Grocery flash call (KR, ACI)
We are hosting a flash call merger review and legal analysis of the Kroger & Albertsons merger today at 2 PM ET. Joining us on the call will be Paul Glenchur, Hedgeye’s Senior Policy analyst, who is focused on regulatory and competition policy issues involving the Justice Department and the FTC. Paul is a member of the American Bar Association Antitrust Section and the Supreme Court Bar.
Our call will analyze the odds of FTC approval, review the proposed SpinCo, discuss the competitive implications across food retail, and provide an early preview of what the combined company could earn. We expect the company to incur a difficult path for approval by the FTC. The merger will also make the company a convenient target for food inflation by politicians who have already blamed “Big Meat” and Russian President Vladimir Putin for higher prices.
We are moving Albertsons lower on our Best Idea Short list.
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CLICK HERE for the webcast and materials. |
Merger opposition (KR, ACI)
Senator Elizabeth Warren (MA) called for the FTC to block Kroger’s $25B acquisition of Albertsons. The Senator’s message was, “Big grocery chains like Kroger and Albertsons are already gouging families with inflated prices. More mergers and less competition would mean even higher prices – and layoffs for employees.” Last month the Senator urged the FTC to block Amazon’s acquisition of iRobot and JetBlue’s acquisition of Spirit Airlines. A Senate antitrust panel is expected to hold a hearing on Albertons’ merger. More opposition to the merger will line up, which Kroger anticipates in its expected closing date of early 2024.
CRAFT ELASTICITY (SAM, BUD)
Rising beer prices are not boosting dollar sales. The average price per case of beer in the off-premise channel has increased 4.6% YTD through October 1 according to NielsenIQ. The $30-39.99 price tier with a 45% share has seen sales decrease by 6.7%. The $40-$49.99 price tier for premium craft beer has had the slowest sales decline of 1.4%. Premium craft has a 37% share of the craft beer market. The super-premium tier priced between $50-59.99 decreased by 6.4% and has a 6% share. Of the top 15 craft beer brands, only New Belgium had growth in sales through the first three quarters of 2022.
AB InBev’s Goose Island had the largest price increase of the top 25 craft brands at 17% and sales grew 10.3%. AB InBev’s total craft beer sales decreased by 4.4%. Boston Beer’s Dogfish Head had a 4% price increase, but a 15.9% sales decrease. Samuel Adams had a 5.8% decrease in sales while Boston Beer’s total craft beer sales decreased by 7.9%. Monster Energy’s CANarchy sales decreased by 7.9%. Heineken’s craft beer sales decreased by 9%. Molson Coors craft beer sales decreased 6.1% with Blue Moon down 2.3% and Hop Valley down 15.7%. Lower prices would not have boosted sales either and costs are rising.
Canadian food CPI accelerates (L.CN)
The CPI for food purchased from stores in Canada increased 11.4% in September, the fastest YOY growth since August 1981. September accelerated from August’s 10.8% growth. Last week Loblaw announced that it was freezing the prices of all store-label products for the next three months to help consumers deal with inflation. Critics, competitors, and even politicians responded by pointing out that Loblaw is hardly a victim of inflation, but instead a contributor, those store-label prices are not often raised during the holiday season anyway, and the gain in profits it has enjoyed since the pandemic should be investigated, respectively.
