Modelo beer sales decline & Prime Day deals week gets off to a slow start

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0:49Hello everyone and welcome to the Modern Retail Podcast. It is our show that covers the ways the retail industry is changing and modernizing. I am senior reporter Gabby Barco and I'm here with our co-host Melissa Daniels. Hey Melissa, how are you today? Hi, I'm doing pretty well. We are in the throes of summer sales events. So both my work inbox and my personal inbox are just overflowing with brands. Is that what we're calling it now? We're not even gonna peg the prime day thing, prime days. We're just calling it Midsommar sales event. I think we're going to get into that later today, aren't we?

1:31Yes, exactly. We were just saying that I feel like this week or for some retailers, a couple of weeks, as we talked about last time, it kind of tends to suck the air out of retail coverage for a while that we want to focus, obviously, a big portion of today to talk about what's going on around all of these sales events with our reporter, Alison Smith, who covers Amazon and in turn Prime Day pretty extensively. So we're excited to have her on later. But yeah, for the rundown this week, first, we're going to look at how Modelo beer sales have slowed down along with other Constellation brands' beer sales, partly due to Latino and Hispanic consumers slowing spend.

2:21A lot of this is being attributed to obviously inflation, spending cut back, and then of course, everything that's going on with deportation threats, immigration policies. So it's a pretty interesting look at what's going on, I guess, culturally and politically, you know, with the backdrop, but also the fact that a lot of this does trickle down to actual sales on the shelf, even if it is by 2%. So we'll talk about that. So yeah, as I said, Constellation Brands said that its beer sales fell by 2 % this quarter. They own Modelo, Corona, Pacifico, some of the top selling beers in the country. So it's a pretty big bellwether.

3:06What are your thoughts, Melissa? Yeah, I mean, there's a lot to unpack here. And I'm glad we're talking about this today. As you mentioned, Constellation Brands says its beer sales fell 2 % this quarter. and that's due in part to this weaker beer demand as well as the higher aluminum costs that they're facing around tariffs, right? So there's a lot of factors at play here. But what I think is interesting about this story is it shows us how issues that affect cultures and communities will in turn affect brands. And I think sometimes it gets lost in the shuffle because we're just so focused on the numbers and the profits and how companies are doing, but really I'm looking into the why some of these things are changing.

3:50You know, Constellation Brands has been in the beverage business forever. And as you mentioned, Modelo, Corona, and Pacifica are some of the top selling brands in the country. Modelo beer surpassed Bud Light as the country's top selling beer in 2023. I can tell you there's usually a case of it in my garage for spontaneous parties. I'm a big Modelo fan. Yeah, it's like, the Gatorade of beers for me. It's like pop open a Modelo and cool down. So it's interesting to see this. I think what was even more, though, as far as the business of Constellation is concerned, is this is something the company's been talking about for a while, right?

4:28So yeah, we should be careful to say, though, that, you know, Constellation brands doesn't necessarily attribute all of this slowdown to these cultural shifts in the political landscape. But they do acknowledge that, you know, anytime there's something going on, whether it's economic uncertainty, whether it's political volatility, consumers do tend to tie in their wallets. And so their CEO, Bill Newlands, just said this in April. He said, the fact is a lot of consumers in the Hispanic community are concerned right now. Over half are concerned relative to immigration issues and how those impact them.

5:09A number of them are concerned about job losses in industries that have a high Latino employment base. And then during this month's earnings call, Newlands acknowledged that the ICE raids were making it difficult to predict consumer behavior at the very least, right? So I think all of that to say, if we're reading between the lines, they are concerned that this could be, you know, an ongoing issue for the next few quarters. You know, one thing that is important to know about this moving forward, and you sort of mentioned this, that it's Hispanic and non-Hispanic consumers who are concerned about inflation and cost structure.

