Beer takeaways from O-I Glass Q3 call (STZ)
“Beer is growing quite well in key markets for us in Western Europe. So we’re seeing high single-digit growth for beer in glass in Italy, France, and the UK…. So with those solid fundamentals, we don’t see any issue with our price increases. We’re very confident we’re going to fully recover inflation going into 2022.” Higher glass costs in Western Europe.
“In the US, I’ll give you a few data points. When we look at both channels, on-premise, and off-premise through Nielsen and CGA, the statistics we see an impressive performance. For example, in beer, which is up like 2%, spirits are up like 13%, and premium wine is around 10%. So what that means is, even with the channel rebalancing, the demand for those products is quite good.” Overall beverage alcohol growth is strong when including on-premise.
“Exports for beer, tequila, and NABs out of Mexico are quite strong.” O-I Glass is Constellation Brands’ glass supplier.
– O-I Glass CEO Andres Lopez 10/26.
Cardboard container inflation
Packaging Corporation’s containerboard mills set an all-time quarterly sales volume record in Q3, and its box plants set new third quarter records for corrugated product shipments and shipments per day. Through the first three quarters, box shipments volume was up 6.7% per day compared to the industry is up 4.5%. Packaging Corporation’s volume from its box plants is constrained by labor shortages, truck availability, driver shortages, raw material availability, and supply chain bottlenecks. The company’s price/mix was up 4% in the quarter. Management did not mention further price increases in Q4, just realization from prior increases. Higher cardboard packaging costs are one of the numerous inflationary costs for many consumer staples companies.
Raised food price expectations (KR)
An updated CPI release from the USDA Economic Research Service reported that food at home prices are expected to increase 2.5-3.5% this year and 1.5-2.5% next year compared to the 20 year average of 2.0%. Beef and pork prices with their more significant weightings have been leading the food categories. The ERS reported that wholesale beef prices increased 14.2% from July to August 2021. ERS price projections indicate a 20% increase in wholesale beef prices this year is possible. The updated ERS forecast shows that meat, poultry, and fish prices are now between 4.5 - 5.5%, up from 4 - 5% last month. Beef prices are expected to be 6.5 - 7.5% higher than 4.5 - 6% last month. Pork prices are expected to be up 6.5 - 7.5% from 2020, up from 6 - 7% last month. Poultry prices in comparison are expected to increase 3.5 - 4.5% from 3 - 4% last month. Beef and veal prices have increased 6.5% this year compared to the same period last year, but September was up 17.6% compared to the prior year. Pork prices are up 6.3% so far in 2021, but in September were up 12.7%.
In our recent grocery Black Book, we dug into food inflation expectations and the causes. CLICK HERE for link to the replay and materials.
Draft beer declines (BUD)
Draft beer sales volumes decreased 6.6% during the weekend of October 21-24 compared to the weekend two weeks prior, according to BeerBoard. BeerBoard tracks draft sales at on-premise bars and restaurants nationwide. Of the critical markets BeerBoard tracks, South Carolina had the steepest decrease of 11.1%, Texas down 10.5%, Florida down 8.3%, and Illinois down 7.7%. On the other hand, Michigan increased 1.7%, and New York increased 1.3%. All of the markets decreased by double digits when compared to the same weekend in 2019. In addition, the average tap pouring is down 50% compared to 2019, while volumes are down 18%. During the weekend of October 21-24, domestic beer accounted for 50.4% of draft beer volume while imports were 16.1% and craft was 33.5%.
