Mexican beer imports decelerate (STZ)
Total beverage alcohol imports declined 5% over the last twelve months ended February and increased 2% over the last three months. 34% of all beverage alcohol imports came from Mexico over the last twelve months.
- Imported beer remained flat by volume and up 2% by value over the last twelve months. Over the last three months, beer imports grew 11% by volume and 13% by value, decelerating from 22% growth in volume and 23% by value in the previous three months. 72% of imported beer by value comes from Mexico. Constellation Brands imports have slowed as inventory levels at distributors have returned to normal levels.
- For the last twelve months, imported packaged spirits grew 3% by volume and declined 6% by value. Over the last three months, volumes grew 10%, and value grew by 5%.
- For the last twelve months, import packaged wine grew 8% by volume and declined 11% by value. Over the last three months, volumes grew 1% and declined 8% by value. 35% of all imported packaged wine by value arrived from Italy.
Premiumization trend in beer continues (STZ)
The highest-priced segments in the beer category, craft, imports, super premiums, flavored malt beverages (tier 3 in the chart below) have risen from less than 10% of beer sales in 1950 to 50% in 2020. Craft beer is a key beneficiary of this trend. Premium and premium light beer (tier 2) had been the dominant group from 1975 to 2015. The lowest-priced tier (tier 1), consisting of value brands and older regional offerings, accounted for more than 70% of beer sales from 1. In 2020 the lowest-priced tier accounted for less than 20% of beer sales. Tier 1 and 3 were about equal in 2010, slightly higher than 25%, while tier 2 was slightly below 50%. Tier 1 has since slowed while tier 3 overtook tier 2 in 2017 with the introduction of hard seltzer. Constellation Brands is a beneficiary of the premiumization trend.
The Honest Company (HNST)
The Honest Company filed for an IPO on Friday. It is a “mission-driven brand focused on leading the clean lifestyle movement.” The company reported revenue growth of 27.6% to $300.5M in 2020. The net loss per share was reduced from -$1.83 to -$.85 in 2020. The company competes in diapers and wipes, skin and personal care, household, and wellness. Diapers and wipes represent 63% of sales. Jessica Alba, co-founder and face of the brand owns 6.7% of the company. In 2017 the company settled a lawsuit over its claims that its products were free of sodium lauryl sulfate after a WSJ article said they were not. The Honest Company has raised $497M in funding to date. We have several questions that we will look to answer about the company:
- How much sales benefited from the pandemic and increased attention on cleaning? Household and wellness category sales grew 116.5% to $32.5M in 2020. Revenue declined in 2019.
- What amount of sales is necessary to earn a profit? The company has never reported a profit.
- Will gross margin expansion continue? Gross margins have expanded 1000bps over the last two years.
- Are digital sales profitable? Digital represents 55% of sales – 33% of sales are from Honest.com.
- How high can the ACV of 40% go in the future?
- How likely is an acquisition of the company?