Spirit sales continue to lead off-premise alcohol sales (STZ)
Total off-premise alcohol sales increased 17.6% in September and October, according to Nielsen. Wine grew 18.9%, spirits grew 26.3%, and beer category sales grew 13.9%. Core beer grew 8.7% in September and October. The beer category’s growth was driven by hard seltzer up 103%, hard tea up 38%, hard kombucha up 129%, and cider up 14.9%. Hard seltzer market share fell to 9%, down from 10% in the summer, but up 4% from September and October 2019. Spirits growth was driven by ready-to-drink cocktails up 131%, tequila up 56%, cognac up 56%, cordials up 32%, and American whiskey up 30%.
Super-premium beer grew 19.7%, craft grew 15.4%, non-alcoholic grew 41%, and below premium decreased 1%. For wine, the growth has been at the higher price points with sales of <$4 table wines down 4.9% and $4-$7.99 table wines up 2.6%. The slower growth at the low end is one reason Constellation Brands is looking to sell its stable of low-priced wine brands. The slower growth at the low end can also be seen in value spirits up only 3.9% compared to ultra-premium up 50% and premium up 28.7%. The week ended Oct. 31, spirits grew 28.5%, wine grew 17.5%, and the beer category grew 13.8%.
For the week ended Nov. 7, the on-premise channel sales velocity was up 233% compared to the week ended March 28 and down 26% compared to the prior year.
Plant-based juice shots (STKL)
So Good So You raised $14.5M in its largest funding round to date. The company provides plant-based beverages that are cold-pressed with natural ingredients known to improve the immune system. Rita Katona, the co-founder, said, “Being in the CPG beverage category, we need to grow at a certain rate, or we won’t be around.” Juice shots and refrigerated shots did not exist four years ago, but the market is now estimated to be between $80 and $340M. In the past 18 months, So Good So You has grown more than 380%. The company said it had not reached 50% penetration in the grocery channel yet. The company closed its cafes in 2019 and shifted to wholesale. Plant-based drinks, meats, etc., have seen a growth spurt during the pandemic seizing on increased health awareness. The juice shot market has several competitors, including Jamba Juice, too many unless the market size can grow. It’s probably better to be an ingredient supplier to some of the competitors as SunOpta is positioned.
Tyson looks forward to recovery (TSN)
Tyson reported FQ4 EPS of $1.81, beating the consensus estimate of $1.19 driven by upside in all of its operating segments and a positive derivative impact of $75M. Revenue decreased by 2%, but operating income increased by 40%. Volume grew 5.9%, driven by beef up 11.8% and pork up 15.2%, while the chicken was up 1.9%. The average price was down 0.6% due to a 6.4% decrease in pork, a 2.3% decrease in chicken, and a 1.2% decrease in beef.
The USDA expects next year’s protein production to increase by 1%. Management expects their beef and pork will remain strong, but down YOY while chicken and prepared food will grow. Beef and pork supplies look ample, but chicken continues to be challenged by lower plant efficiencies. Tyson has debt, but leverage was 2.3x at the end of the quarter.
A vaccine would certainly help demand in the on-premise channel (currently down 20%) while also reducing employee absenteeism and the higher costs from staffing complexities. In terms of COVID-19 recovery investments, Tyson could be attractive than the restaurant companies as its stock price has lagged, and most restaurant companies are already discounting a robust recovery in 2021. We will have more as we explore Tyson's recovery prospects in 2021 with the difficult comparisons in beef and pork, higher feed costs, and competitive activity.
