Another Reyes Beer Division acquisition (STZ)
Reyes Beer Division announced it will acquire DET Distributing in Nashville. The distributor carries Molson Coors, Constellation Brands, Heineken brands, White Claw, and Samuel Adams in 9 middle Tennessee counties as well as 15 western Tennessee counties. DET is one of the largest family-owned distributors in Tennessee. The owner passed away last year. The purchase price was reportedly more than $400M, representing over 2.5x revenue. The acquisition will add Reyes’ tenth market and 9 million cases. Reyes Beer Division is the largest beer wholesalers in the U.S. The distributor has been an important partner in the growth of Constellation Brands as it recognized how to capitalize on Corona and Modelo’s higher sales velocity. Constellation Brands’ share has outperformed in Reyes Beer Division markets. At a conference, yesterday Constellation Brands spoke about the distribution opportunity in the middle part of America. Reyes has been acquisitive in recent years, with most of the acquisitions in Northern California. The Biden Administration’s executive order on promoting competition last year has not slowed the company’s M&A appetite.
Soybeans relief (LANC)
The estimated crush margin for soybeans has remained high historically, but has fallen some 20% from the highs this summer. In the August WASDE report, the USDA raised slightly the supply of soybeans for the current marketing year, exports, and ending stocks. The USDA’s Crop Progress report this week rated 57% of the soybean crop as good/excellent for the third week in a row. The stronger U.S. dollar and West Coast port delays are headwinds for exports and demand as Brazil improves its infrastructure to compete. Lancaster Colony’s significant exposure to soybean oil was a major contributor to COGS inflation. The company had below market hedges in 2022 and 2023. The difference in coverage is factored into the company’s pricing plans for 2023.
Truck rates fall (DOLE, KR)
Average refrigerated truck rates have decreased 19% YTD. From the high in early February, rates have fallen 21%. Just since the beginning of July rates have fallen 12%. DAT reported spot-load postings were down 26% in July MoM and 34% YOY for all of 2022, highlighting the different conditions last year. In 2021, the need for trucks soared as companies scrambled with supply chain issues. The diesel surcharge averaged 77 cents per mile for refrigerated trucks in July, down five cents from the record in June. When companies see relief from higher truck rates will vary depending on their use of contract and spot rates. Higher freight costs have been a headwind for nearly all CPG companies.
