Lagunitas mixed case of 4 different 6-packs on sale at Colorado Costco for $16.99 per case (INSIGHTS saw pic), reportedly cheaper than Bud Light.  Don’t know if this specific retailer simply ordered too much or this is broader, but that’s one of lowest craft prices INSIGHTS has seen….  Today’s stock mkt is disastrous, Dow down over 800 points at presstime, 3% and for much of day Molson Coors stock down more, 4%.  At points, it fell below $50 per share for first time in many yrs…. Remember Gannon Jones?  Gannon spent 3 yrs as MC “head of brand marketing,” sez his Linkedin page, then became SVP consumer mktg for All State, and last mo he started as chief commercial officer for Canopy Growth Corporation, which is 40% owned by Constellation. 

Imports remain highly concentrated at top. Modelo Especial and Corona Extra alone at half of import volume in IRI multi-outlet + convenience yr-to-date thru Jul 14.  Heineken another 10%.  Modelo Especial got the growth. It’s up  5.2 mil cases, 18%, while total imports up 5.1 mil cases, 4%.  But rest of leading imports between -1 and +2%. Corona flat, Heineken down 0.6%, Stella up 1.8% and Dos Equis Lager down 0.9%.   

With 4% growth in Jun, imports finished 1^st half up just 448K bbls, 2.4%.  And that includes 4 consecutive months of growth, as Beer Inst’s chief economist Michael Uhrich pointed out.  Mexican imports still lead the way, capturing more growth than segment as a whole, but at slower pace.  Mexican imports up 522K bbls, 4.1% in 1^st half and grew to be 71.5 share of segment. Dutch shipments down 107K bbls, 4.9%.  Dutch shipments another 11 share of segment.  Canadian shipments down 19K bbls, 2.7%.  Belgian shipments up 112K bbls, 12%, including 40% jump in Jun.  Irish shipments up 17K, 3.5%.  Those 5 countries over 90% of imports. 

Rising But Smaller Stars, Peroni and Heineken 0.0 Even looking at country #s, 2 rising stars among imports stand out.  Number 7 importing country now is Italy, up almost 50K bbls, 47% in 1^st half and that’s gotta be driven by Peroni.  Same situation with Dutch no-alcohol shipments, which jumped 31K bbls, 266% to 43K bbls.  And that’s gotta be almost entirely Heineken 0.0.  Dutch NAs climbed from 16 share of import NAs to 38.

Anyone interested in cannabis bev mkt should sit back with an adult bev or alternative adult product (or two) and read “Drink Up, Stoners.”   Journalist Amanda Chicago Lewis does extremely deep dive into the cannabis bev biz and comes up with some extremely interesting material.  She’s an admitted cannabis bev skeptic, but that doesn’t matter, given the insights (and entertainment) she provides.  Noting the large investments being made by alc bev makers into cannabis, she sez: “There’s only one problem: no one really wants or likes cannabis beverages.”  They’re a “mere 2 to 3 percent of total sales” in legal use markets, she points out.  Why?  After disclosing that she believes drinks to be the “worst” of cannabis edibles, she explains why: “Even if you find one that doesn’t taste like bong water, the absent-minded ease of sipping almost guarantees you’ll have too much.”  As others have reported, the “delayed” impact from the THC dose in current bevs is another downer, and dangerous to boot.  [Editor’s Note: several THC bev suppliers claim to have solved the onset issue, evenly dispersed ‘highs’ and lowered doses.]  Yet, after a long road trip and multiple tastings, Lewis comes around (a little) on potential of cannabis bevs.  But for now, she declares early on: “The whole cannabis beverage category is a mess.  Even if you can get the dosage and the taste and the onset timing perfect, being high doesn’t feel the same as being drunk.”   So why should bev makers try to pound a square peg into a round hole?  Highlights include:

·      “I’m willing to try a weed beverage that tastes and feels better than the crap I’ve had after six years as a marijuana industry reporter and a decade living in Los Angeles.  I’m just also cognizant of the fact that hundreds of millions of dollars have been wasted on dumber ideas before.”

·      A veteran “cannabis kitchen” bev vet, who just scored millions from investors this spring, comments on competing with Molson Coors and InBev: “%&*! them and their insights.  Some insights can be bought, but many insights come from experience.” 

