How Boring Food and Beverage Companies Turn into Huge Stock Winners Year after Year

Joe Weisenthal (0:11)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:17)

And I'm Tracy Alloway.

Joe Weisenthal (0:19)

So Tracy, back in the spring when the pandemic hit, I did something I had never done before. Do you know what that is?

Tracy Alloway (0:28)

I think you're gonna have to narrow it down, because I think a lot of people did stuff they never did before in 2020 But go on, what was it?

Joe Weisenthal (0:35)

That's true.

I didn't know what to do. I was panicking like everyone else. I didn't know what the risks would be. I needed to do something tangible to make myself feel like I had some control over my life. And I went out and bought a few cans of sardines.

Tracy Alloway (0:53)

What, like a prepper? Were you worried about the food supply or? Okay, so you started stockpiling canned goods.

Joe Weisenthal (1:04)

Yeah, basically. I went to the grocery store sometime in the middle of March, and I knew that, you know, I was like, I don't know what's going to happen. I don't know if there's going to be disruptions to the food supply. I don't know anything, but I know that, you know, canned sardines have a lot of protein and they're shelf stable. They'll last for a long time. So if everything goes bad, I can at least stay in my apartment and eat canned fish.

Tracy Alloway (1:28)

I have this image now of a post-apocalypse Joe sitting in your East Village apartment eating sardines directly out of the tin. But I gotta say, you actually, I don't think you were alone because certainly in Hong Kong, there was a lot of panic buying when the coronavirus crisis started and the shelves were empty for a long time.

Joe Weisenthal (1:51)

Yeah, incidentally, I never actually opened any of the sardines, but they did bring me some comfort knowing that they were there.

And, you know, of course I bought toilet paper and just all that other stuff. It was like, you know, just anything that was like on the grocery store shelves, stable, reasonably edible, I thought I should not buy a little bit of it.

Tracy Alloway (2:10)

In 2020, the year that household products found new found appreciation, I'd say.

Joe Weisenthal (2:16)

Yeah, exactly right. So a lot of companies that hadn't done that well, or that maybe people hadn't thought about in a while really did see a surge because I wasn't alone. In fact, I think there was even an article a few months later in the journal about all these people buying canned fish. But the point is lots of people were buying stuff on the grocery store shelves, consumer products, consumer staples that would last a long time, that would be safe, that would be predictable.

And the sort of big food and consumer conglomerates, they were among the winners, especially early on during the pandemic.

Tracy Alloway (2:54)

Yeah, I think that's right. And it's also, I would say, different to what a lot of people were expecting, at least early on in the crisis. I don't think a lot of people expected it to manifest itself in a consumption boom, but we did see people going out and snapping up a lot of staples.

And I know we're focusing on food and household goods and things like that, but it even extended to consumer discretionary since so many people were stuck at home, they were buying lots of stuff online. And so I guess we saw a pretty counterintuitive reaction to a pandemic and economic crisis.

Joe Weisenthal (3:35)

Yeah, absolutely right. But of course the question is always like, can that last? I mean, some companies were winners during the pandemic, but we expect them to have like cemented their position. So for example, Zoom, which we're recording this actually over Zoom right now, they were one of the big stock market winners, everyone conducting meetings, and there is this expectation that Zoom will now be with us for a long time as we sort of do business. And so the question is, what is the future of these big consumer goods companies? Because pandemic buying aside, there's been a lot of questions about whether consumers are looking for something new, whether people are gonna buy food based on direct to consumer brands that advertise to them on Instagram, in which case, shelf space at the grocery stores not as important, grocery stores themselves are a changing business, all kinds of changes to the sort of consumer products business.

So we don't really know for sure if those early winners, like whether they will be able to consolidate those gains or whether that was sort of a one-time blip for a bunch of companies whose fortunes don't look as great in the future.