Beer Marketer's Insights
Here are 10 news developments/trends in 2022 that stand out. Below that, you'll find a special yr-end edition of Throwback Thursday that shows top 10 developments of 2012. Comparing the 2 shows some really big changes. Yet in other ways, the more things change the more they remain the same.
- Blurring of the lines between bevs. No big M&A yet. But with Coca-Cola getting deeper into alcohol in different ways, one of its top execs (Henrique Braun) said at a Beverage Digest conference in Dec, "this is a very big deal." We agree. Pepsi Blue Cloud Distribution also big news (and a flashpoint of friction), far more than its sales so far. KDP's $50-mil investment in Athletic could be just beginning for co that has some $20 bil to deploy in M&A. And while Monster didn't do much yet with its $330-mil acquisition of CANarchy, next yr promises unveiling of The Beast Unleashed, with plenty more in pipeline. That's just for starters. Impacts of blurring lines ripple broadly across bev segments. Sazerac moving from RNDC to beer distribs in CO and WA was another huge story with potentially big implications.
- Far bigger price hikes than usual. With rising costs and supply chain challenges leading to a 2d price increase this fall, beer prices up almost 8% compared to year ago in 4th qtr scan data. And up over 5% yr-to-date. Haven't seen that in decades (at least). And yet, beer prices up less than overall inflation and carbonated soft drinks prices up in mid-teens. Initially, brewers' fall price hike had little effect on demand, but late 2022 softness likely partly related to recent pricing.
- Shipments down nearly 3%. Not a good volume yr. But unclear that longer-term volume picture changed much following outsized shipments growth in 2020-2021 during wonky Covid period. Domestic taxpaid shipments down over 6 mil bbls, 4% thru November 2022, Beer Inst estimates. Even with half-mil-bbl import gain, US volume is down near 3%, giving back all of last yr's gain and then some. Slightly below 2019 totals in all, estimates suggest. Tho TTB revisions could still change picture.
- Less trading up. Through successive waves of craft, import, seltzer and FMB growth, trading up is one of the most powerful long-term trends in US beer. Above premium segments still collectively gained 1 share of $$ yr-to-date thru Nov 27 in IRI multi-outlet + convenience data even as craft and seltzer slipped. But more recently, subpremiums gaining share for the first time in a very long time and above premium segments slowed to +0.2 share of $$ for 4 weeks. Is this just a blip? Or now that above premium segments over 60 share of biz, is there less upside?
- Far more Fed govt interest in alc bev industry. Beginning with Biden Admin's 60-page competition report in Feb, and including initiation of 2 major TTB rulemaking processes, plus a TTB/IRS investigation of largest wine and spirits distrib Southern Glazer's, federal interest in alc bev biz really ramped up in 2022. Your govt is watching and changing its approach to regulating alc bevs. What that will mean going forward is still really unclear.
- Distrib consolidation picked up steam. Even with interest rates going up, volume down, beer distrib deals in 2022 included some blockbusters, at very high multiples. Plus, more deals than in average year and lots more coming. As usual, Reyes Beer Division the most active acquiror, picking up prized mkts like Nashville and Austin. AB One sold off a couple of its branches (reverse of 10 yrs ago—see below), including Lima OH and northern CA.
- Seltzers fall hard. Hard to believe how fast this changed. In 2020, seltzers grew more than light beers ever did in 1 yr (almost 9 mil bbls). In 2022, seltzer volume declining mid-teens in scan data, and showing no signs of steadying yet. With #1 brand, White Claw, gaining share again and outperforming, hundreds of smaller entrants facing big uphill battle.
- Here Come RTDs. Has anyone learned key seltzer lessons above? Tho far smaller than seltzer (1/10th the size in IRI), spirits-based seltzer RTDs are very hot, even more dominated by one brand (High Noon 2/3 of spirits seltzers in recent weeks) and RTD spirits also have hundreds of new entrants, including in broader canned cocktail mkt. RTD spirits also another legislative/regulatory flashpoint amid access & tax equivalency efforts. Any guesses on how this plays out?
