Beer Marketer's Insights
The Year Hard Seltzer Hit a Wall
After years of explosive growth, hard seltzer sales took a dive in 2022. Hard seltzer sales (across beer, spirits and wine) slipped 7%, -$323 mil to $4.45 bil for 52 wks thru Dec 25 in IRI multi-outlet + convenience data. Volume dropped 12.5%, -1.2 mil bbls to 8.65 mil bbls total in tracked off-prem channels. Only still wine $$ declined more.
In a pretty wild plot twist, beer $$ ended up outgaining spirits for the year in IRI data while tracking nearly 6-mil-fewer bbls sold in IRI multi-outlet + convenience channels. Beer $$ grew 0.5%, $218 mil, while spirits +2%, $208 mil, and wine slipped 3%, $450 mil. This was a tale of two halves. Recall, beer $$ declined 1.8% thru 1st half. Up 2.7% in 2d half. Net-net, beer gained 0.34 share of total IRI alc bev $$ to 64.1, spirits +0.3 to 15.6, wine -0.64 to 20.3. While multi-outlet + convenience channels capture a more limited picture of spirits and wine, beer gaining share vs spirits in any channel is pretty notable these days.
This "rocks the whole model," said one plugged in industry source as news broke Dec 30 that one of largest distillers, Sazerac, would move from 2d largest wine and spirits distrib RNDC in over 20 states. That's huge loss for a co with $12.1 bil in revs (and 34th largest private co, according to Forbes). This broader move foreshadowed when Sazerac first announced moves in CO and WA to beer distribs Eagle Rock and Columbia back in Aug (see INSIGHTS vol 53, #15).
Did Constellation's star dim slightly? STZ's long run of industry leading growth continues (albeit at slower pace) but it was not enuf to keep stock from falling 10% on day it released results for fiscal Q3 (Sep-Nov). Worst day for stock in 3 yrs, wrote Barron's (tho up ~3% day after at presstime). Drop followed reduced growth rate, less than stellar earnings and cautionary comments about next yr. Cautions included continued cost increases, "muted" price hikes and lower-than-usual margins. Pricing and slower depletions were focus of most analyst questions on conference call. Constellation stock down 25% in 1 mo "with the deceleration in beer growth imparting short-term and long-term growth concerns," wrote Consumer Edge's Brett Cooper.
Aqua ViTea Kombucha raised $3.2 mil of venture funding in form of convertible notes from Conduit Connect, CEI Ventures and other undisclosed investors on Dec 21, per weekly compilation by banker Silverwood Partners . . . Expanding beer/NA house Scout Distribution raised $3.1 mil of venture funding from undisclosed investors on Dec 22, Silverwood also reported. The co operates in Southern Calif, Ariz and Idaho with range of craft beers, RTD cocktails and NAs like De La Calle and Hoplark 0.0 . . . Next Frontier Brands has sold its Fluère Drinks unit to Lucas Bols for $1.05 mil in deal that closed Jan 1, per Spirits Business. Founders will stay on with promise of earnout over next 3 years if brand hits milestones. Fluère is a maker of non-alc spirits based in Kamperland, Netherlands, that are now sold in 20 countries in Europe and some US states.
Aimed at Booming Home Mixer Segment, PepsiCo's Neon Zebra Seems to Have Failed to Earn Its Stripes
Effort by PepsiCo to exploit pandemic-inspired wave of at-home cocktail mixing under brand name Neon Zebra may have run its course. Over past year we'd been hearing of brand's delisting from some retail accounts and there are increasing signs lately that canned brand has exited market entirely.
Federal Trade Commission advanced on a different front in its war on corporate concentration, saying it's taken legal action vs 3 companies and 2 individuals, including bottle makers O-I Glass and Ardagh Group, to force them to stop using noncompete restrictions on employees, which has the effect of inhibiting new competition. These cos' "illegally imposed noncompete restrictions on workers in positions ranging from low-wage security guards to manufacturing workers to engineers that barred them from seeking or accepting work with another employer or operating a competing business after they left the companies," wrote FTC. At O-1 Glass, FTC found "more than 1,000" employees were subject to restrictions while Ardagh had noncompete restrictions in effect on over 700 in various positions.
Atkins and Quest marketer Simply Good Foods turned in a durable Q1 performance, with revenues rising 7% as it balanced its margin-widening goals with need to keep its items affordable to shoppers who're showing growing signs of price resistance. Among broad trends that played a role, return to workplace brought new buyers into the Atkins fold. And on marketing front, co has just re-signed as endorser the actor Rob Lowe, who's claimed to have been years into an Atkins low-carb diet at time he first signed on in 2018 and is back in studio shooting TV and digital videos.
Throwback Thursday
This week in 1979, INSIGHTS reported on Miller's surprising and sudden resignation from the USBA (United States Brewers Assn, predecessor of Beer Institute). Why would one of biggest brewers in US split from its assoc? Tensions were building for a while apparently. Some examples INSIGHTS shared: in Texas, Miller wanted approval to distribute 7-oz bottles but other USBA members voted against allowing them, in part cause they felt it gave Miller a competitive advantage, as it was doing well with that package in other states. There were disagreements as well on labeling rules and instituting deposits in Michigan. Didn't sit well with Miller either that AB was allowed to keep publicizing Lowenbrau was made in US and not imported any longer. What might have been final straw was AB's new ad campaign in MI called "Brown is Beautiful," which took shots at quality of beer in Miller's clear bottles. USBA board members reviewed ads and felt they were within guidelines. Beer Inst building some in recent yrs, but never yet got back to USBA's old size/stature. And last yr, 42 yrs after Miller delivered USBA this body blow, it was DISCUS that lost its largest member Diageo, similarly for a number of reasons, sources say.
STZ Stock Sinks 9%; Mkt Cap Under $40 Bil
STZ is still winning in beer biz, but today it's getting creamed in stock mkt. Down over 20 bucks per share, about 9% at press time, losing over $3.5 bil in mkt cap. Stock mkt capitalization under $40 bil. Stock dropped further during and following longer-than-usual conference call, where mgt explanations didn't bolster share price, especially comments on continued margin pressure in fiscal '24 (beginning in Feb 23) and "more muted" pricing next yr, i.e. back to its typical range of 1-2%. STZ also lowered EPS guidance for current fiscal yr ending Feb 23. Yet STZ continues to have by far the best growth and margins among the top 6 suppliers that are 85% of biz.