TX On-premise alcohol tax receipts (STZ)
Texas reports its alcoholic beverages sales tax receipts on a monthly basis. In June, alcoholic beverage receipts increased by 4.2% YOY, accelerating from 1.7% growth in May. June receipts were flat compared to May. Using the beer away from home CPI of 5%, June was the second straight month of transaction declines in on-premise locations since the first year of the pandemic. Texas is the second largest state for Constellation Brands.
Stop smoking (HLN)
Earlier this week Bloomberg reported that Haleon is exploring the sale of its smoking cessation business for ~$800M. The sale process has attracted interest from investment firms and competitors.
Reaching an $800M price would deleverage Haleon, but how much exactly is unknown. Several of the consumer healthcare companies including Kenvue and Perrigo have smoking cessation products. Haleon’s smoking cessation business decreased MSD% in 2022. Some young smokers have switched to vaping to help them quit, but studies show vaping can be more addictive. Kenvue’s Nicorette is the global market share leader in the category. Kenvue has seen growth boosted by increased smoking cessation rates.
The consumer healthcare sector should see a series of portfolio enhancements through divestitures and acquisitions. M&A should increase growth rates and expand margins. Every company has orphan businesses that overlap with competitors. Expect a pickup in transaction activity when the market rewards it.
Meat department (KR, BYND)
Meat alternative volumes decreased by 19.6% in the 52 weeks that ended May 21. The average price was up 2.1% to $8.35 per pound according to Circana. The trend was also negative for frozen meat alternatives which saw volumes decrease 7.5% with an average price increase of 10%. Household penetration for plant-based meats has fallen to about one in ten shoppers. Consumer interest in plant-based eating remains high, but plant-based meats are seen as highly processed.
The meat department has been one of the weaker departments across grocery and mass stores in recent weeks with deflationary prices for beef, poultry, and pork leading to sales and unit declines. In May, meat dollar sales decreased by 1.5% with beef pounds down 2.2% and poultry pounds up 1.8%. The underperformance of meat alternatives would suggest a reduction in shelf space from current levels, but retailers have acted slower due to the higher income profile of the meat alternative shopper.
