Texas on-premise alcohol beverage tax receipts (STZ)
Texas reports its alcoholic beverages sales tax receipts on a monthly basis. In February, alcoholic beverage receipts increased by 12.7% YOY. That represents an acceleration from +11.1% in December. Receipts were 18.2% higher than in pre-pandemic February 2020. In Texas, bars have been mostly open with limited restrictions since October 2020. The growth in February signals that the underlying trend is more than lapping the Omicron variant. Texas is the second largest state for Constellation Brands.
Herd size (TSN)
The cattle population liquidation exacerbated by the drought in the West has left the herd the smallest in 61 years. At some point, the herd will be rebuilt. The beef replacement heifer population was 5.16 million head at the beginning of the year, down 5.8% from the prior year. That follows a 5.5% reduction in the previous year. Beef replacement heifers were 17.9% of the beef cow herd at the beginning of the year, the lowest proportion since 2012. On average the proportion of replacement heifers is 18.4%.
Over the past two years, heifers were diverted from breeding to feeding, contributing to the 4% growth in 2021 and 4.8% growth in 2022 of heifer slaughter. The industry figures point to herd expansion not being possible in 2023. A low level of further herd liquidation and retention of heifer calves would lead to herd expansion in 2024 which would mean a sharp decrease in beef cow slaughter in 2023. In order to turn the supply of beef around further reductions will be necessary which is bullish for beef prices.
Amazon takes on state alcohol laws (BUD)
Motherboard obtained a confidential Amazon document that outlined the company’s alcohol delivery strategy in 2021. The 2021 Alcohol Public Policy Strategy document outlined the company’s multi-state lobbying campaign to change alcohol regulations. Amazon’s goal was to fully legalize alcohol delivery and compete directly with package stores and wholesalers.
Amazon’s Just Walk Out technology used in some of its physical stores presented a challenge with alcohol sales. Amazon responded to Motherboard, “It’s common for people at Amazon to put ideas in documents that never make it past the draft stage and are never used to make decisions. The document referenced was drafted in 2020—more than two years ago—and not only was it never approved or implemented, the items discussed in the document are no longer relevant.” Amazon added that it advocates for alcohol delivery across the U.S. and delivery is one proposed step in the company’s effort toward three-tier modernization. It is difficult to change the status quo in alcohol. The pandemic saw a number of short term changes at the state level encouraging some to continue to lobby for changes like the spirits industry currently trying to reduce taxes on spirits-based RTDs to be similar to the taxes on beer. Changes to the three-tier system which was put in place since the end of Prohibition are even more difficult to change.
