One-time cider leader in US, C&C Group, didn’t put numbers to its US biz in otherwise positive trading statement yesterday.  Did note: “In the US, the cider category remains in negative territory.  Pabst [has] made good progress in integrating, consolidating and rebranding our business.  We await to see whether the changes made will be successful in recovering some market share in the second half and into fiscal year 2018.”  Pabst has a big challenge in a challenged segment.  Shipments data shows domestic cider down 19% Jan-Mar, imports off 18% Jan-May.  Scan data not much better.  Cider volume down 600K cases, 11.3% in IRI multi-outlet + c-store scans thru June 12.  Dollars down $17 mil, 9%.   Cider is only above premium segment that’s down this yr and cider slipped below 1 share of volume yr-to-date.  Lead brand Angry Orchard Crisp – just over 40 share of category – down 215K cases, 10%.  Smith & Forge flagship -115K cases, 32%, MC’s top 4 Crispin brands down about 7%.  Stella Cidre is exception: volume +72%, but $$ up about half that rate as avg price down $10 per case, and right at same level as Angry Orchard between $35-$36.  Strongbow growing too, up 20%+ in scans.  Major C&C brands not in current batch of data, but each down 20% or more thru May 1. 

How about other apple products?  Redd’s Apple Ale -406K cases, -20%, Wicked Apple flat, tho Green Apple adding some volume.  All in, those 3 brands down about 200K cases, 5%.  AB adding some incremental apple volume too, with Bud Light Apple and Best Damn.  But this looks like a flavor that’s losin’ favor, at least for now.    

Here’s one look at growing importance of “local” in craft and overall beer biz.  Data from Calif Dept of Alc Bev Control shows that Calif-based craft brewers shipped over 2.4 mil bbls in that state alone last yr.  That was up 420K bbls, 20.8% and fully 10.5 share of total Calif shipments.  In-state craft brewers, there’s now over 700 of ‘em, tacked on about 750K bbls in Calif shipments, 44% in last 2 yrs and added about 3 share.  During same 2-yr period, AB dropped about 400K bbls, 2.4 share, MC lost almost 400K bbls, 2 share.  But Constellation up 830K bbls, 3.3 share.  In-state craft brewers had over half of 19 share held by all suppliers below top 5 last yr and so grabbed a bit of share from out-of-state small and large competitors.

Top 5 Calif crafts – Sierra Nevada, Lagunitas, Firestone Walker, Stone and Ballast Point – shipped 1.27 mil bbls in state last yr, collectively up 240K bbls, 24%.  Those 5 brewers alone had 5+ share of Calif biz, up from 3.5 in 2013.  Big variation in share of each brewer’s biz still sold in Calif.  Sierra’s 388K bbls was just below 1/3 of its total volume last yr.  Lagunitas still did 44 share of its total biz in original home state.  Fast growin’ Ballast Point did just over half of its volume in Calif, Stone just under 60 share.  But Firestone Walker still had 3/4 of its total volume in Calif in 2015.  Much deeper dive into Calif craft numbers in current edition of our Craft Brew News letter.           

Levy Restaurants caters to many millions of consumers every year across US in outlets that range from award- winning, white-tablecloth restaurants to the Kentucky Derby and multiple sports stadiums.  How many? “On our busiest days, when the U.S. Open coincides with college and NFL season openers, baseball, golf, soccer, restaurant guests and NASCAR lighting up the track, we could be serving 3.5 million people in a single week, in kitchens and stadiums coast to coast,”  Levy’s chief exec Andy Lansing told us.  He also spoke to Natl Conference of State Liq Admins, sharing some retail insights.  What’s this cutting edge retail exec “paying attention” to?  Five things: 1) “The last best experience anyone has anywhere becomes the minimum expectation for the experiences they want everywhere”; 2) Mobile technology offers consumers new oppys (i.e. “mobile ordering is taking over” in-store, at venues, at home); 3) “Customers want it their way, not your way, quickly and often without a hospitality expectation”; 4) Retailers need advanced metrics and analytics to best serve patrons; 5) “Coffee,” where same mainstream-import-craft arc is playing out and where handcrafted, exotic, flavorful, local etc cues work. 

