AB’s “purpose-driven” new brand, Cerveza Patagonia, expanded to PacNW and Southeast regions following successful test in CO, AB’s vp of new brands in premium/ superpremium segments, Harry Lewis shared with INSIGHTS. Recall, Cerveza Patagonia will plant a tree for every case sold in partnership with National Forest Foundation, co shared at SAMCOM earlier this yr. It’s based on “very established” InBev brand that has grown double-digits for last 5 yrs while snagging nearly 10 share of Argentina mkt and 22 share of on-prem there, Harry noted. Indeed, this is “new innovation process” for AB, sourcing ideas from its global portfolio to pilot in US. Yet while squarely aimed at imports here, this version of Cerveza Patagonia is brewed in US out of co’s Fairfield, CA brewery. AB made this decision for two main reasons: 1) “reduce carbon footprint” for an “environmentally friendly” proposition; and 2) “guarantee freshness” in a segment that often “struggle[s]” with freshness, he explained. In fact, both the packaging and label note it’s “brewed in the US for a fresher beer.”

Cerveza Patagonia initially tested in Denver mkt for 12 wks starting Oct 2018 and expanded to CO statewide in Jan. Pilot “exceeded all expectations and KPIs,” including wholesaler orders over 300% of what co initially budgeted, Harry shared. Notably, Cerveza Patagonia sold at twice the rate of Mich Ultra Pure Gold and half the rate of Bud Light Orange in pilot, while 3/4 of consumers surveyed were “willing to buy again.” And when placed next to imports on shelf, rate of sale was 2X vs when placed next to craft. It’s priced like an import brand as well, sold in 6pk and 12pk bottles plus draft.

Co made various tweaks thruout pilot, from packaging in uniquely shaped bottle with wider neck, enhancing label with more premium cues and mountainous imagery, and moving away from “Bohemian Pilsner” to just “pilsner” description. Co is “optimizing” Cerveza Patagonia in short order, and now brand is ready to “take it up a notch,” sez Harry. Its environmentally friendly purpose and message will be catered to each individual state where sold, i.e. “buy a case, plant a tree in Colorado.” And AB already looking ahead to “future national launch,” per release. All in, this is just one more way AB lookin’ to “disrupt” in above premium segments these days.

US beer biz keeps losing ground to spirits and wine, but Diageo Beer Co USA sees “a different picture,” prexy Nuno Teles highlighted in recent CNBC interview. Nuno referenced strong 2d half 2018 results, as net sales grew 13% (see Jan 31 issue). “We see both core and innovation doing well,” including Guinness Draught cans up 16.4% in latest 12 wks. Nitrogenated cans are just one of the ways Diageo Beer is “increasing awareness, distribution and penetration” among target 21-34 yr-old consumers, he added. Another is “better-for-you” space, as consumers continue to choose “quality above quantity.” Indeed, Guinness lookin’ to “emphasize” relatively low calorie count (125 cals) that’s “very close to light beer,” Nuno noted in separate Bloomberg article. No mention of its bustling FMB biz thruout CNBC interview, but that’s been up strong double-digits as well and driving bulk of Diageo Beer Co’s growth overall, led by Smirnoff hard seltzers and higher ABV Smirnoff Ice Smash.

Then too, Diageo Beer Co is “looking to grow organically,” rather than thru acquisition, Nuno again commented. Guinness “will continue to be” #1 brand and focus. And innovation from Guinness brewery in MD “will give us a better portfolio to play in the future,” he noted. Co will brew 60 different Guinness branded beers in the first year there, and there’s been “great acceptance of those new beers.” Most recently, it brewed an amber ale with an Irish/English tea for St Patrick’s Day. And over 2K consumers celebrated the holiday at the MD brewery on Sunday alone, Baltimore Sun reported separately. Still on pace for 400K visitors within first full year after opening last Aug.

What about cannabis? “We’re looking at it very closely,” Nuno acknowledged. Ultimately, it’s not Nuno’s call. But co’s looking “very closely” at cannabis from an “innovation-driven” standpoint. “We don’t have any data indicating that” more millennials prefer cannabis vs beer, he added. But “what they want is good experiences” and “products that are delivering benefits on a holistic space.”

