Wine elasticity (NAPA)
Beverage alcohol prices have lagged behind the broader inflationary surge in consumables. Food and beverage prices were up 10.9% in August, but beer prices were up 4.8% while wine prices were up 1.8%. Wine producers have had difficulty raising prices. According to BW166 when a winery raises prices by 25 cents, it loses sales volume. The drop in sales volume does not offset the increased revenue from the price increase based on Nielsen data. The Nielsen data from grocery stores is focused on lower priced wines because that is what is sold in grocery stores. For wines priced between $12 and $20 per bottle a price increase of up to $1 only offsets the volume decrease. The 892 wine SKUs that had a price increase between 76 cents and $1 per bottle had sales growth of 5% in the 13 weeks that ended September 10, but volumes fell by more than 13%.
The elasticity is also evident in the on-premise channel. In full service restaurants, prices are up 8.9%. The price of beverage alcohol in restaurants is up only 5.7%. Wineries see a pushback on price increases from both the distributors as well as the consumers. The Duckhorn Portfolio is on our best idea short list.
At home cooking, but this time to save money (BJ, KR)
The share of U.S. adults who said they have cooked at home at least once a week in the past month has risen. The percentage that cooked a meal from scratch with a recipe rose 4% points to 44% in the past year while the percentage that cooked without a recipe rose 5% points to 49%. The percentage that cooked from prepackaged foods, meal kits, and baked at home all rose as well in the past year as seen in the chart below. The only decrease in at-home trends was making cocktails at home which fell 3% points to 16% as consumers have returned to on-premise locations. Consumers have returned to preparing meals at home, but this time it’s not due to a pandemic. It’s due to saving money.
Smaller almond crop (STKL)
The USDA’s National Agricultural Statistics Service (NASS) estimates that the almond harvest will come in at 2.6 billion pounds, 11% lower YOY. The yield is expected to be 1,900 pounds per acre, the first drop below 2,000 pounds since 2009’s 1,880 pounds per acre. The forecast for the average nut set per tree is down 12% to 4,082. The lower yield reflects less access to water as well as inflationary pressures on inputs. During the summer the USDA projected California’s almond harvest to be 4% lower than in 2021. The crop in 2020 was the largest ever at 1.4 million metric tons.
80% of the world’s almonds are grown in California and nearly all of the U.S. commercial supply. Almond milk is the #1 plant-based milk, but oat milk will overtake it in com the coming years. Higher almond prices will not play much of a role in accelerating the switch, because a half gallon of almond milk only contains about 30 almonds at a cost of 10-11 cents. The bigger reasons behind switching are realizing how few almonds are in almond milk, the water usage of almond trees, and the taste.
