Beer Marketer's Insights

Beer Marketer's Insights

In July, Calif Dept of Public Health handed down rule allowing state wineries to serve alc bevs for on-site, outdoor consumption with or without a "sit-down meal," like restaurants, in certain high risk counties. But breweries and brewpubs had to remain closed for on-site consumption unless they offered a meal. That's "arbitrary and unfair," California Craft Brewers Assn exec director Tom McCormick told INSIGHTS last month. Yesterday, the org and 6 member brewers filed a fed lawsuit in US Dist Ct against Gov Gavin Newsom and state public health officer Sandra Shewry claiming as much, alleging the rule violates constitutional equal protection laws, as first reported by our Craft Brew News.

Inevitable slowdown in on-premise visits following rise in Covid cases/tighter restrictions is showing up more prominently in latest Nielsen CGA report surveying 1557 respondents from Dec 12-15 "who have drunk alcohol in the last 3 months" in TX, FL, NY and CA. Still, 50% of respondents said they went out to eat over the past 2 wks vs 54% in Nov. While that's expected to decrease over next couple wks as just 37% of consumers say they expect to dine out over next 2 wks, number of consumers going out for drinking-only occasions actually looks steady. The 16% of respondents that said they've gone out to drink in latest 2 wks was as high as Nov and a little above %'s thruout summer and most of fall. And 17% plan to go out for drinks in next 2 wks. That's of course driven by younger LDA consumers, as 27% of 21-34 yr-olds went out to drink over past 2 wks. Interestingly, there was an increase in % of folks that say they went out for the first time in latest survey, up 4 pts to 18% of respondents, while those who visit on-premise more frequently (3+ times) decreased 3 pts to 57% of respondents.

INSIGHTS seeing more optimistic analyst reports about several beer cos than typical lately. Several reports this week pumped up Constellation's prospects for fiscal 2021 and beyond. STZ is a top pick for Evercore ISI, following Consumer Edge's report earlier this week about STZ picking up speed in IRI. Constellation shipments expected to be up 22% in qtr thru Nov and depletions up 10% by Evercore ISI's Robert Ottenstein, as STZ replenishes inventories. (Robert's estimates ahead of consensus.) Interesting demographic point from Robert. STZ's "core beer volume should benefit over the coming year from the strong residential construction market," he sez, citing his firm's "macro team and Housing analyst." Hispanics "account for ~27% of the construction-related workforce and ~17% of Hispanic men are employed in the construction industry." Hispanics still over 60% of Modelo Especial and 50% of STZ's total consumption.

As Congress dithers over another biz relief package, local governments are increasingly putting together their own. In Connecticut, state House Repubs announced "a proposed relief package" yesterday, Hartford Courant reports, that "seeks to establish a $50 million grant fund" for struggling restaurants and bars. Plan includes grants of $5K to $50K, suspension of licensing fees, tax payment delays and support for low-interest loans. Officials pointed to similar programs adopted in Mass, RI and OH. Some of these programs tap leftover CARES Act money. Connecticut restaurants/bars had reached out to Gov Lamont for additional relief. CT Brewers Guild joined 'em. Brewers also seeking "rollback of food restrictions" imposed recently so that chips or fries would be enuf of a meal to serve beer.

Steve Hindy will retire at the end of this year at the age of 71. Steve founded one of the most important of the 2d wave of craft brewers, Brooklyn Brewery, in 1988. It grew to become one of top 15 or so craft brewers, but its importance resonates way beyond its size. Michael Bloomberg no less credited Steve's pioneering brewery for being a key to the renaissance of Brooklyn, in his intro to Steve's book "Beer School." Steve, a former journalist, also literally wrote the book on "The Craft Beer Revolution" (tho that revolution facing challenges now). Steve spread that gospel far and wide, including as a global ambassador for the Brooklyn brand. Unique among craft brewers, Brooklyn gets over half its volume abroad. And Steve was generally a unifying force, tho he could take divisive stands at times too. But he was always involved. Indeed, Steve served important stints as the first craft brewer on the board of Beer Institute and several go rounds on the board of the Brewers Association, including one that ends December 31st. We wish Steve well.

