Beer sales slow, with no help from the calendar shift (SAM)
For the week ended August 29, off-premise sales of beer, FMB, and cider increased by 7.1%. Total alcohol sales increased by 9.4%, decelerating from 18% in the prior week. The timing of Labor Day caused the stock-up period ahead of the holiday weekend to be in the corresponding week last year. Beer category sales increased 7.1%, decelerating from 15.4% in the prior week. Hard seltzer sales increased by 87%. Core beer sales, excluding hard seltzers, and FMBs grew 2.4%.
Craft beer sales increased 3.8%, below premium decreased 4.8%, FMBs excluding hard seltzer declined 5%, and premium light beer decreased 0.5%. Spirits sales increased by 12.4%, decelerating from 26.2% in the prior week. Wine sales increased 18.3%, accelerating from 17.4% in the preceding week. Alcohol sales have increased by 22.6% during the COVID-19 period to date. During that period, sales of spirits increased by 32.6% while wine increased 24.7%, and beer category sales increased 18.2%.
Constellation Brands digging out of supply shortages (STZ)
Constellation Brands presented at a conference yesterday. Unlike the last presentation, the company did not have to level-set expectations. Since June, the company has been at normal production levels, digging out of the supply shortage. Out-of-stocks were described as “just a couple of days” and are expected to go on for a few more weeks. In FQ2, depletions were up low to MSD% while shipments were down LSD%. In FQ3, it is expected to reverse to shipments exceeding depletions.
Management said they expect to sell out the max capacity of hard seltzer that they can produce this year between 8-10M, which currently puts them in fourth for market share. Hard seltzer capacity will double next year after the Obregon brewery expansion is completed later this year. Management’s earlier prediction that 90% of Corona hard seltzer sales this year would be incremental has held. Management also expects the consent decrees for the Gallo transaction to be coming in the next few weeks. Constellation Brands described the ongoing negotiations with the Mexican government about Mexicali as “trending in a good direction,” which is better than the most recent comments from Mexican President AMLO. The supply shortages put Constellation Brands in the unique position of being able to grow during a pandemic but also having easy comparisons next year.
Can restaurant demand provide enough of a boost for cattle prices? (TSN)
After one week of seeing cattle feeding margins in the black, average feed yard closeouts showed losses of $42 per head, according to Sterling Beef Profit Tracker. Margins fell $92 per head from the prior week. Packers saw their margins increase $9 per head to $439 despite boxed beef cutout prices falling $2 to $225 per cwt. Prices for fed cattle fell $1-3 after the Labor day push by retailers, as seen in the chart below. Cattle continue to be more massive from their long time in the feed yards providing ample supply, giving packers leverage. Packers continue to be challenged operationally with enough labor staffing. It has been a challenging year for cattle producers and packers for different reasons related to the pandemic. An increase in demand from restaurants would be welcome as spending at grocery stores has begun to decelerate. Meat department sales decelerated to +1% in the week ended August 30 from +16% the prior week (driven by a 19% decrease in pork).
