Energy drinks stay hot (CELH, MNST)
Energy drink volumes increased 2.2% for the four weeks through May 6 according to NielsenIQ. The average price was up 7.9%. That is a slight cooling compared to the four weeks that ended April 22 when prices were 10.1% higher and volumes were up 2.5%.
Celsius stayed hot with volumes up 120% and prices up 8.3%. That represents an acceleration from growth of 112% in the four weeks ended April 22. Monster volumes decreased 0.8% with prices up 10.1% in the most recent four week period, similar to the 0.2% decrease in the previous reporting period. Red Bull volumes were up 1.6% with prices up 7.9%, decelerating from 2.6% volume growth with prices up 7.5%.
About 90% of U.S. adults consume caffeine in some form every day. There is little difference between the sexes, but the amount of caffeine consumed increases with age, and men consume more than women. Energy drink consumption decreases with a college education. Celsius differs from other energy drinks by targeting the young, college-educated consumer. It is why Celsius can grow the market for energy drinks and not just grow from taking existing share.
Price caps across the pond (KR, TSCO.LN, SBRY.LN)
Shop price inflation in the U.K. rose 9% through the year ended May, reaching a new high according to the British Retail Consortium (BRC). Food inflation decelerated slightly to 15.4% in May, the second-highest on record according to the BRC. The inflation rate for food and non-alcoholic beverages was even higher at 19.1% in April according to the Office for Natural Statistics. The U.K. has the highest rate of food inflation in the industrialized world.
The U.K. Prime Minister Rishi Sunak has promised to cut inflation by half this year as one of his five pledges. In the latest development, the Prime Minister is considering asking retailers to voluntarily cap the price of essential food items. Brexit has been identified by many as a contributor to the high rate of food inflation. Price controls did not work in the 1970s, but inaction seems to be a worse alternative for the government.
In Canada, food retailers froze prices over the Christmas holiday period in an effort to diffuse inflation in the grocery stores from becoming a larger political issue. Did the increases in SNAP benefits keep food inflation from becoming a larger political issue in the U.S.? Not only have SNAP benefits become a headwind since March, but college loan repayments are set to resume at the end of August.
On-premise pricing trends (TAP, BUD, MNST)
According to Untappd Insights, the large domestic brewers have been raising the prices most aggressively in the on-premise channel. In Q1, Miller Lite prices in the on-premise channel were 5.5% higher YOY and 1.4% sequentially. Coors Light prices increased 5.5% YOY and 1.1% sequentially. Bud Light prices increased 6.1% YOY and 1.8% sequentially.
In comparison, the average independent craft beer had a 4% YOY price increase in Q1 and the average import had a 3.5% increase. Modelo Especial prices were up 3.5% YOY and Michelob Ultra prices were up 6.2%. Cigar City’s Jai Alai was the only beer in Untappd’s index that did not have a price increase. Cigar City is now owned by Monster Beverage. The catchup in pricing is driving an inflection in Big Beer's margins. Q2 trends should see a divergence between Bud Light and Miller Lite/Coors Light. However, on-premise establishments are less likely to lower prices for Bud Light compared to retailers. On-premise establishments will return the kegs to the distributors rather than lower their average ticket. We recently added Molson Coors to our Long list and presented our Black Book on Tuesday. For the replay: CLICK HERE.
