“Let’s recognize that this new competitive marketplace is likely the new normal,” and that “it may not be possible to replicate the overall growth of the last 19 years.”  So acknowledged Brewers Assn CEO/prexy Bob Pease at outset of sprawling Craft Brewers Conference (CBC) yesterday.  How sprawling?  CBC will host over 14K attendees and feature 600K-sq ft trade show, over 1K exhibitors.  Given increasing competition, more important than ever for craft brewers to stick together, collaborate, help each other and lean on the “legacy” of the generations of family brewers that have come before in the US, said Bob and others.  This “bunch of anarchist cats,” as BA board chair/Left Hand co-founder Eric Wallace described US craft brewing community, must remember that “beer brings people together. And we could use as much of that as we can get right now.”

“We Will Not Gloat” on Corngate While in past, CBC speakers repeatedly rallied troops with talk of revolution vs “Big Beer,” and Bob made light of corn-troversy, he encouraged craft brewers to steer clear: “That’s not our fight. We will not join in.  We will not gloat,” he insisted. “We remain committed to growing the overall category of beer just like we have been for the last 30 years,” he said.  What’s more, BA and craft brewers “work every single day to elevate the image of beer.”  So, Bob and other BA leaders talked up unity.  Eric focused on “the importance of unity among the brewing community” and “maintaining an air of civility.” Traditional “collegiality” of craft has already “changed the face of brewing.” By “working together” now, craft brewers can “be a force of diversity and inclusivity” in the world, writ large, bringing even more folks together, he argued. New Belgium co-founder Kim Jordan celebrated “heritage and legacy” of “4th and 5th generation family brewers,” who started BA and asked CBC to “honor that legacy as we engage with one another and with your” BA.  Bob detailed current BA activities, from providing multiple research and state-guild grants to creating best practices and diversity resources and lobbying, i.e. helping launch efforts to make excise tax cut permanent. Cut helped create 15K new jobs in 2018, Bob said: “We need to keep our economic motor running.”

Creating Community, Staying Safe Big brewers not let totally off the hook.  Guest speaker Bruce Dickinson, front man of rock band Iron Maiden, ripped “the big boys,” as he distinguished between customers and fans.  “I hate customers. Everybody should hate customers,” he insisted. “You don’t want customers. You want fans. You want friends. You want people you can have a relationship with, the instant they walk into whatever you’re doing.”  That’s “the thing that the big boys in the brewing world are desperate, desperate, desperate to have,” he thinks. And that’s why he believes “the big boys are so keen to buy all the brands.” Big beer can’t create the kind of community craft brewers can, sez Bruce.  Instead, they acquire.  If a small brewer is not intent on being acquired and wants to survive, even thrive, “you’ve got to make sure that your nest is somewhere safe.”   Lots more details on CBC day 1 in yesterday’s issue of Craft Brew News.

As Stone Brewing pursues its trademark lawsuit in Calif fed ct vs MC over Keystone Light refresh, apparel co Patagonia just sued AB in another fed ct in same state.  Patagonia claims AB’s intro of Patagonia beer in Colo and elsewhere aims to “take advantage of the tremendous goodwill that Patagonia Inc and Patagonia Provisions, Inc have cultivated in their brand” and usurp company’s reputation for being environmentally friendly.  AB beer not only shares name, but AB created “fictitious” Patagonia Brewing Co on labels along with “mountain silhouette” similar to Patagonia’s logo, passed out “beanies, scarves and t-shirts” with logo in intro mkts and adopted “tree positive mission” (1 tree planted per case sold), aping Patagonia’s ethos.  Adding to confusion, Patagonia has its own beer, Long Root.  What’s more, Patagonia claims AB “submitted false evidence to the Trademark Office to unlawfully obtain a trademark for Patagonia on beer.”  After “letting its fraudulently obtained trademark lie unused for six years,” AB created new “brewing company” and launched “intensive marketing campaign” to intro new beer.  It’s complicated, but Patagonia charges that AB worked with Warsteiner Imports to “unlawfully assign” Warsteiner’s trademark for Patagonia back in 2012.

All in, Patagonia charges AB infringed its trademark, engaged in unfair competition under fed and Calif law and illegally obtained the trademark from Warsteiner.  Seeks judgment to stop AB from making or selling any Patagonia beer or apparel that resembles its brands, to cancel AB’s Patagonia trademark registration, treble any $$ damages to Patagonia, plus punitive damages.  AB gave statement to Fast Company: “We are aware of this lawsuit and believe it to be without merit.  We will vigorously defend our trademark rights.”

