Beer Marketer's Insights
Who’ll be Heineken USA’s partner on hard seltzer brand? That’s teaser issued by cmo Jonnie Cahill at brewer’s sales meeting late last week. Heineken “really close on announcing a major partnership in the seltzer space,” he said, with a “killer brand” from “the world of non-alc,” a brand that’s “already loved, already admired.” Jonnie promised to tell distribs more about this in near future . . . Another day, another cannabiz announcing its plans to launch cannabis-infused bevs in Canada now that they’ve become legal.
Even tho Amazon revs grew a whopping $13.4 bil, 24% to $70 bil in latest qtr, its profits fell 26% to $2.1 bil “as it ramped up spending on its next day delivery service,” noted Financial Times. That led to “sharp sell-off in after-hours trading,” wiping out about $80 bil in mkt cap, said FT. Down about 6% this morn pre-market opening. “It’s a big investment and it’s the right long-term decision for consumers,” averred Amazon ceo Jeff Bezos. Not everyone who follows AMZN closely is convinced next-day rates as key survival tool for shoppers. “For what? Is that necessary? Who needs Cheetos that fast?” Forrester Research’s Sucharita Kodali wondered to NY Times.
Another red-system vet is joining chmn Seth Goldman at Beyond Meat. This time it’s Stuart Kronauge, signing on as cmo this coming Jan after 18-year stint at KO culminating in her running co’s sparkling biz in N Amer. She also held svp marketing title. Honest Tea cofounder Goldman, still active in overseeing the Coke-owned organic brand, is exec chair at Beyond Meat, where he’s recruited such former KO colleagues as Chuck Muth as chief growth officer . . . Mike Spanos, who’s run PepsiCo’s Asia, Middle East & North Africa biz, is heading to Six Flags Entertainment as prexy/ceo effective Nov 18. He also takes board seat. He’s taking several roles held by Jim Reid-Anderson, who’s exiting as chmn, prexy and ceo.
Zx Ventures Focused on ‘Next Big Thing Before It Becomes a Thing,’ Not ‘Chasing Trends,’ per Earp
“Zx isn’t focused on chasing trends – we focus on consumer problems and finding new, innovation solutions,” Zx Ventures’ (A-B InBev’s innovation arm) chief Pedro Earp told Adweek. “We’re focused on finding the new big thing before it becomes a thing.” As example, Pedro pointed to Zx’s 2016 partnership with Kombrewcha, “well before hard kombuchas were even a well-defined category.” Interestingly, AB was also early investor in hard seltzer, and now ramping up fast in segment, yet it didn’t catch much of the volume wave crashing over US shores. Meanwhile, biggest “buzzword” in biz today still “disruption,” sez Pedro. “Data, technology and innovation bring us closer to consumers around the world and help us drive business growth.” Zx now has 1,500 people across globe, and “innovation drives not only our commercial strategy at A-B InBev but also our supply chain, processes for supporting our colleagues and recruiting future talent.” Recall Zx has made investments in non-alc brands like New Wave caffeinated sparkling waters, GoLive probiotics, Owl’s Brew tea-based mixers and Up Mountain Switchel, a Colonial-style drinking vinegar.
Has Support for Legalizing Cannabis Peaked or Simply Holding? NE Govs Agree on ‘Core Principles’
Support for legalizing cannabis held even at 2/3 of adults in latest Gallup Poll. That’s after rising (mostly) steadily since mid-1990s. Long-term trajectory of that support remains remarkable, jumping from just 12% in 1969, 25% in mid-90s and 46% as recently as 2010. Interestingly, latest poll showed “no meaningful differences” in support by gender, education, income, region or urban/suburban/rural residence, with 60-70% support across the board within those categories. But “opinions vary significantly” by age, political party and religiosity. For example, 81% of those age 18-29 support legalization, vs 49% of those 65+. About 3/4 of Dems, 70% of independents are pro-legalization vs just 51% of Repubs. Those who attend religious services weekly are among least likely to support legalization, just 42% in favor. While support for legalization did not increase in this poll conducted Oct 1-13 vs poll in May 2019 or 2018 poll, nor did it wane, despite very negative recent press surrounding dangers of vaping, mostly linked to illicit vaping products containing THC.
