Alcohol distribution changes (BSPE)
The distribution of alcohol has changed more in the past year than any year in the past decades. In many states, restaurants were allowed to sell for off-premise consumption. Breweries shipped directly to consumers’ homes in many states. Many brewpubs canned their own beer for the first time to sell off-premise. Drizly’s sales of alcohol from packaged goods stores directly to consumers’ homes surged. Wine clubs and e-commerce sales proliferated. We do not expect all of the changes to be permanent -especially for on-premise businesses selling off-premise. Still, the wine industry may be best positioned to hold onto the distribution shifts.
Vintage Wine Estates accelerated its growth during the pandemic by enrolling more consumers in its wine clubs, shipping directly, and increasing the grocery channel's velocity through controlled brands. Last week Vintage Wine Estates announced that Wasatch would invest $100M through a PIPE on top of its previous $28M investment. The investment will provide more capital for Vintage Wine Estates to acquire wineries. We are not raising our estimates before the acquisitions are made, but the investment adds to the visibility and should be reflected in the company’s multiple. The merger with Bespoke Capital Acquisition still looks like an early June closing target.
UK grocery demand (NOMD)
For the week ended April 17th, total CPG demand in the U.K. increased 6% YOY despite the difficult comparisons. Frozen food demand was 4% lower YOY but improving sequentially from -18% in the previous week. Sales results have been volatile recently against difficult comparisons, the Easter shift, and the easing of restrictions. The shift to food at home consumption was not as pronounced in the U.K. as in the U.S. due to a lower mix pre-pandemic. The comparisons are not as difficult as in the U.S. The U.K. is Nomad Foods’ largest market.
Beer’s on-premise vs. off-premise shift (SAM)
Over the last 20 years, beer has lost its share of total ethanol consumption per capita. In 2020 beer held a 58% share of the total alcohol market, which has eroded to 46% in 2020. Liquor’s share has increased from 29% in 2000 and has grown to 38% in 2020. Wine’s share has gained slightly from 13% to 15% over the same time period. In 2020 beer volumes were up slightly, but due to the shift to off-premise, $20B less was spent on beer. So far, in 2021, the on-premise channel continues to recover. According to Fintech, on-premise volumes are down 20% through April 18. The beer categories have different shares in the on-premise channel vs. the off-premise channel, as seen in the table below. The recovery in on-premise will boost the craft and cider categories the most while being a headwind for the malt liquor and below premium light categories. Notably, the FMB/hard seltzer category is the third most under-indexed in the on-premise channel.