- Constellation leading industry growth. For most of yr, Constellation sales-to-retailers trucked along at 9% growth rate while US beer STRs down 2.5% or so. That's an impressive continuation of streak of several yrs, led by Modelo Especial. But this fall, Especial slowed. Temporary? STZ still gaining more share than any other player. Then too, key change in shareholder structure that reduced Sands family shares and voting control removes a hurdle to bigger M&A.
- Craft in a tuff spot. Rough year for craft segment overall, tho return to on-premise and taproom growth may have eked out gain for segment. Struggles are most pronounced in tracked retail channels. Craft lost 0.6 share of $$ in IRI, with several leading players getting hit hard. (New Belgium/Voodoo Ranger imperial IPAs and Athletic non-alc brews were clear exceptions.) More closings, more fire sales, and even some bankruptcies. Ten yrs ago (see below) craft up double digits in middle of run of 6 straight yrs of double-digit growth. The "go-go years" for craft were a long time ago.
Drizly anticipates continued strong NA adult bev growth and for hard seltzers to continue losing share to "competitor" products on its platform in 2023, co shared as part of its 2023 predictions post. Hard seltzer lost 0.7 share of Drizly alc bev sales to 3.1 total in 2022 while RTD spirits gained 0.7 share to 2.7 total. That's as Drizly tracked over 100 new RTD brands in its catalog YTD, up to 570 in 2022 vs 458 year ago. "I would not consider this a decrease in interest in the hard seltzer category, but rather, a slowing of growth," Drizly senior brand director, Liz Paquette stated. Editor's note: hard seltzer declined steep double-digits thruout 2022 in more established tracked off-prem channels. Hard seltzer remains the largest beer segment on Drizly. But it's 5th largest by $$ in IRI multi-outlet + convenience data behind domestic premium, import, subpremium and craft; 7th largest segment for latest 4 wks thru Nov 27, behind FMBs and superpremium too.
Not so thrilled with the govt's usual glacial pace, a set of industry trade orgs asked the TTB to further slow their process for potentially revising federal trade practice rules. Given importance and extent of issues TTB raised in advanced notice of proposed rulemaking (ANPRM), 8 orgs seek a 90-day extension to comment period, according to letter sent Fri from BI, NBWA, DISCUS, WSWA, Wine Inst, WineAmerica, American Distilled Spirits Alliance and American Beverage Licensees. If granted, an extended comment period would run a full 210 days, from early this past Nov to June 7, 2023. Whether TTB extends this comment period or not, there will be others. It must digest comments, respond to them and propose draft rules, initiating at least one more comment period.
Athletic Brewing "On Track" to "Become the #1 Player Overall" in NA, Sez Bill Shufelt on CNBC
For a segment that's just a little more than a half a share point of the overall business, INSIGHTS is often amazed at the amount of attention that it's hottest player, Athletic Brewing, garners time and again. Athletic ceo Bill Shufelt got 5 minutes on CNBC today, leading up to dry January. That's quite a spotlight, including one of top talking heads, Aaron Ross Sorkin, noting that Athletic has a "lot of fan boys and fan girls" at the network.
BPI "Below Freezing" in Dec; Lowest Score Yet; Extra Selling Days, Holiday Timing, Comps Offset?
Another tuff sign for beer volume to end the year. NBWA's Beer Purchaser's Index measured its lowest reading yet in Dec 2022, org shared, suggesting wholesalers ordered significantly less beer this Dec vs 2021. Much "like the weather, beer industry dropped below freezing in December" as BPI came in at 30, NBWA chief economist Lester Jones told INSIGHTS. (Recall, readings below 50 indicate fewer orders than year ago while above 50 indicates expansion vs year ago). That's following BPIs of 37 in Oct and 38 in Nov. And "at-risk" inventory slightly up in Dec 2022 vs 2021 too, at 51. Tho gotta note, industry is going up against highest-ever BPI recorded in Dec 2021 at 71 (see Dec 30, 2021 issue).
