BMI Archives Entry
Another sign 2017 ain’t off to greatest start. “Due to recent industry headwinds and weather impacts, our inventory levels for the first quarter of 2017 are higher than our original plan,” wrote AB logistics and procurement veep Fued Sadala to distribs. AB expects inventories for Feb to be in range of 25-27 days for packaged beer, it wrote distribs. Normal range on lagers, bulk of AB’s beer, is 8-30 days, so this is towards upper end of range. “We have actions in place to return inventories to last year’s levels by the end of March,” added Fued. And April will be at same level as last yr too, down to 20-22 days. One distrib noted that AB keeps wanting to ship unwanted loads, and distrib has to argue against. A sizable MC distrib also told INSIGHTS it is dealing with similar issue.
At over 31 share, craft is already the largest beer segment by $$ in San Diego scans, ahead of imports at 29.2 share, +0.2. That's even tho top import player Constellation +2.6 share, buttressed by Ballast Point, natch. But no other top-5 supplier (AB, MC, Heineken USA, Boston Beer) gained share in the market for 13 wks thru early Dec. All other brewers gained 1.3 share of beer $$ to 26.9. That's almost 4 points larger than AB's share in San Diego scans, and over 7 points ahead of MC. (Note that Constellation is #2 supplier in SD at 19.8 share.)
Top 3 Craft Brands in SD All IPAs, All Calif: Collectively Over 15 Share of Craft, 40% of Segment Growth Key difference between craft and total beer biz in SD: 8 of top-10 beer brands in the market down for 13 wks, while top 3 craft brands all up solidly. Surprise-surprise, they're all IPAs and they're all brewed in Calif. Stone IPA is #11 beer brand in SD, up a whopping 39% for 13 wks according to this data. But that's well ahead of yr-to-date trend: Stone IPA up 4% off-premise in its home market thru most of 2016, the co shared with CBN. Total Stone biz up 5.6% off-premise YTD at home, with big gains put up by new Delicious IPA, +32%, and Arrogant Bastard, +49%. As with plenty of other craft brewers lately, "cans have made a huge difference with our growth off premise," Stone sales veep Todd Karnig told us.
But in 13-wk Nielsen data, Stone IPA now ahead of #12 beer brand, #2 craft brand, Ballast Point Sculpin IPA, +10.4%. Note that Sculpin was #1 in SD previously and may be still for full yr. Both IPAs topped 5 share of craft $$. Not far behind, Lagunitas IPA up 20% on the nose and gaining a half-share of craft $$. Together, those 3 brands neared 5 share of total beer $$ for 13 wks. They're already over 15 share of craft $$, gaining 1.9 share collectively. But they're over 40% of total craft $$-growth in SD. So like the rest of the US, some top national brands not keeping up. Blue Moon flagship Belgian White (included in Nielsen craft data) declined by 11% during the period. Sierra Nevada Pale Ale down 5%. But look out for the other SoCal craft star, rising quickly, Firestone Walker 805. It hit #24 beer brand overall for 13 wks, +83%, and #6 craft brand.
More Chain Biz and Expansion of Alpine Making Big Impact for Green Flash; On-Premise Rotation Nation San Diego also home to a handful of other large, growing players, including Green Flash, which continues to see some serious growth locally from Alpine brands it acquired back in 2014. The co's total off-premise volume expanded by over 40% for 11 mos last yr, on pace to top 100K cases by yr-end in SD, founder/CEO Mike Hinkley shared with CBN. Half of that was "frontline" Green Flash beers, up by over 50% at home thanks to a "successful transition to six packs two years ago and our more recent success breaking into retail chains," Mike said. But Alpine brands went from a very small amount of off-premise sales to 21K CEs for first 11 mos of 2016. In fact, by $$, Alpine Duet became the co's top brand in SD food + convenience IRI data for 52 wks to 11/27. So biggest GF and Alpine brands drove growth in local off-premise biz, while other brands down. And the co's large format bottles, 22oz and 750ml, collectively down about 10%, Mike shared, noting that the "22oz market dying a slow death," in his view, as it's "overcrowded and shrinking at the same time."
And that's just easier-to-track off-premise. Many small local brewers focus on draft, often exclusively. That makes for an "overcrowded, rotating San Diego on-premise environment," Mike told us. So Green Flash's 3 largest brands collectively up 15% on premise, "doing great with lots of permanent handles." But overall, the co's on-premise SD biz is "dead flat," with smaller brands "struggling" in tuff rotator world. "Hard to imagine what it's like for brewers that live only in that arena," he commented. And there are plenty that do. Read on for more of this San Diego Spotlight.