Cannabis Legalization ‘Complicated, Controversial and Consequential,’ Sez NY Gov Dem governors of NY, NJ, Penn and Conn recently co-hosted a Regional Cannabis Regulation & Vaping Summit that our sibling newsletters Insights Express and Alcohol Issues Insights attended. State officials from Mass and RI also participated. They agreed on set of “core principles” to address broad range of issues: market regulation and empowerment; public health; public safety and enforcement. That breadth, along with some of details, show just how “complicated, controversial and consequential” issue of cannabis legalization is, as NY Gov Andrew Cuomo called it. Among the myriad principles agreed upon, according to release from NY State, many will be familiar to beer wholesalers and others in alc bev biz. They include: identifying best practices for taxation, implementation and market-based controls; ensuring fair mkts; strategies to limit number of licenses; taxes high enough so as not to encourage use “beyond current rates”; prioritizing small biz oppys; implementing social justice reforms (i.e. expungements/pardons for past violations); adopting minimum purchase age of 21; prohibiting ads targeting youth; warning labels; limiting amounts that can be purchased. That doesn’t even include issues of public safety, awareness campaigns, banking and enforcement guidelines. Breadth of these concerns, some still very live issues in alcohol almost 86 years after end of Prohibition, also suggests why moves to legalize cannabis in NY and NJ stalled in 2019. Given alcohol experience, getting handful of states, even in relatively concentrated Northeast market, aboard same regulatory scheme will be challenging.
The recent NACS c-store expo in Atlanta may have been a snooze by past Monster Beverage standards, without a great deal of radical innovation on view. But MNST brass has been assuring investors there’s lots to come, and a few of these directions were teased out by Wall Streeters Nik Modi and Kaumil Gajrawala the past coupla days. Meanwhile, early signs are pointing to MNST’s distribution partner Coca-Cola’s new Coke Energy being pointed away from Monster Energy in pricing, positioning and retail placement, both in N Amer and Europe, assuaging for now the worst fears that launch represents existential threat to Monster franchise. With the brand already under attack by Bang Energy, some Monster watchers have been spooked at spectacle of a Coke challenger taking a further nibble out of base, even at it distracts Coke bottlers from focus on powerful partner brand. Tho plans are subject to chain as market responds, for now Coke Energy doesn’t seem to presage upheaval for Monster brand.
At RBC Capital, Modi anticipates that Q3 earnings report in a coupla weeks will display solid performance with existing portfolio even as it readies multitude of new entries for right time. His expectation: “Monster has multiple new product concepts that are ready to launch when the time is right, including a CBD beverage, non-alc caffeinated seltzer, and even a spiked seltzer that would go through beer distributors.” Remember, MNST ceo Rodney Sacks explicitly noted this past spring that co is eyeing a range of new categories to play in, including on alc side (BBI, Jun 7). They would offer new avenues to grow as well as hedge vs total reliance on KO, which has launched its own energy brand and seems to be easing away from Monster’s range of RTD coffees in favor of its Dunkin’, Honest and Costa efforts.
Meanwhile, Credit Suisse’s Gajrawala is intrigued by transaction we flagged last summer in which Monster paid $1.9 mil in a 50-50 partnership to purchase land in Kona, Hawaii, for purpose of producing coffee items. “We think this could be alcoholic and non-alcoholic beverages (which may explain the rapid declines in Caffé Monster and Monster Espresso). Pabst Blue Ribbon and Café Agave have recently introduced hard coffee and spiked cold brew products, respectively,” Kaumil notes. In signaling Dec transaction, we’d noted that property seems to be plantation established by Monster brand creator and board member Mark Hall that includes distillery that could be used for challenger to Kahlua and Tia Maria (BBI, Aug 13). But there are all kinds of other items that could emerge from farm in iconic coffee-growing region. We’d also reported that Coke seems to be easing Caffe Monster out of its system, so MNST might be seeking different route to retail for any innovations, even on NA side.