Turns out, an unhappy citizen complained to Beer Inst about AB’s corn syrup ads on day after Super Bowl.  He alleged ads violated BI’s ad/mktg code which bars disparaging ads, requires them to be factual and “never suggest that competing beers contain objectionable additives or ingredients.”  Like others, including MC, he charged the ads insinuated “falsely and repeatedly” that corn syrup is “objectionable” and that ads “aimed to confuse viewers” by suggesting Coors Light and Miller Lite contained high fructose corn syrup.  AB’s assertion that ads were example of “transparency” is “laughable,” he charged, “especially when AmBev [sic] uses that same industrial product itself in another brand.”  He sought a “public apology and other instructions to AmBev to make this right,” specifying in later communications (there are a bunch) that he sought “sanctions.”

After some back and forth with BI and AB, he filed formal complaint with BI’s Code Compliance Review Board (CCRB) that Ingredients ad violated the code.  The CCRB describes itself as “independent from the brewing industry,” a “neutral and detached” group charged with ensuring brewers and importers comply with BI’s ad/mktg code.  The Board “unanimously” decided Ingredients “does not violate” rule requiring ads be factual, since “there is no question that MillerCoors uses corn syrup,” as MC has “stated both in tweets and advertising.”  Then too, “it is the CCRB’s unanimous opinion that the ‘humor, parody and satire’” in Ingredients is “readily identifiable as such by reasonable adults of legal drinking age.”  Thus the ad meets “humor definition” in code and did not violate section barring suggestion that competing beers have objectionable ingredients.  A week after CCRB cleared ad, MC filed its fed complaint making several of same charges.

Bud Light Ad “Unequivocally Compliant” with BI Code, AB Sez  In its original response to the individual, AB asserted ad was factual, a “continuation” of AB’s moves toward “ingredient transparency” and did “nothing more than what MillerCoors has been doing for some time,” i.e. disclosing its brands made with corn syrup.  Thus, Bud Light ad “unequivocally compliant” with BI ad/mktg code, AB asserted.  A lengthier response to defend ad before the CCRB hints at arguments AB may make in court.  AB noted same guy previously filed complaints vs half dozen AB ads going back to 2006; none found to violate code.  Again, AB defended Ingredients ad as neither false nor disparaging.  Ad is “factually accurate,” as acknowledged by MC.  What’s more, ad does not “in any way state or give visual or audio clues to suggest that corn syrup is in any way unhealthy, objectionable or makes the beer unfit for consumption.”  BI code does not bar comparative ads, AB reminded.  Brewers, including MC, have run ads “asserting superiority” based on fewer carbs or calories, for example.  But AB “did not even go that far” as it simply provided “a straight, truthful recitation” of ingredients.  Agreeing with complaint, AB also argued, would be “inconsistent” with BI’s voluntary disclosure initiative adopted in 2017, since it would suggest that disclosure of ingredients “somehow now qualifies as disparagement.” 

Finally, a finding that Ingredients violated the code would “invite many other types of ad code challenges,” AB argued.  Like what?  Like an ad that claimed a brewer followed Germany’s Reinheitsgebot “beer purity law” (beer can only have barley, hops, water and yeast) and was therefore better than other brands with other ingredients.  Would “mere designation of a beer as Reinheitsgebot-compliant improperly imply that non-compliant ingredients in competitors’ beers are objectionable?”  Would CCRB want to open that “Pandora’s box to claims on other types of truthful, comparative” ads?  Apparently not.

In wake of proposed merger between #2 and #3 US wine/spirits wholesalers – Republic National and Breakthru – dropped last week (see Apr 5 Express), Fed Trade Comm put out statement.  After investigation, FTC “informed RNDC and Breakthru Beverage of our significant concerns about likely anticompetitive harm if the transaction were completed,” deputy director of competition section commented.  Cited “extensive testimonial, documentary, and economic evidence”  that supported concerns “transaction likely would have resulted in higher prices and diminished service in the distribution of wine and spirits in several states.”  Deal would also have “adversely impacted suppliers of wine and spirits” that depend on distribs to promote/distribute their products and retailers that buy ’em.  With deal dropped, “consumers will continue to benefit from meaningful competition between RNDC and Breakthru Beverage,” FTC believes.