Recall, Zx also invested in largest online homebrew supply retailer, Northern Brewer/Midwest Supplies, a story Craft Brew News broke in Oct (see vol 7, #86). In late Nov, we also wrote of Zx's investment in Whym, a co that sells specialty ingredients alongside pre-brewed "beer base" to personalize at home. And now PicoBrew. The appliance simplifies homebrewing significantly, allowing users to insert pre-packaged ingredients into the machine and basically leave it alone as it brews, transfers liquid to attached fermentation and serving vessels. The co works with dozens of small brewers, including Rogue, Abita and 21st Amendment, which share recipes and branding to allow users to try their hand at replicating their beers at home. It also markets recipe kits for modified versions of well known craft brands, like "Half Squeezed" and "Plinius Maximus" IPAs, or "Not Yet-ie" imperial stout. Some brewers partnering with Pico not likely to be too excited about this involvement from ABI. But investment again shows that the world's largest global brewer is just as inquisitive as it is acquisitive.
Notably, Pico seriously stepped up marketing over last 6-8 months. Various beer, tech and business publications received, tested and reviewed the appliance, including WIRED and CNET, USA Today, Wall Street Journal and more. It's gotten mixed reviews as by-and-large simpler than traditional homebrewing and certainly cool, but not necessarily foolproof. Existing homebrewers may not be impressed with the simplified process, but at about $800 for the smaller Pico version (recall, the co introduced the larger Zymatic a few years ago), it's largely targeting an audience of fairly affluent beer fans, not necessarily hardcore hobbyists. Yet at the tail-end of last year, we heard a couple of folks start talking about the notion that retailers may see simplified homebrew tech as an easy way to offer small amounts of house-made beer. Though no signs that's happening yet, significant presence of ABI in the intersection of tech, e-commerce and homebrew is certainly notable, to say the least.
Total FMB category is “about 80 million cases” and “I think we can add 50% to that in the next 4 years,” with alc seltzer products, founder of AB-owned SpikedSeltzer Nick Shields boldly stated at BBD Summit on a panel with Casey O’Neill from Boston Beer’s Innovation Team (including Truly Spiked & Sparkling) and MC’s vp of natl craft and innovation (including Henry’s Hard Sodas & Seltzers). So altogether, alc seltzers could add roughly 10 mil cases a year, he thought. SpikedSelzer on its own jumped from 1K bbls in 2014 to 16K bbls in 2015 and leapt to 54K bbls in 2016 while in just 12 states, he shared. Now, with AB’s muscle it’ll go natl in 2017 and Nick and co expects whopping 400% growth, up over 200K bbls on its own.
Then too, Boston’s Truly Spiked has been out for “less than a year,” Casey reminded folks, and co “anticipating a really great 2017.” MC’s getting ready to launch Henry’s Hard Sparkling line with lemon lime and passion fruit flavors. Last yr, Mark Anthony Brands/Mike’s Hard Lemonade Co launched White Claw seltzer brand that sold 1 mil cases in yr-1, with plans to reinvest every dollar of gross profit back into the brand (see Sep 29, 2016 issue). And with a few more brands already in the mix as well, you can start to see how alc seltzers can bring a lotta growth to the table in 2017. Yet 10 mil cases of growth per year’s gonna be tuff. Question remains whether or not that growth can sustain past big launch years. Alc sodas certainly didn’t. And FMBs, in general, continue to be an extremely volatile segment. Yet each panelist felt strongly about alc seltzers as a “health and wellness” proposition that’s less sweet than typical FMBs (parallel to non-alc trends) and could source volume away from spirits drinkers.
For its first-ever Super Bowl commercial, Busch is “going back to one of its classic marketing techniques,” using the exaggerated “Buschhhhh can-crack sound,” as it intros new pkging and a new “Busch Guy,” in humorous spot, per Ad Age. “The goal for our first-ever Super Bowl commercial was to create a spot that was unmistakably Busch,” said Chelsea Phillips, sr dir of value brands at AB. She sez that work by Deutsch NY office has “created a relatable and funny spot, expected to resonate strongly with those who have the same values that we do.” ABI “raised some eyebrows” when it announced it would spend money on a “pricey Super Bowl spot” for its top value brand, noted Ad Age. Busch shipments were down around 1% in 2016, per BMI estimates but with Busch Light gain of 0.4% and gain for Busch Ice, the Busch family finished yr even or up slightly. If you haven’t seen it yet, much-anticipated and mostly well-received Super Bowl spot for Budweiser was released yesterday, with everyone noticing that it touches on hot topic of immigration.
