the sector to a “bullish” rating.
In a note to clients on Jan. 10, Jefferies’ global equity strategist, Sean Darby, wrote: “A Goldilocks scenario might be unfolding for the U.S. consumer — falling inflation but steady employment conditions.”
He sees consumer confidence improving, in part because “households are still sitting on [about] $1.4 trillion of Covid savings.”
Darby pointed to a list of 18 consumer discretionary stocks favored by Jefferies analysts that was published on Jan. 6. Those are listed below, along with three stocks in the sector the analysts rate “underperform.”
The ratings of the Jefferies analysts for individual stocks is based on their 12-month outlooks for the companies, in keeping with Wall Street tradition.
So we have added another list further down, showing which companies in the S&P 500 consumer discretionary sector are expected by analysts polled by FactSet to increase sales the most through 2024.
The Jefferies 18
Here are the 18 consumer discretionary stocks recommended by Jefferies analysts with “buy” ratings on Jan. 6, sorted by how much upside the firm sees for the shares from closing prices on Jan. 9:
Click on the tickers for more information about the companies.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
The two right-most columns on the table show estimated compound annual growth rates (CAGR) for the companies over the past three calendar years and expected sales CAGR for two years through calendar 2024, based on the companies’ financial reports and consensus estimates among analysts polled by FactSet.
(We used calendar-year numbers, some of which are estimated by FactSet for prior years, because some companies have fiscal years or even months that don’t match the calendar.)
The stock pick with the highest 12-month upside potential, based on Jefferies’ price target, is Topgolf Callaway Brands Corp. MODG, -0.22%.
This company has the highest estimated three-year sales CAGR on the list, and has the third-highest projected sales CAGR through 2024, after Planet Fitness Inc. PLNT, +0.69%
and Chewy Inc. CHWY, +1.63%.
On Jan. 6, the Jefferies analysts also listed three stocks in the sector they rated “underperform.” Here they are, sorted by how much the analysts expect the stocks to decline over the next 12 months:
A look head at which companies are expected to increase sales the most over the next two years might serve as a good starting point for your own research.
Bear in mind that some of the companies in travel-related industries suffered declining sales for three years through 2022 because of the coronavirus pandemic. Some of those are on this new list of 20 stocks in the S&P 500 consumer discretionary sector expected to show the highest two-year sales CAGR through calendar 2024:
Among the companies on this list that didn’t suffer sales declines from 2019 levels, Tesla Inc. TSLA, -1.83%
is expected to achieve the highest two-year sales CAGR through 2022.
Dollar General Corp. DG, -0.26%
is the only company to appear on this list based on consensus sales growth estimates and the Jefferies recommended list.
The Securities and Exchange Commission said Monday it has filed charges against Stephen J. Easterbrook, former chief executive of McDonald’s Corp., for making “false and misleading” statements to investors about the circumstances that led to his ouster in November 2019.
The agency has also filed charges against McDonald’s for “shortcomings” in its public disclosures relating to Easterbrook’s severance agreement.
McDonald’s MCD, -0.55%
fired Easterbrook for exercising poor judgment and violating company policy by engaging in an inappropriate personal relationship with a McDonald’s employee. However, the separation agreement struck with the executive concluded that his termination was without cause, allowing him to retain substantial equity compensation that would have been forfeited in other circumstances.
“In making this conclusion, McDonald’s exercised discretion that was not disclosed to investors,” the SEC said in a statement.
In July 2020, McDonald’s discovered in an internal probe that Easterbrook had engaged in other, undisclosed relationships with employees. Those findings were not disclosed prior to Easterbrook’s termination, in the knowledge that they would influence the board’s decision making, according to the SEC.
“When corporate officers corrupt internal processes to manage their personal reputations or line their own pockets, they breach their fundamental duties to shareholders, who are entitled to transparency and fair dealing from executives,” said Gurbir S. Grewal, the SEC’s director of the division of enforcement.
The SEC is charging Easterbrook with violating anti-fraud provisions of the SEC Securities Act of 1933 and the Securities Exchange Act of 1934. Easterbrook has consented to a cease-and-desist order and five-year officer and director bar and a $400,000 civil penalty, without admitting to or denying the charges.
McDonald’s is charged with violating section 14(a) of the Exchange Act and Exchange Act Rule 14a-3. The fast-food giant has consented to a cease-and-desist order, without admitting to or denying SEC findings. The SEC has opted not to fine the company, as it cooperated with the agency and clawed back compensation after its probe.
The stock was slightly lower Monday in early trades.
Shares of Blue Apron Holdings Inc. APRN, +1.46%
shot up 9.9% in morning trading Friday, to trade back above the $1 level for the first time in more than two weeks, after the meal-kit company said it received a delisting notice from the New York Stock Exchange. The notice said the company was not in compliance with the listing requirement of a minimum average stock closing price of at least $1 over a consecutive 30-day period and an average market capitalization of at least $50.0 million, also over a consecutive 30-day period. The company said it plans to notify the NYSE on Jan. 6 that it received the delisting notice, and intends to submit a plan to “cure” the minimum stock price and market capitalization deficiencies. The stock has closed below the $1 mark since Dec. 6, and closed at a record low of 64 cents on Dec. 13. It has bounced since then after the company said it received funding from a major investor; it has rocketing 56.7% amid a four-day winning streak. Meanwhile, the company’s market capitalization was $41.6 million at current stock prices, and has been below $50 million since Nov. 11, according to FactSet data. The stock has plummeted 84.4% year to date, while the S&P 500 SPX, +0.59%
has shed 20.1%.