5:43So this is something that companies like Constellation Brands are looking at across their portfolio and across their consumer demographics. I think, too, that there's maybe changing behaviors of beer drinkers that are also a piece of conversation here. You know, there's a ton of different alternatives out there right now if you want to have a beverage in the price point of a Modelo or a Corona. There are seltzers, there are non-alcoholic beverages, there are mocktails, there are bubbly waters. So there's a lot of sort of - There's cannabis. Yeah, there's so many different cannabis cocktails, right?

6:22So there's a lot of different factors. You're right, because beer sales in general have been weaker coming off of the sort of, this is going to date us, but the craft beer and IPA wave of the 2010s. I think this has been a concern. So it just goes to show that any slight change in behavior can really bring down those sales. Absolutely. And then, you know, when it comes to the Hispanic and Latino population, which is one-fifth of the U.S. population, according to the U.S. Census Bureau, it's also the second largest demographic in the United States. So this is a community that has growing purchasing power in the U.S.

7:01and companies have to be mindful of that. Yes, that's actually something that we're seeing a lot of companies really emphasize or mention the fact that Hispanic Americans are actually pretty big spenders on a lot of different categories. Just in October, Surkana had a report that showed that Hispanic households are driving more than their share of growth in categories like family needs, baby food, bottled water, laundry, pet products. Like these are all big CPG categories that they're actually outpacing some non-Hispanic households in. So yeah, it's pretty interesting, especially they did point out that despite over-indexing in incomes below$50 ,000.

7:46So it kind of just goes to show that they spend on everything from food and beverage to movie going. I know I hear this a lot. They're a pretty big cohort in theater going. So Hollywood is also taking notice. Yeah, and this is something that a lot of companies are beginning to take note of and share. We've seen Coca-Cola and Colgate-Pound Olive report that Hispanic consumers are spending less on groceries, which is in turn hoarding their North American sales. And again, it just makes me think about what I said at the top, is that policies have consequences and decisions that we make that affect communities have consequences.

8:27And it's something that all brands are going to have to grapple with. Wired had a really good piece last month that examined a bunch of SEC filings that mentioned deportations. And it found that there were over 40 companies that had sort of told the SEC, listen, deportations and policies around deportations are going to affect our business. And that's for a variety of reasons, including labor force, but also because of the recession risk that policies like this can bring. I would also say from my standpoint, as someone who's been a reporter in Southern California for a while, I just feel like, you know, it's important that companies take a stand and say how policies are affecting them.

9:08But I can't tell you the amount of sort of fear and uncertainty there is in the communities here. You know, I think everybody saw what was going on in L.A. with protests and how that sort of unfolded. And it's just a really hard time for a lot of reasons for this community. And I don't really know if brand profit is the biggest thing to be worried about. But, you know, from a business perspective and from a business journalism perspective, I do think it's important that we talk about how policy affects them. Yeah, I agree. And we do live in America where corporations do have a lot of sway. So, you know, it's not nothing.

9:49But yeah, I definitely want to acknowledge that, you know, it's not about the profits and the numbers. I think these companies are going to be fine ultimately. But yeah, I think the fact that this cohort is being affected from all angles is really important to acknowledge. Well, speaking of corporations in America, let's transition over to our segment today on Prime Day or Summer's Deals Week or what else are we calling it, Melissa? It's got so many names. It does. For me, it's just quickly becoming the tentpole retail event of the summer. I like that. It's like a Marvel movie. It sure feels like one when you're covering it, doesn't it?

10:36It's full of adventure. We're going to be joined for this conversation by e-commerce platforms reporter Allison Smith. She covers Amazon and its competitors and platforms like TikTok, Shopify, and Timu for modern retail. And with Allison, we're going to get into the ways that sellers and brands are prepping for Prime Day, what kind of results they were seeing in its early days, and just sort of how consumer behavior has changed around events like this and how consumer behavior this year might be a little different because of some of the issues around tariffs in the economy.