·      Lewis meets a bunch of cannabis bev makers, including folks from Two Roots and Lagunitas, tests their products and comments on them.  She also includes a friend’s review of one of ’em: “It tastes like someone put hops in Natty Light, and I’d rather be drinking Natty Light.”

·      She tours the huge bottling facility that Constellation’s partner Canopy has under construction in Canada.  Canopy “won’t let me try its pot beverages, which are supposed to hit within 15-20 minutes and will likely include an iced tea, kombucha, a lemonade and a sparkling water that tastes like pine needles.”  Canopy’s communications veep tells her: “The goal is to create a category.  Before Red Bull, there was nothing like it.  That’s what this looks like.  It fills a new need.”  Canopy’s co-founder and temporary ceo now that Bruce Linton got the ax sez: “You’re making decisions, expensive decisions, without the full details, and so there’s a lot of pivots.”             

·      On the issue of substitution: “With alcohol, everything speeds up, and the distance between yourself and other people seems to shrink.  With marijuana, the world slows down, and a light-hearted haze creeps over you, defamiliarizing reality.  The experiences are not interchangeable.” 

Nielsen’s CGA on-premise arm released some fun data points for International Beer Day (you didn’t know?) today. Most compared trends in US vs Great Britain.  For example, beer is 44% of on-premise volume in US vs 48% in Great Britain.  Tho part of on-premise struggling in recent yrs, Nielsen data suggests that “within the last 3 months, 110 million US consumers chose beer in the on-premise,” which “equates” to over 8 bil servings of beer/yr.  While domestic premiums trending down 9.3% on-premise in US and cask ales running down 9.8% in Great Britain over last 2 yrs, above premium segments growing on-premise in both lands.  During same period, craft $$ +4.5% on-premise in US, import $$ +9.4%.  Craft ££ up almost 22% in Great Britain.  On-premise drinkers tend to have higher incomes in both countries, natch.  But, also in both: “Younger drinkers (18/21-34s) are the least engaged, showing the most dramatic decline in beer consumption since 2017.”  Interestingly very similar shares of same demo in US choose craft (51%), domestic non-craft (51%) and imports (47%), Nielsen CGA data shows, “so offering a varied selection for beers is significant for targeting this group in the US.”  One big difference between US and Great Britain, according to Nielsen’s Matt Drummond: “In the US, consumers reach for the bottle or can, while GB consumers overwhelmingly purchase draught.”

Following latest qtr and elevation of Gavin Hattersley to ceo, similar themes across several analyst reports, along with some specific suggestions.  Key theme: Molson Coors is “company in need of disruptive change,” said Evercore ISI’s Robert Ottenstein, must make “bold move,” said Credit Suisse’s Kaumil Gajrawala. “Dramatic change is needed” and “more” change is “better,” advised Consumer Edge’s Brett Cooper. Brett offered the most detailed suggestions: 

Close a Brewery or 2; Integrate Supply Chain With Canada; Fix Canada, Where Profits 1/3 of Peak  “The construction of new breweries in Canada combined with appreciable volume declines in both Canada and the US makes the North American supply chain ripe for at least one brewery closure,” wrote Brett.  Canada brewery footprint “improved” and “integration into a North American footprint potential is more realistic,” he added.  One reason why: while US “has been a challenge, Canada has been far worse, with no sign of improvement coming. Profits in 2019 should be about 1/3 of peak” and margins only half what they were, “arguing for a dramatic change in the running of that business.”

Incremental Investment Needed in High End and Outside Beer; “Status Quo Can’t Continue”  In CPG (consumer packaged goods), “we often see” a “new CEO coming in and seeking to reinvest in the business to drive improved results,” said Brett.  Tho arguing for “needed reinvestment” can be a challenge, “in the end the Molson family, the Coors family and the Board has to realize that the status quo can’t continue.”  And “incremental funds need to be directed to the high end and innovation,” since “mainstream and value beers will remain in mid-single digit volume decline for the foreseeable future,” asserted Brett.  So portfolio needs to be “reassessed” and “longterm underperformance in the high end is what needs to be addressed,” emphasized Brett, as well as “competing outside of beer…. Molson Coors needs to look outside of beer to find growth as the structural pressures are simply too big.”  He views non-alc bevs, spirits and cannabis as each having potential.  “We believe Molson Coors will be a player in cannabis beverages once legal.”

