Total seltzer biz continues to crush it in available scan data, hitting $1.185 bil in sale4s yr-to-date thru Nov 3 in IRI multi-outlet + convenience.  That’s up $832 mil, 236%.  No wonder speakers and attendees at Beer Insights Seminar and throughout the biz excited about potential of this segment.  Hard seltzers climbed to 3.74 share of $$ yr-to-date, but at 5.32 for last 12 weeks.  Gained 2.6 share YTD and a whopping 3.7 share for 12 weeks.  Still at 5 share for last 4 weeks, well into fall season. 

White Claw Family Up a Half Bil $$  White Claw family of brands continues to dominate seltzer sales.  Got $660 mil in sales.  Up $502 mil, 317%.  And captured 56 share of segment $$ yr-to-date.  And that’s still climbing. Over 58 for last 12 weeks and over 60 share for 4 weeks.  White Claw up a whopping 400% for 4 weeks.  Meanwhile, Truly family got $308 mil of sales, up $196 mil, 176%.  It got 26 share of seltzer $$ yr-to-date, but just 23 share last 4 weeks.  All the rest of seltzers only a little over $200 mil.  AB’s various seltzer platforms doubled and got around $88 mil in sales, 8% of segment.  Smirnoff family almost doubled to about $47 mil, dropped to 4 share.  And Henry’s family also doubled but under 2 share of $$. 

Every speaker at INSIGHTS 26^th Annual Seminar yesterday at least touched on seltzermania.  Everyone agreed furiously growing segment is here to stay, only question seems to be how high is up and no one knows the answer.  On Saturday, AB InBev’s North American ceo Michel Doukeris helped tee up discussion by telling CNBC about AB’s intentions to boost mktg spend behind innovation in 2020, highlighting: “Just behind seltzers we will be investing more than $100 million.  We really want to make this category fly.”  At the seminar, AB cmo Marcel Marcondes gave “kudos” to Mike’s and Boston for addressing consumer needs via seltzer, but he also vowed that AB will “catch up” in segment via its portfolio play and promised “more to come” and “new news” in beyond beer segment next yr.

Supplier spend commitments to satisfy seltzer appetite in US for next year are getting as explosive as category itself. On top of AB’s $100 mil, Mark Anthony ceo Anthony von Mandl said at seminar that the $250 mil he originally planned to spend next yr on a pair of new production plants already blossomed to $385 mil.  Plus, he’s already looking at 2 additional sites for further expansion down the road.  Prexy Phil Rosse said that 10 mil cases of White Claw didn’t “go through the till” due to out of stocks this summer and shipments shortfall more like 20 mil cases.  Mike’s looks to hit 80 mil+ cases in current fiscal yr, despite that shortfall.  Can it double next year?  Yes we can, sez Phil.  As for seltzer’s ceiling, “everybody’s been wrong” so far, Phil noted, and “under-called” it.  In broader view, traditional beer/flavored beer split, now approx 72%-28% in favor of lagers, could go to 50-50, Mike’s believes.  While Mike’s and Boston believe seltzer could double again next yr (from 75-80 mil cases in 2019), Boston Beer chairman Jim Koch repeated his point that in addition, there are approx 300 mil cases of vodka-soda being sold and “we can compete for that with seltzers, with stuff that we can make at a brewery.”   Holy unlimited potential Batman! 

Then too, chunk of the incremental $150 mil Molson Coors plans to plow into its brands next yr will be for Vizzy seltzer, which ceo Gavin Hattersley promised has a point of differentiation that will make it “stand out”; Vizzy will get $30 mil of support.  Over at Constellation, cmo Jim Sabia included Corona Seltzer among ways to “utilize the power of the mother brand” and adopt Corona Extra’s “refreshing, carefree, easy going, laid back” connections.  “We’re going to give it a shot,” said Jim.  Separately, Constellation execs have talked about a $40-50 mil spend on Corona Seltzer.  (So, top 3 alone talking about $170 mil spend on seltzers.)  Boston’s talking about a $65-75 mil boost in ad, promo and selling spend next yr; Truly will no doubt get significant portion of that. 