Anarchy Was Fine in Rossi's TV Role, but When It Hit Supply Chain It Spelled Sad End of Ounce Water
Some thought it might be a slender reed upon which to erect a bottled water brand: helping users track their consumption to ensure they were hitting the 80 ounces a day of consumption that some but by no means all nutritionists recommend. But Sons of Anarchy star Theo Rossi and his cofounders ran with the premise, offering 20-oz and 40-oz bottle sizes of spring water, adding alkaline entries and finding enough of a consumer base to sustain the effort for 7 years. Now that run has come to an end: a company post on Instagram earlier this month cited a "ripple effect" from the pandemic that made it impossible to continue. "In the past 12 months our national ecommerce fulfillment group, our alkaline water source & packaging facility, and our natural spring water source & packaging facility have all shuddered" (before shuttering, we presume). "Our growth, and limited access to rescue funding as a small business, was no match to the fulfillment and packaging partner closures mentioned above, nor the insane inflation that DOUBLED our cost of goods within 9 months, nor soaring gas prices, nor a severe economic slowdown . . . all at the same time!" So, "it is with a heavy heart that we bid a farewell to our beloved brand."
Loop Industries, whose shares have gotten hammered for the past 6 months like many early-stage companies, has been enjoying an uptick since announcing maneuver late last week in which it will sell off the Quebec site that's been reserved for its first commercial-scale rPET plant in North America as a way to generate cash and thereby avoid dilutive capital-raising activities in the coming years. It joins a growing roster of companies, like Oatly, that have had to rejigger their capex plans since investors got jittery about cash-draining buildout plans. With a plant in South Korea now due to become its first commercial-scale operation, it's also more likely now that Loop's tech will find its first use in fiber applications like running shoes rather than in bev bottles.
In the new year, can we please give peace a chance? Oh, and let's all give dry a try, too. Athletic Brewing shed more light on its intensified Dry January activation this year, describing range of activities from national TV ad to Barstool Sports tie-in that should get its NA beers in front of as many as 45 mil Americans. The idea, of course, is to catch drinkers who're observing - or merely dabbling in - the month's abstemiousness in hopes it will become part of their routine during rest of year. As content and targeting show, co is methodically seeking to reach broad swath, male and female, from athletes that brand name celebrates to those whose most energetic pursuit might be slicing scallions and chasing the kids around the couch, as celeb chef David Chang does in TV spot. "Give dry a try," is theme. The 13-wk period surrounding Dry Jan last year enjoyed 20-30% pop and co anticipates similar burst of interest this year. Integrated production capability at 3 breweries means co should be able to avoid out-of-stocks even if demand surprises on upside, cofounder/ceo Bill Shufelt said, pointing to differentiator vs other indie players.
Blue Triton is "the largest branded water manufacturer in North America," reminded ceo retail Paul Norman during brief Beverage Digest Future Smarts presentation earlier in Dec. (That amounts to $4 bil in tracked sales, per Nielsen data.) And since its formation in early 2021, "we've put hundreds of millions already into incremental capacity to serve the growth trajectory of the business," Paul informed. Plus "we've more than doubled our brand investment." Recall, Blue Triton is a private co formed in early 2021, as PE firm One Rock and investor Dean Metropoulos teamed up to buy Nestle Waters North America for $4.3 bil. Paul only joined Blue Triton in early Jun, having spent last few yrs as Jones Soda ceo and prior to that a 13-yr stint at Kellogg. (With Jones long stuck at sub-$50 mil annual sales level, that's quite a jump.) Tho booth execs gave us a gander at some of their innovation at NACS show this fall (BBI, Oct 4), Blue Triton execs otherwise have been exceedingly quiet about their activities. So Future Smarts offered welcome glimpse of at least the general outlines of its strategy.
Bevcos' volume declines accelerated a bit in latest 2-week period thru Dec 17, sagging by 1.6% vs -1% for 4 wks and -0.9% for 12 weeks, but price hikes continued to keep $$ growth in double-digit range, per NielsenIQ data reported by Goldman Sachs' Bonnie Herzog today. That $$ growth came to +11.8% for latest 2 wks vs +12.5% and +12.8% for 4- and 12-wk periods. To smooth out some of the lumpiness we'll report latest 4-wk data in this story as usual. We'll hit on 3 key categories today, then cover the rest in next issue.