Total beer sales (TAP)
December off-premise beer category sales decreased 7.5% YOY in volume and 4.0% in dollars. Beer sales in the on-premise channel increased 139% in volume and 144% in dollars. Due to the higher prices in the on-premise channel industry sales increased 38%. Combined on-premise and off-premise beer volumes were up 6% YOY. Industry off-premise trends have been weak to start 2022 (-3.6% YTD through 2/20), but it’s important to add the contribution from the on-premise channel.
Meat substitution (KR)
According to FMI’s 2022 Power of Meat report, 58% of shoppers have changed their anticipated meat purchase. The number one reason for the change was out-of-stocks. 40% of shoppers said they chose a different item because it was less expensive. A third of customers said they chose cheaper cuts of meat while 31% said they are eating more meals without meat. In 2021 meat sales volumes declined 5.6% while prices increased 6.4%. Traditional and limited-assortment stores saw meat sales decrease 4.6% in 2021 while supercenters’ meat sales increased 5.3% and clubs increased 1.4%. Traditional supermarkets have seen consumers switch their top choice for meat purchases from 57% in 2018 to 48% in 2022. As 98.5% of U.S. households purchase meat, shrinking top choice status is a headwind for the grocers.
Production problems (OTLY)
The Wall Street Journal cited employees and former executives saying that “Oatly struggled to build and operate factories in the U.S., miscalculating budgets, timelines, and equipment needs.” Oatly lost its #1 market position to Planet Oat in 2021 as seen in the following chart. Oatly also lost share to Chobani and Califia Farms. The WSJ pinned production problems for the failure to capture more of the growth in the oat milk category. The Ogden plant’s budget doubled from $50 million to $100 million and was opened a year late. Manufacturing is a skillset and Oatly's skillset is marketing. Last week we wrote: Oatly likely did not spend much time considering acquiring SunOpta before the IPO. Acquiring SunOpta would have prevented a larger decline in Oatly’s market cap. From a brand and top-line perspective, Oatly continues to impress, except for slowing growth in Europe. From a margin, capacity, and execution perspective the company is a mess. Approaching 3x sales the shares would be appealing to many larger companies looking for growth and a larger presence in the plant-based category. However, few companies want to add margin dilution of this magnitude even if they had excess capital to fund Oatly's future expansion. It makes you wish there was another company to invest in the future growth of oat milk (STKL).
