Sweet profits
Captains of candy
Good morning, sugar-rush addicts. This is your Stock Market Rundown for August 28th, 2023. Thanks for joining me on this lovely Monday. Let’s dig in:
TODAY’S TOP STORY: RULING CANDY MOUNTAIN 🍫
Maltesers, Milky Way, M&Ms. When you’re perusing your chocolate-bar choices at the convenience store, it seems like you have endless options to blow your diet.
But the confectionary industry is actually ruled by a handful of conglomerates, who have their sticky fingers in your pocket whenever you enjoy a lil’ fattening treat.
The three biggest players are Mars, Nestle, and Mondelez. The first two probably sound familiar from candy binges. As for Mondelez, it’s just a novel name slapped on a longstanding business: the snack-food part of Kraft, which got spun off a decade ago.
The idea was that as a separate business, Mondelez could focus on exploiting snack-food growth in the developing markets. They’ve been busily selling Cadbury, Oreo, and Trident to consumers from Bostwana to Bhutan.
The confectionary business enjoys enviable pricing power: Nestle raised prices more than 9% in the first half of 2023. Do you really notice if the price of your 3 PM KitKat goes up twenty or thirty cents? Probably not.
But despite a billion eager eaters, Big Candy has been under pressure from big government, since—let’s be real—junk food is on par with vodka sodas and vaping for public health purposes.
Nestle examined their own food-and-drink portfolio, and rated half of it as “unhealthy”, thanks to big sellers like Häagen-Dazs ice cream and Rolo milkshakes. Welcome to capitalism… I don’t think anybody has ever built a billion-dollar business selling fruit salad.
SO WHAT ELSE IS GOING ON?
Santa gets stingy: Macy’s is forecasting weak consumer spending for the coming holiday season. The department store chain reports shoppers are cutting back discretionary spending on apparel and accessories, also known as the “crap you don’t need” category.
Tesla just had a surprise switch in the CEO seat, from a longtime exec who served as a “calming influence”, to a basically unknown functionary. Working for Elon Musk must be like riding a roller-coaster assembled by carnies at the state fair… thrills punctuated by fear.
“I’m in the camp that we’ll have at best a mild recession, maybe no recession at all,” says the finance chief of Wendy’s. My bet is, the guy who monitors data dashboards on Vanilla Frosty sales probably has a better read on the American consumer than most Wall Street strategists.
Beauty conglomerate Estee Lauder’s stock is slumping as buyers prefer chic indie brands rather than Estee Lauder’s staples like Clinique and MAC. Estee Lauder’s CEO, Fabrizio Freda, is working on a turnaround. Now I don’t wanna sound like some man-hater here, folks, but what does a 65-year-old man know about makeup? He doesn’t even wear lipstick.
That’s it for today, see you bright and early tomorrow. Yours in capitalism, The Axe