Gajrawala notes that MNST subtly shaking things up in other ways. Earlier this month, it acquired concentrate plant in Ireland that Coca-Cola was planning to shutter, presaging improvement in margins in int’l biz from 60% today to level potentially approaching 90%.
Coke Energy Segmented Away from Monster Third-qtr earnings report from megabottler Coca-Cola European Partners this week further confirmed that, at least in theory, Coke Energy is intended to win over new energy consumers, perhaps, as Nik sees it, “older consumers looking for a pick-me up but do not currently want to consume Monster or Red Bull ones.” By now, brand has rolled out thru CCEP’s entire territory, with early signs of success more muted lately. As CCEP brass indicated, new Cherry flavor added for US launch will migrate to Europe in full-calorie and zero-sugar forms, doubling sku count there to 4.
Meanwhile, in US, Nik’s discussions with bottlers and retailers suggest that Coke Energy will be placed in CSD aisle at Walmart and next to Red Bull in energy drink aisle at Kroger. “For more regional retailers and smaller format stores, the placement will be mixed (though the majority of regional retailers and independent c-stores provide more autonomy to the Coke bottlers to help with placement — and they are focusing on placement next to competitive energy drink brands — that are not in Monster’s portfolio.” So for Nik, “We continue to hold the view that the shelf space of Coke Energy to either come from tertiary players in the energy drink category (like a struggling Rock Star, Amp or Venom) or come out of Coca- Cola’s own space in the carbonated soft drink area of the cooler/shelf.”
Reed’s Inc, looking to put marketing muscle behind robust portfolio of innovation even as it struggles with return of production snafus, has gone back to the well again for new financing, aiming to bring in $7 mil via share offering. It’s offering 11.67 mil shares at 60 cents, with overallotment of 1.75 mil more shares. For shares that already had sunk from $3 to below $1 on news last month that co is being dogged again by out-of-stocks, the news brought further declines in trading early yesterday but shares edged back up as trading progressed.
Tinley Beverage has joined the trend of cannabis players offering non-infused versions of their products to retailers who might otherwise be staying on sidelines. The Santa Monica, Calif, co that markets non-alc cannabis tweaks on classic cocktail recipes, indicated that BevMo chain is picking up non-infused versions of its canned Moscow Mule-inspired Flying Mule, margarita-inspired Stone Daisy, gin & tonic-inspired Juniper Sky and paloma-inspired Flying Dove bevs for 150 stores in Calif, Ariz and Wash in time for holiday season. The NA brands go out under Beckett’s brand name and maintain non-cannabis-derived plant terpenes that mimic the flavor of Pineapple Jack Sativa used in cannabis-infused entries. They contain less than 2 g of sugar per serving, for 10 calories. Also in mix, it seems are 375-ml glass-bottle versions of its Beckett’s ’27 Cinnamon Whisky, Coconut Rum, Coffee Liqueur and Amaretto. Move comes as co said its cannbis-infused line, out for past 22 weeks in 50 Calif dispensaries, has done well enough to warrant Q4 production run of products with wholesale value of $1 mil, including the new NA entries, at its 20K-sq-ft plant in Long Beach, Calif. Tinley has been producing terpene- and cannabis-infused versions of Beckett’s Tonics and Beckett’s ’27 lines, which by year-end will be augmented with Tinley Juniper Sky entry, Flying Dove entry and coffee liqueur-inspired Tinley ’27 Coffee Cask entry. (The number is reference to 2727 BC date of first recorded use of medical cannabis as well as 1927 end of prohibition in Ontario, per co.)
