Beer Distributors Index (BUD)
The National Beer Wholesalers Association’s (NBWA) Beer Purchasers Index (BPI) fell from 50 in March to 49 in April and 55 last year. The BPI is a diffusion index where a reading above 50 denotes expansion in volumes while below 50 indicates contraction.
- Imports improved from 62 in March to 66 in April, but were down from 70 last year.
- Craft beer improved from 28 in March to 33 in April, but was well below 48 last year.
- Premium lights improved from 43 in March to 48 in April, but were below 52 last year.
- Premium regular fell from 47 in March to 32 in April, below last year’s 38.
- Below premium fell from 53 in March to 49 in April, but well above 37 last year.
- FMB/seltzers improved from 21 in March to 24 in April, but was below last year’s 40.
The at-risk inventory reading increased to 55 from 51 in March. February’s outlook was the best in months and since then the index has pulled back slightly each month. One can not blame the slightly weaker results on Bud Light – premium lights improved sequentially.
Waiting for SSS declines (SFM)
Sprouts Farmers Market reported Q1 EPS of $.98 vs. consensus of $.85. The upside was driven by slightly better sales and better gross margins and SG&A spending. SSS increased 3.1%, above consensus expectations of 2.1%, and accelerated slightly from 2.9% in Q4. Comp transactions were positive and the basket increased, but units per transaction fell. E-commerce sales grew double-digit to 12.2% of sales. Gross margins expanded by 20bps driven by mix shift and optimization of promotions. SG&A spend increased $23M YOY due to new stores, higher wages, utility costs, and higher e-commerce fees partially offset by $4M of expenses shifted to the 2H.
Management guided Q2 EPS to $.61-65 vs. consensus expectations of $.59. SSS are expected to be up 3%. For the year management expects EPS to be $2.58-2.68 up from $2.41-2.53 previously. Revenue growth is now expected to be at the upper end of the 4-6% range. Placer.ai’s traffic data showed sequentially improving trends in recent weeks which only resulted in a slight acceleration in SSS. Sprouts has seen a significant loss of grocery share after the pandemic-induced shift to at-home consumption. Food inflation has driven absolute sales growth while the company lagged peers. Food at home CPI was 10% in Q1 outpacing SSS by 7% points. At the same time, a shift in the promotional strategy has boosted gross margins at the expense of sales. As inflation continues to decelerate in the 2H the SSS growth and margin progress will unwind. Sprouts has the worst setup for food deflation of any food retailer. As management said, “We are certainly not expecting any deflation going forward as the year goes on and within the forecast that we put in place.”
Canadian Beer (TAP)
Total beer sales in Canada decreased 3.8% in March, decelerating from the 2.8% growth in February. Domestic beer sales increased by 2.6% in March, decelerating from 3.9% growth in February. Imported beer sales decreased by 12.3% in March. Beer volumes have been declining for several years in Canada. For Molson Coors, the Canadian on-premise channel is still trailing pre-pandemic levels. Bud Light's current struggles are directly benefiting Molson Coors in the U.S.
