“It’s Too Hard to Sit on the Sidelines, When Hard Seltzer Growth Is So Truly Terrific,” bubbled CITI analyst Wendy Nicholson as she upgraded Boston Beer stock to a “Buy.” (UBS also upgraded this mo.)  And stock poppin’ again this morn, jumped $18, 4.7% to $400 at presstime.  CITI currently estimates that Boston Beer revs will be up 19% in 2019, “a bit conservative,” since Boston upped its guidance on 2019 depletions growth to 17-22%.   But CITI slightly above guidance on earnings “given our bet that favorable operating leverage given such strong sales growth can offset higher investment spending and some margin pressure.”  While Boston didn’t yet give guidance for 2020, “we are raising our forecast for full year revenue growth from 9% to 12.5%, based not only on the inclusion of Dogfish Head, but also on the continued strong momentum of Truly.”  Dogfish Head will add approx. $120 mil in revs to Boston totals next yr, with first half sales all incremental.   Tho CITI thinks Boston’s Truly mkt share will continue to “be under pressure… so long as the category growth remains strong, we still believe that SAM will be able to post 19% sales growth in 2019 and at least 12% growth in 2020.” If so, that would be Boston’s 3d straight yr of double-digit growth, following 2 yrs of decline (2016-17). 

Truly Franchise Up 165%; Gained 0.8 Share, While Boston Up 0.5 in Nielsen for 4 Weeks  Boston $$ sales up 23% for 4 weeks thru Sep 28 in Nielsen all outlet, with Truly franchise up 165%. But Truly franchise accounted for more than all of Boston’s growth.  It gained 0.8 share of $$ while Boston total biz up 0.5 share.  Sam Adams franchise still down double digits and lost 0.2 share of $$ in period.  Angry Orchard also down double digits. Twisted Tea up double digits.  Same general pattern yr-to-date tho less pronounced.  Boston $$ up 20% YTD, with Truly franchise up 177%.  Total Boston gained 0.5 share of $$, Truly gained 0.6.    

Few pictures distill total beer’s struggles as clearly as frankly staggering 2-yr drop in portion of 21-34 yr olds who drink beer on premise. In spring of 2017, 57% of 21-34 yr olds said they chose beer while drinking out, according to Nielsen CGA survey results shared by the co’s Matt Drummond during yesterday’s Brewers Assn Power Hour. By this spring, that dropped 12 pts to 45% of 21-34 yr olds. Oof. Beer consumption among older generations more stable, including basically unchanged 40% of those 55+. Yet % of 35-54 yr olds claiming on-premise beer consumption dipped below half over last 2 yrs, from 53% to 48%. If brands built on premise, brand beer’s got some building to do with young legal age drinkers, that’s for sure. 

Nielsen CGA survey results also show rising interest in above premium segments like craft and imports among 21-34 yr olds. But all alc bev categories clearly trading up, Matt showed. Total alc bev $$ up 1.5% yr to date thru Aug 10 in Nielsen CGA-tracked on-premise data. Equalized units across beer, wine and spirits down 1.4%. Beer trends a bit lower, units -1.8% while $$ +0.9%.  Wine up around 1% by both measures and spirits keeps outperforming, $$ +2.6% on 1.7% unit growth. 

Within beer, craft notably took over as “most valuable” segment in Nielsen-tracked on-premise, passing domestic premium segment in terms of $$ velocity per outlet. Total craft now 34.3 share of beer $$ in on premise, +3.3%, vs premium domestic -4.2% to 31.1 share. Import $$ up 4.6% to 23.2 share. That’s vast majority of on-premise beer sales. Small and growing quickly, superpremium segment surging high single digits in this data, but still less than 5 share of beer $$. And below premium beer less than 3 share, but holding on, +2%. On-premise wild card? Hard seltzer, not noted by Matt or separated out yet in Nielsen CGA data.

“By working alongside our retail partners to add alcohol to the marketplace, we’re offering customers more choice and making it easier for Instacart to be their ‘one-stop-shop’ to get the groceries they need – including beer, wine and spirits – from the retailers they love.”  So sez Instacart chief biz officer Nilam Ganenthiran, quoted in Progressive Grocer.  Turns out Instacart now works with over 300 grocer/retailers in US (up by 100 in last yr alone), covers 80% of US households (up from 35% in just 2 yrs) and sells alc bevs in 14 states and DC, representing nearly 100 different alc bev retailers.  And it’s “looking to add more.”  Instacart’s #1 partner Publix, has 59 share of grocery delivery and its biz more than offset Instacart’s loss of Whole Foods when Amazon bought it.  In Sep, Publix “had 69% more Instacart orders than its next closest competitor,” Costco, Progressive Grocer notes.  Instacart deems alc bev delivery “the next area of grocery growth.”  Three takeaways: convenience increasingly king, old-fashioned brick and mortar bizzes figuring out e-commerce too, alc bev e-commerce really ramping up.