Top New Brands Almost All High End Too
Bump also published interesting list of top 25 new brands in IRI last yr, and every one of ’em was either FMB (12), Craft (11) or import (2). Best Damn Cherry, Estrella Jalisco and New Belgium’s Citradelic were 1,2,3 (see above), followed by Sam Adams Rebel Grapefruit, Four Loko Sour Apple and Bud Light Lime Straw Ber Rita Splash. Also in top 10: Smirnoff Ice Electric Berry, Bud Light Lime Lime-a-Rita Splash and Small Town’s Not Your Father’s Vanilla Cream Ale. Here’s a few of the other craft brands that made list (in descending order of size): Ballast Point Pineapple Sculpin, Sam Adams Nitro Coffee Stout, Trouble Variety Pack (Wal-Mart’s private label craft), Lagunitas 12th of Never Pale Ale (co’s first foray into cans, which really boosted Northern Calif trends), and Ballast Point Watermelon Dorado. Not on Bump’s new brand list, but on another IRI new brand list we saw, Rockdale Light Lager (from World Brews), which sold virtually as many new cases as Rebel Grapefruit, but at $11.62 avg price per case.
Top 25 growth brands in US beer biz (by $$) totally dominated by hi-end, with 10 imports and 8 flavored brands as consultant Bump Williams noted in his monthly update. Each of top 8 and 21 of top 25 are hi-end. Top 2 growth brands, Mich Ultra and Modelo Especial, each up around 25% and gained a half bil in $$ sales between ‘em. Wow! Corona the only other brand that gained more than $100 mil in $$ sales; up $150 mil, 9.7%. Notable that total beer biz gained $916 mil, 2.7%. So those 3 brands grew over 70% of what total industry gained.
Ten of top 25 growth brands were imports; Stella at #5, up 15%. But 8 of those 10 imports were Mexican imports, including 5 from Constellation. Modelo Especial Chelada at #11 (up 34%), Corona Light at #13 (up 8.2%) and Pacifico #23 (up 20%). Also on list, Dos Equis Lager at #12, Tecate Light #19 (up 28%). Heineken $$ sales up $15.6 mil, 2% in IRI, about same $$ as Pacifico (+20%), good enuf to be #22 on list.
Hard-to-cycle FMB category got 5 of top 10 gainers, 8 of top 25: Henry’s Hard Soda was #4 growth brand, Best Damn Root Beer #6, Four Loko Gold #7 (!), Lemon Ade Rita (#8), good ole’ Twisted Tea #10. Only Twisted Tea a repeater. How many of these brands will make a return trip? Interesting to note that top FMB co Mike’s does not have 1 of top 25 growth brands, but got solid 10% growth overall.
Craft got just 3 of top 25 growth brands: New Belgium’s new Citradelic (#20), Goose Island IPA (#21) and Firestone Walker 805 (#25). Bump called this “likely a testament to the ‘deeper bench’ that the craft segment has compared to other segments.” Two other new brands on list. Both from AB: Estrella Jalisco and Best Damn Cherry Cola. Coors Light and Miller Lite both got on list by virtue of their sheer size. Each had $$ sales up 1%, while volume down slightly, but that was enuf to get Coors Light into top 10 gainers (#9) and Miller Lite at #16. Yuengling Lager the only domestic premium on list.
Pabst in Sessionable “Sweet Spot,” Sez Simon; Regional Brands are “Future of Rock ’N Roll For Us”
As consumers move toward sessionable styles, “there’s an intersection in the middle” of high end/craft and sessionability, and Pabst “right in the middle of this beautiful wave that’s starting to emerge,” said Pabst’s new CEO Simon Thorpe at BBD’s Beer Summit. He downplayed “price point” angle, speaking to “approachable, sessionable, easy-drinking” styles that more consumers are lookin’ for. Firestone 805 Blonde is “really good anchor for at least what I’m thinking about.” And Pabst’s “local legend” brands “are ideally positioned to play” due to “authenticity.” Several regional brands were up 10-15% in 2016, including Lone Star and Rainier and “our job is simply to light a candle underneath some of this stuff” and “bring it more to the fore in terms of innovation.”