Doubling is “Doable”  Two distribs, who used to be big brewery execs, Ed McBrien (ex-Molson Coors) at Manhattan in NY and Evan Athanas (ex-AB) at Chesapeake in MD and MS, just as enthusiastic about seltzer oppy as suppliers.  “I wonder if we’re on the cusp of when Miller Lite was introduced,” said Ed, picking up theme that seltzer could be the next light beer, since “taste great, less filling” was “code for ‘you can drink a lot of this stuff,’” and that drove category growth for yrs.  Doubling is “doable” next yr, said Ed.  “Now’s the time to lean in.”  Evan sees seltzer gaining shelf space from domestic lights in chains, probably craft in indie stores; he expects to see “full doors” of seltzers.  Then too, AB, Molson Coors and Constellation jumping in so aggressively helps “convince retailers that this is a real thing, this is a giant segment” and deserves more attention, space on the floor, bigger ad blocks, etc, said Ed. Ditto from Evan, who said big supplier brands will bring in more consumers, since current penetration so low.  “It’s nothing but good news for seltzer,” Ed concluded.   

New Belgium, one of the top craft brewers and one of the long-term icons of the craft beer movement, sold to Lion’s Little World Beverages, wholly-owned Australasian arm of Kirin, in deal announced today, for undisclosed sum.  Indeed, New Belgium is the largest-volume craft brewer to sell so far, at 850,000 bbls last year.  (When Lagunitas sold it was a little less than 800K bbls).   This transaction came just 1 week after AB bought the rest of CBA it didn’t already own for $221 mil.  CBA at 719K bbls.   So in 1 week, 1.57 mil bbls of craft traded.  Both to global brewing giants.  Wow!  Add about 300K bbls of Dogfish Head and other deals and you get over 2 mil bbls of craft deals announced so far in 2019.  Already more than 1.8+ mil bbls in transactions announced in 2015.  And year ain’t over yet.  The times they keep a changin’.

LLWB Makes Its Mark Quickly; Other Kirin Assets in US    Lion’s Little World Beverages wanted to make a big splash in US mkt and it certainly has!  LLWB “looking to put a stake in the ground in the US,” managing director Matt Tapper told INSIGHTS, and New Belgium is a “great foundation stone” as it seeks to “build a great craft beverage business.”  Lion clearly planning other transactions, and given the name, those are just as clearly not only beer, tho “our focus is on craft beer,” Matt emphasized.  Recall parent co Kirin also took a 24.9% stake in Brooklyn, which subsequently took minority stakes in 21^st Amendment and Funkwerks (perhaps more).  So, will New Belgium, Brooklyn etc all get rolled up into one big happy family? “At the moment, these are stand-alone businesses,” said Matt, tho he did acknowledge common Kirin ownership and “over time” LLWB platform will evolve in US.

ESOP Gets $190 Mil; Total Purchase Price More Deal expected to close by end of 2019, pending approvals by regulators and New Belgium’s Employee Stock Ownership Plan.  Total purchase price not disclosed, but NBB letter posted on its website does say that “over the life of our ESOP, including this transaction, the total amount paid to current and former employees will be nearly $190 million.”  That $190 mil “is not the purchase price” but “represents the proceeds from the transaction that will be allocated to ESOP participants,” said Lion spokesperson. But Lion likely assumes remaining debt on over-$150 mil Asheville brewery.  And reportedly paid for other considerations as well. Total purchase price may have been as much as 2x that.    

NBB’s Up and Down Sales; “Cash Demands” New Belgium had a handful of up-and-down roller coaster yrs since finalizing its 100% ESOP in late 2012. It shipped 765K bbls in 2012, skyrocketed to 945K bbls in 2014, dipped to 914K bbls in 2015 and rose again to peak of 958K bbls in 2016, before declining low-double-digits in 2018 to 850K bbls. This year NBB’s growing again, ceo Steve Fechheimer told INSIGHTS.  At NBB “we’ve needed to balance the cash demands of our ESOP and selling shareholders, with the operational need for more capacity (hence the brewery in Asheville) and the need to grow our brand by reaching more beer drinkers with our brand message,” NBB co-founder Kim Jordan wrote. “These are a lot of competing priorities and it has been difficult to do all of them as well as we’d like.”

