The Goods (U.S. Edition) – So Wrong, It’s Write
Welcome back to The Goods! This week we’re discussing a jumbo shrimp problem, Americans’ love for sauces, and how Sharpies brought production to the U.S. without raising prices.
During a DUI checkpoint operation in Northern California last week, police pulled over a Waymo taxi for making an illegal U-turn… only to find no driver behind the wheel. The San Bruno Police Department’s now viral social media post about the incident has garnered a number of comments, including questions about how they even managed to pull the robot car over and complaints about the company not being fined for the moving violation. However, officers said they can only issue tickets to humans, not hardware.
What’s In: This Week’s Trends
- Shelf Help: Startups and niche food brands are gaining ground on big food in a big way. In 2024, food startups – making up less than 2% of the packaged food space – drove nearly 39% of category gains, more than double their share the year before. Legacy food giants like General Mills and Kraft Heinz are being squeezed from both ends: low-income shoppers are trading down to cheaper store brands while more affluent consumers are opting for quality challenger brands. For instance, jerky maker Chomps surged from $70 million in sales in 2021 to $660 million last year, growing much faster than its traditional jerky rivals. This shift is forcing the industry to rethink its playbook by focusing on targeted acquisitions and staying culturally relevant with fresh offerings.
- Shrimply the Best: S. shrimp prices have spiked 21% since April, driven largely by tariffs on India – the country’s largest supplier – alongside Americans’ increased appetite for the crustacean. Some restaurant chains have mitigated the impact by using frozen shrimp stockpiles, while others are revamping menus or raising prices. Last month, Red Lobster changed its well-known “Endless Shrimp” promotion (whose previous iteration drove the company into bankruptcy) into “Ultimate SpendLESS Shrimp,” a $15.99 plate with three shrimp dishes. Local shrimpers from Louisiana and Florida celebrated the tariffs, but their seasonal catches are not a substitute for 90% of the U.S. shrimp supply that is farmed abroad.
Cash or Card: Consumer Behavior
What’s going on with the consumer these days? This week we talk about the sizzling sauce market, Gen Z going screenless and growing demand for smaller portions.
- Endless Sauce-ibilities: From classic ketchup to kimchi mayo and jalapeño mustard, Americans are addicted to dipping. The U.S. condiment market exceeded a value of $12 billion in 2024, surging over 50% since 2019, according to Mintel – and it is expected to grow by almost another $1 billion by 2029. Established brands like Kraft Heinz have expanded their ketchup varieties and widened their sauce portfolio, while restaurant chains like Chick-Fil-A, Taco Bell, and Panda Express have rolled out their own bottled sauces. As cost-conscious Americans remain interested in high-protein diets, they may be turning to sauces to enhance the flavor of more affordable cuts of meat, transforming a budget-friendly meal into a zesty dip-and-dine experience.
- Life in Low-Res: Young adults are trading in iPhones for flip phones, CDs, physical maps and point-and-shoot cameras. After growing up consuming media on their phones, ordering food on apps and using rideshares, Gen Z consumers are tired of screens, and many feel that they don’t truly own their media without it being a physical CD or vinyl. According to a 2023 Harris Poll survey, 60% of Gen Z respondents expressed a desire to travel back to a time when everyone was not “plugged in,” and 80% feel they are too dependent on technology. Some young adults are finding a happy medium, paying for a subscription app that mails CDs or taking digital camera pictures for their Instagram posts.
- I’m Smalling For You: Olive Garden may be known for its bottomless breadsticks and pasta, but the chain has actually found recent success by shrinking portions. After testing a new menu of smaller entrée portions with lower prices to match, the chain’s affordability metric increased by 15%, and customers are coming back for more. Chains like P.F. Chang’s and Cheesecake Factory are also rolling out their own cheap eats, hoping to bite into fast food’s market share. In addition to consumers seeking out more budget-friendly bites, snack-forward eating and GLP-1s are also likely driving this shift. The National Restaurant Association reported that 64% of consumers tend to substitute three traditional meals with snacks throughout the day, and 74% want smaller portions.
