TriumphPay’s CPO expects another year of depressed freight rates
(Image: FWTV)
On Monday’s The Stockout show, Grace Sharkey and I interviewed Josh Bouk, chief partnership officer at TriumphPay, the premier payments network for freight brokers, factors, shippers and carriers. According to Bouk, shippers have been relying more on extending payment terms lately in order to minimize working capital, at times demanding payment terms in contracts that extend out to as many as 150 days. Other trends discussed on the show were largely related to the persistently weak freight markets. Typically, truck rates go up at this time of the year because there is an increase in load volume without an increase in capacity. But rates haven’t increased materially this holiday season despite significant growth in e-commerce sales volume, primarily due to the persistent overcapacity. According to Bouk, tender rejection rates are less than half what they should be in a healthy truckload market at this time of the year. TriumphPay’s data shows that there has only been a modest level of transportation capacity leaving the marketplace the past few months. Therefore, in light of the capacity overhang and slow pace of capacity exiting, Bouk expects there to be at least another 12 months before there is a material increase in freight rates.
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Growing aversion to ultra-processed foods may be a major threat to CPG sales
There has been a steady stream of articles in the trade rags regarding ultra-processed foods, which, fairly or not, are receiving an increasing share of the blame for Americans’ poor health. I understand the argument that, after adding chemicals, dyes and various difficult-to-pronounce ingredients, there isn’t much whole food content in many packaged food products and the result is mostly empty calories. However, I also think the public might just be shifting the blame to highly processed foods’ after the wars on fat, trans fat, carbs, soda and sugar haven’t improved Americans’ health in the slightest. Nevertheless, if avoiding highly processed foods is the next diet trend, I think that could be a bigger risk to CPG companies than the impact of Ozempic and similar drugs intended for weight loss and diabetes, which has been a major bear thesis on many consumer staples names this year.
For those interested in the topic, here is a reading list:
Why we need to talk about ultra-processed foods (Just Food)
Is That Food Ultra-Processed? How to Tell (WSJ)
The Empty Definition Behind ‘Ultra-Processed’ (RealClear Policy)
WHO backs consumptions of some ultra-processed foods (Just Food)
Shares of The J.M Smucker Co. have fallen this year. Following its acquisition of Hostess, investors questioned whether it should have instead invested in healthier alternatives. (Chart: Barchart.com Inc.)
Consumer spending growth slows as inflation cools
(Chart: Bureau of Economic Analysis)
Presumably due to a combination of credit card balances exceeding $1 trillion, the resumption of student loan repayments, an early Black Friday and some cracks emerging in the job market, the growth in consumer spending is moderating. In October, personal consumption expenditures (PCE) growth was only 0.2% from the prior month, according to the Bureau of Economic Analysis, down from 0.7% month-over-month (m/m) growth in September.
The associated PCE price index was flat m/m and up 3% year over year (y/y), down from a 3.4% y/y increase in September. That 3% level of inflation remains above the Fed’s target of 2%, but the latest inflation data suggests that fourth-quarter inflation should come in below the Fed’s earlier projection. Plus, inflation is likely to fall further as lower commodity/ingredient costs are passed on to consumers. As a result, there is a growing consensus that the Fed may be finished raising interest rates. Rates coming back down would historically presage a pickup in freight demand with the caveat that there are numerous other pressures that may inhibit a surge in freight demand.
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