Craft among just 3 high-end segments that gained share of total beer volume in Nielsen all-outlet + convenience scan data for 4 wks thru Jun 6. Growing volume 17.7%, craft gained 0.1 share of beer cases to 7.5. Superpremium segment +0.2 and FMBs +0.035 share for 4 wks. But that's a bit ironic and modestly misleading as FMB sub-segment hard seltzer gettin' all the dollar gains. Literally. Hard seltzer gained 6.5 share of beer $$ to 9.6 for 4 wks. Seltzer sales some 3.7X what they were a yr ago. No other segment (including total FMBs) gained share of beer $$ for 4 wks. And with craft off a quarter-share in last mo or so to 11.1, hard seltzer's gettin' mighty close to passing it in off-premise scans. Wow. Za.

Magic Hat fell steadily and rapidly in recent yrs, from 180K bbls in 2014 to under 50K bbls in 2019. But even if inevitable, it's still wild to see FIFCO's news late this afternoon. FIFCO has "reached a definitive agreement with local craft brewery, Zero Gravity, to sell brewing equipment and transfer its Magic Hat brewery lease." Deal expected to close July 1. Then Magic Hat, once one of nation's hottest craft brewers, will shift all of its production to FIFCO's brewery in Rochester. FIFCO already makes select packages of #9 in Rochester and has been for years. Magic Hat started by serial entrepreneur Alan Newman in 1994. But there is a silver lining. And that's the rise of Zero Gravity. Zero Gravity is fast-growing VT-based regional brewer that grew from 15K bbls to 20K bbls in 2019, according to Brewers Assn stats. Zero Gravity "is excited to be taking over a facility where so much of Burlington's craft beer history was created," said CEO Matt Wilson. Magic Hat facility "right down the road" from Zero Gravity's existing facility, which "will allow us to increase our efficiency" and "to expand our production without sacrificing the space needed for the creative development and innovation that our brewery is known for." As for FIFCO, CEO Rich Andrews said: "With the capabilities and capacity of our new brewery and the evolution of Magic Hat, moving the production to Rochester provided the best long term opportunity."

About 1/3 (30%) of consumers in Calif, NY, FL and TX have been out to restaurants/bars in the last two weeks, latest Nielsen CGA survey of 1,600 consumers (conducted from Jun 5-7) shows, as Nielsen CGA's Matt Crompton and Mitch Stefani shared during webinar last week (and our sibling pub INSIGHTS Express reported). That's still well below typical 82% of total US consumers that visited bars and restaurants at least once every 2 wks prior to COVID-19, so "there is still much more capacity to fill," Nielsen notes. At same time, those who are going out are doing so multiple times per week, including 42% that say they visited 3 times or more in the last 2 wks, 38% who visited twice and just 20% that visited once. And while NY and Calif are slower to reopen, FL and TX saw "huge jumps" in eating occasions, from 21% to 35% of Floridians going out at least once a week and from 22% to 40% of Texans going out once per week. Plus, 41-42% of FL and TX consumers plan to eat/drink out in the next two weeks, survey found. Hope is that in "few weeks' time," CA and NY will mirror jumps in the south as well, said Matt.

Here's a cautionary tale shared by Bell's Brewery as on-premise accounts are reopening across the country. One of Bell's sales reps was out doing a quality check at one account and "was inadvertently served line cleaner," VP of Sales & Mktg Matt Moberly shared with CBN. "Ultimately our rep was hospitalized overnight and I'm happy to say that they were discharged and expected to make a full recovery," he added. "While the line cleaner did not properly flush the lines after cleaning, by stroke of luck, the cleaner also had diluted their caustic solution to 20% of its prescribed strength." But "it's a very scary situation and could have been far worse," said Matt, who shared this story as a cautionary reminder for the rest of the industry. "This risk is always present," but "it stands to reason that the risk is elevated given the increasing number of accounts reopening."

As NY brewers in five regions of the state began reopening their taprooms June 12, they're also seeking an extension to the various privileges provided during the first leg of COVID-19, exec director of NY Brewers Assn Paul Leone and Captain Lawrence founder Scott Vaccaro shared with USA Today's Rebecca King in an interview posted on Rochester Democrat & Chronicle's separate article on NY state brewers during the pandemic. (USA Today is parent co of Rochester Democrat & Chronicle.) Recall, NY was one of the few states granted the ability to ship beer directly to customers, along with curbside pickup and to-go sales thruout the pandemic. But temporary privileges are set to expire on Jun 27, Paul shared. So NYSBA is "really pushing hard to say this needs to go on until this is over" and brewers can host customers at 100% capacity. In most of NY, brewers are now allowed to fill 50% of their total indoor capacity and outdoor capacity is limited to the number of tables that can be appropriately distanced at least 6-ft away from each other. But those brewers are "still going to need shipping and the curbside and home deliveries," since "not everybody's going to be ready to go out," and 50% on-site capacity doesn't make up for those privileges, sez Paul. Plus, some accounts "may be lost" and tap handles may be limited, only adding to what was "already uber competitive" landscape. Local breweries "need this," and won't "be able to survive well" without it, Paul argues.

