Beer Marketer's Insights
Coffee and bevs led the way as organic category broke thru $60 bil mark for first time last year, rising 4% to $9 bil, Organic Trade Assn reported. At time of widespread economic stress, assn took organic sector's 4% growth as sign that it "can withstand short-term economic storms," per OTA ceo Tom Chapman. "Despite the fluctuation of any given moment, Americans are still investing in their personal health, and, with increasing interest, in the environment, and organic is the answer."
Coca-Cola Investing $650M in Fairlife Plant in NY State; Likely to Be Largest Dairy Processor in NE
Fairlife dairy brand would have to rank as unquestioned success of Coca-Cola's partnering and incubation process, soaring to billion-dollar status and offering soda marketer a firm foothold in fast-growing segments of low-sugar, ultrafiltered milk under Fairlife brand and protein shakes under Core Power brand. To support growth in eastern US, Fairlife will construct a 745K-sq-ft plant in Webster, NY, near Rochester, at estimated cost of $650 mil, per estimates by office of Gov Kathy Hochul and others. Groundbreaking should occur this fall, with new plant slated to go live by late 2025. "We were in tough competition with other states for what will be the largest dairy processing plant in the Northeast," exulted Hochul. "Coming from a family of dairy farmers in Ireland, I am proud to have secured this major opportunity to position our state as one of the nation's top dairy producers." At full utilization, plant should absorb 5 mil lbs of locally sourced milk per day, potentially helping state regain spot as 3d-largest milk producer, per state authorities. Decision has a certain karma about it considering that the tech underlying Fairlife's ultrafiltration approach was developed at Cornell Univ not far away in Finger Lakes region. Hochul estimates operation will create as many as 250 new jobs, a commitment that's won up to $21 mil in state assistance for project. Local authorities in Monroe County will apply for $20 mil in infrastructure funding. The gov, who hails from Buffalo, has made upstate economic development a priority, including via initiative dubbed Finger Lakes Forward. Fairlife, recall, launched in 2012, just as Cornell had refined ultrafiltration process, with KO an immediate partner; it moved to fully acquire co in 2020.
Tho expected, it still had to register as a shock for longtime Bang Energy watchers, in tone and certainly in content. "In September 2022, a jury issued a unanimous verdict finding that Vital Pharmaceuticals, Inc. (d/b/a Bang Energy) ('VPX') and former Chief Executive Officer John H. 'Jack' Owoc willfully and deliberately engaged in false advertising by claiming that the BANG energy drink contains creatine, contains 'Super Creatine,' and provides the benefits of creatine," statement begins. It continues: "The United States District Court for the Central District of California has permanently enjoined VPX and Mr. Owoc from falsely or deceptively selling, offering to sell, marketing, promoting or advertising BANG as containing creatine, as containing 'Super Creatine,' or as providing the benefits of creatine." Statement is alongside beauty shot of Bang cans in which rims employ new "Fuel your destiny" slogan rather than past flagging of super creatine ingredient. It's result, of course, of Calif judge's loss of patience with co for dawdling on coming clean on verdict in consumer- and trade-facing communications (BBI, Apr 13).
In quarterly report likely to make hearts sink among the beer houses it abandoned for Pepsi system, Celsius Holdings reported another doubling of N Amer sales, +101%, to $249 mil as its eponymous energy drink lodged firmly in #3 spot behind Red Bull and Monster. Counting still-trivial international biz, +15% to $11.4 mil, total revenues in Q1 rose 95% to $260 mil. Gross margin widened to 43.8% from 40.4% a year earlier as can squeeze abated and co didn't have to rely as much on packs sourced overseas. Partly offsetting that was "additional inventory writeoffs and freight expense as Celsius continues to integrate into the PepsiCo distribution system and build a best-in-class supply chain across the United States," co stated. As reported, that transition has gone very smoothly, by Celsius' account, tho exit from beer houses was sloppier than some might have expected given co's earlier rep as reliable partner (BBI, Jan 26). Operating income quadrupled, +444%, to $44.91 mil. Its category share doubled over past year to 7.5%, comfortably in #3 spot ahead of plunging Bang, as measured by SPINS IRI Total Mulo+C in 4 wks ended Mar 26, as cited by CELH. That data shows brand to have boosted its ACV over past year to 95.4% from 69.5% - testimony, ceo John Fieldly enthused, to embrace brand has received from Pepsi. Plotting transition, he told investors on call yesterday afternoon, execs had anticipated it would take 12-18 months to reach that degree of availability. Coupled with stronger financial performance, move to blue system has been unquestioned success, he argued. "We're gaining market share at the fastest pace in company history while at same time driving the highest quarterly EBITDA margin of 18%, demonstrating the leverage in our operating model," he said.
