Saputo Posts Delectable Q2 Results, but We Think This Momentum Should Stall; Shares Not Attractive

No-moat Saputo booked solid second-quarter results, with sales advancing 20.9% (to CAD 4.46 billion, including CAD 20 million from acquisitions and negative CAD 12 million from foreign exchange rate), a byproduct of higher prices, as volumes held flat; management qualitatively referenced consumers have started to trade down across its categories around the globe. However, in the same breath, it suggested intentions to continue pushing forward with additional pricing, if necessary, which we surmise could ultimately suppress volume and its share position further, due to the highly commoditized and perishable nature of Saputo’s product portfolio. In this context, Saputo now holds less than 3% share in the North American dairy and alternatives category as of August 2022 (down 60 basis points from 3.3% a year ago), where roughly 27% of the market is dominated by private-label offerings, per Euromonitor.