With AB's Beyond Beer handling everything from spirits to non-alcs, FMBs and hard seltzers, isn't it tough to figure out what to focus on, wondered Alan B. Hart on his "Marketing Today" podcast. "At the end of the day, it's about the consumer and consumer first," explained Lana Buchanan, veep of mkting for Beyond Beer. With every different category, "I get to think differently in terms of the consumer," said Lana. Each separate team strives for same goal, to "create an innovation that really fits the needs and wants of the consumer in the different moments," she added. In some situations, "the core consumer target may be the same between a hard seltzer and a ready to drink cocktail, it's just the occasion is different when they choose it," noted Lana. Whatever the product from Beyond Beer, the consumer has to be "proud to hold and proud to order" a brand, whether it be a Bon Viv or a Social Club seltzer, which is aimed at men 30+, "that just didn't really feel the category was for them."

Here comes official announcement of AB's latest addition to its ever-expanding hard seltzer lineup, CACTI, a 7% ABV, 150-calorie agave spiked seltzer with tequila-like flavors made in partnership with rapper, songwriter, producer, Travis Scott, co announced after INSIGHTS Express first reported back in early Nov (see Nov 6 issue). Brand name calls to Travis Scott's record label Cactus Jack as his team worked "side by side" with AB "to create the flavors, packaging, ingredients, branding, marketing plan and more." Product is hitting shelves in spring 2021 featuring lime, pineapple and strawberry flavors, available in unique 9pk of 12oz slim cans as well as 16oz and 25oz singles of lime and pineapple. Unclear how broad the release is, but in at least one region it was initially listed as co's 10th innovation priority outta 19 in 2021.

Hard seltzer sales may be slowin' down, but Goldman Sachs analyst Bonnie Herzog is still "incrementally more bullish on the hard seltzer category," following latest beer distributor survey representing "nearly 50" distribs "or ~145K retail outlets/nearly 25% of total outlets that sell alcohol." Tho "we think 2021 could prove to be a pivotal shakeout year for hard seltzers," she acknowledged. Distribs are "broadly more positive today in their outlook for the hard seltzer category and now expect the category to grow a robust 155% in 2020," up from +140% in Sep survey, and "almost double" in 2021. Once "the world re-opens," hard seltzer "penetration of the on-premise will accelerate," in Bonnie's view, as consumers will "increasingly ask for/demand hard seltzers." Yet there are "a few key distributor concerns…coming into sharper focus" heading into next yr, including "category overcrowding," potential "price destabilization" amid increased competition and "ongoing can shortages," even as "situation continues to improve faster for some." Notably, "only" 38% of distrib respondents believe category can double next yr.

Lotsa new data bits from joint presentation this afternoon by NBWA chief economist Lester Jones and Fintech's Jim Kallies, based on several key industry measures and Fintech's depletions data represents about 30% of total beer volume. Highlights:

  • Overall shipments will be down about 0.5% this yr, Lester still estimates, based on taxpaid reports and imports. On-premise/taproom draft still running at about 50% of 2019 volume and total on-premise volume "running below 2/3 from reduced capacities, closures and limited hours."
  • Even so, distribs remain confident. Lester's Beer Purchasers' Index, measuring distrib beer buys, still running high, at 77 in Nov, with especially strong purchase intent for not only high end segments and seltzers, but premium lights too. Only below premium and cider in "contracting" mode; every other segment in expansion mode. And "at-risk" inventories still very low compared to 2019. That supports lotsa anecdotal evidence from distribs citing ongoing OOS.
  • Weekly STR trends for the year marked by huge "pantry rush" in week 12, generally higher STRs thru summer, but a "Labor Day flop." Fintech data supports anecdotal reports of slower Nov and early Dec, Jim pointed out. Will there be a late year bump is "big question mark," said Lester. Still too many moving pieces for him or Jim to make an STR trend call for the yr.
  • Can share dipped slightly from 67 peak during weeks 12-20, but still sitting at 65 share in period since.
  • Keg biz actually went negative in weeks 12-20 as draft beer on-premise spoiled and had to be picked up. There was slight recovery thru Jul 4, but then another dip and now "struggling to recoup."
  • Most key off-premise channels showing double digit growth, led by supers and small grocery stores, liquor/package stores, wholesale clubs, value stores (comin' on strong with "aggressive pricing") and c-stores. In tuff, tuff on premise, golf clubs did okay, but every other kinda outlet still just 2/3 or less than their 2019 biz, with concessionaires, fine dining, hotels/motels hit the hardest.
  • Fintech's data shows FMBs/seltzers gaining 4.2 share YTD to 11. (Latest Nielsen reports similar 3.8 volume share gain YTD thru Dec 5 off premise to 10.6.) Premium Plus Lights shed 1.5 share to 37.3. Imports dipped 0.6 share to 16. Craft slipped 0.7 share to 9.3. Premium Plus off 0.5 share to 7.5. Below premium gave up 0.8 share to 16.9.
  • Fintech data indicates seasonality effect with seltzer volume dropping sharply in recent mos, and gains really contracting in recent weeks.
  • White Claw hanging in at 46.6 share of seltzer for calendar yr, down from 55 peak in Feb, but very close to 48 share it had in Jan. Truly YTD share at 27.1, well ahead of 22 share in Jan. Bud Light sittin' just over 10 YTD. Corona Seltzer just below 4. Both of those below peak mos. Total seltzer-only share at 7.3 YTD, down from peak of 9.4 in Jun, and down to 4.2 in Fintech's Dec data so far. Non-seltzer FMBs ran ahead of 2019 numbers for most of yr, turned down in recent weeks. Mike's holding share at 22-23, Twisted Tea in mid-teens, Smirnoff and Seagrams brands just below that.
  • As noted, Fintech data shows craft lost 0.7 share YTD, hit harder on premise. Blue Moon in particular, suffered from loss of draft and lost almost full share (including Light Sky), much steeper dropoff than indicated by off-premise scans.
  • Heineken 0.0 grabbed almost 13 share of still-tiny no-alc beer (still just 0.4 total share), sourcing mostly from leaders Busch NA and O'Doul's.
  • Hardest-hit DMAs, where volume recovery vs 2019 still below 80% are Philly and Baltimore. Among top 3, NYC at 85% recovery, LA at 95% and Chicago at 91%. Indy outlets - on- and off-premise - hit especially hard in NYC (indy volume only 30% recovered) and Philly (20%). Overall volume reported up in Portland Or and Salt Lake City.
"Despite all the jello moving on the plate, this year's beer industry [likely] to finish about the same as it always has," Jim concluded, (i.e. flattish) but with some key internal shifts, i.e. from on-premise to off-premise, to cans, a rough post-Labor Day period without football bump and "Christmas slow out of the gate." Seltzers "continue to be the big winner," with Mike's and Boston gettin' most of that and Constellation share gain slowed. Seltzer/FMB seasonality is real. And question remains: are no-alc brews a real trend? Lookin' ahead, recovery of on-premise, about 18% of volume, remains key question for 2021. Another one: how will seltzers compete with spirits brands/RTDs as on-premise reopens?

After yrs of delay and some reconfiguring in process, Constellation officially got "green light" for at least part of its deal to sell its low-end wine portfolio to E&J Gallo yesterday. Constellation sold its New Zealand subsidiary to Dry Creek subsidiary of E&J Gallo, Seeking Alpha reported, posting federal trade commission notice. That's "separate but related" to deal to divest Constellation's New Zealand-based Nobilo Wine brand and other "related assets" to Gallo for $130 mil and