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12:03Amazon's Prime Day has changed a lot in the past 10 years. It started as a 24-hour sales event to celebrate Amazon's 20th anniversary, but it's ballooned into a four-day sale that has become a major tentpole of the retail calendar, almost rivaling Cyber Week by some estimates. Walmart, Target, and almost every other brand has figured out a way to play off Prime Day. Even your local pizza parlor may have a Prime Day sale. Today, Gabby and I are joined by Allison Smith, our fellow modern retail reporter who deftly covers Amazon and marketplaces. Allison, welcome to your inaugural Modern Retail Podcast appearance.

12:46Thanks for having me. It's great to be here. We are so excited for you to share your expertise and insights with us. Let's get into it. So some of the biggest news from this year's Prime Day happened even before it began, and it was actually with a story that ran first on Modern Retail. Allison, tell us a little bit about why this was a four-day sales event this year and how sellers were kind of responding to that being the first time Amazon tried this? Well, ostensibly, Amazon has publicly said that they made this a four-day event up from two years last year to give shoppers more time to shop.

13:26And it makes a lot of sense when you think about it. Since Prime Day started in 2015, we've seen big box retailers like Walmart and even more specialty retailers or online e-commerce upstarts like Like TikTok shop launched their own competing parallel sales this time of year. So and many of those are weeklong events. So it makes sense that, you know, Amazon wants to claw back some of those dollars and make this a longer affair. Yeah, absolutely. And, you know, we're recording this before the official end of Prime Day. But I'm wondering if there's any just sort of takeaways on how that longer sales event is playing out.

14:04Have either of you heard anything about that from folks? So far, we're hearing that it's off to a slow start, obviously by third-party estimates here. But yeah, I'm sure Amazon is not super happy about these headlines, but that's where we're at midway through the week. What we can definitely say is that the four-day format is changing how people shop. And even before this became a four-day event, shoppers were doing their research before they bought anything. They were checking prices on competing retailers, again, since so many retailers have competing Prime Day sales now. So because of this four-day event, I think the consumer is definitely more patient.

14:45They're taking their time adding things to cart before they hit the purchase button. So I think that's a big shift in consumer behavior that we're seeing this year. Yeah, totally. I mean, on the first day alone, sales were down 41 percent, according to Momentum Commerce. That was a stat that was in one of the stories you reported, Allison. but one that Amazon didn't necessarily agree with? Yeah, I mean, I think it's important to keep in mind that we're not done with Prime Day yet. And even Momentum Commerce, they said in their estimates that this Prime Day sale could still outperform last year's buy.

15:25I want to say like 9 % is the forecast they give year over year. So again, it just comes down to a matter of how much more consumers will shop over the next coming days. Yeah, I'm seeing concerns that, you know, this could be a bellwether, like people are finally cutting back. Or I saw some posts saying that the deals are not good. We'll get into that later. Maybe it's a perception issue. But yeah, there seems to be a lot of, you know, I guess, reasons that why that may be. But to me, it just feels like there's no sense of urgency. Like it's not a flash sale the way, you know, it started one day, then it was two days, an hour, four days.

16:06So I think people just feel like they can price compare. I know I did that, you know, and look at what other retailers are doing. And then before probably maybe, you know, hitting the trigger on the last day. No, that's definitely true. The cadence, the rhythm of the event is definitely different. There's less urgency. Gabby, what was it that you were price comparison and where did you end up buying it? Oh my gosh. Okay. Putting me on the spot. So I was looking a couple of days before the official event because all the retailers were already rolling out their sales weeks or whatnot. But I needed new AirPods.

16:47So I was kind of comparing prices and then I saw that it was gradually going down and down further and further. So I ended up just getting them at Best by just because I wanted the instant gratification of going to get them the same day. But yeah, they ended up being about the same price by the end everywhere, which was$149 not to plug AirPods. And par for the course for an Apple product, as I have experienced. Not on sale at Apple, though, I will say. Oh, interesting. So they only did that for wholesale. What about you, Allison? Oh, well, one thing I was just, I haven't actually bought anything on Prime Day yet.

