Prime investigation (CELH, MNST)
Senator Charles Schumer called on the FDA to investigate PRIME, an energy drink founded by YouTube stars Logan Paul and KSI. The beverage has a strong following from the social media influencers’ young fans. When the drink launched last year it led to long lines and a strong resale market. The energy drink has 200 milligrams of caffeine in 12 ounces, equivalent to nearly two Red Bulls. PRIME has a separate drink called Hydration which is a sports drink that does not contain caffeine. The senator’s letter asks the FDA to investigate the advertising, caffeine content, and ingredients of the two drinks and the marketing. Consumers have turned to caffeine for help to be alert and energy drinks have been upping the dosage. We watch a replay of our Caffeine Black Book for trends within the sector and our top investment ideas that share the secular growth driver of caffeine CLICK HERE.
Global food price deflation (WMT)
In June, the United Nation’s FAO Food Price Index fell 1.7 points or 1.4% from May. The price index is now 23.4% below the peak in March 2022. Compared to the prior year prices were 20.9% lower than the prior year, compared to 21.5% lower YOY in May. Sugar, vegetable oils, cereals, and dairy products all fell while the meat price index was flat sequentially. The FAO Food Price Index is a measure of the monthly change in international prices of a basket of food commodities. It consists of the average of five commodity group price indices weighted by the average export share from 2014-2016. The FAO index shows deflationary trends in food prices globally because it consists of commodity prices rather than retail prices
Fewer tasting room visits (NAPA)
The winery tasting room is the primary entry for DTC revenue of the typical winery, bringing in nearly half of DTC sales. As tasting room visitation started to decline late in 2022, DTC shipments did as well. According to Community Benchmark, average monthly tasting room visitors began to fall in May 2022 with a 14% decrease and remained roughly 10% lower for the remainder of the year. In Q4 2022, DTC shipment volumes fell 12% YOY.
From January through May, Napa County hotel revenue per room (RevPAR) fell 10% YOY according to STR. Room rates fell 3% while occupancy fell 7.2%. Napa only has 5,700 rooms so a rebound in demand after pandemic restrictions had a significant impact on price in 2022. Compared to 2019 RevPAR was up 16.1%. The increase compared to the last pre-pandemic year reflects the changes in the lodging industry as well as difficult comparisons to 2022 when wineries reopened. California also had significant rainfall earlier this year which impacted visitation.
Offsetting declining tasting room visits has been wine club acquisitions growing 25% for California wineries this year as well as higher tasting room fees. DTC shipments decreased 1% YOY in May and decreased 4% in the year ended May. With fewer visitations, anemic off-premise sales, and a weak outlook for on-premise sales, wineries will need help from wine clubs this year.
