“The unit economics of point-to-point delivery are tough. And while we do have a pathway to profitability laid out, it is still a few years down the line.” – Kelly Caruso CEO of Shipt December 2020.
Do DoorDash investors believe the profitability achieved during the pandemic will remain after an effective vaccine is widely available?
November retail grocery store sales accelerate (ACI)
Retail sales fell 1.1% seasonally adjusted in November from the prior month. October was revised to a 0.1% decline from a 0.3% increase. Sales in November were up 4.1% compared to a year ago. Grocery store sales increased by 10.5% in November compared to the prior year, as seen in the chart below, accelerating 8.8% in October. November’s grocery store sales growth rate was the highest since July. Foodservice and drinking places sales decreased by 17.2% YOY in November, weakening from October’s 14.6% YOY decline. In October, beer, wine, and liquor store sales increased 18.2% YOY.
Despite the weaker Thanksgiving holiday week, grocery store sales accelerated in November as more restrictions went into effect.
Survey indicates lower hard seltzer intent (SAM)
According to Drizzly’s June survey, most adults of legal drinking age purchased alcohol to drink at home between once or twice per week to a couple of times per month. Drizzly delivers alcohol from over 3,000 largely independent retailers to 2M customers. Survey respondents said they significantly increased alcohol purchases for at-home consumption since March. Millennials had the highest percentage of respondents saying they purchased more, as seen in the following chart.
The survey found that a smaller share of drinkers plans affirmatively to drink hard seltzer this year than last year (38% vs. 52%). Another 31% say they may drink hard seltzer. While fewer respondents are planning to drink more hard seltzer than did in the prior year, a large percentage said they might drink hard seltzer, which may indicate mixed intent. Hard seltzer sales reached 3.7% of total platform sales as of June 1, 2020, compared to 3.1% a year earlier. Pre-pandemic 29.3% of respondents said they visited bars or restaurants once or twice a week, another 25.9% said they visited a couple of times a month, and 22.5% said a few timers per week.
Drizzly’s customer base apparently skews much lower in hard seltzer penetration since the overall market share is about 10%. Drizzly’s customer base spends more on alcohol, visits on-premise more frequently, orders deliveries online more frequently, and has higher discretionary income than the broader population. Notably, Drizzly’s customer base appears less enthused about hard seltzer.
Premiumization of beer (STZ)
Over the last 26 weeks, off-premise retail sales of craft, imports, and domestic super premiums, which are the three highest-priced beer category segments, have increased double-digits compared to the prior year. Domestic premiums have grown 2.5%, while domestic sub-premiums have declined 2.5% over the last 26 weeks. The premiumization trend in beer has been happening for decades. The higher end of beer remains much lower-priced than in spirits and wine, which may account for some of the premiumization trends. In the past decade, beer prices have increased by 19.5%. Ten years ago, there were 1,813 breweries in the U.S, and beer production was 195.1M barrels. Last year there were 8,386 breweries, and production was 179.7M barrels. From 2000 to 2010, craft beer sales doubled. In comparison, hard seltzer sales more than doubled this year alone.
