Beer Marketer's Insights - PepsiCo Drops Grand Alc-Distribution Experiment: Blue Cloud Pivots from Distribution to Brand Licensing; Burwick Exits Boston Beer, Key Partner in Controversial Move

In establishing its own Blue Cloud alc-distribution arm, PepsiCo trod where no NA bevcos had before, but that experiment is over. PEP said it's exiting beer distribution biz after struggling to expand nationally and seeing its lead horse, Hard MTN Dew, move into decline. So it will pivot Blue Cloud Distribution to a "brand licensing and flavoring sales model to accelerate growth and fast track national distribution of new and existing brands," per statement from co. Unit is renamed Blue Cloud National, with mandate to license select PepsiCo brands to other manufacturers. Seemingly a similar setup to Coca-Cola's Red Tree Beverages. Blue Cloud will transfer brand rights of Hard MTN Dew and Lipton Hard Tea to new distribs over coming months with Boston and Fifco networks likely first in line. Hard MTN Dew and Lipton Hard Tea will continue to be produced and marketed by Boston and Fifco USA, respectively. Recall that inception of Blue Cloud drew livid response from Boston Beer distributors, seeing their supplier teaming up with PepsiCo to establish new network that was competitive to theirs, even as many observers predicted that PEP was underestimating the arduous task ahead of it in erecting national network and onboarding outside brands to help carry overhead burden. The retreat "is a win for beer wholesalers, irrespective of their affiliation," assessed Wells Fargo's Chris Carey, who'd viewed PEP's entry into alc distribution as a major disruption. "Molson Coors/Constellation distributors will get the added benefit of obtaining the Hard Mtn Dew and Lipton alcohol products, together a low-single-digit share of FMBs (maybe with higher potential?)." The retreat didn't stop PEP's svp of strategy & transformation, Sylvia Dong, from taking a sort of victory lap anyway: "PepsiCo has always been a company that prides itself on innovation - charting new pathways for growth. In only two years, the Blue Cloud Distribution team stood up a malt alcohol distribution network across 18 states. This network was leveraged to grow two successful brands in Hard Mtn Dew and Lipton Hard Iced Tea. We are proud of the Blue Cloud associates who pioneered a new business model in a new space . . . Our commitment has always been to delight consumers at every beverage occasion with an ambition of reaching a national footprint. This means evolving our business model to extend the footprint of these brands, making them available to consumers nationwide." Wells Fargo's Carey, for one, felt the self-accolade is merited, writing, "Net, we are supportive of efforts to find new growth avenues, acknowledging that not all efforts will succeed."So now PEP is following model of most other NA bevcos, from KO to AriZona Bevs, in their brand forays into alcohol. Of course, Monster Bev is another major NA player to set up its own alc distribution arm, but only by buying into existing beer network of CanArchy Brands, now called Monster Brewing.Changing of the Guard at Boston Beer as Burwick Retires As for Boston Beer, with simultaneous announcement that its CEO of past 6 years, the former Pepsi and Peet's Coffee exec Dave Burwick, will be retiring as of Apr 1, it gets to turn over new leaf with its aggrieved wholesalers. Like Dave, new CEO Michael Spillane will be coming in from longtime role on board (and long career at Nike). During tenure, Dave more than doubled topline, but that could disguise wild ride that included rise and fall of Truly hard seltzer, the rise (and continued rise) of Twisted Tea, acquisition of Dogfish Head and of course the controversial Pepsi alliance. Stock went on wild ride climbing to over $1,200 at one point during height of hard seltzer craze to just over $300 today. Still, stock "generated average annual returns of 11%," said Boston, "by far the highest among US beer producers." Shares taking an 18% hit at press time.

PepsiCo Drops Grand Alc-Distribution Experiment: Blue Cloud Pivots from Distribution to Brand Licensing; Burwick Exits Boston Beer, Key Partner in Controversial Move

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