NBWA brass and guest speakers mostly sounded positive, if familiar, notes on beer biz these days, and identified goals/challenges going forward at Legislative Conference general session yesterday. With new leadership, a slew of new members and “different dynamic” in Congress, lotsa educatin’ to do about: 3-tier system, the value distribs add, importance of state-based regulation and beer’s role in US economy, NBWA CEO Craig Purser stressed.  NBWA/Beer Inst putting final touches on joint Beer Serves America report, which will point out, among other facts, that US beer distribution biz now supports 141K direct employees.  

“I’m Optimistic,” Sez Lester  Amid lotsa talk of soft beer volume, NBWA economist Lester Jones said the Beer Purchasers Index – a monthly measure of distribs’ buying plans – “pretty good” so far this yr, coming in over 50 each of first 3 mos, indicating a “strong start” and an expanding biz. That’s especially true for above premium segments, “slowly taking control” of biz.  He also noted expansion of suppliers, SKUs and points of sale in recent years, everything from taprooms to salons, which reflects strong consumer demand, albeit shifting preferences, and broad “cultural acceptance” of alc bevs.  Meanwhile, two population “bubbles” in transition will determine preferences going forward: millennials getting jobs/building households and baby boomers hitting retirement. Lotsa oppy there for beer, Lester believes. Net-net: “I’m optimistic.”

Support for Status Quo; Sup Ct Decision in May or Jun On behalf of NBWA-supported Center for Alcohol Policy, Lori Weigel presented results of recent poll that showed Americans’ maintain broad, consistent support for state regulation, 3-tier system and brand choice it enables.  They even support state laws that require license holders be in-state residents.  That led into review of recent US Supreme Court hearing in case of Tennessee residency law for off-premise retailers. NBWA counsel Paul Pisano cited 13 legal briefs filed in support of law, from distrib advocates, state AGs, public health groups and others.  This was not necessarily the case nor the facts that distrib advocates wanted to go before Sup Ct, as Craig acknowledged.  But it’s the case that’s there, and it’s important.  Distrib advocate Mike Madigan noted case’s “tortured history” – TN’s own AG did not defend law and it got tossed in US Dist Ct and US Appeals Ct.  But Mike pointed out that 6^th Circuit Appeals Ct “most reversed Circuit Court in US.” And, even if TN law struck by Sup Ct, he does not expect a “dramatic impact on” beer wholesalers. John Nieman, who clerked for US Sup Ct Justice Kennedy and wrote amicus brief for Center for Alc Policy, would not predict outcome.  But he noted Justices “well-educated” about 3-tier system/alc bev regulatory history and “attuned” to what next case would be if they tossed TN requirement: retailers seeking to ship across state lines.   Decision expected in May or June.

End Tariffs Now! Extend Tax Breaks!  Exterminate Equivalence! Beer Inst prexy Jim McGreevy laid out familiar arguments about need for “complete repeal” of aluminum tariffs, attempt to extend or make permanent fed excise tax breaks for alc bevs and beer’s need to continue to resist distillers’ attempt to “equalize” beer and spirits.  Re the ongoing debate over next revision of US Dietary Guidelines, “we’ll be working to make sure the language shows benefits of beer compared to spirits,” Jim vowed. 

Recognize Regulation, Add Truckers, Continue Tax Relief and “Beer First”   NBWA’s key issues on Hill these days include HR 285, a resolution “recognizing 85 yrs effective state alcohol regulation.”  Also: Drive Safe Act that addresses current shortage of 50K CDL-licensed drivers to create “quicker path to training”; making corporate tax rate breaks for pass-thru corporations permanent; pension reform; extension of fed excise tax break for alc bevs; ensure cannabis gets regulated and more. Craig also mentioned “Beer First” category health initiative. Tamarron’s Lori Scheiffler detailed many of same points Express reported yesterday about initiative.  Craig urged brewers to not let competitive instincts get in the way and “put aside differences” when it comes to building category growth. While NBWA moving forward with “Beer First,” not enough $$ in till to fund planned national ad campaign at this time.  As always, NBWA poised, primed and purposed to defend distrib independence, especially amid “decisions by suppliers to terminate longstanding relationships without cause,” an oblique but clear reference to Constellation’s Calif moves. Interesting times and full plate for all.

