Say no to lower taxes (BUD, SAM)
The Beer Institute, Brewers Association, and the National Beer Wholesalers Association are all speaking out against a proposed bill in North Dakota that would tax some RTD cocktails at the same rate as wine. Wine’s tax rate in the state is $.50 per gallon while spirits-based RTDs are currently taxed at the same $2.50 per gallon rate as spirits. Numerous states considered changing the tax rate in the past two years as the popularity of RTDs has grown. Michigan, Nebraska, and Vermont did change the tax rate for RTDs while the measures did not pass in more than a dozen states. Beer enjoys a significantly lower tax rate of $.16 a gallon in the state. RTDs have the advantage over malt-based hard seltzers in flavor and variety generally speaking, but malt-based seltzers have a significant tax advantage. The beer industry is not going to concede a significant cost advantage without a fight from its lobbyists because it would cost the industry a meaningful amount of share.
Whole Foods is back to opening new stores (SFM, KR, ACI)
Whole Foods Market outlined its 10-year vision called, “Growing with Purpose” earlier this week. The company will invest behind four priorities: creating the best customer experience in stores and online, investing in team member growth and happiness, delivering exceptional business performance, and expanding research to serve customers in new ways. Management’s aim is to set company records for new store growth while looking to expand to new markets globally. The company is working towards eventually opening 30 or more stores a year – tripling the current pace. It already has 50 new openings planned and currently operates 534 stores. The new store opening plans are counter to Amazon’s most recent moves to pause new openings of Amazon Fresh stores and to close all of its Amazon Books and Amazon 4-Star locations. Employees in charge of the physical stores are expected to be among the hardest hit in Amazon’s recent plans to lay off about 18,000. Whole Foods is also planning to expand the use of Amazon’s Dash Cart technology which enables shoppers to skip the checkout line. Amazon’s acquisition of Whole Foods in 2017 triggered a significant amount of consternation in the food retail industry. Walmart’s curbside pickup and COVID-19’s impact on supply chains and online ordering have had a far greater impact. Whole Foods’ 10-year vision sounds more like a wish to accelerate the pace of store openings, but the price gap to the competition limits the TAM.
Alcohol servings in 2022 (BUD, STZ, NAPA)
According to Bw166, total beverage alcohol servings (12 ounces of beer, 5 ounces of wine, and 1.5 ounces of spirits) decreased by 0.13% in 2022 compared to 3.3% growth in 2021. Over the past 20 years, the market has grown +1.2% annually. The number of servings in relation to the legal drinking age decreased by 1.1% to the historical norm over the past 20 years. Bw166’s analysis uses TTB and state beverage alcohol tax data as well as Customs import data, census bureau analysis, BLS, US Bureau of Economic Analysis, public company reports, retail scan data, and industry reports.
- The amount of beer received by distributors decreased by 2.4% to 204 million barrels driven by domestic declines somewhat offset by import growth. Consumer spending on beer increased 6.5% to $135B in 2022, driven by a further recovery in the on-premise channel.
- Spirits received by distributors increased 7.0% to 289M cases, driven by imports, RTDs, tequila, and whisky while vodka and rum declined. Consumer spending on spirits increased by 13.0% driven by the on-premise recovery.
- Wine received by distributors decreased by 3.8% to 453M cases driven by declines in flavored wine, while traditional still wines grew 0.7% and sparkling wines grew 3.5%. Consumer spending on wine increased 4.5% to $84B driven by the on-premise recovery.
Per capita servings have not changed much over time despite much written on the difference between generations. It is a market share battle between the beverage alcohol categories and within them.
