Beer volume up 0.9% in Nielsen all outlet data for 4 weeks thru Jun 7  (including Memorial Day weekend,  plus the weeks just prior to and just after the holiday), while $$ sales up 3.8%.   Avg prices for a case of beer up 61 cents, 2.9%, about half from mix shift, i.e. trading up.  But trading up slowed a little over 1^st big holiday period of 2014.  Above-premium segments up 2.2 share for 4 week period.  They were up almost 3 share yr-to-date thru mid-May. Meanwhile, premium and subpremium pricing increases continued up at about half the rate of overall industry pricing, or 1.5%.  Interestingly, avg cider and FMB prices down slightly last 4 weeks. FMB volume growth has slowed to just 6% in Nielsen, with avg prices down 15 cents or half a percent.  But cider still nearly doubling; volume up 94% latest 4 weeks, but avg prices also down 0.5%.  Interestingly, cider jumped 0.7 share of $$ to fully 2 share in grocery channel and volume still up 63%. 

Both AB and MC posted ingredients of their major brands to company-owned websites late last week after a blast of media coverage and questions precipitated by Food Babe’s flashy and pseudo-scientific PR and petition (see last issue).  For anyone who doesn’t know how the leading American lagers (or most other beers) are made, here are those ingredients: water, malted barley, hops, yeast plus adjuncts rice or corn, depending on the brand.  Big revelation.  The supposed “policy change” came just a day after food activist Vani Hari, aka the Food Babe, launched the petition.  That led Hari to praise her “Food Babe Army” for changing “the policy of a multi-billion dollar company overnight.”  More media outlets jumped aboard, writing about the “first time” the beer makers have “revealed” ingredients, or the King of Beer’s “secret,” as Reuters did.  Of course, 3 of those 5 ingredients have been on the Bud label for many moons and the other 2 are hardly revelatory.  But still, AB “has rolled over,” according to USA Today, and the entire escapade was “a coup,” The Street wrote.  Other sources reverted back to the Babe’s post from a year ago to ask readers “how about a tall, cold glass of fish guts?” like MarketWatch from the Wall Street Journal did.  

After starting her victory lap, the blogger/activist turned her fans’ attention to the Sam Adams Facebook page (interesting that Sam Adams was third in line), apparently not realizing that Sam Adams brand pages already listed those basic beer ingredients.  But what of all those other scary-sounding compounds Hari claimed she’d discovered were in our beer?  After a brief Facebook note that she’s still “gathering the facts” on Friday, Hari seems to have moved on, or rather back to other crusades.  Today she’s returned to outing ingredients Taco Bell uses, which Forbes called one of her “fear-based campaigns…with information heavy on rhetoric but often lacking in science-based rigor” in May.  Hari may well return the focus of her 600K Facebook page followers to beer.  But for now don’t head there to dissent or question her tactics as those posts will be hastily removed.  Perhaps Hari’s attention-seeking speaks to a greater concern for the health of her brand than of her followers.

Once again, each of Constellation Brands Beer Division’s Modelo beer brands is showing healthy growth in IRI multi-outlet + convenience data yr-to-date thru May 25.  Total Constellation Beers biz up 3.4 mil cases, 13%.  Half its growth from industry’s hottest brand, Modelo Especial.  Modelo Especial up 1.7 mil cases, 23.7% for 5 mos.  But Modelo Especial just over 30% of Constellation volume.  Meanwhile, Corona continues to show strong growth midway thru 2014; up 1.15 mil cases, 7.9%.  Corona Extra is over 53% of volume, but about 1/3 of growth.  Corona Light is slowest grower among portfolio of Modelo brands, up just 2.7% off-premise, even while draft giving Corona Light on-premise biz a boost.  (Tsingtao brand sales actually down off premise).  Pacifico up 8%, Negra Modelo up 6%.   Modelo Chelada is 60% as big as Negra Modelo, representing just a little more than 1% of Constellation volume, but 10% of growth. And even Victoria, tho small, has returned to robustly positive trend; up 50,000 cases, 29% YTD thru May 25.   

