Mini stockpiling is over in the U.K. (NOMD)

The week ended October 3rd, total, CPG sales grew 8% YOY in the U.K., decelerating from +10% the previous week. COVID-19 cases have resurged in the U.K., with cases per million exceeding the U.S., prompting more restrictions. Notably, the “surge” in grocery purchases was a rather limited one-week bump, as seen below. The restrictions on closing bars earlier likely led to increased alcohol beverage purchases in grocery stores as the category led all other categories. According to Nielsen, total beer, wine, and spirits were up 17% in the four weeks ended Oct. 3. Beer sales grew 19% in the four-week period while wine grew 17%, and spirits grew 16%. The second-fastest-growing category was frozen food, up 16% for the four-week period. The frozen category decelerated to +14% from +21% the previous week as the mini stockpiling was short-lived. The U.K. is Nomad Food's largest country by sales, representing 31% of overall sales.

Staples Insights | Mini stockpiling over in U.K. (NOMD), Fewer CPG promos (SFM), Next Pacifico (STZ) - Staples Insights 101520

CPG promotions remain lower (SFM)

Grocery items have had lower promotions during the pandemic. With the shortage of inventory, increased demand, and less frequent visits, retailers have had fewer reasons to promote items. For the week ended Oct. 3, CPG promotions were down 14.4% compared to the prior year, as seen in the chart below. Lower promotional intensity is a gross margin tailwind for the retailers and CPG manufacturers.

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One of the main reasons promotions are lower is that the breadth and depth of products are lower due to the increased demand exceeding production capabilities. The following chart depicts the total distribution points, as reported by Nielsen. For the week ended Oct. 3rd, the total distribution points were down 5.3%. Sprouts Farmers Market has pulled back on promotions in its produce section, a major category in which it previously used to drive traffic into the stores, driving 450bps of gross margin expansion in the most recent quarter. In contrast, Kroger only had 5bps of gross margin expansion in its most recent quarter.

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The next Pacifico (STZ)

Constellation Brands announced that Victoria would be the official beer of SummerSlam, the WWE’s second-largest event of the year, in August 2021. Constellation Brands said, “Victoria consumers are huge fans of WWE action and its Superstars, so we can’t wait to be a part of SummerSlam and other activations throughout the year.” In Mexico, Victoria has a long history of sponsoring Lucha libre (freestyle professional wrestling). WWE’s audience is 20% Hispanic, and the #4 ranked cable program among U.S. Hispanics.

When Constellation Brands purchased Crown Imports, Modelo Especial was seen as the growth engine and the “next” Corona with Pacifico years away in the wings. In recent years Pacifico has received increasing marketing support and growth. Pacifico sold 10M cases in 2019 and is the seventh-largest beer brand in California. This year Victoria sales are down 7% in the convenience store channel as the production shutdown impacted it. Victoria now looks to be receiving more marketing support. Victoria is getting ready to be the “next” Pacifico.