Beer Marketer's Insights
Three recently elevated execs from the three biggest US suppliers took center stage at the Beer Insights 2022 Conference last wk. Despite their different portfolios, common threads emerged as they plotted paths forward in their respective roles. Chief among 'em: more disciplined innovation, ongoing trade up, Hispanic & spirits RTD oppys, and a growing optimism that beer is back (or in some cases, never left).
Optimism brightened numerous discussions of beer's near-term outlook during the Beer Insights Seminar in NYC last wk. Wonkiness created by the pandemic lingers, making folks eager to leave the last few yrs in the past as they move forward with care, leading industry experts acknowledged. But economic oppys abound, macro and micro alike.
Business of beer distribution has become ever more complex, a panel of 3 megadistribs highlighted at our Beer Insights Seminar. The panel on "the evolution and future of beer distribution" focused on the following: huge #s of brands, SKUs and suppliers; trouble finding drivers, warehouse people and other employees; higher costs; expanding into non-beer bizzes like wine, spirits and NAs; adapting to big changes in biz model during pandemic; plus need for scale and much more consolidation coming (see below). This combustible stew makes for tumultuous environment, even for the largest of distribs.
Manhattan Beer Sells 47+ Mil Cases, Up in 2022, Sez Ed; Has 385 Brands Manhattan Beer (giant STZ/MC distrib in NY metro) will be over 47 million cases this yr, its biggest yr ever, said coo Ed McBrien. But Manhattan represents 118 suppliers with 385 brands and about 2100 SKUs during any 90-day period and 98% of that is beer. Spirits, wine and NA are small part of its biz, but growing at 20-25% clip, said Ed. Manhattan views this as important oppy in part because it wants to make sure that it remains distrib of choice if/when its suppliers sell non-beer products. In NYC, on-premise coming back, but "customer count" only about 75% of 2019. "Commutation is down, down forever," he added. Manhattan Beer has about 1600 employees (1900 in summer). Fun fact: Manhattan Beer spends about $2 mil a yr on parking tickets (that's down from $2.5 mil, not tax deductible.)
Two AB distribs on panel were much deeper into non-beer brands. Hand Family Cos ceo JR Hand and Eagle Rock ceo Steve Economos, 35-40 mil cases and 25 mil cases respectively across multiple states, each are 60-65% beer. HFC represents about 100 suppliers and 2400 SKUs and has 1200 employees. "We are a… more and more complex business," said JR. Eagle Rock at 350 suppliers, 5,000 SKUS in GA and 90 suppliers and 2600 SKUs in CO, with about 850 employees across both operations. In JR's mkts, on-premise in Chi more like NY, other mkts didn't shut down as much. For Steve, GA "on premise bounced back much quicker," but while accounts "open," owner can be "beverage buyer" and "bartender" and doesn't have time.
Sazerac "Tremendous for Us" in CO, Sez Steve; NA Biz Has Done "Exceptionally Well" in Chi, Sez JR Steve said getting Sazerac brand in CO "instantly made us the most valuable partner to our retail customers." But "our shoeboxes were full before we made this move," so it "was more of a logistics issue…. Bringing in 1200 SKUs and 1.2 million [cases] was the challenging part." For JR in Chicago, HFC bought 4-5 mil cases of NAs and NA biz in Chicago "has done exceptionally well, especially during the pandemic." JR summarized his view: "The trucks are running and the infrastructure is there. Why would you not put as many $$ on the truck as possible, especially" with fuel/labor pressure? "Nothing wrong with putting a little gravy on the potatoes," he added.
"Labor Crunch" Could Be "Tough Road" for Distribs for 2-3 Yrs But "biggest existential risk" to beer distribution and perhaps all CPG is "labor crunch," said JR. That's mainly driven by scarcity of commercial drivers. To fix that and other labor issues, HFC already increased wages 20% over last 2 yrs but turnover rates "probably higher than they've ever been." Distribs could be in for "tough road" on labor "for at least" next 2-3 years, added JR. Meanwhile, Manhattan Beer was short 85 commercial drivers heading into summer (runs about 350 routes per day). It hired 4 driver training specialists who run 4 classes per yr, 18-24 people, essentially paying people to become CDL drivers. All 3 distribs prioritize increased automation as "almost a necessity" in future.
More Consolidation Will Happen For Many Reasons All 3 panelists see more consolidation coming. "Absolutely," said JR, pointing to "generational gap" as "families have to work stuff out" and the need to "get scale." Ed agreed: "Scale matters" and is key to "running good operations," and distribs need to get bigger to "fend off the guys that want to swallow you." Steve also pointed to Eagle Rock's "farther and deeper" infrastructure in CO as key in getting Sazerac. "That one point of contact versus very fragmented competition…. You can use that to your advantage," he added. And "for that reason you're going to see more consolidation." Back in 2001, Steve had 1 supplier in GA, now 326 selling less volume. "Top line" and "GP" are "good but that's a lot of complexity you're having to manage. Some people are saying 'do I want to do that?'" These guys covered several of big reasons for uptick in recent consolidations: generational change, scale advantages, increased complexity. Read below for details on deals.
