Will a convenience store recovery include beer? (BUD)
According to a NACS survey of U.S. convenience store owners, 52% expect summer travel and commuting patterns will be close to pre-pandemic levels. 28% do not expect to see a return to previous patterns until 2022. Retailers expect growth in dispensed cold beverages and coffee as well as prepared foods. Convenience stores sell 80% of the fuel purchased in the U.S. During the pandemic, fuel sales fell 13%, and breakfast food and coffee sales fell 10-15%. Convenience stores are the most important channel for beer sales. During the early stages of the pandemic, grocery store sales growth was twice that of the convenience store channel. Still, after a couple of months, the convenience stores outpaced the grocery stores. National Retail Solutions which sells POS systems to thousands of independent convenience stores, liquor stores, and other small retailers, said beer category sales at its customers grew 19% in 2020. Sales of spirits grew 48%, and sales of wine grew 45%, outpacing total sales growth of 17%. While the convenience store industry hopes to retain last year’s sales, alcohol sales would likely decline even as overall sales recover.
The boom in greenhouses (APPH)
Green Life Farms announced it had commenced construction on its second hydroponic greenhouse in Lake City, Florida. The company is building a 400,000 square foot greenhouse on a 24-acre site. In comparison, AppHarvest’s current location is 2.76M square feet on a 60-acre facility. Green Life Farms will grow leafy greens for the North Central Florida region. Using Florida’s natural sunshine, the facility is expected to use less electricity than other greenhouses. Since the customers are close by, the company anticipates using less fuel as well. Green Life Farms’ other 100,000 square foot facility produces leafy greens for the South Florida market. The company is planning to add seven additional facilities totaling 2.8M square feet. There is currently a boom in greenhouse/vertical grow construction. AppHarvest’s current valuation has likely attracted even more capital to the new industry. AppHarvest’s business model differs from most competitors in two significant ways: 1) one centralized area of production 2) growing tomatoes. Investors would do well to understand the implications and shortcomings of the differences. By the end of Q2, we may have three public vertical grow companies listed on U.S. exchanges and an even larger pipeline if the valuations hold up.
Canned wine (BSPE)
The top 25 table wine brands in supermarkets saw sales growth of 17.5% to $3.8B in 2020, benefiting from the shift to at-home consumption. Half the top ten wine brands in supermarkets were available in alternative packaging like boxes which outpaced wine sales in bottles. For the week ended March 20, Nielsen reported canned wine sales grew 25% despite the comparison against the stockpiling period last year. The vast majority of major supermarket wine brands are from California and are priced between $10-15. The premiumization trend in wine continued in 2020, albeit with some slower growth periods when the economic outlook was weaker. There are now two pure-play public wine companies to invest in the premiumization of wine, Bespoke Capital Acquisition Corp. (BSPE) and Duckhorn (NAPA). Constellation Brands which has sold off its lower-priced wine portfolio to focus on the higher end, is pursuing the same strategy.
