The Mexican beer standoff
The Mexican government surprised many when it labeled the beer industry as non-essential and all non-essential businesses to close in late March. The entire government was not behind the ruling. The Agriculture Department sent a letter on April 6 to the major brewers to restart production. That brought a swift rebuke from Assistant Health Secretary Hugo Lopez-Gatell, the government’s point person on COVID-19. “There are general orders from health authorities suspending all work activities except the essential ones, which are clearly spelled out in the Health Council’s decree of March 31, and they do not include the production or distribution of beer.” The Agriculture Department then issued a clarification saying it only meant to encourage the beer industry to continue to buy crops because farmers do not have storage capacity. Mexico’s National Alliance of Small Business said last week, “Beer supplies should be guaranteed because beer helps people get through quarantine on better terms.” The small business alliance estimates that 40% of small shops’ volumes are beer. Wholesale prices have increased by 40% since the beer production stoppage was announced. Anheuser-Busch InBev and Heineken have wound down their beer production in Mexico. Constellation Brands assured investors that its inventory levels and the projected length of the stoppage would not impact sales. The longer the situation drags out in Mexico, the more varied the regional differences will be with following the federal government’s decrees.
Local grocery sales re-accelerating?
Local and independent grocery store sales increased 53% YOY on April 19 and have re-accelerated since the initial decline in late March after the pantry loading phase in mid-March, according to Womply (a CRM provider). One crucial caveat is that the data excludes food and beverage stores that close. Small grocers have increasingly decided to close their doors in the past two weeks. Since April 12, when 12% of Womply’s grocery store base was closed, the percent closed has increased to 30% over the following week. The closing of the smaller stores that have not been able to keep up with the challenges of operating in a pandemic have benefited those still operating. The larger regional and national chains are up less in percentage terms, but that is of much larger sales bases.
Food stamps to increase
The USDA said on Wednesday an additional $2B was provided by the federal government to increase benefits by 40% for families enrolled in the Supplemental Nutrition Assistance Program (SNAP). The USDA said, “the average 5-person household receives … $528. These emergency benefits would provide the average 5-person household an additional $240 monthly in food purchasing power, bringing the average household up to the same benefit level as households already receiving the maximum [of $768].” About 37M Americans were enrolled in the program at the last count. 12M already receive the maximum benefit and would not see any increase. Compared to total supermarket sales of roughly $650B, the amount is small, but individual food retailers will gain a more significant share of the rise in benefits.