More than usual, speakers at our INSIGHTS Spring Conference last week were willing to predict future developments, tho with standard caveats, hedges, grains of salt, etc.  Short term first: While US volume picture still cloudy almost halfway thru the year, 2014 dollar sales remain healthy, especially off premise.  Outgoing BI economist Lester Jones’ forecast for the year?  Weather so far “has not cooperated,” “not much” improvement in unemployment and pricing “still skewed,” with beer prices outpacing wine and spirits.  So, while his early volume forecast was for -0.3% at low end, +0.9% at high end, right now he’s between -0.5% and +0.5%.  Either would be an  improvement.

Consultant Mike Mazzoni more specific and more skeptical.  He sees 2014 shaping up as “mirror image” of last yr, with industry off 1-1.5 mil bbls.  AB and MC likely to shed another 3-4 mil bbls, 2-3%, in Mike’s view, and imports down a half-mil bbls.  Gains in craft (high single digits, he lowballs) and others (Constellation Brands Beer, Yuengling, Mike’s) will add approx 3 mil bbls.  BA economist Bart Watson more optimistic about craft; he expects another 18% gain for segment. 

Lookin’ farther out, Mike projected all the way to 2020 and sees industry shedding another 14 mil bbls (about 7%), with AB and MC continuing to decline but not losing much share.  Some of Mike’s thinking: 1) AB hasn’t built brands and new products won’t offset extended Bud Family declines; 2) MC “seriously challenged” by Lite and legacy Miller brands; 3) nuthin’ out there to offset “inexorable continued decline” of mega brands; 4) distribs’ expansion to other bevs, including non-alcs, reduces focus on and exacerbates mega band weakness.  Gotta note Mike not alone in pessimism about overall trend and mega brand futures.  Both Jim Koch and Bill Hackett expect big mainstream brands to continue decline.  (MC innovations veep was sole voice to claim “leaky bucket” can be “refilled.”)  And while Lester didn’t go out past 2014, Bart expects that “downward trend” for “pure beer,” excluding cider and FMBs, “to continue for a while.”  He sez too that following repeat high double digit gain in 2014, craft can “slow” to 10.5% gain in following yrs to reach BA goal of 20 share in 2020.  

Actually, kinda hard to separate beer from gas.  Unless latter is in liquid form being sold in state of Pennsy.  While privatization talks popping again in biggest control mkt in Pennsy, biggest current obstacle (in long line) appears to be whether to expand beer sales in c-stores, most of which also sell gas.  C-store chains itchin’ to add beer, natch.  But Pennsy’s home D retailers don’t want state to add that kinda competition.  So there’s “major point of tension in this year’s Pennsylvania alcohol debate,” according to PennLive.  Dems, generally against privatization want to keep “gas prohibition” in any bill.  Even some Repubs, who generally support privatization, considering “buffer zone” to prohibit c-store sales within certain distance of existing home Ds. (So home Ds would be elevated to similar status held by schools and churches?)  Meanwhile, all of the other stakeholders – brewers, wholesalers, wine/spirits, supermkts, state union workers, etc – still have their own pet tweaks and/or objections.  Lotsa amendments floating around, as well as lotsa lobbying $$, as Pitt Post-Gazette detailed recently.  AB told paper it wants any privatization to “ensure parity for beer,” if wine sold in grocery stores, for example.  And of course distiller assn DISCUS pushing for “level playing field” for spirits if privatization happens, as its economist wrote in op-ed for Tribune-Review.  And there’s still chatter that franchise reform is in the mix.  Key remains getting 26 votes in Pennsy Senate.  Right mix of amendments not yet cobbled together to get to that number, sources say.     

Meanwhile, privatization supporters dropped efforts in Oreg to get issue on this yr’s ballot.  After spending about $2.5 mil to get ballot measure (including hefty contributions from DISCUS), according to The Oregonian, lead backers called off initiative process earlier this month.  Recall, two measures proposed, only one got approved and backers liked the other better.  Plus, they only had 2-3 wks to gather signatures.  So they backed off, but promised to return.  Interestingly, DISCUS put out statement supporting the decision, as it didn’t like specific ballot measure. DISCUS remains neutral on privatization, it sez, but after staying on sidelines in Wash, “we concluded that we must engage in any privatization effort that is moving forward… to ensure” consumer and distiller interests are served.  