While Pabst depletions basically flat over last 2 yrs (up 2.5% in 2015, down 2.5% in 2016), revs are up 16% and gross profit up 30%, he reminded. Flagship Pabst Blue Ribbon down 3% in 2015 and down 2% in 2016. Small Town “blew up” then “died back down” but it’s starting to “stabilize,” according to Simon. It’s “a longer term build,” hoping to attain a status similar to Mike’s Hard Lemonade. (Not Your Father’s franchise still down 64% in Nielsen all outlet last 4 weeks). Craft strategy starting to formulate via New Holland, Minerva, etc and there are “a lot of opportunities” with imports. Co “had to rebase some of our expectations” on Woodchuck (down 44% last 4 weeks). But regional brands are “the future of rock ’n roll for us.”
While all alc bev segments outperformed total CPG (volume “pretty much flat,” and $$ up 0.9%), beer share loss to wine & spirits was highlighted in data presented by Nielsen’s Danelle Kosmal and Jon Collins at BBD Summit. Beer $$ up 2.2% vs Wine $$ up 4.4% and Spirits up 4.9%. So beer and spirits share about even at 42 share of total alc $$. Interestingly, beer share among Gen Xers dropped most of over last 6 yrs. But millennial males in particular prove to be the most promiscuous: 38% of millennial males consume 3 or more alc bev categories within one occasion compared to 15% of boomer males. On premise, there’s been a 1 in 6 reduction in neighborhood bars in the last decade, Jon noted, which he referred to as a “loss of beer’s heartland” since 56% of consumers “opt for beer in neighborhood bars.” And there’s “sub-optimal assortment” of beer segments on premise, said Jon. Craft has 58 share of $$ vs 45% of taps allocated; Imports 21 share of $$ vs 16% of taps; and Domestic Premium has 17 share vs 29% of taps.
Meanwhile, total number of new innovation brands finally showed signs of slowing down in 2016; 2,042 new products launched last yr vs 2,665 launched in 2014, Danelle noted. “No indication” that retailers are expanding space for craft at all and “this may be the apex as to how high it can go” in terms of space. Yet “it makes sense for retailers to continue to focus on it,” even as some “are getting a little bit scared,” said Danelle. People aren’t leaving craft,” but “fewer people are coming in,” said Danelle. “As craft continued to push that distribution,” there were “new buyers coming in.” But that’s “leveled off” more. So “existing craft buyers” are the “challenge.” All in, consumers still “want more” styles, tasting rooms, etc. and “demand is still there.” “That’s where the long tail contributes,” but retail shelves are “overwhelming.” Separately, consumers generally don’t know what “sessionable” means, it turns out. Only 3% of bev alc drinkers said they were “very familiar” with session brews and only 28% of drinkers said “somewhat familiar.” Within “somewhat familiar” group, over 40% associated sessionability with “flavored beer” compared to 34% with alc content, 36% heavy vs light, 36% style.
An engaging Pete Coors riffed on the family biz, his role, competing with ABI and much more at Beer Business Daily’s Beer Industry Summit yesterday. “My basic job” as Chief Customer Relations Officer, “is that of flag waver,” Pete said, tho he does “share some thoughts” with top mgt from time-to-time. “They don’t let me do that much,” Pete quipped. About half his time is spent on US biz, and half globally.
Asked about going up against ABI, Pete said: “We don’t believe we can or should take them head on particularly. We mind our own business.” Molson Coors must “do what we can do well.” ABI is “formidable” with “unlimited resources” and could “make life a little bit difficult for us.” By the same token, “being small, nimble and quick has its advantages.” In fact, Pete continued: “Our biggest challenge is to be quicker. We’re too slow,” Pete said pointing to the rapidity of craft innovation these days. “We’re not good at competing in that environment,” said Pete. “We need to do that better.”
Molson Coors acquisition of the rest of MillerCoors for $12 bil is referred to as “the Big Deal,” according to Pete. When he told his Uncle Bill, now 100 years old, about the price tag, Bill called it “shocking.” With both ABI and Molson Coors taking on considerable debt recently, Pete wondered why a price war would be any more likely than it has been historically, adding that’s not where Molson Coors wants to “focus.” Focus now is to “integrate the companies” and on “cash generation to pay down debt.” But Pete did also note that brewers raising price faster than vintners and distillers and there are a “lot of questions” about whether beer’s value is “where it needs to be,” though he’s “not sure a price war solves it.”
Asked about a Heineken hook up, Pete acknowledged “that’s the stuff that guys like you speculate about,” but only added that Heineken family is “a great family. We have business relationships with them in other parts of the world.” Earlier he’d said that what’s “wonderful about this industry” is “that it’s very family oriented,” pointing to Yuengling family, “they’re around longer than we are.”