Customer traffic to bars has a gradual recovery, while traffic to supermarkets weakens
Customer traffic to bars continues to recover as the pandemic enters August. As seen in the following chart, traffic to bars has been negatively impacted by several states reinstating restrictions, but the larger trend continues to point towards a slow recovery.
Customer traffic to supermarkets has weakened since early July. Grocery sales from June to July have been relatively stable, but traffic has weakened. All of the large grocery chains noted in their calendar Q2 conference calls that traffic continues to be down while basket size has increased. There are a number of reasons driving customers to visit supermarkets less frequently (we outlined them in our grocery black book, CLICK HERE), but the impact of less frequent visits benefits departments like frozen and center aisles, while departments like bakery, deli, and prepared foods are negatively impacted. Gross margins have an overall net benefit due to less shrink from higher volumes and lower promotions. The recent drop in traffic could be due to increased e-commerce usage amid rising cases of COVID-19 in a number of crucial states, pantry de-stocking, increased food away from home consumption, and changes in work locations.
Diageo (DEO) acquires Aviation Gin & Davis Brands for up to $610M
Diageo announced that it would acquire Aviation Gin and Davis Brands for up to $610M. The acquisition price consists of an upfront payment of $335M and $275M in contingent payments after ten years. The actor Ryan Reynolds became the face of Aviation Gin after he acquired an unspecified but significant stake in the company. Aviation Gin is now the second-largest premium gin in the US and grew 100% in volumes in 2019. Humorous ads featuring Ryan Reynolds helped drive the brand to significantly outpace the gin category's growth of 3%. The acquisition has similarities with Diageo's acquisition of the tequila brand Casamigos for $700M plus contingent payments of $300M in 2017. It makes you wonder, what hard seltzer brand will find an actor to partner with for a couple hundred million? Or maybe the celebrity endorsements work better in spirits.
Online grocery gains (ACI, KR)
Overall, online grocery transactions grew 15% YOY, but there were significant share gains and losses. Walmart has overtaken Amazon in the share of online grocery transactions, according to TABS Analytics. TABS surveyed 1000 adults in early August about their food and beverage purchasing habits. Walmart has reached a 30% share of online food and beverage transactions, down slightly from 30.4%. Amazon's online food transactions fell from 32.6% to 27.1%. Traditional grocers share fell from 15.7% to 15.3%. E-commerce companies Fresh Direct, Net Grocer, Peapod, and Instacart, achieved significant gains in online transaction share. Grouped together, the e-commerce companies' share grew from 7.9% to 16.7% in the past year. The e-commerce companies' transactions grew 140%, compared to 12% growth for conventional supermarkets, and 4% decreases for Amazon and Target as seen in the following chart. E-commerce's share of grocery is about 7%. Online grocery spending has been declared a major winner during the pandemic, but the primary beneficiaries have been the companies focusing on grocery, especially online grocery.
