Restaurants
Black Box - State of the Restaurant Workforce
In a survey of 300+ participants on 9/2/21, respondents said for the next 6-12 months, 46% of restaurant corporate office staff are expected to work at the office at least three days a week. Only 28% of 300+ operators surveyed on the webinar classify corporate office work as "completely voluntary." Over 45% of restaurant operators still believe that higher pay in other industries is why employees leave the industry. Other reasons included better working hours, company culture, and a lack of professional development opportunities.
Consumer Staples
The Long Drink (SAM)
Boston Beer announced a nationwide launch of Bevy Long Drink in November. The new product is a sparkling refresher inspired by a traditional Finnish cocktail made of gin, grapefruit soda, and tonic. Boston Beer’s version will not have spirits but will be made from a malt base and wild juniper berries. The drink will be 5.8% ABV and come in two flavors sparkling citrus and sparkling berry. The Finnish Long Drink has low awareness in the U.S. Last year The Long Drink, a Finnish beverage, launched in several states, including California, Florida, and the Midwest. In addition, Hartwall Original Long Drink launched earlier this summer in six states.
Boston Beer has announced many future FMBs in recent weeks, including Hard MTN Dew, a JV with Beam Suntory to make hard seltzer spirits, and Sauza tequila branded FMBs Truly cocktail-inspired flavors for the winter. We are probably past the peak of innovation of the hard seltzer category based on the new products in the pipeline compared to the past big launches of iced tea, lemonade, and punch. Innovation is essential in the hard seltzer category due to the high decline rates for last year’s new products. The recent flurry of new product announcements and JVs with other beverage companies certainly looks different when viewed through the lens of a company lowering guidance twice in less than two months.
SAM pulls guidance
The Boston Beer Company withdrew its guidance for 2021, with EPS between $18 and $22 last night. In addition, guidance was lowered on the Q2 earnings report from $22-26. The company cited slowing trends in the hard seltzer category, which will cause it to write off inventory, pay third-party manufacturers fees for ordering less product, and incur other fees that will be expensed this year.
Management seems intent to avoid widespread discounts on Truly in the marketplace. There will be a reckoning in the hard seltzer category, with retailers having devoted increasing amounts of shelf space to the category in the past two years. In numerous stores, White Claw and Truly were just stacked on the floor for easy access and ease of restocking. It is easy to see how other hard seltzer products will have to be cleared or returned to distributors as demand in the category no longer keeps up with recent ordering trends. Boston Beer wants to ensure that the customer does not see Truly cleared in a way that leaves a bad taste in consumers’ mouths.
Our thoughts have not changed, but our EPS estimates have. Hard seltzer will not be a high growth category, so SAM shares do not deserve a premium multiple. $16-20 (or lower) is a better range for run-rate EPS, and a 20x multiple still reflects a premium for “depressed EPS power.”
See our separate note for our full thoughts.
Beer imports decelerate (STZ)
Total alcohol beverage imports grew 16% by value over the last 12 months ended July. Over the last three months, imports accelerated to 53% by value from 48% in June. 35% of all imported beverage alcohol by value came from Mexico over the last 12 months. Total beverage alcohol exports grew 2% by value over the last 12 months and grew 28% over the last three months. 26% of all exported beverage alcohol by value went to Canada over the last 12 months.
Imported beer grew 19% by volume and grew 21% by value over the last 12 months. Over the last three months, imports grew 31% by volume and grew 34% by value, decelerating from 43% to 47% respectively for June's three-month period. 73% of imported beer by value comes from Mexico. Exported beer grew 59% by value over the last 12 months and grew 123% by value. Constellation Brands represents a majority of Mexican beer imports and 60% of imported beer. The latest three months indicate growth in price/mix. Constellation Brands is now lapping the production shutdown at its plants last year, driving the strong YOY growth. Management said at an investor conference yesterday that the worst of the out of stocks were in August and are now behind the company.
Imported packaged wine grew 19% by volume and 16% by value over the last 12 months and 35% by volume, and 68% by value over the last three months. Imported packaged spirits grew 18% by volume and 17% by value over the last 12 months. Over the last three months, spirits volumes grew 44% by volume and 63% by value.
