Saw some ads for Super Bowl weekend for “premium” light beers at $13.99 a suitcase in North Carolina Harris Teeter (that’s $2.80 a six).  Not only that, but hottest beer brand in US, Michelob Ultra, included in this steeply discounted ad.  At exact same price. Food Lion only slightly better at $14.99, again including Ultra. You could also buy two 12-packs for $11.99 each and get the 3d for a penny.  Harris Teeter ad works out at 58 cents a can or bottle, while Food Lion’s $14.99 is 62 cents and buy 2 get 3d for a penny would be 67 cents.  Meanwhile, Food Lion also offers up New Belgium Dayblazer for $13.99 for 15 or less than a dollar a can.  

AB improved its ranking but wasn’t able to rebound to win last night’s USA Today Super Bowl Ad Meter which it had dominated in years past.  A humorous car ad was ranked best by over 15,000 viewers in Ad Meter for second straight year.  Auto Makers took the top 3 spots (Kia spot with Melissa McCarthy, Honda, Audi), and 5 of top 10 last night.  Bud’s 60-second “Born the Hard Way” was ranked 4th by viewers.  (AB’s highest ranking last yr was 9th with Helen Mirren responsible drinking ad.)  Bud Light’s Ghost of Spuds was ranked #21, and scored 3 ½ stars from Ad Age, while Mich Ultra and Busch ads were ranked #36 and #37 overall.  San Francisco Chronicle thought Ultra ad was one of worst, but Ultra improved considerably on its #54 rank in last year’s Ad Meter.  

“Funny ads always tend to do well, and this year may have been just what many viewers were looking for – a respite from the divisive political climate,” ad execs told Wall St Journal.  That would explain Spuds’ well-received cameo, yet Bud ranked higher as it ended up becoming part of current immigration debate.  “It’s a great ad, but it seems unlikely that people will interpret the ad as being about the heritage of the beers as opposed to being a politically motivated jab,” Cedric Devitt, cco of digital ad co Big Spaceship told WSJ. Twitter hashtags calling for boycotts popped up on Twitter, and Bud ad “had generated over 57,000 comments on social media – about 17% of them negative and 14% positive, per research firm Network Insights.  Ad Age noted “Bud’s ‘Brewed the Hard Way’ tagline/theme positioning takes a suddenly more credible and powerful turn when it becomes a position on immigration.”  AB “will weather the boycott by Trump supporters, and the commercial will be mentioned positively for decades to come,” wrote SF Chron.      

First set of 2017 IRI not too pretty as beer volume declined 0.6% for 4 weeks thru Jan 22 in IRI multi-outlet + convenience, including last wk of last yr after Christmas leading up to New Year’s.  AB volume down 1.8%, MC down 3%, but Constellation up 16.6%.  MC losing more share than AB in early 2017 scan data.  AB down 0.7 share of $$ and MC down 0.8.  Constellation picked up the slack.  Grabbed same 1.5 share of $$ AB and MC lost last 4 weeks. Heineken volume continued flat.  Pabst still down double digits and $$ sales down 20%.  Improving in latest period: Diageo Beer Co USA  volume up 4.8%. Decelerating: Yuengling down 3% for 4 weeks compared to 4% gain for 52 weeks.

Overall beer trend on-premise improved ever so slightly in Nov, reports Nielsen CGA.  But volume still off 3% for 12 mos thru Dec 3.  That’s while spirits volume +1.5%, wine -0.8% same period.  In deeper dive, Nielsen numbers show top 12 beer suppliers really getting stung on premise: volume -4.9%.  All Others, basically craft below top few, +2.4%.  It gets worse (for some).  “The 12 largest brewers that account for almost all the on-premise Domestic Premium volume...has struggled to an aggregate -8.5% trend on the year.”  What’s more, top craft brewers among those 12 (overall) “actually underperforming versus the rest of the top 12,” Nielsen notes.  How much worse?  Top 4 craft brewers actually -6%, while remaining 8 brewers -4.8%.  Since overall craft volume +1.2%, “it’s clear that the growth in this subsegment is being driven by smaller brewers.” Crystal clear.     

