Scapegoat (KR, ACI)
Jared Bernstein, the chair of Biden’s Council of Economic Advisers, said last week, “We’ve seen elevated (profit) margins, particularly in the grocery sector, and have taken note that there needs to be more pass-through there (to consumers).” White House aides told the New York Times that more is to come. The Administration’s previous focus on price gouging in the grocery industry has been in the meatpacking industry.
A Kroger spokesperson said, “We agree with President Biden. Too many grocers in America have increased margins in contrast to Kroger.” Food retail gross margins have changed little since the pandemic, as seen in the table below. Operating margins are also similar, so it is unclear what the Biden administration is pointing toward. It is easy to chalk up the comments to election-year rhetoric. Perhaps the biggest takeaway from the comments around the grocers is a more hostile view of the pending Kroger-Albertsons merger.
Texas On-Premise Alcohol Beverage Tax Receipts Slide (BUD)
Texas reports its alcoholic beverages sales tax receipts monthly. In January, alcoholic beverage receipts decreased by 1.3% YOY, slowing further from -0.1% in December. The CPI for alcoholic beverages away from home rose 4.6% YOY in January. The tax receipts and CPI imply a significant decline in alcohol volumes in the on-premise channel in Texas in the past nine months.
Where’s the beef? (TSN)
The size of the U.S. cattle herd was 87.2 million head on January 1, 2024 according to the Cattle Report. That herd is 2% smaller than a year ago. Beef cows were down 2% to 28.2 million, while dairy cows were down slightly to 9.36 million. Cattle and calves on feed for the slaughter market for all feedlots was 14.4 million, up 2% YOY. Prices for all classes of cattle are at record levels. CattleFax projected high prices to continue for several more years as the herd rebuilds. The still shrinking cattle supply will put upward pressure on prices, possibly for years. The current environment is favorable for ranchers and unfavorable for the producers.