Widely viewed as catalyst for departure of Canopy Growth’s co-founder Bruce Linton on Jul 3, Constellation brass tightened ties to their cannabis partner again, naming cfo David Klein as new chairman of Canopy.  David will stay on as Constellation cfo.  “David’s leadership has been extremely valuable to our board at this pivotal moment in Canopy Growth’s history,” said chief exec Mark Zekulin, “and I am confident that he will continue to add value in his new capacity as board chair in the years ahead.”  As search for Mark’s replacement continues, Canopy’s preparing for much-anticipated addition of cannabis edibles/bevs to Canadian mkt later this yr.

STZ met with analysts in Napa Tuesday to unveil its wine and spirits strategy going forward, once divestiture of lower price wines (40% of biz) to Gallo completed over next few mos (could include brand divestitures to others as well).  Constellation’s wine and spirits biz will be estimated 22% of sales, but just 16% of oper profit once that’s done, estimated CITI.  Over half of biz that remains will be in Woodbridge and Svedka brands, wrote Morgan Stanley’s Dara Mohsenian.  But STZ will focus on 10 “Power Brands,” up 6% in latest qtr in IRI.

Constellation goal is to grow its wine and spirits revs by 5% and get its oper margin up to 30% from low 20s today.  One path to growth: applying “some of the marketing best practices of the beer business,” wrote Dara.  In that “spirit,” STZ cmo Jim Sabia, who successfully led co’s beer mktg for a decade and now presides over all mktg, presented plans, including baseball sponsorship for largest wine brand Woodbridge, as reported by BBD.  But Woodbridge will also raise prices and some analysts expressed concern about size of potential volume hit. 

Trends Could Be Choppy; Expect More Innovation Too; More Beer Distribs? Going Direct?   Tho STZ showed “path to improved performance, we should expect volatility,” said Consumer Edge’s Brett Cooper.  “Constellation is looking to implement pricing in a category that hasn’t seen pricing in years and where retailers can be non-accepting of pricing,” he added.  “Branding enables pricing,” noted Brett. But it “won’t work everywhere” and “they need proof of concept.”  Another beer-like move: “push into more convenient packaging formats,” which “should act as a growth tailwind.”  Plus “bigger set of line extensions are in the works.”  So more innovation in brands and packages, better pricing, bigger mktg push on Power Brands.  Sound familiar?

There will also be “distribution changes,” Brett said, as many wine and spirits distrib contracts “are up over the next couple of years.”  Brett also sees “direct-to-consumer and convenience” as “enhanced areas of focus.”  Constellation highlighted that “e-commerce is only 2-3% of the category right now, but growing quickly,” noted Morgan’s Dara.  While not knowing what STZ will do, “status quo seems likely to change,” said Brett. He also asks if there could be contractual “carve out” for beer distribs in convenience channel.  Finally, he cautioned: “if the branding doesn’t work, we question whether the wine and spirits business is retained. Constellation is putting their best marketing talent against the branding effort.”  

White Claw got less ad spending than Corona Refresca or Angry Orchard thru July in data Kantar shared with online publication Marketing Dive.   White Claw spend down 30% to $11.1 mil for 7 mos in Kantar, even while total seltzer, cider and “malternative” spend up 21% to $77 mil.  Corona Refresca got $13.8 mil of spend, while Angry Orchard got $11.5 mil, wrote pub.  Vast majority of “tracked media budget” for White Claw on cable tv (91%), while 6% in magazines and 2% on spot tv. Suggests this cut of Kantar data not recording social media spend much, if at all, tho that’s perhaps at least as important in how one builds brands today.

White Claw Added Sponsorships, Shifted to Digital and Shifted Timing; Did Not Cut Spend   Tho Mike’s “tremendously grateful for all the social media and attention White Claw received this summer, we did not cut spend in 2019,” said Mike’s Hard mktg veep Sanjiv Gajiwala.  Mike’s “increased our media spend on White Claw.” It’s leading in sales, but also spend, Sanjiv said.  “We did however shift timing and channels of the spend, moving into more digital channels, adding marquee sponsorships with media components like the Kentucky Derby and Bonnaroo, and put increased traditional media weight into late summer, fall and winter seasons of the year to better attack wine and spirits occasions − something we continue to focus on…. That data hasn’t been reported or captured yet.”

