Canadian Beer Sales Decline Again (TAP)
Domestic beer sales in Canada decreased by 3.8% YOY in volumes in March. The decrease in March comes after sales were inflected positively in February after eight consecutive months of decline, as seen in the chart below. Import sales decreased by 4.9% in March, decelerating from a 1.8% decline in February. Beer sales have declined in Canada in 2022, 2023, and look to see similar declines in 2024. Share gains have helped offset the category weakness for Molson Coors.
Beer Purchasers Index Improves (STZ)
The National Beer Wholesalers Association’s Beer Purchasers Index (BPI) had a score of 62 in April, rising from 53 in March. It was the first time the index surpassed 60 since December 2021. The BPI is a diffusion index where a reading over 50 denotes expansion and below 50 denotes contraction.
All the beer segments saw their BPI score improve YOY in April.
- The imports’ score was 73, up from 66 last year and last month.
- Craft was 36, up from 33 last year and even with 36 last month.
- Premium lights were 63, up from 43 last year and 53 last month.
- Premium regular was 59, up from 32 last year and 47 last month.
- Below premium was 53, up from 49 last year, and 47 last month.
- FMB/seltzer was 40, while still in contraction; it was up from 24 last year and 34 last month.
The at-risk inventory level reading was 46, down from 47 in March. Distributor inventories have been contractionary for six consecutive months. Constellation Brands remains the only growth story in beer.
Only What You Need (SMPL, STKL, BRBR)
The Simply Good Foods Company announced an agreement to acquire Only What You Need “OWYN,” a plant-based RTD protein shake brand, for $280M. OWYN was the fastest-growing RTD protein shake brand in the year ended March 31, with sales increasing by 121%. In the four weeks ended March 31, sales were up 114%. OWYN is expected to reach sales of $120M in 2024. The purchase price represents 2.3x projected revenue and 13.3x adj. EBITDA, including synergies. The acquisition is expected to dilute margins initially and be accretive to EPS in the year following the acquisition. There are notable competitors in the RTD protein shake sector, including Premier Protein, Muscle Milk, and fairlife, but there is significantly less competition in plant-based options. More than one-third of Americans are lactose intolerant. There is a lack of plant-based RTD shake options in the marketplace, which represents an opportunity for SunOpta as the leading plant-based milk manufacturer. 4-packs of Tetra Pak aseptic cartons (the size/type SunOpta manufactures) accounted for 80% of OWYN’s sales. BellRing Brands trades at a premium to the transaction price, but the acquisition does highlight that a potential acquirer is not limited to beverage companies. BellRing’s high growth rate and capital efficiency would be attractive to numerous CPG companies.