17:30I looked at every item I have and like saved to cart and nothing that I want is really on sale. I'm really exposing myself here, but there is a decanter that I wanted in the shape of a duck and it wasn't on sale. So that was disappointing. But I'm also trying to, like a lot of consumers, I'm trying not to spend money right now. So yeah, just because it's on sale. Yeah, it's so hard being, you know, retail reporters. And then sometimes I'll go see what a retailer is doing and end up browsing for a while. But yeah, I think, first of all, I think you should get that decanter regardless. But yeah.

18:07Yeah, it's probably worth it. One thing I will say, you know, if consumers are playing this weight in C-Gain, as they seem to be doing comparing prices, it may not necessarily behoove them to do that. because I was thinking of stocking up on just some basic necessities like shampoo that was $5 off yesterday for Prime Day. And I checked again, and it was no longer on sale. So just because it's on sale yesterday doesn't mean it's gonna be on sale tomorrow. You know, that's a really, I think, like salient point to how this whole Prime Day and summer sales event week is playing out, though. It's like, you know, people are price comparison, they are shopping around and I'm seeing a ton of anecdotal evidence at least that people are just using this as an excuse to get deals on the stuff they already buy.

18:52It's less of a splurge and treat myself. But like in Gabby's example, you probably already would have replaced your AirPods eventually anyway, right? It was on the list and this became an opportunity to make that purchase happen. In my experience, we've been putting off an expensive window treatment replacement. and I finally bit the bullet this week because in addition to a site-wide sale, I had an additional 5 % off coupon. And that makes a difference. Plus, I had a Rakutan cashback account. So I did a little stacking. Melissa, you're officially a couponing mom. I love it. Oh, girl, that's another podcast.

19:28Let's get into it. But I'm actually wondering, and Allison, in your reporting so far, what have you heard from sellers? It sounds like maybe there's a mixed bag on what some people are seeing. Yeah. And my personal take, honestly, is that some of this disparity we're seeing in year over year prime day sales among sellers is that a lot of some of this might be tariff driven. The sellers that I talked to that are seeing year over year declines, they are sellers that had to raise prices. They are sellers that manufactured predominantly in China up until a month ago or are still predominantly manufacturing in China.

20:04And the brand I talked to that is doing really well this year, it's a beauty brand. They're doing a lot of their, the vast majority of their manufacturing is here in the U.S. They're not as reliant on manufacturing overboard and especially not China. So that's an interesting trend I noticed so far. Yeah, well, because that means they have sort of maybe the flexibility and their margins that people who are getting their products from China or other tariff impacted countries don't have right now. So they can do that deep discounting that competitors can't afford. Yeah, well, it's just tariffs introduced so many complexity for Amazon sellers.

20:39So for example, one seller is having out of stock issues right now. They can't currently discount their best selling products, which is what they did last year. And that's what drove sales. This company sells fire pits, hammocks, that sort of thing. And so they're having to discount this year, as he put it, they're like second tier or third tier products. And that's weakening the consumer demand this particular seller is seeing. You know, while we're on the topic of discounting and how sellers figure out their pricing, I'm sort of interested in seeing if either of you have any context or insights to share about this idea of like pricing theater, where sellers might quietly raise their price a month before and then do a 40 % offer for the sales event.

21:23Is that real or is that just a perceived thing I'm seeing shoppers on Facebook talk about? I think it's definitely real. And you can even go into Rufus on a particular product and see the last 30 days or even 90 days of a product's price history. And you can see how they change it. And I've had sellers like openly admit to me that they do this. Good old Rufus. That's Amazon's chatbot. Yeah, I guess it is hard to tell. I know, you know, even brands, whether they're selling through Amazon or not, are pretty, you know, hesitant about just doing kind of site-wide, for example. I think some of them are picking maybe, yeah, best sellers or actually maybe even some, you know, products that are slow to move.

