Large scale domestic beers continue to lose out to wine, spirits, craft and now hard ciders too, according to new report from Mintel.  Asked why they have cut back on domestic beer consumption, 20% of Americans said it was “because it has too many calories,” while 15% “believe it to be unhealthy,” according to report.  Over last 6 mos, 53% of US consumers said they have consumed liquor while wine and domestic beer each were named by 52%; 45% said they drank an imported beer.  Approx 22% of Americans said they drink wine instead of domestic beer and 18% are choosing liquor instead.  Meanwhile, “craft beer continues to make inroads,” with 51% of key 25-34 yr old age group reporting they choose craft because they “feel that smaller producers make better quality products,” per Mintel.  A growing thirst for variety is behind growth of wine, spirits and craft, according to survey.   “Nearly 55% of all beer drinkers say they like to try new alcoholic drinks like craft beer or hard cider” and 18% of 22-24 yr olds report drinking more hard cider in last 6 mos, “the largest increase amongst any alcohol type across all measured age groups.”  

With Super Bowl ads running over $4 mil per 30-seconds to reach audience of around 100 mil, there are plenty of industry skeptics “rightfully” wondering if it’s really worth it, wrote Forbes.  With so much at stake, “companies committing such huge dollars are being forced to work overtime to prove the benefits they will see will outweigh the costs,” added mag.  AB, the biggest spender of all, has understood that lesson for a while now, pointed out Tony Ponturo, AB’s former VP of Global Media and Sports Mktg.  “You can’t just drop (a few million dollars) on advertising around the game and expect to see an immediate impact to your bottom line,” noted Tony.  “Sponsors still have to leverage their assets properly and that means maximizing the interaction they’re having with consumers,” he added.  This yr, AB’s doing that with Bud Light Hotel, a “massive” cruise ship docked off Manhattan’s West Side.  It will not only host a series of concerts and “house thousands of football fans, Bud Light partners and VIP’s,” but serve as the “center point for distribution of tens, if not hundreds of thousands of AB beverages throughout the weekend,” per mag.  “We started the concept of a ‘party place’ during the 1996 Olympics in Atlanta,” said Tony.  “This year’s Bud Light hotel is just the ultimate manifestation of what originated as a simple hospitality tent.”  

AB Adds Another 30-Seconds to Super Bowl Ad Time  AB decided to run a 60-second version of “Hero’s Welcome” Bud ad for Super Bowl instead of 30 secs, it said today.  So it will have 4 mins of ads during game.

 

Bud’s Past Ads Scoring Well Today  NBC’s Today show is running contest this week to pick the Best Super Bowl Ad of All-Time, and AB’s scoring quite well with 5 of 8 remaining ads being voted on.  Besides 2 Clydesdale spots, the “Bud Bowl”, “Wassup,” and “Frogs,” are among all-time faves.    

Mike’s Hard Lemonade hit 20 mil cases for the first time in 2013, said founder Anthony von Mandl at BBD’s Summit yesterday, despite large amount of new product intros from AB and MC. He saw AB’s Ritas as “incredible endorsement” of FMB potential by world’s largest brewer; Anthony thinks FMBs could become several times their present size in yrs ahead. Corporate parent Mark Anthony in US and Canada is a “fast growing $600-million business, without outside financing,” noted Anthony, including acclaimed winery (Mission Hill), craft brewery, an alc bev importer in Canada and more.

For 2014, Mike’s expects to return to “double-digit growth and not just modest double-digit growth,” but “quite significant double-digit growth” in US, he said. It has refreshed packaging, will have 8-oz cans, is coming with new flavors, now has a natl accounts team of 50 people in place (“that’s the kind of investment we’re making”) and has solidified its mgt team under new prexy Phil Rosse. This is Mike’s 15^th Anniversary yr, it has sold a cumulative 187 mil cases-to-date and it is expecting "big" yr. 

AB’s home state shows basically what’s happened in US beer biz in recent yrs, only more so: soft overall volume, with top 2 down, Crown gaining and All Others – mostly craft, of course – flyin’ off the shelves.  Total beer biz down 133,000 bbls, 3% in Mo last yr; that’s double overall dropoff pace.  AB shed another 122,000 bbls, 4.5%, sharper than its loss across US.  But AB still has over 61 share in Mo, even while losing 0.9 in 2013.  Meanwhile, MC took about same 3% hit in Mo as it did nationally.  It has 24.4 share in Mo, so top 2 still have nearly 86 share there.  Crown gained 6%, HUSA up 4% last yr, but those 2 combined for just 3.2 share in Mo vs 10 share in US.  Very modest import presence is biggest difference between Mo and US.  And Pabst drop steeper in Mo than overall.  But All Others up 7%, gained 0.7 share to 8.7.  Craft was about 2/3 of Others’ biz in Mo, up 22,000 bbls, +10.5% in 2013.  Held 5.6 share, just a point or so behind natl avg.       