Net-net, Diageo Beer Co continues to grow solidly in US in early 2019 scans. Volume grew 14%, $$ up 12.5% YTD thru Mar 2 in Nielsen All Outlet data. Co kept up 12%+ growth rate in latest 4 wks even as core Smirnoff Ice brand family $$ collectively declined 1% YTD and -5.5% for latest 4 wks thru 3/2.

US beer biz keeps losing ground to spirits and wine, but Diageo Beer Co USA sees “a different picture,” prexy Nuno Teles highlighted in recent CNBC interview. Nuno referenced strong 2d half 2018 results, as net sales grew 13% (see Jan 31 issue). “We see both core and innovation doing well,” including Guinness Draught cans up 16.4% in latest 12 wks. Nitrogenated cans are just one of the ways Diageo Beer is “increasing awareness, distribution and penetration” among target 21-34 yr-old consumers, he added. Another is “better-for-you” space, as consumers continue to choose “quality above quantity.” Indeed, Guinness lookin’ to “emphasize” relatively low calorie count (125 cals) that’s “very close to light beer,” Nuno noted in separate Bloomberg article. No mention of its bustling FMB biz thruout CNBC interview, but that’s been up strong double-digits as well and driving bulk of Diageo Beer Co’s growth overall, led by Smirnoff hard seltzers and higher ABV Smirnoff Ice Smash.

Then too, Diageo Beer Co is “looking to grow organically,” rather than thru acquisition, Nuno again commented. Guinness “will continue to be” #1 brand and focus. And innovation from Guinness brewery in MD “will give us a better portfolio to play in the future,” he noted. Co will brew 60 different Guinness branded beers in the first year there, and there’s been “great acceptance of those new beers.” Most recently, it brewed an amber ale with an Irish/English tea for St Patrick’s Day. And over 2K consumers celebrated the holiday at the MD brewery on Sunday alone, Baltimore Sun reported separately. Still on pace for 400K visitors within first full year after opening last Aug.

What about cannabis? “We’re looking at it very closely,” Nuno acknowledged. Ultimately, it’s not Nuno’s call. But co’s looking “very closely” at cannabis from an “innovation-driven” standpoint. “We don’t have any data indicating that” more millennials prefer cannabis vs beer, he added. But “what they want is good experiences” and “products that are delivering benefits on a holistic space.”

Net-net, Diageo Beer Co continues to grow solidly in US in early 2019 scans. Volume grew 14%, $$ up 12.5% YTD thru Mar 2 in Nielsen All Outlet data. Co kept up 12%+ growth rate in latest 4 wks even as core Smirnoff Ice brand family $$ collectively declined 1% YTD and -5.5% for latest 4 wks thru 3/2.

Aluminum may be getting more expensive for US producers, but that’s not slowing cans’ momentum in US beer.  Packaging report for Q3, 2018 from Beer Inst economist Michael Uhrich shows domestic volume sold in cans up a solid 4.2%, while domestic bottle biz down 7.5% and draft -1.9%.  Import volume up across all three package types. Q3 pop put cans at 59 share of total US biz for the qtr.  Cans closed 2017 at 56.1 share, averaged 57+ yr-to-date thru Sep 2018.  That’s up about 7 share over last decade.  Meanwhile, draft hung in at amazingly steady 9.5-10.5 share for 9 yrs since 2008, and right there in 2018 too.  Could it be that tuff-to-measure taproom biz not making it into that number?  Then too, “draft continues to gain share of on-premise beer volume,” Mike observes.  “Year-to-date though Q3, about 7 in 10 beers sold on-premise was from a draft system, up 1.1 share points compared to last year.”       

