Beer shelf space (BUD)
In the 52 weeks that ended May 20, only imports (+5.5%) and FMBs (+13.5%) grew off-premise distribution points in the total beer category. Craft beer distribution points decreased by 2.6%, cider decreased by 5%, and hard seltzer decreased by 9.2%. Craft beer sales decreased by 1.1% and hard seltzer decreased by 13.1%. FMB sales grew by 20.3% followed by import sales growth of 9.6%. It is difficult for sales to grow when shelf space is decreasing. Budweiser’s vicious cycle has begun with the loss of many floor displays. Losing shelf space will happen when grocers and C-stores reset their shelf and refrigerated displays early next year.
Discount grocery chains gain traffic (SFM, GO)
Value grocery formats, like Aldi, Lidl, and Grocery Outlet, have continued to see traffic growth in 2022 and 2023 while food inflation was at an elevated level as seen in the chart below from Placer.ai. Fresh format grocery chains, like Fresh Market, Natural Grocers, and Sprouts Farmers Market, began to see a divergence in traffic growth beginning in February 2022. Until that point, the format was experiencing store visit growth. Store visits for fresh format grocers has been in decline since June 2022 which coincided with the surge in gasoline prices. Discount grocers have seen growth in-store visits outpace the broader supermarket category since February 2022. Higher gasoline prices may have been the trigger for the change in shopping behavior. The expiration of emergency pandemic SNAP payments in March and the resumption of student loan payments later this year will likely drive shopping behavior changes for more consumers.
Raising higher (GIS)
We are raising General Mills to the #3 Best Idea long as seen in the updated position monitor below: General Mills is scheduled to report FQ4 results next week. Our model is ahead of consensus EPS estimates of $1.07 and revenue growth of 3.9% YOY. Our margin estimates are also ahead of consensus expectations. General Mills has beat and raised guidance several times this past year. Investors are concerned about management’s initial guide for F2024, which we believe is priced in given management’s conservative guidance history.