Five-yr trends also revealing.  Total biz off 300,000 bbls, 7%, again slightly sharper than 4% decline in US since 2008.  AB dropped 358,000 bbls, 12% in home state vs 10% overall drop since formation of AB InBev that yr.  AB lost almost 4 share there.  MC down 7% but held share since JV formed.  Pabst down 6%.   Crown up 14%, HUSA flattish, but again very modest shares for those 2.  All Others picked up 126,000 bbls, 52% and grew from 5.3 to 8.7 share since 2008.    

Speaking at Beer Business Daily’s Summit yesterday, Crown ceo Bill Hackett noted Modelo Especial “broke through” 50 mil case milestone in 2013. That's led by its fiery growth in Calif. But Modelo Especial is growing across all demos, said Bill, and he sees “a lot of white space.” Following strong 2013, Crown “started the year off with a bang,” Bill said, adding that “west coast weather served us very well” and “we expect our momentum to continue.”  As further evidence of Crown’s fast start, a large SoCal distrib up 35% in Jan, wrote CLSA’s Caroline Levy today. (Editor’s note: that’s reportedly at least some Reyes operations, so off a really big base.)  Several distribs in SoCal and Southwest also flying with trends approaching that. Total Crown reportedly up double digits for mo.

Caroline’s Crowin’ About Crown’s “Compelling Opportunity” Too; “Long Runway” for Distribution Gains On-Premise  CLSA analyst Caroline Levy initiated coverage of Constellation on positive note, concluding, like others, that “transformational beer acquisition” bodes especially well for the co.  Indeed, in handful of reports over last week or so, she points out Modelo portfolio outperforming overall beer biz, that Crown has “culture of cooperation” with its “gold” network of distribs and a CLSA on-premise survey shows “a long runway for distribution gains” for Modelo brands in that channel. 

Caroline cited comments from Crown prexy Bill Hackett and other execs from BBD’s Summit and post-session talk in Phoenix yesterday.  Bill said build-out of Piedras Negras brewery on track (ultimately scalable to over 25 mil bbls, nearly twice current volume sold in US).  He doesn’t expect shortages this summer and supply agreement with AB InBev going fine since ABI “likes the efficiencies of producing more volume.”   Modelo Especial Chelada line extension off to good start with per-distrib velocity “in line with expectations” and brand’s getting more distribution points than expected.  Distribs “relieved” that Crown got entire biz and focused on growth.  On mktg, Crown will continue to focus efforts on summer selling season, soccer and boxing, boosting digital, natch.         

NY’s Vukelic family is expanding its beer biz again. Saratoga Eagle in upstate Saratoga Springs has deal to purchase 1-mil case AB-NAB-Heineken house Bartyzel Inc in contiguous Amsterdam mkt. With operations in northern and western NY, Vukelic family now near 15 mil cases. 

Open barely 3 months now, SF's Cellarmaker Brewing plans to be predictable in its unpredictability. In departure from marketing orthodoxy, brewer in city's South of Market (SoMa) nabe plans to have "no flagship at all," asserted co-owner Tim Sciascia, but rather pursue experimental whims inspired by exotic hop varieties, spontaneous fermentation and the wine and spirits barrels it's able to get its hands on for aging. During recent visit by CBN, offerings ran gamut from obscure but "reemerging" grisette style (under name Coquette) to J-17 Pale Ale named for new J-17/63 hop out of South Africa. So far, biz has been brisk enough to prompt co to pull out of some of its East Bay keg accounts in order to meet demand on home front, attesting to success of strategy so far.

Brewery is located in former auto body shop outfitted with dozen taps and communal tables in SoMa area that's emerging as design district and is likely to get further burst of upscale energy as relocation of Twitter accelerates revival of long down-at-heels Market St not far away. Its youthful founder Connor Casey had worked as server at Press Club wine lounge and did stint - like so many plying Bay Area beer biz these days - behind counter at SoMa bottle shop City Beer Store. (Store provided not just experience but investors from its ranks of regular customers.) Casey's partner and brewmaster Sciascia had helped conduct tours at Boston Beer while studying classical sax at New England Conservatory, then spent 5 years at Marin Brewing, across bay from SF in Larkspur. Finding they were "on the same page beer-wise," as Tim put it, duo started talking about collaboration in Sep 2012 and were brewing exactly a year later, with help from a cousin of Casey's who expedited construction as general contractor. Tasting room opened in Oct. Brewery's got 12.5-bbl system, is adding fermentation capacity, and anticipates doing 800 bbls in first year. It's also just embarked on barrel-aging program with view to hand-bottle some of results.