The last 12 months was a year of fast-rising inflation, fast-rising interest rates and fast-rising questions about a future recession.
Prices went up while stock markets and savings account balances went down, leaving consumers and investors dizzy and their wallets hurting.
There may be more financial pain, that’s pretty sure — but it might not be as bad as feared, according to Vanguard’s look ahead to 2023.
The likely recession will not send jobless rates charging sharply higher, sticker shock will fade for the price of goods, and the rise in rent and mortgages will also ease, Vanguard said.
“On Tuesday, inflation data for November showed prices are continuing to cool. Analysts say that makes a 50-basis point increase, rather than a 75-basis-point increase, more likely.”
The good news: This opens up chances for stocks to rebound, the asset-manager added.
The outlook, released this week, comes as Americans are trying to guess what 2023 holds for their finances while they manage their holiday shopping budgets, and 2022 investments.
On Tuesday, inflation data for November showed prices are continuing to cool. From October to November, the cost of living nudged up 0.1%, lower than the 0.3% forecast, the Consumer Price Index showed. Year over year, the inflation rate receded to 7.1% from 7.7% in October, according to the CPI data.
On Wednesday, the Federal Reserve will announce its latest decision on interest rate increases. A 50-basis point increase is widely expected after four jumbo-sized 75-basis point hikes from the central bank.
Here’s one roadmap for what’s next, as far as Vanguard’s researchers and experts can see.
Hot inflation will cool
Inflation rates during 2022 climbed to four-decade highs. There have been signs of easing, such as smaller-than-expected price increases in October.
“As we step into 2023, early signs of a recovery in goods supply and softening demand could help balance supply and demand for consumption goods and bring prices lower,” the authors noted ahead of Tuesday’s CPI numbers.
But the cost and demand of services are going to prevent a quick fall, they noted. Signs of slowing price increases are already emerging in rents and mortgages, but they will take longer to ease than prices of consumer goods, the authors said.
That echoes the view from Treasury Secretary Janet Yellen, who said Sunday there will be “much lower inflation,” absent any unanticipated shocks to the economy.
But while hot inflation will cool, it will still be warm to the touch. The Fed says 2% inflation is its target goal; Vanguard sees 3% inflation by the end of 2023.
A recession is very much on the cards
As “generationally high inflation” slowed economies across the world, the Fed and other central banks have countered with interest-rate increases to tame price increases. That “will ultimately succeed, but at a cost of a global recession in 2023,” according to Vanguard’s report. Vanguard sees a 90% chance of a recession in the United States by the end of next year.
In Vanguard’s view, it’s not so bad. “Households, businesses, and financial institutions are in a much better position to handle the eventual downturn, such that drawing parallels with the 1970s, 1980s, 2008, or 2020 seems misplaced,” the authors wrote.
Job losses may be clustered
For now, the jobless rate in a tight labor market is 3.7%, which is just a little above the lowest levels in five decades. That stands against the headline-grabbing list of companies where layoffs are mounting, notably in the tech sector.
When a recession, in all likelihood, lands next year, “unemployment may peak around 5%, a historically low rate for a recession,” the Vanguard outlook said. As interest rates climb, the job losses “should be most concentrated in the technology and real estate sectors, which were among the strongest beneficiaries of the zero-rate environment.”
The unemployment rate going from 3.7% to the 5% vicinity is “a sizable move,” Roger Aliaga-Díaz, Americas chief economist for Vanguard, said in a Monday press conference on the report. “But it is less dramatic of a rise than compared to past recessions perhaps.”
Spotting the opportunities
When interest rates go up, bond prices go down. So it’s been difficult for bonds with lower returns and “near-term pain” for investors this year, the Vanguard outlook said.
“However the bright side of higher rates is higher interest payments. These have led our return expectations for U.S. and international bonds to increase by more than twofold,” the report said.
Vanguard said U.S. bond return projections could be 4.1% – 5.1% annually over the next year versus its 1.4% – 2.4% return estimate last year. For U.S. stocks, the forecast could be 4.7% – 6.7% annually, while returns in emerging market equities could be between 7% and 9%.
On Tuesday morning, stock markets are soaring higher on the cooler than expected inflation data, igniting hopes of an end of year Santa Claus rally.
“‘There’s one silver lining of our outlook for a modest global recession. And it’s the clear silver lining of higher expected returns for investors.’”
— Joseph Davis, Vanguard’s chief global economist
Still, the Dow Jones Industrial Average DJIA, +0.30%
is down nearly 5% year to date. The S&P 500 SPX, +0.73%
is off 14% in that time and for the Nasdaq Composite COMP, +0.38%
is down more than 26%.
When the market hits bottom is impossible to know, the outlook said — but it noted “valuations and yields are clearly more attractive than they were a year ago.”
“There’s one silver lining of our outlook for a modest global recession. And it’s the clear silver lining of higher expected returns for investors,” said Joseph Davis, Vanguard’s chief global economist.
“We’re long concerned that the low rate environment was both unsustainable and ultimately a tax and a headwind for savers and long term investors,” Davis said.
But even with all the turbulence this year, “we certainly are starting to see the dividends to higher real interest rates around the world in the higher projected returns that we anticipate for investors over the coming decade.”