“More Sustainable Level of Decline” Possible Combo With Heineken; Cannabis Bevs Finally, Evercore ISI’s Robert said Gavin “must do two things” to get TAP on better path. First, “slow the declines of the firm’s North American beer business to a more sustainable level of decline, say -2%.”  Second (similar to Brett), Gavin must “reinvent the company as an agent of disruption in the adult beverage space, going faster and more aggressively in areas like cannabis and CBD-infused products than its more conservative competitors.”  In Canada, “we believe TAP is well-positioned” with its Truss JV and its “strong market position.”

Robert also points to 2 “outside of the box routes to upside not currently in the stock.”  First, a “potential strategic combination with Heineken,” which Robert once rated as 50% chance by 2020. Editor’s Note:  Heineken not presently much interested in this, INSIGHTS understands.  Second, “potential upside from cannabis… beverages.”  Lead cannabis players like Canopy Growth and Med Men believe that bevs “could account for 20-30%” of mkt in future (see below for a contrary view).  While there would be “cannibalization” of beer… the opportunity looks much greater than the risk,” according to Robert.  “After ABI, no one else in North America has close to the same manufacturing footprint, distribution base, sales force and retailer relationships.”  Between Brett and Robert, that’s easily a half dozen suggestions about possible bold change ahead for Molson Coors, all of which INSIGHTS imagines both Gavin and the board of directors have already considered.  Next chapters clearly much anticipated.

Population growth and especially aging of the large millennial generation into their 20s over the last decade compounded the impact of soft US beer volume trends. US shipments on beer and cider, including imports, dropped by 4.3% between 2008 and 2018. Total US beer volume declined in 6 of the last 10 yrs, down by more than 1% in 5. But factor in growth of the legal drinking age population and average beer consumption per 21+ adult fell by a precipitous 13.8% over this period. The average US adult consumed very near 1 beer/day in 2008, 6.2 12-oz servings/wk or 30.4 gal/year. But steady declines in beer drinking meant that by the end of 2018, the average 21+ adult consumed just 5.4 beers/wk. That’s a loss of about 45 12-oz servings, 4.2 gal/yr per person. Add it all up and it amounts to 9.2 mil bbls, gone.

Dig deeper with Ten Years After, the new Beer Insights Special Report, coming next Friday, August 9. Ten Years After takes a broad view of key US beer industry data, revealing important shifts at both the national and state levels, reviewing the most impactful trends with quick-hitting text. Packed with data and exclusive analysis from the experienced editors at Beer Marketer’s INSIGHTS, Ten Years After: The Aftermath of 3 Huge Beer Biz Deals tracks a decade of big change in the US beer industry. No other resource rounds up this hard-hitting information in one place. Reserve your copy today for just $200.

Asked several times on Molson Coors conference call how co will change under his leadership, incoming ceo Gavin Hattersley gave a few key lines.  “I’m going to spend the next few months planning for 2020 and beyond,” said Gavin.  For sure, “there will be change” and under his leadership, “we need to consider all options to maximize the future potential of our business” and “create additional firepower” which will “require” change.  Unclear exactly what or whom Gavin meant by that last remark.  Goldman Sachs Judy Hong asked if that meant brand and asset sales on table, but Gavin stuck to script, didn’t expand upon his answers.   

What drove the timing, another analyst asked current ceo Mark Hunter?  “Nothing unusual,” Mark said. This is “same time of the year as Peter Swinburn” passed reins to him and it “allows incoming ceos to impact the long range plan,” since Board of Directors meet in Sep and Nov. Succession an “ongoing discussion with our board, as you can imagine.”  Molson Coors delivered on synergies, debt repayment in 2017-18-19.  That sets up change and will “allow Gavin to drive the next chapter,” which will look more towards top line growth.  

MillerCoors changed chief mktg officer last year because Mark and Gavin were “not happy with our performance.” Tho it took awhile to find someone, new cmo Michelle St Jacques “more than worth the wait,” said Mark.  He noted that Coors Light already improved to low single digit drop in Q2 and “normal business trends” returned in July, following weak May-Jun.   Michelle and MC “moved very quickly” on Coors Light marketing, noted Gavin. New CL campaign “unlike anything else you’ve seen” and it “resonates with young people,” said Gavin, adding “I don’t know that I’ve experienced such excitement” from distribs “since 2005.”  Yes, “it’s day 3,” Gavin acknowledged, but new Coors Light campaign indicative of faster MC pace. “The range and pace of initiatives stepped up dramatically.”