Boston Beer’s longterm ceo Martin Roper will step down next yr; exec recruiting firm Korn Ferry searching for his replacement.  “The Board has been discussing Martin’s retirement plans for over a year,” chairman Jim Koch said in statement.  Martin will stay thru search “to assure a smooth transition.  I remain fully engaged and committed.”  This is unusually long lead time. What’s more, search already underway for a while, INSIGHTS hears.  Martin’s retirement another sign of changing times in craft; 9 of top 20 craft brewers have changed ceos in last couple of yrs amidst far more challenging environment.   (This article adapted from beer marketer’s INSIGHTS.)

“Our performance under Martin’s stewardship has been incredible,” said Jim, citing 8-fold gain over last 22 yrs, since Martin joined (he was prexy for 17 yrs).  Most impressive part of run: 5 yrs between 2010-2015 when Boston Beer more than doubled revs, and almost doubled volume and profits.  Rode hot hand with Angry Orchard, Rebel, Twisted Tea and more. Revs jumped about $500 mil, from $464 mil to $960 mil, oper income grew from $81 mil to $156 mil.  Volume nearly doubled from 2.3 mil bbls to 4.3 mil bbls. But game has changed.  Boston Beer volume, revs and profits all down for 9 mos 2016 (Boston has only reported results thru Sep).  Shipments down 7.7%, revs down 7%, oper inc down 20%.  Q4 not great either.  

Boston has continued to struggle in scan data in recent mos. Volume down 7.6% for 4 weeks thru Jan 22 in IRI multi-outlet + convenience, and 4.7% for 12 weeks (IRI does not include subsidiary Alchemy and Science in Boston total; that’s way down in recent mos). Boston still getting good growth with Twisted Tea brands, but suffering severe short term drops (4-wk) in some craft brands, Seasonals (down 50%) and Rebel (-31%).  

Boston Beer’s stock also went on magnificent run, multiplying over 15x between 2009-2015 from $20 in early 2009 to $314 at beginning of 2015. Stock mkt capitalization peaked over $4 bil. But since then value of stock cut in half to $156 and mkt cap under $2 bil. Meanwhile, Martin realized $60+ mil in value of options in last 2-3 yrs (selling and buying); still has plenty of stock.  

Then too, Boston overhauled sr mgt team in last 18 mos. Six of its top 10 exec officers are new since Aug 2015.  That includes new CMO, CFO, Legal, HR and Supply Chain veeps and chief accounting officer.  New ceo will make 7, leaving just Jim, chief sales officer John Geist and brewing veep Dave Grinnell as vets.  All in period of its worst trends ever.  So now chairman/founder Jim Koch looking to reinvigorate Boston with mostly new top mgt amidst radically shifting and far more difficult craft landscape.  “Recent management changes and continued challenges the business is facing, could raise some questions about whether bigger changes may be afoot at SAM,” Goldman Sachs’ Judy Hong suggested in report today.

Many acquired craft cos among top share gainers in IRI MULC thru 2016. But there's a long list of indie brewers that continue to add sizable growth to the category across the country as well.

Ballast Point Largest Craft Share Gainer in 2016 Scans Ballast Point trended twice as fast in tracked scans as its total shipments trend, with $$ up 75%, volume up 73% in IRI multi-outlet + convenience data thru Dec 25. That made Ballast the largest craft share gainer in 2016, snagging 0.6 share of craft $$ to 1.6 total. Indeed, parent co Constellation made it clear on last conference call that it thinks Ballast has room to run, particularly in natl accts, while "increasing our support levels behind the brand" (see Jan 6 issue). Tho keep in mind, lead brand Sculpin IPA started off 2017 down in foodstores and co's going up against several 2016 brand launches (i.e. Pineapple Sculpin, Watermelon Dorado, Mango Even Keel). Lagunitas (+0.5), Founders (+0.4), Firestone Walker (+0.35), Bell's (+0.3) and Goose Island (+0.3) are the other top share gainers (see Jan 6 issue).

