Prime steaks priced for the backyard grill (TSN, TXRH)
One impact of the pandemic on the beef industry has been an increase in the number of cattle rated as Prime, the highest rating. COVID-19 infections at meatpacking plants this spring caused a reduction in slaughter. The closure of most high-end restaurants that sell Prime beef reduced demand in the spring. The USDA reported cattle rated as Prime in May at 12% compared with 8% the prior year. June’s weekly average for Prime rating was 10.6% compared to 7% last year. The combination of increased supply and decreased demand for Prime has narrowed the price gap between the highest grade and the second and third rating. In June, the premium for Prime loin was 2% higher than last year while Choice and Select premiums rose by 20%. The higher prices of Prime steaks keep the demand low in the retail channel (Costco is one of the few food retailers that sells Prime steaks). Texas Roadhouse uses Choice cuts in its menu.
Traffic to grocers picks up in states adding restrictions (ACI)
Traffic to supermarkets increased by HSD% week over week after bars and restaurant restrictions went into place in California and Florida. The consumer behavior to shift meals to the home when COVID-19 causes additional restrictions can be seen at the state level using smartphone location data. A resurgence in COVID-19 cases and elevated spending in grocery stores in Q3 is not in current projections for the grocers.
Higher-end wine outselling lower-end wine during COVID-19 (STZ)
Consumers have been drinking more wine during the pandemic while eating at home. Wine sales are up 28.4% in the off-premise channel in the 17 weeks ended June 27. Despite being in a recession, wine growth in the off-premise channel has been led by the higher-priced tier. This is due to increased purchasing by a portion of wine consumers who are sheltering at home with higher disposable incomes and fewer areas to spend it. Instead of eating out, these consumers are enjoying a more expensive bottle of wine with their home-cooked meals.
Constellation Brands expects to close on the sale of its <$11 wine brands portfolio to E &J Gallo this quarter.