Then too, White Claw’s “success to date… at least partially” because of “a viral video that didn’t come from the brand,” i.e. comedian Trevor Wallace’s “parody video” posted Jun 25, sez Mktg Dive.  But White Claw sales already going thru roof before that video hit; took off even more over summer. Video likely one of many reasons.  Notable too that White Claw’s $11 mil in spend barely more than Bon & Viv’s $10.4 mil (60 share of segment vs 6) and Diageo’s Smirnoff Spiked got $5.5 mil, while Henry’s got $2.3 mil (2 share) and Truly only $1.6 mil (before new campaign broke).  Whatever total spend including digital amounts to, it’s pretty clear so far that big tv campaign not a necessary attribute for building a brand in this emerging hard seltzer space.

Mike’s Hard Lemonade Co hit 50 mil cases in depletions today, sez prexy Phil Rosse.  Recall, it had goal to hit 50 mil cases in 5 yrs; this is yr 2.  But Mike’s Hard Lemonade depletions up 145% in Sep, now up 80% yr-to-date, noted Phil.  And that’s with significant White Claw out-of-stocks.  Up even faster so far in Oct.

Turns out Certo is 5.6 mil cases, sez someone with knowledge of deal, not 4.5 mil cases our original source estimated.  Bakersfield is in California (CA), not Colorado (CO), of course.     

Hard to keep track of all the legal spats AB InBev finds itself enmeshed in these days.  Latest in ongoing battle with Heineken over dueling countertop draft systems: a big win for Heineken.  Recall, both brewers claim in different legal venues that the other infringed patents they held for systems aimed at restaurant and/or home use that employ bag-within-container technology (appropriately called a “bladder”) and special dispensing equipment, all aimed to keep beer fresh.  In recent decision, US Intl Trade Commission judge found that Heineken proved AB InBev infringed several Heineken patents and “recommended issuing an exclusion order.”  If adopted by full commission, it “would ban AB InBev from importing its Nova system, used to store and dispense its Stella Artois beer across the US,” reports World Intellectual Property Review.  Meanwhile, AB InBev filed separate case at ITC claiming Heineken infringed ABI patents with its BrewLock and Blade systems. First round decision to drop that case after Heineken said it would temporarily halt sale of those systems in US under review by ITC.  ABI also filed civil suit in US Dist Ct in NY on same issue, put on hold until ITC ruling.            

AB still duking it out with Patagonia in fed court in Calif over the apparel co’s claim that AB’s intro of Patagonia beer in US “infringes, dilutes and usurps the goodwill of Patagonia’s famous… trademarks, as well as the reputation it has built” over 40 yrs.  Recall, Patagonia claims AB “submitted false evidence to the Trademark Office to unlawfully obtain a trademark” for Patagonia beer back in 2012, 7 yrs before launching brand in US at Colo ski resorts last winter.  AB tried, but failed to get suit dismissed.  Responding to amended complaint, AB now lays on the rhetoric about “Patagonia – a mystical region of the world that is famous for its dramatic mountains…and stunning landscapes.”  Specifically, AB insists it has owned trademark for Patagonia beer in US since 2012, and brand has been in “AB family’s portfolio for much longer” via South American brewer InBev bought in 2008.  “Plaintiffs have now apparently decided that they want to enter the beer market with a Patagonia branded beer and realize that AB and its rights stand in their way.”  AB’s registration dates to 2006, it sez, and Patagonia never objected before.  “But now, hoping to cash in on the beer industry, and despite sitting on their hands for more than a decade,” Patagonia objected to AB’s registration in Apr this yr, “the same day they filed trademark applications for Patagonia on beer.”  Patagonia wants, AB claims, “to take” AB’s registration and “a monopoly” on the name for all goods and services, even while Patagonia itself “borrowed the name of a famous, awe-inspiring region of the world, which no one can own.”  

Three months after forfeiting its license in Massachusetts (see Sep 4 Express), distrib Johnson Brothers agreed to pay $51,300 “as part of a settlement agreement” with the Virginia ABC after 8-mo investigation found distrib “selling beer and wine in an unauthorized manner,” according ABC statement. As in MA, Johnson ran afoul of VA come-to-rest law by not warehousing product before delivery to retailers, even while it partnered with local import company, which also got tagged as part of settlement.  Penalty was largest ever paid by single entity in VA ABC’s 85-year history, it said.  Johnson Bros and partner Riverside Imports also agreed to 12-mo probationary period “in exercising their ABC license privileges.”