IPO pipeline (ZVIA)
According to Renaissance Capital’s IPO Index, IPOs have underperformed the S&P 500 YTD at 1.0% vs. 16.3%, respectively. More companies are coming public despite the lagging share price performance, as seen in the charts below. The last week of June was the busiest week for traditional IPOs since 2004. By our own count, a dozen companies in our Restaurants and Consumer Staples coverage have filed S-1s, SPACs that have announced merger targets or have stated publicly that they intend to go public this year. Next up in our coverage is Zevia, a calorie-free soda company.
Beer growing conditions (STZ)
Record heat and drought are taking their toll on the U.S. barley crop. It is the worst year based on records going back to 2001 for barley as seen in the chart below. Growing conditions are also poor for spring and durum wheat. For spring-sown crops grown in the north like spring wheat and barley, the crop conditions are the worst for the past two decades. The latest USDA Crop Progress report had 39% of the barley crop rated poor to very poor. Roughly 80% of the barley production is within areas experiencing drought. The price of barley is up 31% YOY. 98% of the spring wheat crop is in areas experiencing drought. Spring wheat makes up a quarter of the U.S. annual wheat crop. Yesterday, the USDA lowered their all-wheat production estimate by 10% in the July WASDE report due to stress on the spring wheat crops. Barley is the most commonly used grain in beer making, but packaging and transportation comprise more COGS. With the higher costs in trucking, glass, cans, and diesel, beer manufacturing is beset by inflationary pressures.
Beer production increased above pre-pandemic levels in April (BUD)
Total domestic beer production increased 13.1% in April, according to the Alcohol & Tobacco Tax and Trade Bureau (TTB). Production accelerated from flat in March. Compared to April 2019, production was 1.4% greater. Shipments of bottles and cans were flat with the prior April and March 2021, but compared to April 2019 was 4.1% greater.
Keg production was up considerably compared to a year ago when on-premise was shut with 1.09 million barrels compared to 0.02 million barrels last April. Keg production was up 8.1% month over month. Compared to April 2019, keg production was 15.7% less. A recovery of production packaged in kegs should help somewhat alleviate the shortage in cans. Brewery on-premise use increased 56.6% YOY in April. At the end of April, inventory was 16.3% higher YOY, up from the 9.4% increase at the end of March.
