How many restaurants will close? (SYY)
The National Restaurant Association says 40% of operators aren’t sure they will make it six more months. The restaurant association released a new survey this week that found nearly one in six restaurants, or 100,000 units, closed either permanently or long term. The Association said consumer spending in restaurants was down 34% on average. According to Black Box, comp sales for chain restaurants declined 12.3% in August, with traffic down 17.7%. QSRs are significantly outperforming full-service restaurants, and sit-down chains are recovering faster than independents. According to Revenue Management Solutions, traffic declined 10-15% at counter service restaurants with sales flat to down 5% while full-service transactions are down 30-35%.
It’s essential to keep in mind the Association and its members are also asking for more legislative assistance, so dire forecasts for the industry are somewhat self-serving. According to Womply, a CRM provider to local restaurants, the closure rate (the percentage no longer processing transactions) for local QSRs has been about 18% since June, as seen in the following chart.
The closure rate for sit-down restaurants has increased slightly since the end of June but has been at 23% since August. The closure rate for bars/lounges has increased since the end of June to 38%. With so many restaurants not currently open, it does provide a boost for the open restaurants. According to Womply, sales at all local restaurants were down 47% on September 4 while sales at open restaurants were down a much more modest 8.1%, as seen in the following charts. The reward for persevering through the pandemic will likely be a less competitive environment, which the larger chains are better positioned for.
Beer category lags other alcohol sales (STZ)
Off-premise alcohol sales increased 17.5% for the week ended September 5, boosted by the Labor Day calendar shift, up from 9.9% the previous week. Spirits grew 33.4% for the week, up from 12.8% the previous week, led by tequila up 62.8%. American whiskey sales increased 36.1%, ready to drink cocktails grew 143%, and prepared cocktails grew 49.4%. Wine sales grew 17.9% for the week, up from 13.5% the previous week. Table wine was up 14.0%, and sparkling wine was up 33.3% for the week. The average price for wine in the off-premise channel increased by 6.6% to $11.38. The fastest-growing categories at retail was above $15, particularly between $20-25. Even though wine sales in the off-premise channel are up 24.7% during the pandemic, 57% of US wineries report that their sales are down. This is due to the larger wineries taking more share. The beer category grew by 12.2%. Core beer sales (ex. FMBs and hard seltzer) rose 6.8%. The on-premise channel grew 2% for the week ended September 5 compared to the prior week.
Mexico hard seltzer (HEIA-AMS)
Heineken is testing Pure Pirana, a new hard seltzer brand in New Zealand and Mexico (depicted below). The company is also bringing Canijilla to certain US markets. Canijilla was launched in Mexico last year. Heineken is late to the US hard seltzer market, but internationally Carlsberg and Heineken are more aggressive in introducing hard seltzer to new markets. Boston Beer has said it is not seeking international growth for Truly while White Claw is only somewhat aggressive outside North America. That leaves the international market as a big potential opportunity for someone to pursue.
