“Our full-service format outperformed other bricks-and-mortar food retail formats throughout this pandemic. As many customers sought to minimize their grocery store visits, they gravitated toward one-stop-shop grocery stores that met all their household needs.”
-Empire CEO, 6/18/20 earnings call
The timing is right for the IPO of Albertsons. Please join us for a pre-IPO review on Wednesday at 2 PM. For our grocery industry and ACI webcast and materials: CLICK HERE
Canopy Growth investor meeting highlights the opportunity in beverages
Canopy’s investor meeting highlighted revenue opportunities more than cost cuts, but this isn’t the same management team that chased every market and product potential. Management told investors that trends in the Canadian recreational market had improved somewhat since the last conference call as physical stores have reopened. Management projects the legal market TAM in 2023 globally to reach C$70B from C$10B currently with the US, Canada, and Germany, representing 90% of the total. That represents growing 4x by 2023 in Canada.
In Ontario, 2.0 products now account for 25% of total recreational sales in May. Management is bullish on the cannabis beverage opportunity, one of the original reasons for Constellation Brands’ interest in Canopy. Beverages are now 28% of the beverage/edible category in Ontario in May. They believe the product can target lapsed cannabis users, but also new users that are attracted to the low calorie, low sugar, and no hangover attributes in a setting where others are drinking beverages. The company has now doubled weekly production runs for beverages. One of the issues for beverages is a low possession limit for THC, which limits the purchase amount to five cans of its Tweed & Soda. Drinks are only 1% of the market in the US, which management attributes to a lack of execution on consumer experience.
If the recreational market in Canada can rebound with restrictions slowly lifting in Ontario and beverages continuing to take share, Constellation Brands investors may give Canopy more time as there is little upside embedded in the share price.
Consumer survey points to flattening of grocery spend (ACI & KR)
In the last week of our grocery survey, 52% of respondents reported their spending on groceries was the same as the previous week. This is the same percentage as our last survey two weeks earlier. The percentage of respondents that said they were spending less than the last week reached a survey low of 8%.
Grocery union demands hero pay reinstated (KR & ACI)
The United Food and Commercial Workers International Union (UFCW), which represents 1.3M workers in grocery stores and other retailers have called on the major supermarket chains to reinstate hazard pay. The union cited the increases in COVID-19 cases in at least ten states. Many businesses extended additional hourly pay or bonuses for front line workers during the initial months of the pandemic. Kroger and Stater Bros phased out their respective bonus programs in mid-May while Albertsons’ ended on June 13. After the union complained about the initial phase-out plans, Kroger announced a $400 bonus for full-time workers and $200 for part-time workers that totaled to $130M in additional pay. Walmart is paying a second round of bonuses of $300 for full-time workers and $150 for part-time workers. Sobey’s (Empire) ended its hero pay on June 13. Stop & Shop extended their 10% bonus through July 4. H-E-B extended their extra pay through June 21. Not all companies paid their front-line workers more, but most have ended it by now, including Amazon, Molson Coors, Starbucks, and Rite Aid. Only 25% of employers that required employees on-site offered hazard pay, according to WorldatWork. Workers employed in retail were more likely to receive additional compensation, with 46% of supermarkets offering hazard pay compared to 29% of healthcare employers. One key difference for Kroger and Albertsons is their unionized workforce and the demands they make, notably when the grocers are outperforming.
