Food volume declines (KR, ACI)
According to IRI, consumers' edible food purchases declined 2.6% in Q1, but the amount paid for the purchases increased by 6.2%. As prices for food rise consumers are reducing their unit purchases of the more expensive items. For example, steak sales increased 5.5%, but pounds fell 5.5%. 52% of meat-eaters are purchasing smaller portions, 10% switched cuts, and 38% did not purchase any beef.
We are hosting our grocery sector flash update call tomorrow Tuesday, May 24 at 12:30 PM ET.
April wine sales (VWE, NAPA)
Domestic wine sales increased 11% in the 12 months ended April. Sales in April increased 9% YOY, decelerating from 11% growth in March. Off-premise wine sales decreased 3% in April, improving from -5% in March. DTC shipments decreased 3% in dollars in April, compared to a growth of 4% in March. Tourist spending in Napa County increased 51% in 2021 YOY but was still down 16.7% compared to 2019. Sonoma County’s tourist spending increased 58% in 2021 but was still 10.5% below 2019 levels. The wine industry outperformed the overall state with total California tourist spending in 2021 at 69% of 2019 levels. California residents accounted for 70% of all travel spending in 2021 while out-of-state visitors accounted for 24% and international visitors accounted for 6%. In 2022, the on-premise, tasting room, and DTC will be the strongest channels while off-premise faces difficult comparisons.
California drought (OTLY, STKL)
Despite recent rainfall, 60% of California is experiencing extreme drought and 95% is experiencing severe drought. The Metropolitan Water District of Southern California, the largest water provider in the country, is mandating a 35% reduction in household consumption. Half of the state’s water flows to the Pacific to maintain rivers and waterways. Of the other half that is allowed to be used 80% is used by the agriculture industry. The state allocation for farmers is 5% of normal and the federal water allocation is nothing. The California Farm Water Coalition said in a press release that, “the state could see as much as 691,000 acres taken out of production this year, a 75% increase over last year and 151,000 acres more than the previous high in 2015.” Crops such as strawberries, citrus fruit, peaches, broccoli, rice, and tomatoes, in particular, are being greatly affected by insufficient water supplies. Almonds comprise 13% of California’s irrigated farmland. According to the USDA, 80% of U.S. grown fruits, nuts, and vegetables are grown west of the Rockies. 80% of the global supply of almonds comes from California. Almond milk only contains 2% of almonds, so the price increase for almonds does not have an overly significant impact on almond milk. The better for the environment aspect of oat milk is one of its appeals for consumers.
