May CPI accelerates away from home (ACI)
The CPI for food at home decelerated from 1.2% YOY in April to 0.7% in May. The CPI for food away from home accelerated from 3.8% YOY in April to 4.0% in May. The comparisons last year will continue to drive a widening differential in food at home vs. away from home next month as well. The chart below shows that it is becoming even more affordable to eat at home, a headwind for meal consumption at restaurants. The CPI for meat, poultry, fish, and eggs had the biggest deceleration from 2.0% in April to 0.2% in May. The CPI for alcoholic beverages decelerated from 1.9% in April to 1.6% in May. Consumers have other considerations than affordability when returning to restaurants after more than a year of pandemic restrictions. Albertsons said that its business plan assumes food at home inflation to be 1-2%.
Shrinking grocery trade areas – temporary or permanent (KR)
Conventional grocery stores were one of the biggest beneficiaries during the pandemic. Consumers consolidated shopping trips and reduced the distance they traveled to shop. Those changes benefited the local conventional grocer who carried the majority of items consumers wanted. Many conventional grocers, including Kroger and Albertsons, saw the shrinking trade area trend continue into Q1, as seen in the following chart. Both Kroger and Albertsons have encouraged this trend to focus on their loyalty programs and online grocery offerings. If temporary pandemic causes drove the trend, other food retailers would benefit, like specialty grocers, mass-market chains, and warehouse clubs.
Can shortage again? (SAM)
Ball Corporation said it would continue allocating inventory to customers with supplies remaining tight. The company is also importing cans to keep up with demand this summer. At an investor conference, this week CFO Scott Morrison said, “In the Northern Hemisphere, both in Europe and U.S., we’ll be on allocation again this summer. We’re coming into this summer in North America extremely tight on inventory.” Supply is estimated by Ball and a competitor to be 10-14 billion cans short of where demand is projected to be with the shift to off-premise. The CFO said the reopening of the on-premise channel has not resulted in a dramatic change in demand. Many of the fast-growing new product introductions are being packaged in cans like hard seltzer and ready-to-drink cocktails. Ball’s new facility in Glendale, Arizona, came online in Q1 near a new White Claw plant. Ball expects a facility to be opened in Pittston, Pennsylvania, by the end of Q2 and another plant in Bowling Green, Kentucky, before year-end. The industry is slated to add 30 billion cans by the end of 2023. The on-premise channel has only recently begun to recover, so it’s no surprise the impact has not been felt yet on can supply. We are doubtful hard seltzer sales will be limited by can supply this year, but we will adjust if the data points point in that direction.
