COVID-19 has rapidly accelerated the online grocery push (KR, ACI, SFM, GO, SEGR)
Grocery BOPIS has increasingly become the cost of doing business and is more popular than delivery. E-commerce grocery sales in August totaled $5.7B, 20% less than June, but up significantly from $1.2B in August 2019, as seen in the following chart. 29% of all U.S. households are considered monthly active users of online grocery in August, up from 16.1M a year ago. The first month over month, deceleration in online orders has revised market expectations for digital penetration post-COVID-19. Amazon Fresh opened its second store last week, and Whole Foods announced one-hour delivery. The digital change in the sector has been accelerated due to the pandemic, creating new winners and losers.
We are updating our grocery sector themes with a Black Book presentation on Wednesday. It has been four months since our last update, and consensus EPS estimates have come much closer to our own projections. While we see the spending shift to food at home from food away from home lasting longer than consensus expectations, our thoughts on how to be positioned have been adjusted. We will be making several changes to our position monitor.
Grocery Outlet’s East Coast expansion (GO)
Grocery Outlet started to post job listings for independent operators in the Philadelphia area late last week. The company is looking for operators in Elkins Park, Malverne, Royersford, Trevose, Palmyra, Trenton, and King of Prussia. The company is also recruiting buyers, merchandisers, and directors of construction. Grocery Outlet was also identified as the anchor tenant for a new development that broke ground last week in a Philadelphia neighborhood.
Grocery Outlet currently has 19 stores in Pennsylvania. The company entered the East Coast market with the acquisition of Amelia’s Grocery Outlet a decade ago. Over the years, the stores have been rebranded, and some have closed, but there has been very little growth. Last year the company hired a former Sam’s Club executive, Heather Mayo, to be the EVP of the East division. As Grocery Outlet opens additional stores on the East coast, it will make new supplier relationships and ship less from the West coast. New supplier relationships with East coast companies will create more supply for the West coast stores.
Americans’ frequency of wine drinking is up the most (STZ)
Overall, the U.S. wine sales volume is roughly flat during the pandemic, with steep declines in restaurants offset by significant increases at retailers. Americans’ frequency of wine consumption is up 19%, tops among seven countries in a study by Wine Intelligence, as seen in the chart below. It seems Americans are reaching for a glass of wine more often after a day of Zoom calls.