Beer production falls (STZ)
Domestic beer production decreased by 7.7% in May measured by taxes paid to the Alcohol and Tobacco Tax and Trade Bureau (TTB). Beer production decreased compared to the prior year in four of the past five months and May was the largest YOY decline this year. April’s production decreased by 4% YOY. YTD through May domestic beer taxes have declined by 4.4%. Imported beer shipments increased 5.2% YOY in May after decreasing 11% in April. Imported Mexican beer increased 11.9% YOY in May after decreasing 9.2% in April. Over the past 12 months, imported Mexican beer has grown 2% YOY. Constellation Brands has seen a pick-up in sales as AB InBev cedes share and the increased rainfall dampened demand earlier in the year. A temporary pause on keg orders may have impacted Constellation Brands’ recent trends.
State grocery taxes (ACI, KR)
Currently, 13 states charge sales tax on groceries. The states are Alabama, Arkansas, Hawaii, Idaho, Illinois, Kansas, Mississippi, Missouri, Oklahoma, South Dakota, Tennessee, Utah, and Virginia. The tax rate varies from 0.1% in Arkansas to 7.0% in Mississippi. Alabama, Mississippi, and South Dakota are the three states that still tax groceries at the same rate as the state sales tax.
Kansas is fading out its grocery tax after dropping the rate from 6.5% to 4% at the start of the year. Virginia dropped the rate to 1% to start the year. Illinois suspended the grocery tax for the past year, but the tax resumed on July 1. The $1.8B in collections is needed for the state’s budget. Eliminating the grocery tax would likely be a small tailwind for the sector.
Prime Day (KR)
According to PYMNTS, Amazon is looking to learn from last year’s Prime Day by customizing deals to make further inroads in the grocery category in this year’s sale. Last year 23.1% of Prime Day shoppers purchased groceries, up from 20.5% in the prior year. Some of Amazon’s best deals could be on grocery items this year.
Amazon is offering 20% off in-store purchases leading up to the event. It is offering 30% off early Prime Day deals, $20 off purchases of $100 or more on July 11-12, and 6% rebated back to customers who use the Amazon card at Amazon Fresh stores. The push to get consumers to visit Fresh stores makes sense, but Prime Day deals will not be the fix. Earlier in the year Amazon announced it is closing nine Go convenience stores and paused the rollout of Fresh stores. In February, CEO Andy Jassy said Amazon has “a very significant opportunity in the grocery segment.” It’s an opportunity the company still has not captured.
