Lowering Blue Moon's Valuation in Light of Pricing Disruption in Some Online Channels

There are three drivers to Blue Moon's growth strategy: per capita consumption growth; footprint expansion; and new product development. We think the company is well-positioned to benefit from all three, and should achieve growth well into the double digits for at least three years. We think the underlying growth rate of the concentrated liquid laundry detergent market in China is in the mid-teens. Growth was slower in 2020 due to fewer social occasions in lockdown and lower laundry volume, but according to Euromonitor, concentrated liquid laundry detergent grew at an average annual rate of 20% between 2015 and 2019. Conversely, despite a very strong year in 2020, we expect liquid hand soap to revert to levels also in the midteens, slightly above the 11% growth rate of recent years. Urbanization and increasing workforce participation, as well as growing disposable incomes are the secular drivers of this strong underlying growth rate. Management has positioned Blue Moon to be a leader in the online channel, which is growing even faster. With a leading brand in its categories, Blue Moon is likely to leverage emerging e-commerce platforms to further drive growth.