Portfolio combination (BUD)
AB InBev is combining the field sales teams in the U.S. for its craft brewery and high-end divisions. The combined sales team will have 400 people supporting the company’s premium and super-premium brands reporting to Andy Thomas. AB InBev has 21 craft beer brands in its portfolio including six larger national brands led by Goose Island, Kona, and Elysian. Andy Thomas also oversees the high-end brands Stella Artois, Estrella Jalisco, and Michelob Ultra Pure Gold. A portfolio consisting of that many brands is just unwieldy. How does a salesforce provide the optimal coverage for that many competing brands? The 21 craft beer brands combined hardly move the needle for the company. I’m not sure what the optimal structure is for the craft beer brands, but it’s not this. As we discussed in our Q2 earnings wrap-up call yesterday CLICK HERE the beer manufacturers are being aggressive with their price increases in the 2H of the year while the consumer is voting more towards budget beers.
Inflation concerns receding (WMT)
Overall inflation concerns have remained steady, but the percentage that considered themselves as very concerned has ebbed as more consider themselves as somewhat concerned in recent weeks. The percentage of respondents to a CivicScience survey that said they were very concerned about inflation has fallen from a peak of 63% in early June to 54% last week.
Inflation concerns in the survey more closely reflect gasoline prices rather than the CPI as seen in the following chart:
Consumers may have become accustomed to higher prices, but it is interesting that gasoline prices would play as large of a role in the perception of inflation. Fewer people may be very concerned about inflation, but more are changing their spending behavior in order to cope with it including shopping more at Walmart.
DTC wine still expands (VWE, NAPA)
DTC sales of wine in the U.S. grew 2.1% in Q2 according to Enolytics and Wine Direct’s index of over 2,000 wineries. DTC sales over the internet decreased 20% in Q2 and 22% in the first half of the year. Tasting room sales decreased 8% in Q2, bringing 1H performance to +6%. Wine club sales were a bright spot for the industry with growth of 17% in Q2. There was a wide range of sales performance by price point in the first half of 2022. Luxury wines with bottles priced at $90 and above grew 32%, bottles priced between $50-59 grew 15%, bottles priced between $20-39 grew 5%, and bottles priced below $20 decreased 1%. Cases sold in the DTC channel in the U.S. decreased 7.8% in Q2, while the average order value increased 9.7%. The average bottle price has continued to climb in Q2 as seen in the chart below, while discounts hold steady. The DTC and off-premise channels benefited from the pandemic and now have difficult comparisons. Tasting room sales and club sales are still accretive to growth in 2022.