What about seltzers? “No doubt, seltzers are big” said Gavin and are “here to stay.”  Henry’s is “doing well” and Cape Line is good example of MC’s enhanced innovation capabilities, “doing meaningfully better” than White Claw or Truly “at the same stage.”  (Hmm.)  In future, MC will “more squarely go after seltzer space with new and unique” offerings, promised Gavin. “Watch this space,” he added.  Will do. 

While distribs continue to carry more brands and SKUs on avg, number of suppliers on avg leveled off in annual Tamarron Malt Beverage Supplier Performance Survey shows. Across 191 distribs surveyed, avg number of brands and SKUs rose to 327 brands (+17) and 1,385 SKUs (+7) in 2018. Yet these gains were “at a slower pace than years past,” Tamarron noted. And “this was the first year for the average number of Suppliers to go down slightly (from 44 to 43).” Also gotta note, brands outgrew SKUs, suggesting more paring back of certain SKUs in-house. Both developments certainly track sentiment expressed by several distribs across the country these days, no longer seeking new craft with the same vigor as during craft’s go-go years of growth, and both suppliers and distribs are looking to focus more on specific sets of SKUs. “Some suppliers have improved their SKU Management, but there is still a long way to go to ensure the right SKUs are in the target markets/accounts,” one of top distrib comments noted.

This yr’s 191 distribs surveyed included 44 ABI distribs, 128 Boston, 35 CBA, 123 Constellation Beer Brands Division, 116 Diageo Beer, 130 HUSA, 158 MillerCoors, 115 Mike’s, 95 New Belgium, 87 Sierra and 40 Yuengling. About 45% of the 191 distribs had annual revs less than $50 mil, including 23% below $25 mil. And 55% had revs over $50 mil with 12% between $50-75 mil, 21% between $75-150 mil, 13% between $150-300 mil, 9% above $300 mil. Total number of distribs surveyed is down from 206 in prior year, but most of that drop attributed to AB distribs (down from 60 to 44 total). Most other suppliers had increase in responses, per Tamarron.

Boston Beer Top Performer Again; Only HUSA and Sierra Scores Slipped; Performance vs Perception  Boston Beer again ranked as top performing supplier among distribs in annual Tamarron Survey. Its overall avg performance score grew 0.08 pts to 3.61, pulling away from Constellation Beer Brands (+0.03 to 3.46) on scale of 1=poor, 2=fair, 3=good, 4=very good, 5=excellent across 70 performance based questions. Yet several suppliers saw larger increases in score and all but two of 11 suppliers, HUSA (-0.05 to 2.86) and Sierra (-0.04 to 2.77) improved scores. Despite continued declining sales, both ABI (+0.29 to 3.09) and MC (+0.09 to 3.36) notably improved “average performance score” among distribs surveyed (keep in mind, larger AB swing in score is in part due to much fewer responding AB distribs). But at same time, less than half of both AB and MC distribs would grade their performance as an “A or B” purely based on “perception” of suppliers. Similarly, New Belgium (+0.17), Yuengling (+0.11) and CBA (+0.26) scores rose despite only ~40% of distribs grading performance an A or B based on perception. Tho each of em still below 3 (“good”) score overall. On the other hand, Diageo Beer Co had 2d largest gain, +0.25 to 3.03, as its sales trends notably improved over the last couple yrs. And Mike’s, the fastest growing sales company in all of beer biz these days, saw score rose 0.11 to 3.28, with 91% of distribs viewing performance as an A or B grade.

Red-hot White Claw is testing new line extension in Denver. It’s called White Claw 70 and comes in variety pack with just 70 calories and 3.2 ABV.  “We see the seltzer category as transformational disruption and as the seltzer category leader we must also be leading.” ceo Phil Rosse told INSIGHTS.  “That means exploring ways to reach even more beer, wine and spirit consumers and occasions.  White Claw 70 is a small regional test currently… as we look to continuously learn and build connections to our strategic objective of extending the seltzer consumer base.  Very early days but a promising incremental concept.”   On wings of White Claw, Mike’s, which just passed 2 mil bbls in 2017 for first time, sold over 2 mil bbls in 1^st half 2019. It’s neck-and-neck with Pabst.