Off-premise beer sales in 2022 underwhelm (STZ, BUD, SAM, TAP)
Off-premise beer sales grew 0.8% YOY in 2022 with volumes decreasing 4.8%. The average price increased by 5.8%. Beer sales in the grocery store channel decreased by 1.5% with volumes declining by 5.7%. Beer sales in the C-store channel grew 1.7% with volumes declining by 4.9%.
FMB sales grew 17.2% with volumes up 8.5%. Imports grew 6.6% while volumes grew 1.6%. Domestic super premiums grew 5% while volumes grew 1.1%. Domestic premium beer decreased by 2.3%. Domestic sub-premiums grew 0.1%, but volumes decreased by 6.6%. Hard seltzers decreased by 10.4%. Craft beer sales decreased by 4.7%.
Modelo brand sales grew 18.3% while Corona sales grew 4.4%. Modelo with 12.8% volume growth was one of only six brands that had volume growth in 2022. The others were Twisted Tea (+23.9%), New Belgium (+14.5%), Mike’s Hard (+3.5%), Michelob (+2.8%), and Smirnoff (+1.5%). AB InBev’s sales decreased by 1.8%. Molson Coors sales increased by 0.9%. Boston Beer sales were nearly flat with sales declining 0.1%. Heineken sales decreased by 9%. Price increases worsened the volume declines in beer consumption in 2022, I don't see that improving in 2023.
The state of tomatoes (APPH, KAL)
The supply of tomatoes varies widely depending on the variety according to Intergrow Greenhouses. Field-grown tomatoes and Roma tomatoes have improved leading to prices falling back to $1 per pound from $2 per pound following Hurricane Ian at the end of September. Tomato on the vine supplies on the other hand have tightened while pre-planned marketing drove demand despite thin supplies. That led to tomato on the vine prices approaching $3 per pound in early 2023. Grape tomatoes were also priced above $2 per pound following Hurricane Ian, but have recently become oversupplied. The challenges for the greenhouse tomato industry include Brown Rugose Virus and higher energy costs. Tomato plants require strong sunlight and room temperatures making winter production more costly. Many European greenhouses are not producing in the winter due to the higher energy costs. The availability of field tomatoes at $1 per pound is putting pressure on indoor grow winter production in the U.S. Much of the premium consumers pay for indoor-grown tomatoes is not flowing to the growers, but is captured in the supply chain. The growers will need to capture that premium in order to earn a return on the capital outlays. AppHarvest announced that it began commercial shipments from its 60 acre Richmond facility this past week. AppHarvest and Kalera are on our Short list.
Lettuce worries (ACI, SYY)
One of the hardest hit areas of California by the atmospheric rivers is the Salinas Valley. It is a northward draining river that starts in Southern California and travels through some very fertile land in the central part of the state. There continue to be concerns about flooding in the Monterey, Mariposa, and Merced counties. Monterey grows over 60% of the country’s leaf supply. While most of the leafy vegetables were not planted yet it will take time to test the land for contamination and to assess damage to the infrastructure. Strawberry growers in the state are already reporting $200M of damages. Carrots are one of the few crops in-season and prices have surged to a ten-year high. Restaurants may be more impacted than grocers by a shortage of leafy greens since it is more acceptable for grocers to be out of stock.
