Infant formula price increases (PRGO, KR)
The infant formula out of stock rate was 61% last month. Availability is expected to improve with the Abbott’s Michigan plant at the center of the shortages now resuming production. From March 2021 to May 2022 baby formula prices have increased by an average of 11% according to an analysis of a dozen retailers conducted by DataWeave as seen in the chart below. Kroger had the largest price increase at 19%. In comparison, HEB, Target, and Wegman’s have had minimal price changes. As the store label manufacturer Perrigo has had modest price increases compared to the branded manufacturers but is positioned to retain newly won market share based on the relative price gap. It is interesting to note Kroger’s aggressive price increases relative to other retailers. Target for example has long had a goal to be the retailer of choice for parents of young children and not raising prices aggressively in a high profile category like baby formula would fit with that strategy.
Pinched at both ends (SAM)
The average case price for FMBs has increased 4% YTD through August 20, while the average price for hard seltzer has increased 7%. The average price for imports has risen 4% YTD. For craft beer, the average price has accelerated from 2.7% in 2021 to 4.4% YTD. Craft beer at both ends of the price spectrum has seen weakness this year. Off-premise sales YTD for craft beer priced below $20 a case have fallen 16.8%. Craft beer priced between $80 to $89.99 a case has seen a sales decline of 17.3% YTD. Premium beer priced between $40 to $49.99 per case has only seen a 2.6% sales decrease. Constellation Brands’ pricing is not only lagging behind the beer industry but the import category as well. We believe Constellation Brands has room competitively to accelerate pricing.
Grocery store sales (KR, ACI)
Grocery store retail sales increased 7.7% in August, decelerating from 9.3% in July. The two-year average accelerated from 5.6% to 6.9% sequentially as seen in the following chart. Sales at food & beverage stores decelerated to 7.2% from 8.5% sequentially. Food service and drinking places sales increased 10.9% in August, accelerating 60bps from July. Food at home spending fell 10bps to 48.6% of total food spending.