More generally, he concluded that operators need to “be nimble.”  They don’t need to be the “inventor,” but they have to be able to spot change and apply it to their bizzes.  “If the change outside your company is happening faster than the change inside your company,” he suggested, “then the end is in sight.”  Sometimes, it does mean being an inventor.  Andy shared this story: “We had a wild idea of creating a twist on the classic Michelada at Dodger Stadium by adding a popsicle with the bright tomato and lime flavor to a draft beer. We had a hunch it would work for Dodger fans, as Micheladas were a rising beverage trend in Los Angeles, and we’re seeing beer cocktails on menus around the country. Partnering with our friends at Diablo, we launched the Diablo Michelada Pop in 2015. On the success of the initial launch, we have expanded the menu to include new flavors –yuzu jalepeno, passion fruit cayenne, and a special nod to the team with the blue jalepeno pop.”

Craft Comin’ on, But Mainstream Beer “Beloved for a Reason”  Each of Andy’s 5 attention-getters have implications for beer.  On experience and expectations ‒ Andy talks a lot about providing “high quality” experiences ‒ virtually immediate service pioneered by Amazon and Starbucks now coming to stadiums where “beer is still king” and patrons don’t want to wait on long lines. And in those stadiums, “it’s all about options.”  Some sports fans still “want popcorn, a hot dog and beer.  Some want crab cakes and tenderloin.  Our job is to serve both.”  And that includes a balance of mainstream and craft beer offerings.  Sure, some patrons want the “hip, new and cool brands,” Andy acknowledges.  But the majority of beer sold in stadiums still Bud, Miller and Coors brands that are “beloved for a reason.”  Both styles “have a very valuable place on the menu,” Andy said.  Options vary by sport, he said and Levy always “trying to figure out the sweet spot” and “appropriate amount of choice.”  Obviously, stadiums can’t offer 100s of brands and rotation not as acute an issue as in smaller indie accounts (tho it’s there).  But it’s not just 3 or 4 options, and Levy, like every other retailer, needs to know “what do people want right now.” 

Regarding the phone and tech issues, Levy itself is to some extent a “tech company,” Andy pointed out.  Customers now arrange for their tickets, parking, money for food/bevs via phone.  And Levy has found they spend more on food and bevs via mobile than if they pay with cash or credit card.  Millennials especially insist on “having it their way.”  That includes pulling taps in some venues, customized cocktails and more.  (Indeed, Chi media reporting today about coming “Tapster” concept where patrons buy pre-paid card, pour their own beers as oppy to sample more beers.)  At same time, Levy needs more data and info from distribs and suppliers about guests, and not just sports fans.  On-premise data still in early stages compared to off-premise, he acknowledges.  And “we know what we are selling, by inning and what it’s being paired with.”  But Levy also wants to know what consumers are drinking when they’re not in its venues, data other industry members can help to provide.

Recent surveys of hundreds of nutritionists and a representative public sample show lotsa disconnects between experts and consumers about what’s “healthy” and what’s not, as NY Times reported yesterday.   Two quick, dramatic examples: 71% of public think granola bars are healthy, 80% say granola’s healthy.  But only 28% of nutritionists say bars are healthy, 47% say granola is.  Beer’s reputation ain’t good among either group.  In fact, only 23% of nutritionists consider beer healthy.  And that’s 10 pts higher than the 13% of public that thinks beer is healthy.  That’s right, over 2/3 of nutritionists and over 80% of consumers don’t consider beer healthy.  Wine fares much better, at least among experts.  Fully 70% of nutritionists say wine is healthy compared to 52% of the public.  So wine still has much better rep, even among experts, despite years of research showing benefits of moderation spread across all alc bevs.  These findings remind us of most recent Gallup Poll on similar subject, with similar implications.  Last summer, Gallup reported that just 17% of adults believed moderate drinking, 1-2 drinks/day, was “good for health.”  And that was down from 25% a decade earlier.    

