Bega Group: Limited Brand Strength

Australians are still dining out. As a share of wallet, consumers are spending less at supermarkets than before the pandemic. We think this provides an opportunity for supermarkets over the medium term as spending between eating out and eating at home normalizes. But we expect this reallocation to have a negative downstream effect on suppliers like Bega. We think the balance of power between suppliers and the major supermarkets lies firmly with the supermarkets, making it a relatively less lucrative channel. Indeed, Bega has been increasing sales to nonsupermarket channels, like convenience stores and chain restaurants.