Elysian, Karbach and Rhinegeist Shine Among Up and Comers; Still Lots of Strong Growth from Smaller Cos Elysian, Karbach and Rhinegeist continue to stand out among class of up and comin' craft cos in scans. With extra AB muscle and Space Dust IPA firin' on all cylinders (see last issue), Elysian $$ sales up 70%, volume up 62% in IRI MULC last yr. Elysian finished comfortably over 500K cases and $24 mil tracked in IRI. Good enuf to grab over 0.2 share of craft $$. Then too, all in TX and before it's integrated into AB system, Karbach $$ grew 56%, volume up 61% in IRI MULC thru Dec 25. That's also over 500K cases tracked and over $18 mil in sales, making it 30th best-selling craft co in scans by $$. And right on its tail, OH's Rhinegeist $$ sales grew 70% and volume up 76%, jumping ahead of 14 cos to 32nd largest craft co by $$ in IRI MULC last yr. Recall, Karbach expected ~80K bbls and Rhinegeist expected ~50K bbls in 2016, so all these cos have outsized presence in scans. Karbach gained 0.15 share to just under 0.5 of IRI craft $$ and Rhinegeist gained 0.14 to nearly 0.4 share of IRI craft. Only 7 other cos gained more share in 2016 scans (see above). Also gotta note, Flying Dog gained over 0.1 share of craft too, up 33% in scans (well ahead of its modest +4% total shipments gain). Both 10 Barrel (+39%) and Devils Backbone (+38%) snagged 0.1 share of craft $$. And two private label brands - World Brews' Rockdale and Walmart's Trouble brands gained 0.1 share each (both defined as "craft" by IRI, tho Rockdale's just $11.62/case and Trouble's $26.09/case).

A group of smaller, very locally-focused cos were flyin', including Lawson's Finest (+90%), Deep Ellum (+103%), Perrin (+581%), Switchback (+77%) as well as larger regional co Troegs (+77%). Each were among top-20 largest share gainers in IRI, grabbing nearly as much craft share as Stone and Deschutes. Another high flyin' VT brewer, Zero Gravity grew 588%. Larger regional cos like Hop Valley, Cigar City (+29%), 21st Amendment (+26%), as well as MadTree (+53%), Foothills (+32%), Fremont (+36%), New Holland (+31%) and Columbus Brewing (+99%) round out top-30 $$ share gainers. And there are plenty of strong growth trends further down the list, as long tail continues to collectively grow at a faster pace and gain share of segment. List of top-60 craft players in IRI and further analysis of this dataset will appear in the 2017 Craft Brew Guide (see below).  

While craft segment ultimately managed to grow in scans last year, one clear shift was the sheer number of cos and brands that declined in 2016. Over 1/3 of almost 1,250 IRI-defined craft cos and nearly half of near 7,500 craft brands tracked last year saw sales dip. That's not just top-heavy, cos and brands of all sizes took a hit. Some cos may be focused more on other indie channels and some aren't in mkts where scans are prevalent; some brands were discontinued and some have seen focus shift to other brands within their respective portfolios. But that's a lot more minus signs than we've seen before. What's more, over half of total craft growth came from 1K+ brands new to scans last yr. That's right, new brands provided more growth than previously existing brands in 2016. And over half of previously existing brands declined. Some have suggested SKUmaggedon is nearing its peak as several brewers and distribs alike talk about simplifying their portfolios. Yet most brewers continue to innovate and add new brands to the mix as well. Such is the volatile nature of craft. Heading into increasingly competitive times, cos will look to find the right balance. (Editor's note: our list of "new brands" includes several that had almost entirely incremental sales, such as NBB Citradelic Tangerine IPA, Sierra Nevada Otra Vez and more.)