Mgt Stays On; “Things Evolve,” Sez Kim; “We Jumped at the Opportunity”  New Belgium’s Steve will continue as ceo and mgt team “remaining in place,” the cos said.  Kim Jordan “will remain deeply involved with the company,” said release, “and also play a key advisory role in collaborating alongside other leading founders with the Lion Little World Beverages network, ensuring the core tenets of craft beverages are aligned with the strategic vision” of LLWB in US and worldwide.  (That sounded very similar to what craft founders have said in virtually all deals we’ve covered.)  Since Kim for a long time was one of most charismatic, vocal proponents of the potential of the indie craft movement, INSIGHTS asked for her thoughts at this moment.  “Things evolve,” she simply said, praising her and NBB’s “ability to work with” LLWB, and alignment on core values like remaining a B Corp and Lion’s pledge to get to carbon neutrality in Australia and New Zealand in 2020.  This deal better than “other options,” she said, tho “there wasn’t a process,” added Steve, i.e. a deal-making process.  And “joining Little World Beverages to anchor a US Craft Beer platform is so congruent with all the things we’ve committed ourselves to at New Belgium that we jumped at the opportunity to offer this to shareholders,” added Kim.

Lion’s Little World Mapped Out Lion’s Little World Bevs is already a far flung, multifaceted bev co across multiple geographies.  It includes 4 units with 4000 employees “across Australia, New Zealand, the UK and the US.”  New Belgium will now anchor Lion’s US craft beer unit, but earlier this year, its Little Creatures opened a US microbrewery in San Francisco.  LLWB also has a US fine wine unit, DVWP (Distinguished Vintners Wine Partners) which includes vintners like Argyle, Markham, Textbook, etc.  The 3d unit is UK-based, including recent acquisitions like Fourpure and Magic Rock.  And the 4^th arm of LLWB is based in Singapore, including a couple of other Little Creatures outposts in Hong Kong and Singapore, among other assets. 

Molson Coors took notable step towards embodying its upcoming name change to Molson Coors Beverage Co (Jan 1), reflecting its intent to play in bigger way in NAs.  The co hopes to make up for lost time by aligning itself with decade-old incubation firm LA Libations.  Molson Coors signed multi-year partnership with LA Libations that includes “significant non-controlling equity investment” by TAP.  The investment gives Molson Coors a stake in new items launched by LA Libations and exclusive access to “brand creation, brand building and consulting/insights services” from Libations, which over the years has been involved in incubation of successful brands like Zico Coconut Water and Body Armor, and boasts category captain role at several major retail chains.  MC gets option to purchase in full any brands created by Libations or to ride any upside via its stake in Libations’ ownership of brand.  MC also places 2 execs on board of LA Libations, which had been seeking strategic partner after longtime ally Coca-Cola began to distance itself. (This article appeared in expanded form in our Beverage Business INSIGHTS).  

Deal allows Molson Coors to quickly install bev accelerator without need to build in its own infrastructure, said emerging growth prexy Pete Marino in discussion which included LA Libations co-founder Danny Stepper on Fri.  LA Libations was appealing partner because it plays “on leading and bleeding edge” and is extremely well connected in entrepreneurial and retail circles, said Pete.  Pete has known Danny for 8 years.  In early years alliance will focus on NAs in US market, but it’s possible alliance could expand overseas and perhaps eventually include alcoholic brands, Pete told us.

Partners’ efforts, Danny said in Fri discussion, would be combo of leading-edge categories with heavy consumer education burden, as well as legacy categories that can be disrupted with natural ingredients and other upgrades, as Body Armor has done with sports drinks and Libations-created Arriba brand has done with cheladas.  Both Pete and Danny said not every NA brand will prove a logical fit with MC beer network in brand’s early days, so they would adopt flexible approach in getting items out to retail and deciding whether brand should ultimately be owned and distributed by MC. 