Making Moves: Industry Transformations & Innovation
ICYMI, even industry icons need to reinvigorate their brand presence through unique and creative ways. Here are some new brand moves that you should know about:
- Out For Spud: Lay’s wants you to know that its potato chips are made of potatoes. In addition to specifically calling out that they are, in fact, “made with real potatoes,” the brand’s crinkly yellow bags will soon be swapped out for a heavier, matte finish packaging. Lay’s owner PepsiCo is also reformulating the chips to lean more on natural ingredients, switching some varieties from seed or corn oils to olive or avocado oil and reformulating their barbeque flavors to remove artificial coloring. Consumer research revealed that 42% of people didn’t know Lay’s chips are made out of real potatoes.
- Bulk Up to Slim Down: Novo Nordisk, the maker of Ozempic and Wegovy, has partnered with Costco to sell a monthly supply of the weight loss drugs for $499 out of pocket. The move expands upon the Danish pharmaceutical company’s existing direct-to-customer model and partnerships with CVS and Walmart, making its GLP-1 medications more widely available in a trusted retail setting. As demand for weight loss treatments continues to surge, this is the latest move by a GLP-1 maker to stave off competition from med spas, clinics and compounding pharmacies offering cheaper alternatives.
- So Wrong, It’s Write: Back in 2018, many Sharpie markers were made overseas. That was until Sharpie-maker Newell Brands, led by then-CFO, now-CEO Chris Peterson, challenged the team to bring production back to the U.S. Through $2 billion in investments, thousands of hours of training and a complete overhaul of a U.S. production factory, most Sharpies in all 93 colors are now made domestically – and done so cheaper, quicker and with higher quality. Rather than reducing employee count, Newell focused on retraining staff to run and maintain the automated assembly lines. At least half a billion Sharpie markers are now churned out from the company’s factory in Tennessee every year, and only the felt tip is imported from Japan.
Capital Markets Corner
What consumer news is moving the market this week? Our investor relations experts break down this week’s trends and headlines.
- Rolling the D(ICE): Intercontinental Exchange Inc. (“ICE”), the parent company of New York Stock Exchange, plans to invest up to $2 billion in cryptocurrency-based prediction market, Polymarket. Polymarket allows users to wager on real-world events, ranging from politics to pop culture. As part of the deal, ICE will become a global distributor for Polymarket’s event-driven data, with plans to collaborate on future tokenization projects. As an endorsement from one of the world’s leading exchange operators, the investment could lend Polymarket the credibility it needs to do business in the U.S. after being told to cease U.S. operations in 2022 for failure to hold proper licenses. The move follows the agreement by CME Group, the largest U.S. derivatives exchange, to partner with online gaming platform FanDuel to offer betting on stocks and commodities.
Word on the Hill
The Word 🏛️ Some retailers are looking for change… literally. Pennies are disappearing from circulation faster than expected since the U.S. Mint stopped producing the one-cent coins in August. Industry trade groups are urging Congress to pass immediate legislation allowing businesses to round cash transactions to the nearest nickel.
What does it mean? While rounding prices up to the nearest nickel may seem like a straightforward fix, retailers face specific regulatory hurdles. Industry groups argue that existing legislation doesn’t do enough to provide businesses with the clarity they need to address three specific concerns:
- The patchwork of state and local sales taxes causes final prices to vary.
- SNAP-paying customers must be treated exactly like any other customer, so rounding certain transactions in either direction could cause retailers to violate SNAP regulations.
- Many retailers cash checks – including paychecks – for customers without bank accounts and will need to round these transaction amounts to continue providing these services.
Meanwhile, on the street… Kwik Trip announced that all cash transactions across its convenience store locations will now be rounded down to the nearest five cents as a “guest-friendly approach.” The company says it will continue this policy, which does not apply to digital and card-based transactions, until Congress enacts a permanent solution.
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