Off-premise sales bounce (STZ)
Off-premise beverage alcohol sales surged during Christmas week but then dropped in the last week of the year according to IRI. For the week ended December 25, sales increased 25.7% week over week, but then fell 15.1% the following week. Compared to the prior year sales grew 3.7% for the Christmas week while the New Year’s week grew 6%.
Beer category sales grew 2.2% during the Christmas week and 7.2% YOY for the New Year’s week. Beer volumes declined 5.3% and 1.8% YOY respectively. Modelo sales grew 8.2% with volumes up 1.6% for the Christmas week and 22.9% with volumes up 15.2% for the New Year’s week. Corona sales increased 15.7% with volumes up 9.7% for the New Year’s week. RTD sales grew 8% for the Christmas week and 12% for the New Year’s week. The holiday weeks in 2022 have been much more volatile than in past years despite the pandemic receding. Constellation Brands needs to see an acceleration in depletions in order to hit consensus expectations.
Egg Prices (CALM, VITL)
Egg prices increased more than 225% in December YOY to an average price of $4.79 per dozen. Seasonal demand for holiday baking combined with the smaller egg-laying flock from the avian flu was behind the surge in prices. 43M egg-laying chickens have been slaughtered to deal with the spread of the virus, making up the majority of birds depopulated. Egg production was down about 5% in the fall. Some grocers have limited the number of cartons of eggs customers can purchase at one time.
Eggs have a large mix in breakfast meals and are an input in a number of baked goods. 98% of U.S. households purchase shell eggs or egg products. Since eggs are an inexpensive source of protein there is not a lot of demand destruction at higher prices. Egg prices are expected to fall by the middle of the year. Vital Farms’ small pasture-raised flocks have been much less susceptible to the virus outbreaks compared to large commercial farms like Cal-Maine.
Round One winner (ACI, KR)
Washington State’s Supreme Court denied the State Attorney General’s most recent attempt to stop Albertsons’ special dividend payment. Albertsons will resume the process to pay the $6.85 special dividend to shareholders as of record on October 24. The merger review process for Kroger-Albertsons will be lengthy. The attempt to stop the special dividend payment foreshadowed a determined effort to oppose the merger by several parties. At the end of the day the law is the law that should lead to the approval of the merger. As the attempt to stop the special dividend payment shows, the opposition will try numerous tactics to “run out the clock” or tie the review up in the courts. There is a path for the merger to close or for Albertsons to succeed on its own, but we expect a lower share price during the process.
