CPG sales decelerate with second wave uptick (ACI)
For the week ended June 28, CPG demand in the grocery store channel grew 14% YOY but decelerated 800bps from the previous week. CPG demand in the multi-outlet channel increased 10% YOY, decelerating 600bps, as seen in the following chart. Multi-outlet includes grocery stores, drug stores, mass merchandisers, dollar stores, and military commissaries. For the grocery store channel, the last week of June had the lowest growth rate since the pandemic began. Florida, Texas, and California added restrictions during that week in response to the second wave of COVID-19 cases. IRI projected an uptick in the grocery channel, but not for the multi-outlet channel for the next week.
Craft beer’s hard seltzer challenge (SAM)
With sales accelerating during the pandemic, hard seltzers now have $2.8B in annual off-premise sales, as seen in the following chart. In 2019 on-premise sales were $1.2B. For the week ended June 27, hard seltzer sales grew 187% and now represents 10.7% of beer category sales. White Claw and Boston Beer’s Truly dominate the hard seltzer category. Despite the new offerings from Natural Light and Corona, White Claw and Truly have maintained their market share. We are starting to see several craft brewers enter the hard seltzer category as well. However, it may be a challenge for the craft brewers to take share from the category leaders since they compete in beer by offering more flavor at the expense of calories, which is turned on its head in hard seltzer.
Lidl’s future competitive pressure (KR)
Lidl, the German discount grocer, opened its first four locations in Long Island in early 2020. A new study from UNC’s Kenan-Flager Business school found that the Long Island openings pressured other grocery stores to reduce their prices by as much as 15%. (Lidl commissioned the study.) Lidl was priced 45% lower than Trader Joe’s and more than 30% lower than other national retailers on Long Island. Stop & Shop was priced 34% higher, while Costco, Aldi, and Walmart were priced similarly to Lidl. Aldi cut its prices by 15% after Lidl’s entry while Walmart cut its prices by 9%. Stop & Shop and King Cullen decreased their prices by 4-5%. Over the past year, Lidl opened 25 stores, seven of which were in Maryland and six in North Carolina. The chain will have roughly 100 locations concentrated in the mid-Atlantic region, as seen in the following map. Lidl’s DCs are in Virginia, Maryland, and North Carolina. Each DC can support up to 400 stores and cost $100M to open.
Food is the most competitive sector in retail, and Lidl is competing at the low end of the price range with its private-label offering. Lidl is not opening enough stores to be broadly deflationary for the grocery industry yet. Notably, the study documented the price impact on a significant part of an MSA with only four stores. King Cullen and Stop & Shop (the market share leaders in Long Island) terminated their merger last month after long delays in getting approval from the FTC. After more Lidl openings on Long Island, the companies should have the FTC take another look at the combination and competitive activity.