It’s a wrap.  With Nielsen all-outlet scans now in thru Mar 30, Q1 story all about continued trade up to above premium and seltzer phenom.  Quarter closed with volume -0.6%, $$ +1.4%.  Above premium picked up 2.5 share of volume to 35.7, 2.7 share of $$ to 48.4.  Above premiums grabbed over 49.4 share in final 4 wks, so a full 50 share not far off.  FMBs, driven by hard seltzers, led the way, as Express noted yesterday. Superpremiums and imports fed the fire too.  But craft volume and $$ down in Q1, and had especially tuff Mar, volume -5.4%.  Cider went negative too.  Lion’s share of share loss came from premium regular/premium light segments, -1.9 of volume,

-2.2 of $$.  

AB volume -1.9% in Q1, $$ -0.8%.  It shed 0.6 share of volume, 1 full share of $$.  MC volume -3.8%, $$ down 2.9%.  So it gave up 0.8 share of volume, 0.9 share of $$.  Pabst and HUSA each gave up a tick or two of share as well.  Constellation was lead share gainer in volume (+0.9) and $$ (+1.1).  But Mike’s, just 12% of Constellation’s size, not that far behind in share gain.  Mike’s picked up 0.5 share of volume, 0.8 share of $$.  Then too, Mike’s total volume and $$ shares in Q1 matched Boston’s, at 1.8 and 2.6.  Boston and Diageo Beer Co each picked up 0.1-0.2 share in Q1 as well.

Bud Light trended down 6/7% in Q1 ($$/volume), Coors Light down 4/5%.  Lite eked out tiny 0.1% $$ gain, as volume off just 0.7%.  Every other top premium-priced brand lost ground in Q1.  In economy, Natty Light, Ice and Daddy each up.  All other top economy brands down as segment shed 0.5 share of volume, 0.6 share of $$.  Among top above premium brands, more of mixed bag.  Michelob Ultra and Modelo Especial rolled up 0.5-0.7 share gains.  Corona Familiar up 0.1-0.2.  Twisted Tea became top-10 above premium brand with growth in 10% range.  Losing ground in above premium: Corona Extra, Heineken, Dos Equis, Stella Artois, Blue Moon and Corona Light.  Each lost share of segment, tho most held on to overall category share.

Another analyst questioned whether Boston can meet its growth objectives, looking at latest scan data.  Boston Beer’s “recent Nielsen trends are troubling and call into question the achievability of guidance,” wrote Cowen’s Viven Azer. “Deceleration driven by deteriorating beer trends and tough cider comps could lead to a miss, if Truly doesn’t deliver” promised doubling.  While Truly still putting up exceptional growth, Truly “has lost dollar share in the hard seltzer category in 25 consecutive 4-week periods, as measured by Nielsen,” Vivien wrote.  It is now under 30 and White Claw well over 50. 

Craft $$ up 2.9% in IRI multi outlet + convenience data yr-to-date thru Mar 24, in expanded IRI data from Bump Williams Consulting.  And IPAs continue to eat up more share of the segment. IPA $$ sales up 14%, and gained 3.9 share of $$$ to 39.9.  40 share of segment.  Wow.  Top IPAs: Lagunitas IPA $$ down 1%, while Founders All Day up 21% and Elysian Space Dust up 32%.  None of top 3 IPAs is BA-defined craft.  Sierra Torpedo down 2% and Goose IPA down 2% round out top 5.  Bell’s Two Hearted is #6, largest indy craft IPA that’s growing, up 6%.  A coupla other notable gainers: New Belgium’s Rampant Imperial IPA is up 33.5% and Sierra’s Hazy Little Thing up 165%.

FMBs leading industry growth so far in scan data, with stunning $100 mil, 22.4% gain in IRI multi-outlet + convenience yr-to-date thru 3/24.  And Mike’s and Boston are by far leading way in FMB growth, each up almost 50% in segment, expanded IRI data from Bump Williams Consulting showed.  Mike’s up $59 mil, 48.3% and Boston Beer FMB biz up 49.3%, over $33 mil.  Mike’s at 33.6 share of FMBs, Boston Beer at 18.7 share.  So top 2 a little more than half of segment $$, but grabbed over 90 share of growth YTD.  Diageo Beer Co also doing very well.  It’s #3 and up 18%, $10 mil.   Diageo at 12.3 share, just slightly higher than MC at 12.2 and AB at 11 share of FMBs.  Each of AB and MC were #1 in FMBs at one point.  MC $$ down 10% and AB $$ up 1% in segment.  It’s kinda amazing that hottest growth story (seltzers) still dominated by Mike’s and Boston several yrs in. 

