June CPI (WMT, TSN)
Food at home CPI increased 4.7% in June, decelerating from 5.8% in May. The two-year average decelerated 50bps to 8.4%, a step down from the two-year average trend that has been in place since September.
Fruits & vegetables and sugars & sweets were one the only categories to see a sequential acceleration. The meats, poultry, fish and eggs category had deflation of 0.1% in June, decelerating from 0.3% in May. We have been calling for food deflation in the perimeter of the grocery store. The meat category has led inflation on the way up and now on the way down. Price increases in CPG are not over, but not every company will be able to raise prices. Disinflation, demand destruction, and capacity have been headwinds for meat producers.
Redirected SNAP spending (KR)
According to Circana, the expiration of the supplemental SNAP benefits in 32 states in March reduced government transfer payments by $23B annually. The expiration resulted in a 35% reduction in total monthly food and beverage spending by households receiving SNAP benefits. Circana’s analysis concluded that SNAP households reduced their spending on nonfood items at over three times the rate of their spending on food and beverages. The reduction in discretionary spending has benefited spending on food at home and away from home. Pizza chains and hamburger QSRs were cited as the top beneficiaries of redirected discretionary spending. Food consumption is a top priority. SNAP benefit reductions will be seen in consumer staples, but even more in discretionary categories.
Alcohol imports (STZ)
Total beverage alcohol imports grew 1% by value over the last 12 months and declined 7% by value over the last three months.
- Imported beer was flat by volume and grew 3% by value over the last 12 months. Over the last three months, imports were flat in volume and grew 3% by value. 81% of imported beer by value comes from Mexico. Constellation Brands represents a majority of Mexican beer imports and 60% of imported beer.
- Imported packaged spirits decreased by 3% in volume and grew by 2% in value over the last 12 months. Over the last three months, volumes decreased by 18% and value decreased by 15%. 42% of imported packaged spirits come from Mexico.
- Imported packaged wine declined 16% in volume and declined 2% in value over the last 12 months. Over the last three months volumes declined 16% and by value declined 1%.
The underwhelming volumes for Constellation Brands were apparent in the most recent quarter, but trends excluding kegs have improved.
