Idea Hunt (MNST)
We are hosting our Q2 Idea Hunt on Thursday, April 28 at 2 PM ET.
We will vet two Consumer Staples companies in our Idea Hunt. The first company is Monster Energy. This year, shares have come under pressure over concerns about M&A, competition, and cost pressures before partially recovering recently. We will seek answers to the following questions:
- What are the most likely M&A scenarios?
- Will gross margins come under more significant pressure with cost increases?
- How formidable is the combined threat from new entrants to the energy drink market?
- Has the long-term opportunity in international markets changed?
- What is the outlook for the shares in Quad 4?
Higher alcohol taxes in the EU? (BUD)
The European Union is contemplating higher taxes on beer, wine, spirits, and cigarettes across all of its member states. The EU is also considering raising the minimum tax rate, which would bring countries currently with low tax rates like Spain on par with the other countries. The minimum tax rates applied to alcoholic beverages has not changed since 1992. The tax rates also vary widely across countries. Spain adds taxes of €0.03 per 330ml compared to the EU average of €0.14. Alcohol taxes in the EU average 5.7%, 14.0%, and 31.3% of the retail price of wine, beer, and spirits respectively. Various health organizations are in favor of higher taxes to curb alcohol consumption. The European Union has issued a public call for feedback on the current tax rates on alcohol until July 4. Higher taxes would lead to lower consumption, but the impact will likely be concentrated in a few countries.
Grocery wage rates (KR, ACI)
Produce Blue Book conducted a comparison of hourly wages in the grocery industry:
Whole Foods – 1% of employees earn less than $15/hour. 24% earn more than $20/hour.
Albertsons – 36% earn less than $15/hour. 21% earn more than $20/hour.
Target – 3% earn less than $15/hour. 4% earn more than $20/hour. 82% earn between $14-16/hour.
Kroger – 48% earn less than $15/hour. 9% earn more than $20/hour.
Aldi – 36% earn less than $15/hour. 21% earn more than $20/hour.
Publix – 60% earn less than $15/hour. 7% earn more than $20/hour.
Food Lion – 77% earn less than $15/hour. 2% earn more than $20/hour
Walmart - 51% earn less than $15/hour. 9% earn more than $20/hour.
Wegman’s – 50% earn less than $15/hour. 12% earn more than $20/hour.
Unionized grocery workers in Southern California signed a new contract last week that provided wage increases between 19% and 31% or $4.25 per hour over three years. Union officials called the contract the best in the country. Workers also received more health benefits, four more hours for part-time workers, and a secured pension. The contract was reached without a strike. The average pay rates have a lot to do with where the stores are located. Even though California minimum wages are higher than Florida, it’s more likely that California raises wage rates further than Florida.