Rollup play Golden Grail Technology said it's expanding its Florida hq to accommodate growing array of brands it's onboarded, with another due to be announced in early Dec. It's also adding a sparkling extension to its acquired Koz Water. Its other entries include Spider Energy Drink, Trevi Fruit Essence Water, Tickle Water, Sketch Can and Cause Water . . . "Here lies WC Fields. I would rather be living in Philadelphia," the legendary comedian proposed as his epitaph back in 1925. And he didn't even know about the Pure Leaf Holiday Oasis Lounge. That's a popup couch or two situated near Terminal E at Philadelphia Int'l Airport that "will transport travelers during the busiest moments of the upcoming holidays to a tranquil and relaxing space that they deserve with chic, upscale seating and Pure Leaf-inspired décor and surroundings." It opened yesterday and will stay in place thru Jan 15. Relaxing visitors will be accosted by brand ambassadors handing out mini stocking stuffer gifts and recipe cards for Pure Leaf tea-infused mocktail and cocktail drinks and will be invited to peruse holiday books curated by Reese's Book Club . . . Here's an unusual c-store growth initiative: 11-store Noble Market chain based in Conn will not only offer EV charging stations at new stores, but several will get "massive 24,000-square-foot EV showroom and service center at several of the new c-stores it's currently building throughout its network," as C-Store Dive reported. That's in addition to new-store footprints that, at 8K-sq-ft, already are gigantic by c-store standards. The showrooms will be 2 stories with an elevator and "set up for customers to see, touch, feel and test drive EVs," owner Michael Frisbie told C-Store Dive. Multiple tenants will share the space and it will have a service center that can handle different EV brands. First will open next Mar in Sturbridge, Mass.
C4 Energy's Austin-based marketer Nutrabolt has welcomed back an old hand, Sabba Naserian, as chief growth officer. Sabba has served as co's vp global development from 2014-2016 before heading off to run her own agency and then taking role at cannabiz Canopy Growth. Her duties will include "expanding the business into new categories, continuing to round out the company's portfolio of products, and serving as a hands-on leader for the talented teammates at Nutrabolt," per announcement, which pointed to her being "a sure cultural fit," presumably in contrast to at least one senior exec who'd recently moved on after being deemed a disruptive match among tight-knit crew at marketer of C4, Xtend and Cellucor brands.
At time it opened its doors in spring 2020, the blank-check player HumanCo Acquisition Corp was ambitious undertaking that drew a certain amount of star power, including former PepsiCo ceo Indra Nooyi and ex-Coke exec Brian Kelley: unlike traditional VCs, HumanCo was a holding co modeled on Warren Buffett's Berkshire Hathaway, with the intention of offering entrepreneurs at organic food/bev brands and other CPG plays "a permanent partner to grow their businesses and offers founders other perks such as equity in the holding company," as Austin Biz Jnl profiled (BBI, May 29 2020). That was then. Now founder/exec chmn Jason Karp and his ceo Ross Berman are throwing in the towel, saying in 2 years of beating the bushes they simply couldn't "reach a deal with a target company that we were confident would result in a successful business combination," as Berman put it last night. So they're liquidating the co, returning investors' money on Dec 1. "Current market conditions have also convinced us that the best way to deliver on our promise to shareholders is to return the capital held in trust," Karp said.
Nirvana Springs, which is hoping to make the functional recovery ingredient HMB a household name, has undertaken a broad pivot in strategy that's seen a cadre of DSD specialists from Voss Water move on and a new ceo recruited as it narrows its focus to Northeast and readies plans to build out a more comprehensive suite of products, including some built around another super-ingredient, 2-HOBA. Now at helm is David Vanderveen, who brings familiarity to functional space by virtue of stewardship of XS Energy brand, which he successfully shepherded to exit to Amway in 2015. Founder, chmn and core investor Andrew Cervasio cited Vanderveen's "respected track record of innovation and disruption in consumer goods, beverages and sports nutrition that spans over 20 years," per announcement this morning. Among rebuilding effort David has brought aboard former Mad Tasty marketing chief Leila Khoury as interim cmo, with view to putting her on permanent team, and has recruited as board members Hal Kravitz, the ex-Coke and Aquahydrate exec, and Caroline Levy, longtime bev analyst, who've been enjoying brisk and continuing run on Celsius board. Vanderveen told us they're taking hands-on role via related work contracts.
ABI had quite a dilemma on its hands when gov't in Qatar reversed course at last min and banned sales of alcohol at 8 stadiums hosting World Cup games. (Remember those fans can still drink Bud Zero.) On its Twitter feed, Budweiser announced it will ship its unsold beers to the winning country to celebrate. "We will host the ultimate championship celebration for the winning country. Because, for the winning fans, they've taken the world," an ABI spokesperson told CNN. Report noted too that while that last minute decision by Qatar officials "dramatically reduces" AB's presence "for thousands of fans at the World Cup," plus its global sponsorship and tv ads aren't affected.
Sup Ct Takes Up Jack Daniel's Dog Toy TM Tug of War; Impacts Industry Self-Regulation, Orgs Argue
Over 8 yrs after a dog toy producer first tried to command holder of Jack Daniel's trademark to heel and let go of attempts to block a parody product for pups, the dispute is headed to the highest court in the land. Supreme Ct granted petition filed by Jack Daniel's Properties, which seeks to reverse a decision by (ultra-liberal) 9th Circuit appellate ct. Suit begins all the way back in 2014, Law360 reviews. That's when the whiskey-maker tried to stop VIP Products LLC from selling its "Bad Spaniel's Silly Squeaker," shaped and styled like the "iconic" spirits bottle. By 2018, a district ct agreed with Jack Daniel's that the toy was likely to confuse consumers. But in 2020 the 9th Circuit reversed, finding the "expressive" product met standards for protected parody speech. Sup Ct opted not to take case in Jan 2021, sending suit back to district court, which upheld the circuit ct ruling. On another appeal, 9th Circuit agreed with itself. And this time, Sup Ct agreed to hear case.
After WA court granted Olympic Eagle a Temporary Restraining Order two weeks ago (see Nov 9 issue), Judge elaborated on legal rationale for siding with Olympic Eagle's arguments to block Constellation from terminating without cause in an official written order granting TRO, filed late last week.