As Craft Brew Alliance/ABI looks to spin off Kona brand rights and brewery assets in HI to help expedite DoJ review process, Kona's long-running new brewery project is officially slated to be "fully online" by this September, Kona Brewing's general manager Billy Smith told West Hawaii Today. "We should be starting to do some test brews in late July, early August," then "hopefully in August, we'll actually be packaging" before going "fully online" in Sep, he shared. Tho construction on the administrative offices at the brewery expected to still be in the works post-summer. Recall, this is a 30K sq-ft, 100K bbls/yr production brewery, about 8X greater capacity than the old brewery, which was only able to supply "around 13% of the local demand," paper noted. Now it should be able to supply "around 80%, with only bottled beer still needing to be shipped from the mainland." Suggests Kona closer to 125K bbls in HI prior to COVID, over 12 share of total HI beer volume. And also suggests new entity PV Brewing would still need to rely on ABI production of Kona bottles if the spinoff deal in HI is approved.

Mass Bay Brewing, parent co of Harpoon/UFO series, Arctic Summer hard seltzer, Clown Shoes beer and City Roots cider, has "disbanded" its distribution company and sold distribution rights to Boston-based Burke Distributing, Brewbound first reported. Burke will begin delivering Harpoon & Mass Bay Brewing brands on June 22, it announced on its website home page. Gotta note, Burke Dist is seemingly looking to make up for lost non-alc bev sales after Red Bull terminated last yr and Bang subsequently terminated em more recently following Pepsi distribution agreement. Burke decided to exit non-alc segment altogether, leaving slew of brands like 3D Energy, Brew Dr Kombucha, IBC sodas, Voss Water, Virgil's sodas and Yerbae yerba mate line seemingly lookin' for a new home in Boston, as our sibling pub Beverage Business Insights first reported (May 28 issue).

You say yes, DoJ says no, you agree to sell off Kona’s home mkt brand rights/assets, now deal’s a go go go? Craft Brew Alliance will sell Kona’s brand rights and brewing assets in Hawaii, where Kona has ~11 share of state sales, in order to potentially get its deal done with ABI. “To expedite the regulatory review process and alleviate potential regulatory concerns,” AB and CBA “agreed to the purchase of CBA’s Kona Brewing operations in Hawaii” by new entity PV Brewing Partners, CBA announced late yesterday. PV seemingly swooping in for cheap price too, with an aggregate purchase price of just $16 mil in cash, contingent upon approval of ABI/CBA deal, according to 8-K filing (more details below). This new entity, PV Brewing, happens to be co formed by ex-AB prexy Dave Peacock along with VantEdge Partners investment firm, which also owns part of the Kansas City Royals and 260 quick-serve restaurants including Dunkin’, Taco Bell and more (Peacock & VantEdge = PV). (This is an expanded version of article that appeared in INSIGHTS Express.)

Why the Selloff? Kona an 11 Share in HI; AB at 40 Share; Deal Expected to Close By Year End DoJ never publicly commented on need to revise deal, tho parties clearly knew HI was a problem. “As we went through with the DoJ,” cos “came to the conclusion” that this was in “best interest to get things facilitated,” CBA CEO Andy Thomas told CBN. Indeed, Kona still has ~11 share of HI beer mkt, Andy confirmed, suggesting it sold over 110K bbls in HI out of 1.014 mil bbls of total beer shipped in HI last year. That’s about same size as Constellation and HUSA in state. And AB still over 40 share there, as we’ve reported (see Feb 28 issue). Kona biz in HI nearly 1/4 of Kona’s total 475K bbls shipped in 2019 and about 15% of total CBA volume. But hey, it could still be worse – in 2008, DoJ required ABI to divest Labatt USA’s entire US biz because proposed sale “would likely have led to higher prices for beer in Buffalo, Rochester and Syracuse, NY metropolitan areas,” where Labatt had big shares at the time. DoJ still needs to approve this revised proposition before anything can move forward. Andy and co still expect deal will get done by end of 2020 and expressed confidence this will help “expedite” the process. Recall, deal with AB struck in Nov 2019, after protracted mating dance. Deal with PV will close on Aug 3, 2020 if ABI/CBA merger is approved prior to that date, per 8-K filing.