“I’ll challenge” that “what’s in the bucket can’t grow,” MC VP Mktg of Innovations & Insights, David Kroll opened during innovations panel at this yr’s BMI Spring Conference.  That’s a response to Jim Koch’s depiction of mainstream beer’s “leaky bucket” of volume to be had (see yesterday’s issue).  It’s “too easy to say…they’re [premium and premium lights] never going to grow again.”  “Middle income families have not recovered” yet from the recession, sez David, “so their disposable income has shrunk.”  “What will happen to premium, premium lights when that middle tier of our economy improves?” he asked.  Ultimately “that bucket will get refilled.”  He also noted “Miller Lite original can” providing a spark for the brand.  The “bucket is gonna be a tuff one to refill,” said HUSA VP of Consumer/Mkt Intelligence, Steve Tramposch.  Yet both agreed that the overall industry is healthier currently, despite volume declines.  “It depends on how you look at it,” said Steve.  As consumers trade up more frequently “we see dollar sales increasing,” and “people are spending more money today than ever on beer.”  Another reason why David believes “premium and premium lights aren’t dead” is that “you’re going to increasingly see innovation happening within those spaces to bring to market beers that are less filling, lower calorie, lighter carbs.”  When asked “are you willing to replace your soft main brands with your new innovative brands,” during Q&A, David said “we will be coming to market with things that should replace that (less productive) space.”  As example, “Redd’s will continue to scale… In the immediate term is it directly off-setting those (main brand) losses? No.  In the longer term can they? Absolutely.” 

In last issue of our flagship Beer Marketer’s INSIGHTS we featured an article on theme that tho deals haven’t happened, some big ones were very much in air, like ABI buying SABMiller and Pabst selling.  Since then, atmosphere even more rife with these possibilities.  Following Financial Times article earlier this week (see yesterday’s Express), many more analysts are weighing in on merits of deal for ABI to buy SABMiller.  And Molson Coors stock near all time high on potential for it to acquire rest of MC in wake of ABI-SAB.  “That [deal] puts Molson Coors in a very strong position to buy that 58 percent at a very favorable price,” Societe Generale’s Andrew Holland told Bloomberg. 

Meanwhile, two private equity/family office firms reportedly at points close to Pabst purchase.  But restless Pabst owner Dean Metropoulos keeps moving in different directions. Dean “will consider purchasing” the Buffalo Bills, a spokesperson told the Rochester Democrat and Chronicle today.  

MC brought a whole lotta innovation to the table in 2014, with Fortune, Smith & Forge and new Redd’s variants.  “We’re on pace to hit a 1 share (of $$] with Redd’s,” noted MillerCoors vp of mktg innovation & insights, David Kroll during innovations panel at this yr’s BMI Spring Conference.  It’ll be “1 mil bbls in a short order, especially with Wicked (brand),” about to enter the mkt.  Redd’s “still not where we want to be in terms of a spirits perspective”: currently “35% [of its volume] comes from wine,” 50% from outside beer, and it’s “heavily over-indexing” with “millenials” and “multicultural.”  Not to mention, 40% of Redd’s volume is from women.  “Same thing for us” with Desperados and Dos-a-Rita each getting 50-60% of its biz from wine & spirits, noted HUSA veep of consumer/mkt intelligence Steve Tramposch.  Meanwhile, Miller Fortune also sources half of its volume from wine & spirits, but over 30% of new volume “is coming from economy; a huge amount of it’s coming from PBR,” noted David.  Fortune is a “highlight for us,” and “a really good example of how to go to market.”  It “completely trumped” previous launches straight outta the gate with “80% off premise distribution in a couple of weeks.”  To date “over 2 mil cases have gone out the door.”  With such broad initial distribution and big orders, in some cases too much beer out there initially.  “Did we pick up some inventory? Absolutely,” acknowledged David (it paid for 100%).  MC inventory “unbalanced” in “pockets of country.”  But “we driving trial and repeat, and our trial and repeat is really solid on this, so we’re still bullish…. Unlike line-extensions” such as Bud Light Platinum, “we’re building a new brand,” and “we’re in this for the long haul,” added David.  

