Alcohol Imports (STZ)
Total beverage alcohol imports grew 9% over the 12 months that ended in December. Over the last three months, imports grew 1% decelerating from +5% in the three months that ended in November.
- Imported beer grew 3% by volume and 5% by value over the last 12 months. Over the last three months, beer imports fell 2% by volume and were flat by value decelerating from flat and +2% respectively for the three months that ended in November. Mexican beer volumes in November fell 11%. 80% of imported beer comes from Mexico. Constellation Brands represents a majority of Mexican beer imports and 60% of imported beer.
- Imported packaged wine for the last 12 months decreased by 14% by volume and was down 1% by value. Over the last three months, volumes decreased by 12%, and by value decreased 4%.
- Imported packaged spirits grew 19% by value over the last 12 months. Over the last three months, volumes fell 2% and value grew 2%. That compares to 2% volume growth and 10% value growth over the three months that ended in November.
- Exported beer grew 24% by value over the last 12 months. Over the last three months, exported beer decreased by 26% by volume and 24% by value. Exported packaged wine fell 13% by volume and fell 9% by value over the last three months, negatively impacted by the stronger dollar.
The pace of beer imports decelerated into year end, but a rebound in January compared against Omicron last year should lead to better imports in January for Constellation Brands and the industry.
Divesting stores (KR, ACI)
According to Reuters, Kroger and Albertsons are advancing plans to sell between 250 and 300 stores in order to appease the FTC’s concerns over local competition. The stores could be worth more than $1B according to the sources in the article. Kroger and Albertsons have reaching out to potential buyers for the overlapping stores. The companies have previously outlined a divestiture of 100 to 375 stores.
Kroger’s filing states 650 is the upper limit for divestitures it would consider. The FTC has institutional memory of the Haggen bankruptcy. Haggen purchased 146 stores divested by the Albertsons-Safeway merger only to go bankrupt months later. Kroger and Albertsons will need to prove the financial viability of the divested stores. In our merger analysis the distinction between divesting underperforming stores vs. average stores made a significant difference in the accretion of the merger.
Flu Monitor (PRGO)
The CDC estimates that there have been at least 25 million illnesses from the flu this season through the week ended February 10. The flu had surged since Thanksgiving but has declined in most areas despite the Christmas and New Year’s holidays. The flu sometimes has two peaks, but influenza A(H3N2) continues to be the main subtype making a second peak less likely. If the trend continues this season’s flu will have started early and ended even earlier.
The cumulative hospitalization rate is the second highest observed for the fifth week of the year going back to 2010-11, following only the 2017-18 season. The in-season cumulative hospitalization rate is still lower than the end-of-season hospitalization rates for all but four pre-COVID-19 seasons (2015-16, 2013-14, 2011-12, and 2010-11). Perrigo’s Q4 is mostly set for the cough & cold season as orders are already in and production is maximized, especially for liquid medicines. Most retailers are short of cough & cold medicine. A larger or longer cough & cold season would be seen in Q1 results as retailers reorder more inventory.