PV to Pay Just $5 Mil Upfront; New HI Brewery A Lost Cost; “Autonomy” to Operate/Innovate Locally At face value, CBA appears to be selling off HI assets for less to get deal done. Contingent upon approval of the CBA/ABI deal, PV Brewing will then pay aggregate purchase price of $16 mil in cash for licensing rights to Kona brand and intellectual property in HI, Kona’s new 100K-bbl brewery (still under construction) and two brewpubs, plus “certain transitional services” and distrib agreement, per 8-K filing. Just $5 mil “will be payable” to CBA at the onset and the remaining $11 mil will be paid upon CBA’s “achievement of certain construction and production milestones with respect to the new brewery.” There’s also an option for PV “to defer up to $6 million of such payment for a year following the Kona closing, subject to the terms and agreements set forth by the purchase agreement.” Recall, CBA has been in the process of building its 100K bbls/yr brewery in HI for yrs, spending $10s of mils in the process. Suggests that those construction costs are beyond lost. Gotta figure COVID-19 impact on tourism and overall biz in HI this year likely had an impact on purchase price as well.

Then too, Kona is already mostly brewed in CBA’s OR and NH breweries plus AB’s Fort Collins brewery, as well as small amount of volume licensed out to AmBev for Brazil production. Until construction on Kona’s new brewery site is completed, ABI will have to produce a fair amount of volume for HI. But goal is to ensure that “they [PV] have the walls to operate autonomously” from ABI in HI, said Andy. “The parties are aligned in having harmony in the way the brand is developed,” but PV will locally have “autonomy” to “maximize their opportunities” and “innovate” with “fair amount of operating independence,” Andy explained. It’s “not a foreign concept,” in our industry especially, to have ownership of a brand locally that’s separate from the brand owner, he noted. “In principal, we agree that the overall health” of the brand “will have to be…a concerted effort.” CBA is in “very final stages” of construction at HI brewery, Andy added, and once that’s done, “absolutely, they have the capacity” to serve HI mkt. Tho “Hawaii will always be important to the brand” and “the ethos of the brand.”

Met with “Diverse Group” of Interested Parties CBA/AB met with “very diverse group” of potential suitors for its HI biz that ranged from “financially oriented suitors” to strategic brewers “both US-based and international,” Andy shared. Even amid the pandemic, cos were able to “run the gamut” in review process and “cast a pretty wide net.” But co liked Dave and VantEdge, as “Dave is a known entity to a lot of us,” and “given his experience and financial backing” from VantEdge, co believes this to be “a really good solution,” said Andy.

ABI Struck Two Other Deals Yesterday; Super Coffee and The Wine Group Interestingly, revised deal that would spin off Kona in HI announced at the same time as two other ABI deals last night. First, ABI took minority stake in fast growing RTD coffee brand, Super Coffee, thru its Zx Ventures arm, looking to take brand national thru AB distribution system, as our sibling pub Beverage Business Insights first reported. ABI also “expanding” its partnership with The Wine Group, America’s second largest wine supplier, to “grow key brands in the canned wine and FMB RTD segments.” Both of these partnerships show ABI’s emphasis on building beyond beer capabilities at the same time as it’s struggling to get latest beer deal signed, sealed and delivered.

CBA Up 7% YTD Thru May; Kona Seltzer Outperforming in Test Mkts; Likely Still Soft w/o Draft Meanwhile, Craft Brew Alliance notably improved in off-premise scan data this yr since COVID hit; $$ grew 7% YTD thru May vs down 2.5% thru Mar 8 in IRI multi-outlet + convenience data shared by Bump Williams Consulting. That includes 20+% growth rates in recent weeks. Movement toward larger packs, “migration toward” established brands and a bit of innovation are collectively driving growth. The one “new thing” Andy highlighted was Kona Seltzer in test mkts outside of HI. Currently available in CA, MN and some east coast mkts, Kona Seltzer is adding “a little bit of wind to Kona’s sails,” and stands out among other recent hard seltzer launches like Omission, he noted. But gotta recall, CBA shipments declined 6% in Q1 as draft volume fell 25% and even Kona depletions off 5% for qtr (see May 7 issue). And CBA mix was 23% draft, 77% package in 2019. So total CBA likely still soft in Q2 altogether.

Hello and Goodbye: PV Would Be New Top-40 Craft Co; 1st Time ABI Won’t Own Acquisition Locally  All in, there are several odd wrinkles to this new development, worth doubling back on to further underscore. If these deals are approved as is, PV Brewing would suddenly become a top-40 brewing company in the US on its own, albeit with sales in just one state that happens to be located in the middle of the Pacific Ocean. Deal also reminds of class action suit that CBA settled to the tune of $4.7 mil, claiming co misled consumers about where Kona was made. Could this perhaps change the perception of Kona beer among HI’s local scene? Or will folks still view it as part of the broader ABI family even once it's technically run separately in HI? Finally, this marks the first time ABI won’t own an acquired brewery in its home mkt. For AB’s Brewers Collective of acquired craft brands, winning in home mkt is oft-stated #1 priority and where much value derived in craft beer these days. Does that affect the way ABI values CBA in total? Recall, AB to pay approx $220 mil for rest of CBA as proposed deal structured.