Tanisha Robinson, former ceo of BrewDog USA and a “prolific entrepreneur,” is prepping a new CBD flavored sparkling water called W*nder, per The Columbus Dispatch. “I see CBD as something similar to where craft beer was 30 years ago in the US,” said Tanisha, who’s building up her newest biz in Columbus, Ohio. “We’re just at the very early stages, so there’s a huge opportunity to be one of the first brands on the market.” Her former bosses, BrewDog founders James Watt and Martin Dickie, are early investors and have confidence Tanisha can build a successful brand. “Tanisha did a great job building BrewDog in America, and we’re eager to see that she will do with W*nder in such an exciting space,” said Martin, per release on launch. W*nder, which is infused with vitamins and 20 mg of CBD, worked with the spirits-oriented St Louis-based Flavorman to develop its first 4 flavors: Breakfast Club, with blood orange, mint and ginger; Born to Run, with lemon and rosemary; Fast Times, with cucumber, mint and lime, and Night Moves, with blueberry and basil. W*nder plans on selling its cans (priced at $5, $20 per 4-pack) online and at local grocers, salons and spas to start.
420 Rule Besides being ceo and “chief disruption officer” at BrewDog, Tanisha previously founded Fudha, a “Columbus dining coupon” biz, and an “on-demand graphic apparel printer” co called Print Syndicate. So she knows about difficulties of funding, particularly as a minority woman. “You know, as I look to the cannabis space, there are a whole lot of already-wealthy, straight white dudes that are investing, and they’re going to make a fortune,” said Tanisha. “And actually when I say this to wealthy, straight white dudes, they’re like ‘Yes,’ so there’s no harm.” Tanisha notes too, how cannabis laws impacted urban communities and wants to address that. “The challenge for black and brown people, and I’m personally aware, is it’s really hard to raise capital,” she noted. “We plan to take 4.20% of our profits and invest in entrepreneurs from communities that have been disproportionately harmed by the prohibition of cannabis.”
A-B Distrib Olympic Eagle Gets Arbitration Loss vs Monster Erased, Along with $3 Mil Bill for Fees
Nice win for distrib in franchise rights/arbitration case. In situation discussed at Natl Beer Wholesalers Assn convention last mo, Washington state distrib Olympic Eagle went to court after it lost arbitration to Monster Beverage, after Monster terminated it and offered severance fee of $2.5 mil in 2014. Olympic Eagle argued that termination violated Wash State’s general franchise law as termination without cause. But arbitrator agreed with Monster that Olympic Eagle not protected by state’s general franchise law, and awarded Monster its atty fees. US Dist Ct upheld arbitrator and tacked on Monster’s fees for court proceedings. So, Olympic Eagle lost the arbitration and was on hook for $3 mil. But distrib just won reversal of both arbitration and US Dist Ct awards at US Appeals Ct. Now, it can either go back to square one or settle with Monster, as our sibling newsletter Insights Express reported today.
Turns out, arbitrator failed to disclose that he had ownership stake in JAMS (Judicial Arbitration and Mediation Services), which did the arbitration. That failure to disclose, “coupled with the fact that JAMS has administered 97 arbitrations for Monster over the past 5 years,” created a “reasonable impression of bias,” enough to vacate the arbitration award, Appeals Ct ruled. For same reason “we also vacate the district court’s award of post-arbitration fees to Monster.” Dissenting judge on panel warned dismissal will create slippery slope of “redone” arbitrations and “endless litigation,” but reversal stands. Commenting on decision, NBWA Alcohol Law Review blog said it provides “important guidance to help preserve the integrity of the arbitration process.” Beyond disclosure issues, a brief filed by NBWA in this case, which Appeals Ct panel found “relevant and useful,” noted the arbitrator ignored recent interpretations by Wash Sup Ct of its franchise law and applied standards from a different state.