“This is probably the first time that LA Libations has been properly capitalized,” Danny exulted on Fri, hailing “the alignment, the fit, the people.”  He added that agility and purpose he’s seen in new partner have been “incredibly refreshing.”  Molson Coors “dedicated to putting our best foot forward,” Pete told INSIGHTS. 

Those who don’t follow day-to-day deals in global alc bev biz could be forgiven for being confused by this release from IWSR: “AB InBev recently announced they were launching Mike’s Hard Sparkling Water in the UK.”   Recall, ABI purchased Canadian rights to Mike’s Hard Lemonade and other brands in 2015 for approx $350 mil.  “Under the agreement with the Mark Anthony Group,” Globe & Mail reported at the time, “Labatt’s parent company also gains the international trademark rights – which exclude the US.”  (Also, ABI sells Corona everywhere in world, except US.)  Mike’s has its hands full making enough White Claw to fill US orders, but gotta figure Mike’s hard seltzers will someday compete with Mike’s Hard Sparkling Water in some mkts.  

White Claw franchise hit $625 mil in Nielsen all outlet yr-to-date thru Nov 2.  That’s up $469 mil, way more than top gainers of last several yrs in US beer, even tho they continue strong growth.  Its growth 1.5x greater than Modelo Especial franchise, which grew $313 mil, 19% ($276 mil from Modelo Especial, the rest Cheladas and Negra).  And it’s 1.8x as much growth as Michelob Ultra, which is up $257 mil, 16% YTD.  Ultra also getting great growth from Pure Gold, but it’s not in this data set.  Pure Gold and Lime Cactus up $88 mil in IRI thru Oct 6.  But White Claw franchise still likely outgains all variants combined.   White Claw franchise jumped 1.5 share of $$ to 2 YTD, while Truly franchise jumped 0.6 share of $$ to 1.  But for 4 wks, White Claw franchise at 2.9 share, Truly at 1.2.

While Consumer Edge’s Brett Cooper looked at ways to measure Molson Coors “potential for success” going forward (see Nov 11 Express), Credit Suisse’s Kaumil Gajrawala found some notable nuggets in TAP’s Q3 govt filing.  Most highlight headwinds vs potential tailwinds.  Importantly, Coors Light and Molson Coors’ other big brands need boost.  Coors Light global volume -4.1% in Q3 and all-in global brands -2.2%.  That’s even while Miller Lite +0.7%.  Kaumil’s take: “transitioning away from premium light will be an uphill battle, especially at 65% of US volume.”  (Editor’s Note: it’s more like 55%.)  At same time, despite strong Peroni trends, “deconsolidation” of Grolsch in UK and Ireland highlights that Molson Coors “has limited imports exposure” in US, even as it ups above premium focus.  (Sol still up 2.5% YTD in Nielsen scans thru Nov 2, but tumbled 29% in most recent 4 wks.)   

Meanwhile, TAP’s Canada biz especially soft.  It took $668-mil goodwill impairment charge and “Coors Light distribution agreement is considered at risk of future impairment.”  With Canada volume down for 3 yrs running and EBIT margin falling from 20% to 11% in 5 yrs, “expect further de-emphasis once combined with US unit.”   On other hand signal that Euro biz will run as “standalone” with its own teams, suggests “a company that is perhaps willing to do something more strategic with the asset, (per EU brewer Carlsberg management comments).”  What’s that about?  On Carlsberg’s Q3 call, a Barclays analyst said “we’ve heard that Molson Coors is considering a strategic review of their businesses in Europe” and asked ceo to comment.  CEO Cees ’t Hart’s reply: “With regard to Molson Coors, we can only share with you that we heard the same, but obviously, we’re not commenting on that.”  Lastly, while TAP’s Canadian cannabis partner plans to intro edibles there next year, Kaumil “expects no meaningful impact from cannabis beverages in ’20 – the industry remains in flux from inventory rationalization, limited retail distribution points.”