Then too, it’s easy to see (especially looking overseas)…cider has the potential to scale to a 4-5 share equivalent,” sez David.  Cider nearly 20 share in UK, added Steve.  Gotta note, it’s barely 1 share in US now (if that).  Still, MC is “aggressively trying to build leadership share positions in cider, and we’ve made a lot of progress in that recently with both Crispin…and Smith & Forge.”  “Mainstream cider will continue to scale,” as Smith and Forge “already number 2” US cider brand, sez David (it’s #5 in volume, #6 $$ in IRI scans yr-to-date thru May 25, so David presumably talking more recent periods). Cider is “basically 50/50” split between male and female consumers.  There’s a “big opportunity to better cater to women from a profile standpoint, occasion standpoint, and a packaging and sizing standpoint.”  Then you have “40-50%” of the US population “paying attention to their diets…and that over-indexes with women.”  All sorts of “flavor fusions,” and “mixology” as “burgeoning trend(s),” too.   It’s becoming “symbiotic” chimed in Steve, adding “beer cocktails” are “just in the early stages.”  “There’s a lot to be seen in the next couple years.” 

HUSA’s playing in these spaces with launches of Dos-a-Rita, Amstel Radler, and Desperados this yr, testing regionally in just a small handful of mkts before looking to go natl.  Thus far HUSA’s receiving “good feedback” all around, and “might see Amstel Radler expand further in the (perhaps near) future,” said Steve.  Then too, Strongbow seeing solid growth, Steve acknowledged, but still in its “early days.”  Recent decision to re-create the Strongbow brand with “new liquid” and new packaging caused a bit of “backlash” from consumers, Steve noted.  However “upside in Gold and Honey is much longer than the downside,” and “we made the decision to move forward.”  Currently Strongbow is 3.7 share of US cider, according to IRI, and “seeing a rate of sale up 40% in the first month” since the change.  HUSA is “focused on gold…. This is where the long term win is going to be,” sez Steve.  

The self-proclaimed “Food Babe” struck again this week, calling for AB and MC to post the ingredients in their brands on their websites via a petition on her own site.  The petition doesn’t call for any regulatory reform, simply “transparency” in the form of disclosing ingredients on brand websites.  Picked up by USA Today and the Chicago Tribune early and shared on social media with the hashtag #MysteryBeer, the petition gained over 40K signatures in a little over a day.  Both AB and MC responded to at least some requests from national ABC News last night (piece is currently #3 “Hot” article on ABC’s site).  Media paints the “Babe” as a crusader who “thought beer was just hops, water, yeast, malt and barley” (outing her own ignorance or a reporter mis-hearing “malted barley”?).  

Tho blogger Vani Hari, founder of Food Babe website/persona/brand, has trouble with ingredients like high-fructose corn syrup and artificial flavorings and dyes (more likely to appear in FMB brands than major flagship lagers), reports gave other possible additives much flashier, offensive-sounding names like “fish bladder and antifreeze ingredient” for headlines.  But “fish bladder” refers to isinglass, a powder in fact made from fish swim bladders that’s been used by brewers as well as winemakers as a clarifying agent for at least a century, likely much longer.  It doesn’t appear in the final product, but still would keep vegetarians and particularly vegans away.  In many commercial cases it’s been replaced by products that do the same thing better.  That antifreeze ingredient is propylene glycol, “generally recognized as safe” by the FDA even though in very large doses it can be toxic.  And there’s the rub.  Each of these ingredients is federally considered safe to consume, so certainly any brands using them would comply with federal requirements, as spokespeople for both AB and MC told ABC News.  They also provided the network with as much information as possible without actually providing the information Hari seeks.  

Recall Hari’s long but shallow dive into supposed “Shocking Ingredients” in beer last summer (see Express Vol 15, #90), on which this petition builds.  Just prior to that “research,” her petition to convince Kraft to stop using a food dye in its Macaroni and Cheese brand hit almost 300K signatures.  That campaign resulted in meeting with Kraft execs and eventual removal of said dye.  Her other major “success” was getting Subway to remove a compound sometimes used in yoga mats from their bread.  Similarly, the offending compounds Hari highlights in the beer petition may not be harmful but her characterizations of them easily create consumer uproar.  Even Michael Jacobsen, longtime director of the Center for Science in the Public Interest, acknowledged that propylene glycol is a “harmless food additive” and “she exaggerates” for ABC. “But who cares,” he added (Hari’s initial post is largely based on a CSPI book from 1982).  Indeed, exaggeration, fear mongering and semi-truths in the name of advocacy largely get a pass these days.  That’s especially true if, as in this case, the advocacy boils down to information seeking.  Fighting transparency in 2014 is often a losing battle, and the more time spent fighting it, the more ammunition is provided to the opposing side. 