Country-by-country trends remain very uneven, but import shipments overall continue to roll, driven by big Mexican gain.  May import shipments up 306K bbls, 10.5%, reports Beer Inst economist Michael Uhrich from Commerce Dept data.  Mexican shipments jumped 22%, Belgian shipments up 6% and Irish shipments up 23%.  But Dutch, Canadian, German and UK shipments continued down.   For 5 mos, imports up over 1 mil bbls, 7.8%.  Mexican imports alone up 1.5 mil bbls, whoppin’ 18% Jan-May.  Very little growth elsewhere.  Irish shipments gained 62K bbls, 17%; German and Polish shipments eked out tiny gains.  But Dutch shipments off 40K bbls, 1.9%, Belgian shipments still off 223K bbls, 24% and Canadian shipments dropped 211K bbls, 26% yr-to-date.  UK biz off more than 30%.  With solid import gain thru May, total US shipments up 1.1 mil bbls, 1.3% for 5 mos before any cider drag (import ciders off 18%).   Meanwhile, export biz really picked up Apr-May.  After being down slightly in Q1, exports now up 158K bbls, 9% for 5 mos.    

Calif is already biggest medical marijuana mkt in US.  But if voters pass ballot initiative there this Nov to legalize recreational use, experts predict a $4 bil marijuana mkt there by 2020, reports Huffington Post.  And “legalization of recreational pot would generate an estimated $1 billion in additional taxes per year.”  Exec for private equity co that invests in pot bizzes enthused: “I don’t believe there will be any precedent in the United States that can compare to it except for maybe the Gold Rush.”  Meanwhile, lotsa $$ already being invested by current growers, medical marijuana sellers and others in anticipation of passage.  Same law enforcement and health groups that successfully opposed recreational use back in 2010 ready to battle again, HuffPo reports.  But “this time backers have the deep pockets of former Facebook president Sean Parker,” support from Calif’s Lt Gov and “strong support” from citizens in recent polls.  In nearby Ariz, pro-legalization groups have already raised over $2.2 mil to persuade voters to pass that state’s ballot initiative in Nov, reports Sierra Vista Herald.  Those against have ponied up about $700K. Those numbers already far exceed amounts raised in previous measure that legalized medical marijuana in Ariz.     

Group backed by large chain grocers in Colorado, which had been pushing to put ballot measure before voters in Nov to immediately allow such stores to sell full-strength beer and wine, called an end to that initiative on Friday, multiple Colo papers report. The decision comes a few weeks after Gov John Hickenlooper signed a bill that phases in alc bev sales of all kinds across 20 yrs. Recall, grocery chains initially suggested they may continue with their ballot measure anyway or pursue legal action. But even now that ballot measure nixed, no mention of any legal challenge to the new law in latest reports. At same time, the phase-in of full-strength beer sales to Colo grocery stores also means a likely phase-out of lower-strength, 3.2 (alc-by-weight) beer there. And with Okla also staring down end of 3.2 sales, folks in Utah now wondering how those moves might affect beer sales in their own state, according to a columnist for the Salt Lake Tribune. Up in Missouri, Gov Jay Nixon signed into law bill that clears suppliers to lease beer coolers to retailers on Friday. That goes into effect at end of August. And though that provision broadly bashed by small brewers in the state, bill also allows more retailers to fill and sell growlers there.

In response to “some misreporting in the media” about AB approach to equal pay in context of new Bud Light ad, including Wash Post article we cited last week, AB spokesperson Lisa Weser defended the company.  “At Anheuser Busch, we believe in – and practice – equal pay for equal work.”  Third-party experts “confirm that the media salary of female employees is equal and fair,” she notes.  In fact, women who work for AB in US at parity with men, we understand.  And AB would “never put out an advertisement on equal pay if we could not back it up….  Our goal was to start a conversation and bring awareness to the issue.”  AB “not satisfied” with under-representation of women at highest ranks in its (as well as others’) workforce, Lisa acknowledges.  And it has taken these steps: 1) 60% of incoming MBAs in 2015 were female; 2) 51% of mktg team, as of June 2015, were female; 3) Women are head brewmasters at 5 of 12 US breweries; 4) AB adopted enhanced parental leave policy and mentoring program for women this yr.

