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

mailto:[email protected]�

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


• 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



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



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


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



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



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



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



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



• 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



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



• Commodity prices

• Retail price increases

• Timing • Pushback by retailers

• Volume

• Market volume below expectations • Share movements

14

Trends Respondents Are Seeing at Mass Merchants



13%

38% 31% 31% 31%

56%

0%

10%

20%

30%

40%

50%

60% A

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15

Trends Respondents Are Seeing at Independent Retailers



31%

19%

38% 38% 31%

63%

0%

10%

20%

30%

40%

50%

60%

70% A

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Seeing at Independent Retailers...

16

Net Headcount Reductions Over Last 12 Months



24%

41%

35%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Net increase No change Net decrease

Headcount Over Last 12 Months

17

Headcount Increases Suggest Optimism Last 90 Days



35%

59%

6%

0%

10%

20%

30%

40%

50%

60%

70%

Net increase No change Net decrease

Headcount Over Last 90 Days


November 2012




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


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


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.


November 2012




216-649-7269


new wild bird feeding industry - chamber nation survey results... · 2012. 11. 27. · • 20 years...

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