22:07Like maybe sometimes you're just clearing out some products during these events. But yeah, I think the pricing is interesting this year, especially because I feel like customers seem to be pushing back a little bit about whether something is a good deal or not, as I was saying at the top. Yeah, I definitely see that happening with, you know, 20 % off doesn't really impress me much, to paraphrase the great Shania Twain. Like if I'm going to pull the trigger on something and oh, is this a great deal? It's got to be like a deeper discount. I think that's just kind of how we're trained now for better or worse.

22:47But that's where the competition comes in, right, though? Because it's like, do I want to buy this from Amazon or do I want to buy this from Target for Circle Week where I might also get my 5 % back on my debit card and also already have free shipping or what is it? Like, I think shoppers sort of have the opportunity when there's competing events like this to sort of just choose what makes sense for them based on the benefits they're going to get from that platform. you know? I do wonder whether there is discounting fatigue though, because the last couple of years we've seen so much promo across the board that maybe this just doesn't feel that much of an event for some people.

23:27When, you know, when everybody's constantly promoting, it's a little bit of a race to the bottom, but yeah, you think you kind of get stuck in this vicious cycle. Yeah, that's definitely come up in a lot of my conversations with sellers, this idea of deal fatigue, even like before this Prime Day sale came up. This was something that continually came up in my conversations with sellers, especially because so many of these Amazon sellers, they're no longer just on Amazon. They're also selling on TikTok shop and Walmart and Target. So they're having to coordinate a lot of these sales have at the same time.

23:59So they're having to coordinate a bunch of deals at once and they say it's very exhausting. Allison, I'm curious if any sellers kind of outlined whether they have any like clever or interesting tactics on how they're approaching this. Like how do you keep that customer at the very least coming to check out the site that day? Because traffic is still there. Yeah. So it's a couple of things. One, a beauty brand I talked to that's seeing positive year over year sales compared to last year, They actually pulled back on discounting. They started doing that for the past year. So it's kind of counterintuitive.

24:36It's not necessarily what you expected. And so they pulled back on discounting and that's helping them, one, preserve profitability. And in doing that, they also upped their Amazon advertising a lot. and one of the ways they're also doing that is ramping up the number of creators they're reaching out to i think they said they reach out to like 300 creators a week or something like that which i thought was a lot um but like samples um to create organic content ahead of the event that sort of that sort of thing and that's something i've heard other brands talk about too is they're really upping the amount of samples they give to creators and i think that's like a scrappy lo-fi way brands are trying to market without while also stretching their marketing dollars Yeah, you're casting a wider audience net versus trying to get everybody to fill their cart with everything that's on sale.

25:26Yeah. It's almost like endemic marketing in a way. Like you need to drive people to your maybe your Amazon shop by doing a 360 campaign with creators on Instagram or on TikTok or whatnot, because, you know, they'll direct their followers there. I know that's something that's been on the rise the last few years. Mm-hmm. And I don't know if this is exactly creative per se, but one thing we're seeing, or I'm seeing anyway, is that the breadth of products that sellers are discounting is a lot less. So brands are still participating in discounts, but they're maybe only discounted like their hero products or a select range of products as opposed to the whole product catalog.

26:10Yeah, I think especially a lot of the sort of like direct to consumer or startup brands that are still pretty small can control more of that, I think, are probably going for that strategy. Yeah, I think that's something we're seeing too in even those sellers and brands that aren't on Amazon, right? You know, they have that special deal where here's the thing you can get this week. You know, one company that I've written about who really leans into this is the Anti-Prime Sale from Bookshop.org. You guys ever shopped them? They have the book sales that you can do and support an independent bookstore in the process.

26:45And they're very like, they call it the anti-prime day sale. I mean, it's very obvious. And I think there is a lot of creativity in the brands who just know that people's eyes are on their browsers and they have their digital wallets handy and their cards out. And, you know, once you start spending, you just can kind of keep going. It's very akin to Cyber Week in that way, I think, where people just sort of use it as an opportunity to spend. Yeah, their landing page is Amazon Who and a little countdown clock. So they're very much leaning into this. Yeah, one thing is since we were talking about like discounts being disappointing this year, I occasionally buy books through Amazon, although I try not to.