COVID surge to extend at-home AlcBev consumption

Consumer Staples COVID-19 Tracker: Week 15, July 6, 2020

From Nik Modi (nik.modi@rbccm.com), RBC Capital Markets|Equity Research – US Beverages, Household Personal Care and Tobacco Analyst

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“COVID Elasticity and Panic Buying II: While officials have not yet issued plans for returns to stay-at-home orders, there are rumblings of panic buying and pantry stocking in certain regions.

 

“In Texas, grocery chain HEB, which has 300+ locations in the state, has reinstated purchase limits on certain items. In Australia, which has been experiencing increasing new case counts after an initial rapid-recovery phase, the country’s two largest chains implemented purchase limits on toilet paper after panic buying cleared shelves.

 

“Looking back to initial panic buying in the US in March, we note that categories that saw the greatest increase in demand in HPC were cleaning wipes, bleach, toilet tissue, cleaners, paper towels, dish detergent, soap, and laundry detergent (among many others). We note that Clorox has said that it will have increased capacity on Clorox wipes this summer (while Lysol wipes continue to show out of stocks w/w, according to Numerator).

 

“In packaged food, the top categories were pasta, soup, pancake mixes, tomato products/spaghetti sauces, nut butters, meat, and hot cereal (among many others). In beverages, bottled water and coffee saw the biggest spikes, followed by alcoholic beverages and juices; recall that energy drink demand fell meaningfully.

 

“We believe that some of these categories will see a resurgence in demand as case counts and panic climb (wipes, packaged food), while others may see less of a resurgence after initial stock-up fears did not play out (e.g., bottled water stock-up for the water being shut off).

“We think that a resurgence in case counts will keep demand elevated for at-home beverage alcohol consumption, especially as many on-premise venues operate under restricted capacity guidelines or are completely shut down.

 

Ultimately, we believe the current situation could result in upward pressure on consensus revenue/EPS estimates for many companies across our HPC, Beverage, Packaged Food, and Tobacco coverage.