Constellation’s cannabis partner Canopy hosted coming out party for its new beverages, edibles and vape products as Cannabis 2.0 hits in Canada next month.  Tasting event showed off 6 drinks under its Tweed brand, 3 with THC, according to report from analysts at Jefferies.  Molson Coors partner Hexo also sez it will have 6 drinks “spanning THC and CBD ready for December.”  Interestingly, ABI partner Tilray announced it would not have THC bevs ready by Dec.  Canopy focusing on relatively low-levels of THC; most of ’em have 2-2.5 mgs per serving.  Why? “Our cannabis beverages are best designed for the most novice cannabis consumer,” Canopy prexy Rade Kovacevic told Yahoo.  They’re made to kick in after 20 mins “to mimic the familiar experience of drinking alcohol as much as possible.”  Also, to be sessionable. “Some people will have one glass and that’s enough.  Other people will have three or four.  That’s why we think this is disruptive.”  While seeking to mimic alcohol, Canopy’s also touting its bevs as alternatives: “no alcohol, no calories, no hangover, happy liver.”  Better for you!  Meanwhile, THC drinks in legal US mkts tend to be stronger.  Best seller in CA, Hi-Fi Hops (Lagunitas), has 10 mgs.  They also tend to be expensive, close to $10, sez Cowen analyst Vivien Azer, vs many edibles at $1-2 per serving.  Price may be one factor in keeping bevs at tiny share of legal sales in US mkts, but Canadian execs think they can exceed that there.  Jefferies analysts not so sure.  Indeed, same report concluded that “we continue to have reservations around the success of beverages,” noting 3 share in US so far. “Our estimates do not reflect the bullishness Canopy has in the space.”  Besides, until bevs get up to scale, “costs associated with such a large portfolio are likely to continue to weigh on the bottom line.” 

“Think Twice, It’s Not All Right”: The Fool; Changes in Attitude  Those build-out cannabis costs and their impact on bottom line continue to wreak havoc on Canopy, Hexo and other cannabis stocks, Motley Fool notes in two articles today.  Indeed, “there’s growing evidence to support the idea that the cannabis bubble has in fact burst.”  Canopy stock down almost 60% from its 2019 high.  Similarly, Aurora lost about 65% of its value in 6 mos.  Hexo share price whacked again after it announced huge loss in most recent qtr: $60.7 mil on gross revs of just $20.5 mil (both in Canadian $$).  Hexo slashed staff, suspended production in 2 of its plants and decided to stop providing projections, reports Investing News, “until the market matures.”   Two top execs recently resigned.  Stock bubble burst, sez the Fool, as investors “adjusted” their attitudes.  Sales growth and long-term “opportunity” ain’t substitutes for makin’ money and that’s been exceedingly challenging so far.  With these losses and potential recession looming, investors playing it safer.  Then too, less M&A on horizon given continued federal ban in US, and “the headaches that Constellation Brands has endured with its pot investment weighing down its financials, companies aren’t going to be lining up to worsen their bottom lines….  The once-exciting new industry to invest in is looking a lot more burdensome today.”  Add in concern over vaping deaths and other bummers (one Canadian co got caught growing illegally), and investors have “many reasons to think twice about what’s been a very volatile industry of late.” 

Amid Japanese brewer Asahi’s rise in global ranks thru $20+ bil in acquisitions over last 4 yrs, CEO Akiyoshi Koji does not mince words when talking about future global ambitions. “We are expanding with the goal of being No. 1 for the premium beer segment in every geographic area we’re doing business,” Koji told Bloomberg in recent article. “Premium beer” in this case refers to above premium beer by US terminology. But either way, this is another indicator Asahi buying spree could continue well into future, including here in US, where it does small amount of biz currently. Gotta note, leaders in US high-end beer segments (that aren’t owned by global brewers) are Constellation, Boston Beer and Mike’s.

Several analysts remain skeptical, and many knocked ‘em for paying too much for deals in Australia and Europe from ABI among others, paper points out. Plus, “the vast majority of mature markets are reaching the limits of growth potential,” Spiros Malandrakis, head of research for alcoholic drinks at Euromonitor, commented. “I think the era of global mega brands that can maintain brand equity across long periods of time will die with the millennial generation,” he added. But cos can expand into mature global mkts thru consolidation, Koji contends, defending recent $11.3 bil buy of CUB in Australia as “not that expensive” given Australia’s population growth alone. Meanwhile, Asahi’s domestic biz in Japan is struggling of late. Yet stock has soared 27% this yr, Bloomberg notes, seemingly fueled by global expansion.

