That didn’t take long (VWE)
Vintage Wine Estates acquired The Sommelier Company yesterday for $8M, not including an earn-out. The Sommelier Company is a global provider of independent wine and spirits events. In addition, the company conducts virtual and in-person events such as guided tasting experiences and wine education for corporate and consumer events. The Sommelier Company had revenue of $5M last year with adj. EBITDA margins above 60%. The acquisition is expected to enhance Vintage Wine Estate’s DTC business. The Sommelier Company will offer a selection of Vintage Wine Estates wines, including custom labels and etched bottles. The acquisition is expected to be immediately accretive to earnings. We expected Vintage Wine Estates to make an acquisition this year but did not expect it so soon after it was “de-SPACed.” We expect the company to be acquisitive with its new cash. Management is not new to acquisitions and has a proven track record of creating value in the fragmented wine industry.
Perimeter departments benefited from COVID-19 (KR)
The Supermarket News 2021 Fresh Foods Trends report surveyed 116 supermarkets and wholesalers responsible for the fresh food department. Many respondents reported a sales increase in their perimeter departments during the past year due to COVID-19 restrictions, as seen in the pie chart below. Two-thirds of respondents reported sales increases ranging from 1% to 15%, while 18% reported sales increases between 10% to 12%. Conversely, nearly half of those reporting decreases reported a sales decrease of 22% or more. The main contributors to the sale decreases were the deli and prepared foods area.
The perimeter departments are the most profitable for the grocer. Many grocers saw an improvement in the profitability of their perimeter departments during the past year. The meat/seafood and produce departments had the most improvement in margins, as seen in the chart below. With food consumption shifting back to away from home, grocers will not maintain the largest margin tailwind – the benefit from increased velocity in the produce and meat/seafood department. In Kroger’s most recent quarter sales, deleverage and lower shrink benefit were the two largest headwinds to gross margins.
UK grocery sales fall (NOMD)
Kantar reported that supermarket sales in the UK fell 1.6% for the 12 weeks ended June 13. Shopping visits increased 13.1%, while the average spend per trip fell 13.6%. Off-premise alcohol sales increased by £29 million compared to May despite the reopening of restaurants and pubs in part due to the bank holiday. Online grocery sales grew 0.2% for the four-week period and represented 13.4% of grocery sales. The competitive intensity for online small grocery orders has picked up with online start-ups Gorillas, Getir, and Weezy forcing responses from the brick and mortar chains. The coming months will reveal whether British consumers resume pre-pandemic shopping behavior or if it was a secular shift. Kantar reported that grocery deflation was 1.9% in part due to more promotions. While the U.K.’s vaccination rate lags the U.S., it is ahead of continental Europe. The UK is Nomad Food's largest country by sales, representing 31% of overall sales (before the Fortenova frozen food acquisition). British consumers have not adjusted much of their total food spending as pandemic restrictions have only recently loosened, but their purchasing has begun to change.
