Alcohol imports weaken (STZ)
Total beverage alcohol imports decreased by 5% by value over the last 12 months and decreased by 16% by value over the last three months ended August.
- 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 4% by value. 82% of imported beer comes from Mexico. Constellation Brands represents most of Mexican beer imports and 60% of imported beer.
- Imported packaged spirits decreased 12% by volume and decreased 9% by volume over the last 12 months. Over the last three months, volumes declined by 25%, and by value declined by 24%.
- Imported packaged wine for the last 12 months decreased 18% by volume and decreased 6% by value. Over the last three months, volumes decreased by 29% and decreased 20% by value.
Constellation Brands beer shipments grew 8.7% YOY, and depletions grew 7.9% in the quarter ended in August. The company had supply disruptions with kegs during the quarter but is now producing and shipping kegs.
Bumper Potato harvest (LW, UTZ)
This year’s potato harvest is wrapping up and nearly complete in the U.S. Industry forecasts for this year’s potato harvest projects a 9.5% increase from 2022. Idaho’s production is expected to be 22.8% larger than in 2022, driven by a 12% increase in planted acres. Washington's crop is expected to be 5.3% larger on a slight decrease in acreage. The larger projected harvest is due to a 5.9% increase in the projected yield. When compared to the 20-year trend in yield, it is less than 1% higher. The quality of the harvest is expected to be excellent. In contrast to last year, farmers will have open potatoes to sell and store. This will lead to some diversion from the frozen processing market to the table potato market. Potatoes for the chip market should also see an increase in yields this year. Lamb Weston has contracted potatoes for next year 20% above this year in the U.S. There is less incentive to drop a lower margin customer contract when there is available supply at significantly lower prices than last year. The company is hosting an investor day on Wednesday.
Sugar high (HSY)
Sugar prices hit their highest level in thirteen years. Prices in September increased 9.8% from August, the second consecutive monthly increase. Behind the higher prices are concerns over a tighter global supply outlook. Six of the ten leading producing countries have had extreme weather this year. El Nino is leading to drier weather in countries such as Thailand and India. Conversely, increased precipitation in Brazil’s growing regions has raised concerns about a slowdown in sugarcane crushing.
Hershey is introducing new price increases in the 2H, while most food companies are relying on price increases in the 1H of the year to offset higher input costs. Sugar and cocoa beans are the primary inflationary pressure.