Stay up-to-date on the latest trends and forces shaping the fast-changing US beer biz at the Beer INSIGHTS Spring Conference, May 17-18 at the Four Seasons in Chicago. You'll hear informative and engaging "fireside chats," thought-provoking presentations, informative panel discussions and more. You'll also get unparalleled opportunities for Q&A and networking. View the agenda here and register today!
Consumer price index for beer still running ahead of inflation with a 5.9% increase in Apr vs yr ago, per Bureau of Labor Statistics. That's down from +6.1% in Mar, +7% in Feb and +9% in Jan. CPI for All Items up 4.9% in Apr vs yr ago following increases of 5% in Mar, 6% in Apr and 6.4% in Jan. CPI for distilled spirits rose 1.5% while wine prices up 2.5% in Apr vs yr ago. YTD thru Apr: CPI for beer up 7% vs 5.6% rise in inflation. CPI for spirits and wine up 2.1% and 2.8% respectively YTD.
Longtime ABI-watcher and HSBC managing director Carlos Laboy put out a blistering report this morn, downgrading ABI stock to hold. "The lead-up to this Bud Light crisis and the handling of it renews questions about whether AB can build a brand culture," said Carlos. "It is unclear how ABI will reverse eroding US volume and brand relevance, and fix distributors' trust, without leadership changes," he posits. More clarity on fixing volume as well as fixing distributors' trust should be front-and-center in its meeting this week with distribs in St Lou.
"I only stepped in because the A-B guy bailed out," quipped Boston Beer chairman Jim Koch when Beverage Marketing's Michael Bellas introduced him at last week's Beverage Forum in Chicago. (Jim was last-minute addition after Anheuser-Busch chief commercial officer Kyle Norrington couldn't make it for undisclosed reasons, at time Bud Light marketing fiasco continued to roil brewer.) Speaking about spirits-based RTDs, flavored malt bevs (FMBs) and hard seltzer, which Bev Mktg groups as adult alternative beverages (AABs), Jim IDed their "complete taste plasticity" as key characteristic driving growth. "You can make things taste however you want them to," said Jim, bevs that are "designed to be pleasing" instead of an acquired taste. And "liquor figured it out first," he added, specifically vodka. "I believe about 80% of liquor is consumed in a mixed drink," almost always with "sugar, juices, spices." It's "easy to innovate in the space," he said, while nursing a Sam Adams beer as always. (A version of this article appeared in yesterday's issue of INSIGHTS Express.)
Zevia PBC got off to strong start in 2023 even as it embarked on new strategic phase under ceo Amy Taylor with sweeping brand refresh, push toward single cans served cold and tilt of marketing spend from "new year, new you" early in year to peak summer selling season. ZVIA team also continues to study move to DSD but nothing to report yet, Amy told investors on call this morning.
Its production finally starting to catch up with demand, St Louis-based BellRing Brands ushered in new calendar year that should keep building on strength of its core Premier Protein shakes even as its gym-rat-oriented Dymatize powder brand makes surprising transition to food, drug & mass channels. Also offering a lift were powdered version of Premier Protein, which more than doubled, +123%, thanks to first national marketing campaign. With that momentum behind it, BRBR already is in talks with pair of new protein shake copackers about further capacity additions, prexy/ceo Darcy Davenport indicated on call this morning. "Our shake capacity expansions remain on track, enabling significant future growth," she said. "Our momentum in the first half gives us greater confidence to deliver our second half expectations and drives our decision to raise our full-year outlook," to $1.61-1.66 bil sales range.