Ex-AB ceo and chairman August Busch III doesn’t often comment publicly about the company that still carries his family name.  But St Lou Biz Jnl ran letter to the editor from him today to “offer my thoughts on the recent conversation around Bud Light’s campaign focused on ingredients transparency.”  AB’s longtime commitment to combining quality ingredients and “our strict and time-consuming brewing process yields a beer that is consistent, refreshing, and drinkable,” August writes.  He also notes hard work over generations to “build relationships” with growers “and now the topic is coming to the forefront as a result of the consumer desiring more transparency into the ingredients found in the products they buy and consume.”  August does not specifically mention AB’s Super Bowl ads, corn syrup or competing brands.  But, “as industry leaders, Anheuser-Busch and the Bud Light brand are smart in taking the initiative towards greater transparency into the ingredients found in beer,” and thereby meeting consumers’ desires.  “I congratulate Bud Light for taking this first step towards greater transparency and believe it is good not only for Anheuser-Busch but also for the beer industry as a whole. Hopefully, the entire beer segment will benefit from the push towards transparency.”

Add MillerCoors to growing list of established brewers looking to enhance innovation capabilities and further emphasize new brands in adjacent alc bev spaces. In the next 6 mos, MC will launch MOVO wine spritzers and La Colombe Hard Cold Brew Coffee as well as two other items (to be announced) in test mkts, vp of innovation Sofia Colucci shared at MC’s distrib meeting in Tampa. MOVO is marketed as “better-for-you wine spritzer with lower ABV, so it’s taxed and licensed more like a cider,” Sofia explained. After just 4 mos in development, MC now testing MOVO in Ann Arbor, MI with O&W and Vancouver, WA with Craig Stein within “a few weeks.” La Colombe Hard Cold Brew Coffee is a collaboration with fast-growing premium coffee brand, La Colombe, set to launch this summer in Boston with Burke Dist, Denver with Coors Dist, and Tampa with JJ Taylor. And “there’s a lot more coming,” Sofia promised.

Based on feedback from distribs, MC “changed our innovation strategy to help us get better scale, push more into white spaces and test and learn, all while moving a lot quicker.” And “I’m just hoping that this can give you a sense of our approach, our commitment to do more, and our sense of urgency.” Indeed, “we are going to aggressively test out new whitespace areas and go-to-market models,” ceo Gavin Hattersley promised.

This is a clear evolution of MC’s ethos, and a welcome one at that, many distribs conveyed. MC now invested in non-alcs (Bhakti Chai, Clearly Kombucha), canned wine, hard coffee, as well as cannabis (HEXO) thru parent co Molson Coors. But innovation not just comin’ from new brands in new spaces. “You’ll see innovation on Coors, Miller, Leinie’s and Blue Moon,” Sofia added. “And I’m not talking seasonals.” Revamped Miller 64 packaging teased as just one example. “Our team is going to deliver true year-round packaging and liquid innovation that hits on consumer needs in relevant ways,” she proclaimed.

Supply Chain Transitions “Still Difficult” for Remaining DRIVE Go-Lives Gavin didn’t mince words while addressing supply chain issues over the last year and change. Golden, CO was nothing short of “disaster,” he again acknowledged. “But we learned from that disaster, made adjustments, brought in new leadership under Bob McCann and moved forward with a better plan.”  MC now has “better understanding of how we can plan for volume moves” and subsequent DRIVE go-lives have been “smoother than Golden, though I’ll be the first to say that’s a relative term,” he said. “The transition is still difficult. That’s just the unfortunate reality until the entire system is fully operational.” Tuff weather conditions in Milwaukee and “frankly” Golden this yr are only adding to the challenges of moving millions of bbls around. “We’re doing that while contending with a ridiculously cold winter that has at times kept us from shipping beer to keep it from freezing.” Albany and Irwindale are the last two breweries to go thru updates, planned for later this summer. While this is “frustrating” for all parties involved, “the good news is that when we meet again next year our entire system will be live…and we will be in a position to make enhancements to the system,” Gavin concluded.

Govt’s consumer price index (CPI) showed some more movement in alc bev prices in  Feb than in recent mos.  Consumer price index for beer increased 2.6% in Feb vs Feb 2018. That follows 2.1% gain for month of Jan and recall, before that CPI for beer had not risen more than 2% in any month since Sep ’17.  Then too, CPI for beer outperformed Feb increase for All Items (+1.6%) for 2d straight month after not doing so for 16 months.  Spirits prices surged too, up 3% in Feb vs yr ago, double its 1.5% gain for Jan.  Last 2 mos are best pricing gains for spirits in over 5 years.  CPI for wine was up 1.1% in Feb vs yr ago.  Longer term beer pricing continues to outpace competitive adult bevs.  Over last 12 mos, CPI for beer was up 1.6% compared to 2.3% gain for All Items, 1.3% for wine and 0.2% gain for spirits.   