Pressure mounting in national and local press, Founders reached resolution yesterday with ex-employee Tracy Evans, who sued the co last yr, alleging that racial discrimination led to unequal treatment and wrongful termination. Leaked deposition in ongoing case, published by Detroit Metro Times Oct 21, turned into media firestorm, a week and a half of constant headlines and negative social media attention. Multiple retailers promised to drop Founders brands. The co pulled out of some events and canceled others. It temporarily closed its Detroit taproom. (We covered this fallout as it happened last week in sibling pub Craft Brew News.) Diversity & Inclusion Director, Graci Harkema, hired in January after lawsuit became public last fall, resigned last Friday, posting blistering resignation letter to social media. She and numerous others, including Detroit Free Press columnist in opinion piece posted yesterday morning, heavily criticized Founders’ handling of the story. “It’s really like a trainwreck,” that Free Press piece began, commenting on PR disaster, before turning to pair of crisis management PR specialists to offer advice for what Founders should have done. First: “settle the lawsuit.” Not 12 hours later, that’s exactly what co did. 

“Through recent discussions with Tracy, we listened, engaged in self-discovery, and reached common ground to make amends,” Founders co-founders Mike Stevens and Dave Engbers said in statement. Terms of settlement not disclosed, but Mike and Dave say that co admits no wrongdoing. Settlement provides “an opportunity to place our full attention on the work we now have to do,” the pair continue, “to rebuild relationships.” Statement from Tracy Evans shared along with Mike and Dave’s comments. “I want the world to know the power we have when we step forward and make ourselves heard,” he said. After acknowledging impact of lawsuit on Founders employees, he promises to use his experience “to help both employers and employees become better at acknowledging, understanding and dealing with” issues he faced, which “happen everywhere.” As both parties in lawsuit try to look forward, how lasting will the damage done to Founders’ brand prove to be?  Founders consistently one of fastest growing US craft players over last 10 yrs. But growth already started slowing considerably in off-premise scan data this yr. Founders volume down for recent periods in its home state of Mich, as is lead brand All Day IPA in a number of other markets, according to Nielsen data reported by Black Apple consulting.

Several analysts expressed skepticism about Molson Coors revitalization plan, even while seeing general direction as right one. “While we believe TAP’s new strategy is a step in the right direction,” wrote Morgan Stanley’s Dara Mohsenian, “we see the turnaround as a tough fix, given TAP’s outsized exposure to the declining  premium and economy segments.”  Molson Coors has “spotty innovation history” and “we don’t think the level of reinvestment is that material to drive a significant improvement in the business given we expect declining topline results,” Dara added.  “We also see the potential risk for near-term hiccups given TAP is embarking on a large organizational restructure of the business at the same time as it is stepping up reinvestment behind its brands.”   Yet TAP’s “plan makes sense,” said Evercore ISI’s Robert Ottenstein “and we would not be surprised to see some improvement in performance in 2021 and beyond.” Tho plan similar to previous ones, “we believe it is deeper in scale and with significantly greater urgency to cut costs, reinvest in the core business and extend into new adjacencies.”  Furthermore, “the firm could rationalize its North American brewery footprint in the next 1-2 years.” And “we believe that the plan represents a last best shot turning the ship around…. If the stock is not meaningfully higher in ~3 years, we suspect that the families will consider more drastic actions.” 

Bump Williams Consulting’s monthly letter heavily featured seltzers.  “Spring shelf sets are nearly completed” and Bump sees “recurring themes… focused around Hard Seltzers continued march to HoF (Hall of Fame) status and how much more shelf space to allocate for it.” One theme: continued “growth of High-End beer” and  “what to do about the collapse of Premium and Below Premium beer and all of that shelf space that is losing $.”  Another: “How BIG can Hard Seltzer get and what will all of the new (lower priced) hard seltzers do to an already healthy (margin) business model. Where do I put all of these new brands and what do I get rid of? WHO is actually buying and drinking Hard Seltzers?” 

Seltzers Got 3.8 Share of $$, 10 of Top 25 Growth Brands in IRI MULC YTD  Seltzers at 3.8 share of $$ yr-to-date in IRI multioutlet + convenience yr-to-date thru Oct 20, Bump showed.  Earlier stats showed seltzers peaking at about 5.5 share in late summer, drifting back towards 5 in most recent periods.  Seltzers now over 1/3 of FMB $$ and got $806 mil of growth so far in IRI MULC in 2019.   Seltzers also got 5 of top 10 growth brands in IRI yr-to-date, including brands #2-6.  Three of top 10 are White Claw and 2 are Truly.  And hard seltzers also 10 of 25 top growth brands (Bump includes MC’s Cape Line as a seltzer).  White Claw’s Variety Pack up $245 mil, 286% YTD thru Oct 20.   That’s almost as much growth as Modelo Especial (up $274 mil) and Mich Ultra ($261 mil).  Much more than those 2 growth leaders in recent periods. On top of it, White Claw Black Cherry is #4 growth brand and up another $103 mil. Meanwhile, Truly’s Berry Mix Pack is #5 growth brand up $77.5 mil.   BWC partnered with Persky “to conduct a national survey” of Hard Seltzer drinkers and teased the results.  Survey asked “What are you drinking Hard Seltzer instead of or in addition to?”  The largest % of respondents, 54%, cited liquor, while 43% cited domestic light beer, 38% said wine. 

