Constellation Brands receives FTC clearance for brands sales (STZ)
Constellation Brands confirmed that the Federal Trade Commission (FTC) had accepted the proposed consent order for the wine portfolio sale to E. & J. Gallo. The transaction is scheduled to close the week of January 4, just missing the expected year-end timing. The FTC’s acceptance includes the separate transactions to divest the Paul Masson Grande Amber Brandy brand and the Nobilo Wine brand.
On November 9th, Constellation Brands announced that it signed a consent order with E. & J. Gallo and the Bureau of Competition of the FTC. Approval of the sale has been a long process of going through each brand's competitive dynamics, along with supply agreements further complicated by COVID-19. The wine and spirits portfolio of brands retailing at $11 and below was first announced in April 2019 for $1.7B. By May, the deal was delayed after additional information requests by the FTC. The transaction price is $1.03B, which includes a $250M two-year earnout. The Nobilo Wine brand is being sold separately for $130M to Gallo. The Paul Masson Grande Amber Brandy brand is being sold for $255M to Sazerac.
The on-premise recovery (BUD)
Kegs typically account for about 10% of all distributed beer. Between weeks 12 and 20, kegs fell to nearly 0% or even negative, counting the returns. On-premise businesses began to reopen in week 21 but will finish the year at roughly 3% of all packaged beer. The keg volume shifted to can packaging, which increased 5% points to 65%, while bottles remained the same at 32%. With two weeks remaining in 2020, the on-premise segment that has performed the best in 2020 is golf courses that have sold nearly 90% of 2019 volumes, according to Fintech. The fast-casual restaurant channel has seen an increase YOY. Sports bars, private clubs, restaurants, bars, taverns, and casinos have sold 60-70% of their 2019 volumes. Hotels, fine dining, airports, other transit hubs, and stadiums are at less than half of last year’s volumes.
The recovery in on-premise consumption will provide a boost for Anheuser Busch InBev. The company’s on-premise mix in the U.S. is a couple of percent less than 20%, skewing higher than the industry’s mix.
BREXIT deal is a positive for Nomad Foods (NOMD)
The U.K. government has reached a trade deal with the European Union, completing the bloc's separation. The agreement must still be approved by the U.K. and European legislatures and the E.U. member states. The trade deal allows for tariff and quota-free trade in goods after Dec. 31 but does not apply to the services industry. Tesco’s Chairman said the consumer would not see any noticeable changes in food costs despite “a little bit more administration associated with importing and exporting.”
The BREXIT agreement is good for Nomad Foods. It would remove 5 years of policy overhand, allow it to continue to trade without tariffs between the U.K. and E.U., and allow management to focus their attention on the business. A strong British Pound and Euro are also tailwinds - both transactionally and translationally.
Nomad Foods is a best idea long.