Meanwhile, IRI data shows avg case price up 57 cents, 2.4% yr-to-date thru Feb 24 off premise.  But that’s mostly driven by trade up, as even import prices up just 54 cents/case 1.7%, and craft prices rose on avg 43 cents/case, 1.1%.  Premium and subpremium segment prices up in 1% range too and FMB prices down almost a dime/case on avg.  Meanwhile AB has price hike scheduled for Apr 1.  How will pricing strategy impact beer volume, especially vis a vis spirits? 

INSIGHTS had interesting chat with AB chief sales officer Brendan Whitworth, responding to MC’s blog post about Bud Light’s soft sales, while he was at ABI leadership conference in Belgium.  Using IRI multi-outlet + convenience data thru Mar 3, Brendan painted fuller picture of recent trends, and basically said MC cherry-picked stats in Nielsen.  Brendan showed last 4 weeks thru Mar 3, compared to 12 weeks prior and no doubt Feb looked bad (affected by weather and Super Bowl timing), especially in c-stores.  Total industry volume dropped to down 1.4% for 4 weeks in IRI MULC, compared to up about 1 point in 12 weeks prior, for a 2.5-point trend change. But Brendan noted, Coors Light trend decelerated more, 3.1 points.  Down 5.4% for 4 weeks, compared to 2.3% drop 12 weeks prior (CL softer in Nielsen).  Bud Light trend also got worse, but 2.6 points worse. Down 7.8% for last 4 weeks, compared to down 5.2% for 12 weeks prior.  Brendan’s point: Coors Light dropoff steepened more than category and more than Bud Light.  So too did MC value brands, which fell 6% last 4 weeks in IRI MULC, compared to 3.3% last 12 weeks prior, for a 2.7-point trend swing.   Looking at all light brands (including Ultra, value, etc), AB gained 54 basis points of share last yr, said Brendan, 65 for last 4 weeks.  Finally, Brendan said AB “expecting” industry volume “to recover” from that four-week period.  “We’re confident that it will.”   

MillerCoors natl sales convention in Tampa showcased significant changes in direction.  Big emphasis on innovation and much more about premiumization, while also spending far less time talking about its extensive subpremium biz.  Above premium about 10% of MillerCoors volume.  Getting Coors Light “back on track” is #1 priority, new cmo Michelle St Jacques noted (many distribs responded positively to her outta gate).  And MC closed show with Miller Lite, which veep Anup Shah said is “on the right track.”  Yet MC above premium and innovation efforts got lotsa air time and well-received. 

Big new brand bet will be sparkling cocktail Cape Line, which will get $26 mil in media support, “more than any other FMB,” according to innovation veep Sofia Colucci.  Launching nationally next mo with tv campaign right away and more.  Orders already 2.5x bigger than MC expected.  Tenth & Blake grew 15% in 2018, said prexy Pete Marino, and its craft partners (plus AC Golden) grew 22%.  Imports up 4%, but Peroni up 14% with its first tv ads breaking soon.  Peroni growing rapidly in many of its largest mkts in early 2019.   Lotsa buzz too around Saint Archer Gold, a craft light lager aimed at Michelob Ultra. It’s in 4 test mkts initially, Austin, Charlotte, Indianapolis and state of Arizona, and will get media weight in those mkts equivalent to what brand would get if it were $30-mil natl launch.   

MC ceo Gavin Hattersley summed up new approach as “take more risks, move faster and connect better with consumers.”  On move faster front, he pointed to Corngate, natch. (Battle with AB over its new ad campaign got lotsa mentions early, but less of a focus as day went on.) But Gavin also noted how MC moved up launch of Cape Line by a full yr from original launch date.  And he promised to expand St Archer Gold “with speed” if it sells in test, with early reports suggesting “it surely is.” 