Several key topics wove thru multiple presentations at our Spring Conference yesterday; soft overall industry volume, fate of mega brands, ongoing growth of craft and more.  Different speakers brought (very) different perspectives.  For example, consultant Mike Mazzoni pegged overall softness to significant volume lost by megabrands in recent yrs that can’t be made up otherwise.  Mike still convinced that those losses not only inevitable, but explained by product life cycle theory as US consumers “don’t drink their father’s beer.”   Therefore, trends have little (or nothing) to do with familiar economic, weather, other factors often used to explain fact that beer shipments about 8 mil bbls below peak.  Interestingly, Mike, Constellation Beer’s Bill Hackett and Boston’s Jim Koch each declared that megabrand volume losses – specifically each of top 3 premium lights, Bud and Heineken – will continue in coming years.

But outgoing Beer Inst economist Lester Jones defended more traditional approach.  Indeed, he used one of Mike’s slides to show how downturns for key megabrands timed closely to economic recessions.  Then too, Lester had powerful slide showing continued weakness in “young male labor force participation” now at lowest level since post WW II and clearly unrecovered from most recent downturn.  There are “still over 3.6 million young males with reduced or no income,” Lester pointed out. He also pointed to major pricing trend gap that opened between beer, where CPI rose significantly since late-2008/early-2009, and wine/spirits where pricing flattish. 

Several speakers mentioned how millenials far more promiscuous drinkers across different alc bevs than previous generations.  Gallup poll shows 71% of young males (age 18-29) preferred beer way back in 1992, wine/spirits at 13-14% each.  Fast forward to last yr and beer preference among those young men fell to 41% vs 24% for wine, 28% for liquor.  Lester even defended a “weather effect,” correlating avg temps in 2013 (lower than avg) and 2012 (higher than avg) with beer trends.  “Everything” affects beer trends, said Lester, not single factor.

BA’s economist Bart Watson, suggested perhaps too much attention being paid to volume in first place.  He cited continued health in dollar sales and avg case prices that’s run thru recent softness. Dollars should be focus of industry health, not volume, Bart suggested.  In his view, over last few years “old business model of making fewer dollars on volume has shifted toward a high-end model” and “not just craft, but for the big guys too….  Volume used to be a good metric because it also said something about profit.  It doesn’t in the same way it did 5-10 years ago.”  Proof’s in the trend that AB and MC shed almost 18 mil bbls since 2008 but boosted profits by over $3 bil.  Other speakers noted record high profits for brewers and wholesalers alike.  Another place where perhaps too many eyes trained, in Bart’s view: cider.  Tho specific companies with significant cider bizzes gotta be engaged, Bart noted that entire segment (in YTD IRI multi-channel) sold slightly more dollars than Bud Ice, significantly less than Natural Ice.  And how much do you hear about those brands?    

One-and-a-half interesting mysteries.  Lester showed slide that draft volume has been basically stuck at 20 mil bbls for decades, even with explosion of brewpubs, taprooms, etc.  Total draft biz 20.5 mil bbls last yr, -2.1%.   But Bart pointed to a 600K bbls of growth from brewpubs/micros last yr alone, most of which is draft (lotsa taprooms, growlers, etc) and basically untracked by scanner, other data sources.  Then too, as we reported in last Beer Marketer’s INSIGHTS, available reporting-state data indicates AB and MC draft has gotten hammered in recent years, acknowledged by execs there as each brewer sharpened on-premise focus, upped investment.  Same slide from Lester showed vast expansion of can biz over decades. And that’s continued. In Q1, while both import/domestic bottle biz and draft biz down, domestic can biz shot up 3.5%, import can biz up 5.8%.  Bottle biz trends same period: -3.9% and -6.4% respectively.