Southeastern Grocers files for IPO (SEGR)

Southeastern Grocers filed an S-1 registration statement yesterday to go public. Southeastern Grocers operates 420 stores under the Winn-Dixie, Harveys, and Fresco y Mas banners. The company is the sixth-largest conventional supermarket operator in the U.S. and the second-largest in the five states in which it operates. The company intends to list on the NYSE with the ticker SEGR.

The supermarket industry has a massive tailwind from the pandemic, and Southeastern Grocers is not going to let a cold reception for Albertsons dissuade it from going public. Conventional grocers benefited from the consumers’ shopping trip consolidation during the pandemic. Yet only three of the larger grocers saw an increase in foot traffic from March through September, including Albertsons, Winn-Dixie, and Meijer. SEGR’s SSS increased 26% from March through July and 21% in the most recent quarter. A store remodeling program should be a ~2% benefit to SSS. The grocery chain has a 27% private label mix. 76% of its stores are in Florida.

Southeastern Grocers had declared bankruptcy in 2018. In recent months the company has announced agreements to sell all the stores in its BI-LO banner and that 87% of its remaining portfolio will be Winn-Dixie stores. Just yesterday, we speculated that we might be in a cycle of IPOs and divestments rather than mergers and acquisitions, and SEGR files plans for an IPO after making some divestments. We will have more thoughts and details as SEGR moves towards a roadshow.

Grocery demand elevated, flat for the week (ACI)

For the week ended October 11, the total CPG index was up 11% YOY, flat with the prior week in grocery stores, as seen in the following chart. Demand was led by the frozen category, which was up 18%. Beverage alcohol was also strong, up 17%. Edible categories were up 11% down from 12% the prior week, while non-edible categories were up 7% even with the prior week. Seafood continues to lead fresh food categories. Seafood is a cuisine many Americans prefer to eat in restaurants than at home, so it is likely directly benefiting from more meals consumed at home.

Staples Insights | SEGR IPO, Grocery demand elevated, but flat WoW (ACI), Hard seltzer's share (SAM) - staples insights 101920

Hard seltzer’s gains come from beer (SAM)

According to IRI, nearly half the growth in hard seltzer in the U.S. comes from drinkers who are switching from beer, wine, and spirits, as seen in the chart below. Two-thirds of that is from switching from beer. Most of the switching from beer comes from a light beer. 12% of the volume came from new buyers to the beer, wine, and spirits category. 40% of hard seltzer’s gains are from additional purchases.

Staples Insights | SEGR IPO, Grocery demand elevated, but flat WoW (ACI), Hard seltzer's share (SAM) - staples insights 101920 2

Estimates for Boston Beer’s FQ3 EPS to be reported on the 22nd are too low given the strength of Truly Hard Seltzer during the quarter. We are concerned about the boost from COVID-19 on 2020 results and the slowing trends, but those concerns do not factor into FQ3. Both White Claw and Truly believe that they left sales on the table this summer due to product shortages.