Hard seltzer decelerates (SAM)
Through Q1 hard seltzer accounted for 8.7% of total beer category sales in the off-premise channel. White Claw believes hard seltzer could reach 25-30% of the beer category in the next five years. Jim Koch of Boston Beer Company believes hard seltzer can double over the next three to five years. Boston Beer’s expectation for this year is hard seltzer to grow 60-90% in 2021, with Truly growing faster than the category.
Hard seltzer had decelerated to a single-digit growth rate in the off-premise channel now that it is up against the difficult comparisons during the pandemic when on-premise establishments were closed. Hard seltzer benefited from at-home consumption, in part because the mix on-premise is much lower. In the latest four-week period, hard seltzer grew 7.4% and in the last week ending May 8 grew 1.6%. Boston Beer believes there will be a shakeout in the fall when brands with slower velocity are removed. It seems likely that slower turning hard seltzer products are reduced, but it also seems likely that the category receives less prominence in retail stores with growth slowing. The top ten brands have ~95% of the hard seltzer share, so removing products out of the top ten will likely negatively impact other hard seltzer brands. We have been highlighting how hard seltzer benefited from the pandemic, and now it is being seen in the sales data.
Wine sales accelerate in April (BSPE)
Domestic wine sales, including bulk imports, decreased 4% in the 12 months ended April. Sales for April were 24% higher YOY, accelerating from -3% in March. Off-premise sales in April were 13% lower YOY, similar to the 12% decrease in March. On a TTM basis, off-premise sales were up 12%. DTC shipments were 5% higher YOY in April, decelerating from 16% growth in March. On a TTM basis, DTC shipments were up 15%. Vintage Wine Estates' sales mix differs from other wine companies, with a third of its sales coming from DTC, B2B, and wholesale. This positions the company to continue to grow to lap the pandemic boost to wine.
Pallet shortage (KR)
In addition to the other shortages challenging food suppliers, there is a pallet shortage. According to a letter to the North American produce industry signed by 19 produce industry groups, the pallet shortage is acute. The shortage has been caused by higher lumber prices, the availability of lumber, a shortage of resin to make reusable pallets, and the reduced number of trucks. In the past few weeks, pallet costs have increased more than 400% in some areas. The produce growers and suppliers are concerned about their ability to meet delivery needs unless there is a concerted effort to ensure pallet availability. The pandemic has challenged numerous supply channels, which will take time and resources to remedy. The pallet shortage does not get as much publicity as trucks and computer chips.