Each of top 8 seltzer brands has more than doubled.  White Claw has top 2, Variety Pack and Black Cherry, each up around 300%.  Truly has 3 and 4. Its Berry Mixed Pack is #3 and all incremental, while its Variety Pack  up a mere 112%.  They are all flying.  Bon & Viv Spiked Seltzer Mixed Pack is #5 hard seltzer brand, up 154% yr-to-date.  Smirnoff is #8, up 236%. Henry’s does not have a brand in top 10.  Henry’s variety pack is up over 2000% but is #12 seltzer brand at $2 mil.

While broad industry-wide program to “elevate beer” blew up amidst AB-MC corn syrup controversy, NBWA stepped up and presented some new tools during workshop this morn at Legislative Conference.  Purpose: to “engage and initiate conversations” with retailers to promote beer during retail sales calls. “Beer First” program aims to reverse beer volume declines, loss of per capita consumption and share erosion to spirits/wine.  How?  By using “fact-based selling” and key data points to leverage distrib relations with retailers and “start the conversation,” “change the conversation,” “show up differently” and “engage retailers” with “beer first” messages, as distribs Mark Doll (Doll Dist-IA) and Mike Barnes (Andrews Dist-TX) said.

Specifically ex-distrib, ex-brewer and now consultant Bob “Sully” Sullivan suggested distrib sales forces use first 10% of every sales call to talk up beer category first, before moving on to brand-specific discussions.  Using data primarily from Nielsen, Sully provided slew of pro-beer numbers and messaging, available as “sell sheets” and/or customizable power points from NBWA.  For off-premise, he focused on grocery, noting:

·      Beer has 49 share of volume, 46 share of $$, vs wine’s 35-37 share, spirits’ 16-17 share (spirits not sold in channel in all states).

·      Beer $$ grew at 1.2% CAGR (compound annual growth rate) over last 4 yrs to $38 bil in 2018.  Mark advocated, like Constellation does, focusing conversation more on $$ sales/profitability (“that’s what retailers take to the bank”) rather than volume. 

·      Beer attracts more shoppers for more trips, more repeat buys and increases basket rings ($34.86 without beer, $55.21 with beer).

So, suggested “asks” of off-premise retailers: more merchandising, ads, displays, promo frequency and space.

For on-premise, beer also 50 share of all drinks sold, $42 bil in total sales in 2018 (Nielsen CGA). Also:

·      In casual dining, beer drinkers have higher avg annual household income ($79.6K) than wine/spirits drinkers ($78.4K) and non-drinkers ($73.6K).

·      Beer drinkers spend more per month in casual dining spots ($197) vs wine/spirits drinkers ($188) and average customer ($176).

·      Among those who “typically” drink in bars, restaurants and similar outlets, 46% drink beer, 44% spirits, 34% wine.

·      110 million US consumers drank beer on premise over last 3 mos.

Then too, among weekly drinkers on premise: 64% drink beer vs 42-43% vodka/whiskey, 41% wine.  Again, across all outlets, beer outsells spirits/wine in mid-day, mid-afternoon, early evening/happy hour periods, then slips behind spirits in late evening.  For on-premise, suggested “asks”: more features, beer/food pairing suggestions, more draft visibility and increased education for bartenders/servers.  Similar data available for c-stores and chain grocery.  More to come as program develops.

This program a bit of break from past, Sully acknowledged, when brewers might have taken lead.  But that’s not happening.  And fact that distribs initiated “Beer First” has “truly powerful” potential, he believes, if it “bubbles up” from distribs and “street level.”  Suppliers will then sign on, he expects.  Indeed, a couple of large regional brewers have already looked at data and pledged support as soon as distribs adopt the program, Sully said.     

It’s early days and lotsa questions about how to adopt data/program to different markets, how to work with suppliers and/or competing distribs and how to ultimately share, adapt and access “success stories.”  Next steps include higher profile at general session and closed NBWA distrib mtgs later today.  So, many miles to go.  But: “It’s a start.  This is for real,” Mike stressed.  And, as another distrib told us anonymously: “It’s better than corn.”