MC also pushing further afield into adjacencies as it will expand its Clearly Kombucha across the West, launch more wine-like entries for Crispin cider (Pearsecco), potentially get into wine and spirits, plus Molson Coors will have cannabis bevs in Canada this fall, Coors Edge (NA) might come to US and more.  MC brand showcase reception featured 95 beers. MC also promised to innovate more (and more quickly) around core.  A “first look” redesign for Miller 64 (slim can) got surprisingly hearty round of applause.  Despite a very tough 2018 (early 2019 ain’t great either from what INSIGHTS hears), MC meeting more upbeat and better received by distribs than many expected.    

Over the last couple of years there’s been a growing skepticism voiced by some researchers, public health advocates and govt officials about any health benefits of light-moderate drinking, regardless of what much of the science indicates.  Be prepared for a new round of such commentary as a new study will be presented at the Mar 17 mtg of the American College of Cardiology.  Based on 17K American adults, the study links moderate drinking (7-13 drinks/week) to increased risk for stage 1 and stage 2 hypertension.  “It’s the first study showing that both heavy and moderate consumption can increase hypertension,” the lead author said in a press release, adding: “I think this will be a turning point for clinical practice, as well as for future research, education and public health policy regarding alcohol consumption.”  The study does not claim causality, nor has it been peer-reviewed or published.  But that hasn’t prevented headlines like this from the Daily Mirror: “Just one glass of beer a day can be deadly, claims survey.”  Or this from the more-staid BBC: “One drink a day is fine, right? No, says a new study…”  A key question will be whether this new study and that growing skepticism will impact the current reconsideration of dietary guidelines in the US, not to mention the ongoing hopes that “health and wellness” concerns will help drive sales for current “innovations” in beer and beyond beer brands. 

NJ Gov Cuts Deal with Legislators to Legalize Cannabis; NY On Hold Over Oppys for Minority Licenses  Governors of NJ and NY promised legalized recreational cannabis this yr, but progress slow in both states.  (Passage in both states would open recreational sales to an additional 21+ mil 21+ yr-olds.)  In NJ, Gov Murphy and Dem leadership announced yesterday morn “they have reached a deal to legalize recreational marijuana and expunge low-level pot offenses,” Wall St Jnl and others reported.  Criminal justice issues have driven decriminalization/legalization in NJ and elsewhere as unfair enforcement of drug laws against minority communities has long been an issue.  Reported deal includes state excise tax of $42/ounce of cannabis, (some) tax revs going to cities/towns that host bizzes, a new 5-member cannabis regulatory commission and “a process that prevents some marijuana offenses from being considered for certain housing, education and occupational licensing purposes,” per WSJ. 

While Gov Murphy sez “he’s all in to get this over the goal line,” ubiquitous cannabis critic Kevin Sabet of Smart Approaches to Marijuana sez Murphy doesn’t have the votes.  Senate President Steve Sweeney said legalization “will bring marijuana out of the underground market so that it can be controlled, regulated and taxed, just as alcohol has been since the end of Prohibition.”  He may have missed recent article in Cherry Hill NJ Courier-Post quoting NJ dealers expressing confidence that “it’s going to be business as usual” even if the state legalizes.  Why?  The product they sell is not taxed, is of higher quality and greater appeal to their “loyal customers,” they deliver and “because the state has no idea what they’re doing,” as one dealer said.   

Meanwhile, in NY, “black lawmakers are blocking a push to legalize recreational marijuana,” NY Times front-paged yesterday.  Those lawmakers seek assurances that “people of color are guaranteed a share of the potentially $3 billion industry,” via job training programs and access to licenses to grow and/or sell cannabis.  New York’s legislators cited “one misstep” in the 10 states that legalized recreational use: none “ensured that minority communities would share in any economic windfall of legalization – missing out on an opportunity to redress years of having a disproportionate number of African-Americans arrested on marijuana charges.”  Gov Cuomo’s office reportedly planned to address these issues via regulation.  The lawmakers want them in legislative language before they support any bill.