Restaurants
A Setback
We remain SHORT Casual Dining as a Theme
Restaurant sales lost some ground during August amid a spike in COVID cases and its negative effect on consumer confidence. In August, same-store sales growth was 6.1% during the month, a 2.1 percentage point drop compared to July. Traffic growth was -5.4% during August, a 1.6% decline from July. Sales growth was the lowest recorded since 5.8% posted in May, and traffic results were the worst for the industry in the last three months. The industry is relying on larger-than-usual growth in average guest checks to propel sales into positive territory. The average check grew by 4.5% year over year in August. On a 2-year basis, the average check grew by 13% during the month. However, the average check grew by only 3.2% in all of 2019. Sales growth was 11.8% for limited-service restaurants in August, an improvement of 0.8% points compared to July. Meanwhile, full-service experienced a sharp downturn with sales growth at 2.4% in August, a drop of 3.8 percentage points compared to July.
Inching towards pre-pandemic food trends
Food away from home sales continues to recover as a percentage of total food consumption. Food away from home has been a secular increase in the share of food spending, as seen in the chart below. The pandemic altered the secular decline in the share of food-at-home consumption. In August, the food at home fell 40bps from July to 54.2%. Food at home was 49.9% of food consumption in February 2020. At the rate of change since the anniversary of the pandemic in March 2020, it will take another five months to reach the pre-pandemic share of food consumption.
Consumer Staples
Grocery store retail sales accelerate in August (KR)
Grocery store retail sales increased 6.2% YOY in August, accelerating from 2.3% in July. The two-year average increased 100bps from July but was in line with May and June. Food and beverage store sales increased 5.7% in August, accelerating from 2.4% in July.
Wine sales tick up (VWE)
Domestic wine sales, including bulk imports, increased 10% YOY to $51.8B in the year ended August 31. August sales were $4.3B, up 21% YOY, accelerating from 20% YOY in July. Off-premise wine sales increased 3% for the year but decreased 7% for the month of August YOY. DTC shipments increased 13% for the year ended August and increased 27% YOY in August. Sales in August were the second-highest month of the calendar year so far.
U.K. oat milk (OTLY)
In the U.K., oat milk has surpassed almond milk to become the #1 plant-based milk, according to Mintel. Oat milk sales doubled in the past year. 32% of adult Britons drink plant-based milk compared with 25% in 2020. Among people aged 25 to 44 years old, it is 44%. British consumers spent £146M on oat milk in 2020, up from £74M in 2019. Almond milk sales grew from £96M to £105M in 2020. Total plant-based milk spend grew 32% to £394M in 2020. In comparison, dairy milk was £3.2B, with 89% of people consuming it. The U.K. is further along the adoption curve for oat milk than the U.S. and is a good indicator of plant-based milk’s future in the U.S. However, the U.S. is further ahead in plant-based milk consumption, with 41% of households currently purchasing plant-based milk. In the U.S., oat milk is still a distant #2 to almond milk… for now, but we expect that to change in several years.