Agreement reached between Lumbee Tribe and NC distrib R.A. Jeffreys includes “a resolution of all claims against Anheuser Busch and R.A. Jeffreys,” tribal chairman announced Friday, reports several NC papers. Recall, tribe had filed trademark suit vs AB and Jeffreys after distrib had put up ads in retail stores using tribe’s symbol and slogans (see Jun 15 Express).  Jeffreys immediately pulled ads after tribe expressed objections and apologized.  Subsequently Jeffrey’s agreed to make “substantial donation” (amount not disclosed) to non-profit Lumbee Land Development organization that funds education and youth programs. Ads were a “mistake that arose out of a misunderstanding for which R.A. Jeffreys takes responsibility and apologizes,” tribal chairman said. “The Lumbee Tribe accepts that apology.”          

Interesting analysis of key summer period beer sales – mid-June to mid-Jul – and promo efforts by consultant Bump Williams suggests “serious concern for the health and wellness of retaining” the best beer buyers, he wrote clients on eve of Jul 4 weekend.  This 4-week period represents about 9% of total beer sales for the yr and “traditionally represented the highest point of total category volume sales compared to any other 4-week stretch throughout the year” tracked by IRI.  Lookin’ at volume trends and promotional activity in different combos (merchandising, features, displays, price reductions) shows that while promo support levels not necessarily the highest during this period, “the corresponding lifts experienced during this quad week period are typically the highest or one of the highest out of all 13” 4-wk periods for the year.  But here’s the kicker: “Unfortunately, since peaking in 2012, the volume lifts across all promotional activities have declined steadily each year” during this period thru 2015.  What’s more, in general, “lifts associated with promotional activity for the Beer category have declined nearly every quad week since 2012.”  Last yr, while the avg volume lift from all promo efforts during this key 4 wk period was still “noticeably higher” than the calendar yr average, the “corresponding changes in lift vs. where they were a year ago were down by a much higher degree across every tactic during this same window compared to the annual average,” Bump notes.   Net-net: lifts from promo activities ain’t what they used to be and especially in key summer period.  That doesn’t bode well for overall volume.  Not only that, but declining lifts “could also be indicative of increased subsidization, with core shoppers continuing to buy when on promotion and declining trial among New shoppers.” 

Other factors pressuring volume as well, in Bump’s view.  These include: “consumer switching between segments has cut into Premium occasions and into their share of basket.”  Then too, wine and spirits are still grabbing volume from beer.  High-end segments are gaining share from mainstream brands as well, and while those high-end buyers stayin’ in beer, “the average size of purchase and purchase frequency differs between segments…. With consumer loyalty not being what it once was and Premium Light brands becoming commoditized, consumers have started to shift their behavior and the predictability and magnitude of the peak Summer season has started to change with it.”  Another consultant close to retail, Joe Thompson, put this pressure on volume another way: “the good months are not quite as good as they used to be and the bad months are a little worse.”  

If traditional promotion activities not as successful as they used to be, what’s the alternative?  Bump ticks off a few successful tactics from other CPG companies: “cross promotional and cross-category promotions, out of aisle beer displays, educational POS pieces and ‘Branded Story’ messages” can help “win the battle with consumers at retail,” he suggests.  Two other interesting observations from Bump’s current client message.  While craft slowing down, he sees no bursting of the bubble and attributes some of that slowdown in the scans to “unreported” volume sold at breweries and tap rooms, perhaps as much as 12-14% of craft total.  Bump also calls AB discounts on Michelob Ultra a “bad idea because this brand is extremely healthy, so why give money away on a super premium brand with virtually no competition when you don’t have to?”  (Execs from a competitor recently voiced exact same puzzlement to us.)  Could be AB seeking to get back some lost Bud Light and Bud shoppers, Bump speculates.