Canopy Growth down another 15% at presstime, to its “lowest level in 2 years,” wrote Bloomberg, following another disappointing earnings release.  Stock reached a peak of $52 earlier this yr, but now down to $16.  Stock market capitalization down to $5 bil (recall Constellation Brands invested over $4 bil to get near 40% ownership).   What drove the drop?  Several misses of analyst estimates on revenue and earnings. Today Canopy Growth reported an EBITDA loss in the quarter of $155.7 mil Canadian, much larger than analysts’ consensus estimate of a $96 mil loss.  MKM Partners analyst Bill Kirk called the magnitude of the loss “astounding.”  

Here’s the latest step in direction of brewers’ promoting no-alc options: a new ad from Budweiser, part of its “Drink Wiser” responsible drinking campaign.  Featuring tv’s “Black-ish” star Anthony Anderson and LA Laker Danny Green, the ad encourages viewers to “hydrate between Buds,” with water, following similar ad last yr.  (This is probably not the place to remind people that 90-95% of beer is water.)  The ad, and AB InBev’s overall corporate social responsibility activities “are not the kind of initiative for the short term where we need to measure ROI, where we are concerned with tomorrow’s impact,” AB ceo Michel Doukeris told CNBC in Sep.  Rather, “we are really doing something that we hope is going to last” and reflects notion that “we are brewers for centuries” with long-term perspective.  New ad will run on tv during NBA games, online and in arenas, sez AB.  It follows Halloween-themed Drink Wiser ad that, per CNBC, “showed mugshots of what appeared to be people arrested in Halloween costumes with the tagline ‘Don’t Let Halloween haunt you forever. Drink Wiser.’”   Along with ad, AB’s Drink Wiser Challenge will give fans oppy to get NBA tickets for pledging to Hydrate Between Buds.  Drink Wiser message will also be included on Bud pkgng, AB sez.

Meanwhile, as consumers flock to hard seltzer, and liquor $$ sales continue to grow at a mid-single digit rates, the media and alc-bev marketers, especially brewers, continue to pursue non-alc and/or low-alc options.  Recall, AB InBev set goal of 20% of its global beer volume being low- or no-alc by 2025.  Heineken sez it will spend $100 mil in US to support Heineken 0.0 in 2019-2020 alone.  That’s as no-alc beer hasn’t cracked 0.5 share of US beer in over a decade.  Meanwhile, media continues to celebrate “sober curious” millennials, spreading availability of mocktails and alcohol-free bars.  ABC News put all this together today in a story “inside the growing trend of low- and no-alcohol beverages.”  Turns out “moderation isn’t just a fad; it’s a trend,” ABC news concludes, based on comments like this from consultant Devon Bergman of consumer analytics co Social Standards: “As health and wellness are on the mind of the consumer, more and more things that are attached to it, such as low-alcohol and no-alcohol products and consumption, tend to rise with it.”  Devon points to increase in social media “discussions” of low- and no-alcohol drinking and dropoff in “conversations” about casual/heavy drinking.  ABC points to Heineken 0.0 and ABI’s Hoegaarden no-alc beers, an O’Doul’s refresh and the new AB ad.  The owner of an alc-free bar in Brooklyn, NY gets the last word: “we’ve hit a tipping point” where enough consumers are reviewing their drinking habits, he sez, plus some new language (i.e. sober curious), “but I think what’s really happening more than anything is that companies and alcohol brands have started trying to cater to that market.”

Natty Light Seltzer seemingly got off to a decent start, boosting AB’s $$ share of seltzer segment in recent weeks back close to 10.  But there must be considerably more product out there than is actually selling through.  Why?   Nation’s largest retailer Walmart already selling Natty Light Seltzer at bargain basement price.  Source sent pic of brand from Florida, just intro’d around Labor Day, on sale $6.50 a 12-pack, down from $13.48 “everyday low price.”