Not much Dogfish Head volume moved into Boston Beer distrib network so far.  But Cavalier had Dogfish statewide in OH and recently sold to Boston network in state, reportedly over 100,000 cases.  Superior did initial deal; other distribs include Heidelberg and several more.  Recall that almost half of Dogfish Head volume, around 2 mil cases, not in Boston Beer network and Boston aimed to move “quickly,” as chairman Jim Koch told INSIGHTS in early Jul.  Several mos later, in many areas, discussions dragged past deadlines, as valuations disagreed about, and legal letters sent. But OH is 1 top 10 state where deal did happen several weeks ago. Lotsa other talks elsewhere.

Another month another beer distrib deal for Reyes Beer Division. Its Premium Bevs in VA just bought Dixie Bev Co in Winchester, VA.  Dixie only sold about 280K cases of beer, but is also a wine distrib.  Acquisition includes “brands from suppliers such as Yuengling, Heineken, Diageo, MillerCoors, Pabst Blue Ribbon and Sierra Nevada.”  Premium will just fold it into Chantilly warehouse.  Recall, Reyes bought Loveland in Richmond, VA late last yr.  In recent mos, it also bought DBI in Northern Calif and announced deal for W.A. Thompson in Bakersfield, CA. 

Add it to the list. AB’s BABE Wine will become Official Wine Sponsor of the NFL, co announced this morn, joining official beer Bud Light, official beer of Thursday night Bud Light Platinum and official hard seltzer Bon & Viv. Indeed, this sponsorship further underscores AB’s willingness to spread out and leverage NFL across its full portfolio. A mindset AB really first began to showcase with slew of Super Bowl ads across its portfolio earlier this yr, vp of Beyond Beer brands Chelsea Phillips pointed out to INSIGHTS. Babe Wine’s rosé, pinot grigio, and red variants “will be available in 12 stadiums across the country and will be activating at team tailgates throughout the season,” co shared. NY Giants, New England Patriots, San Fran 49ers, Miami Dolphins, Washington Redskins, and Denver Broncos are among teams that inked deals initially. And Babe will be “activating” at both Pro Bowl and Super Bowl.

“This was always the plan,” BABE co-founder Josh “The Fat Jewish” Ostrovsky told INSIGHTS. Since inception of BABE, idea was to “disrupt the wine and spirits part of venues.” There’s been “nothing for women and younger generation” of consumers “that made sense outside of beer categories for venues and sporting events.” So “building on Anheuser Busch’s long-standing relationship with the NFL, we have seized a unique opportunity for BABE to become the football wine the world has been waiting for,” stated co-founder of BABE David Oliver Cohen in press release.

BABE will tap into massive social media following to showcase NFL partnership, while sharing content and developing an “influencer program,” Josh noted. Co created new video starring Kayla Nicole (on-camera host and girlfriend of Kansas City Chiefs’ Travis Kelce) tackling a wine sommelier in full football gear, with tagline “Babe, how Football does wine.” Initially video will be shared “digitally on our channel,” which can reach upwards of 100 mil people, said Josh. Depending on how people respond to it, BABE will figure out “how to leverage it” and understand more about “how we go and show our product” in broader marketing realms.

Recall, AB fully acquired BABE in late June after initially striking deal for minority stake in 2018 thru ZX Ventures arm (see Jun 28 issue).

In the latest wrinkle of marketing spats between AB vs MC, AB’s Natty Light is taking shots at Miller Lite’s new campaign to “unfollow Miller Lite,” reported Thrillist. “We don’t agree on everything but we agree on this – it’s 100% time to unfollow @MillerLite,” co posted on Twitter. “To offer support we’re doubling down on their offer & giving anyone who unfollows them $$ back on Natty Light. Hit us up on Twitter, FB, IG, or Pinterest for more…”

In some ways this seems like low-hanging fruit for tongue-in-cheek competitive response. But against the backdrop of corngate feud and more, it all seems that much more retaliatory and interconnected. 

In other AB/sports-related news, ABI inked deal as beer sponsor for SoFi stadium (LA Rams and Chargers new stadium) but with a twist, per LA Biz Journal report. Instead of leading with Bud Light, co will give Mich Ultra “lead brand” for the sponsorship. Constellation will also have “beer rights at SoFi,” leading with Corona, which was first brand to ink sponsorship with LA Rams back in 2016, paper noted. Two brewers will have craft beer rights, which likely will mean LA-based AB brewer, Golden Road, among others.