Tho they sell kegs to handful of good-beer accounts as far down peninsula as San Jose, their aim "is to sell as much through the front door as we can," both by the glass and via growler fills, Tim said. To encourage sampling, pricing structure includes 5-oz pours at $2.50, half pints at $4.50 and pints at $6, even for ingredient-rich or high-gravity items like Vastness of Space Imperial Stout (10% ABV). Among brews offered on day of visit, J-17 was single-hopped item from one of only 2 brewers to obtain new hop (other was La Cumbre in NM) while Coquette was wheat-heavy grisette, variant of saisons. Lightly smoked Coffee & Cigarettes porter employed nearly 2 lbs per barrel of Kenyan Keratu coffee from Sightglass roaster in SoMa. And while partners are happy to accede to many customers' preference for hoppy beers, they vary the menu, from Simcoe Galaxy IPA (at 65 IBU) to Jagged Little Pale Ale (45 IBU), which melds Simcoe, Centennial, Mosaic, Summit and Australian Galaxy hops. Indeed, Simcoe Galaxy rates as most popular IPA - but 3 months into brewery's run, they'd only produced it 3 times, Sciascia noted with satisfaction. Next up, to keep customers guessing, was to be Southern Passion IPA, single-hopped item employing yet another rare South African hop variety.  

Staking out identity as brewer of organic ales based on yerba mate herb was enough to make 7-year-old MateVeza an outlier in craft world, but now its biz model has evolved in another offbeat direction: to ease consumer education burden, it's pulled out of most out-of-state markets in order to build more extensive retail footprint, which soon will number 3 cafes in Bay Area. Founder Jim Woods buttressed his 2-year-old original location, Cerveceria de MateVeza, in SF's Mission District, by landing 2,300-sq-ft site on Telegraph Ave in Oakland that he's equipping with 40-bbl system, then opportunistically added compact store on Polk St in SF's Russian Hill nabe when that space became available (no on-site brewing is planned there). Tho Woods himself didn't make comparison, it's kinda like what Starbucks did to elevate knowledge about good coffee, eliminating middle man to operate its own stores where it could control message. "It's not always product innovation, but path to market" that wins day, Woods noted during recent CBN visit to Mission District cafe, which was moving lotsa beer and artisanal empanadas to Sat afternoon crowd.

Yerba mate, of course, is caffeine-rich rainforest herb that's indigenously drunk as hot infusion via gourd and metal straw (called "bombilla"), ritual adopted by US users on college campuses and elsewhere. It's also sold in bottled form under Guayaki and other brands. Since the caffeine derives naturally from ingredient, MateVeza is like coffee-based beers in not running afoul of govt regs that a few years back forced reformulation of Four Loko without caffeine. Its yerba-mate-based beers typically carry 60 mg of caffeine per 12-oz bottle, equivalent to half cup of coffee.

Venture began when homebrewer Woods drank some yerba mate, followed that with Sierra Nevada beer and was surprised at how well flavors went together. Adding it to mash yielded intriguing beer, so he launched MateVeza 7 years ago as contract brew out of Mendocino Brewing in Ukiah; by now, it's offered in kegs, 4-packs of 12-oz bottles and 22-oz bombers with label imagery sporting colorful pirate-like character drinking out of bombilla and gourd. Eventually Woods found himself wanting local base, so in Nov 2011 he opened retail beer-and-empanada café with 20-gal system at prominent Mission District site, at NW corner of bustling Dolores Park. Everybody enlisted to work the bar there has brewed at least a few batches, and menu board flags whether it's Matt, Sam, Brendan or Jim (or Ukiah site) who created item. Matt is Woods' partner/beer "curator" at CdM, Matt Coelho, Stanford-educated engineer who honed beer smarts at cutting-edge SF operations like City Beer Store and Church Key.

Store's direct link with consumers led Woods to rethink broader strategy. "It's been difficult to educate sales reps and retailers," he said. "It's more hands-on here, and we sell more." When ownership changed at his Wash and Oreg distribs, he pulled out of those states, reducing footprint to just Calif and Colo. Even within Golden State, he's exited SoCal to focus on Bay Area, where brand goes out to limited retail base via Morris Bros. (In Colo it relies on Elite Brands.) Operating 3 stores should offer more direct link to consumers and make biz more predictable. "I want to get to a point where we brew a batch at Mendocino and have it all spoken for," Woods said. He noted that earlier career in commercial real estate proved unexpected advantage in executing new vision.

During CBN visit, CdM was pouring 6 MateVeza beers plus guest beer from Evil Twin, and offered additional bottled beers in cooler, some for on-premise consumption, others to go. MateVeza stalwarts like Yerba Mate IPA and Yerba Mate Gold were joined by Morpho, to Woods the co's most interesting brew to date: technically, a New World gruit employing some wheat malt and yerba mate, hibiscus flowers and bay leaves, all organic. Non-yerba-mate offerings included traditional English-style stout called Flashman and Walt altbier. CBN also was invited to sample forthcoming entry called Woods Candy Cap Ale devised with local blogger William Bostwick using Madagascar cacao beans from SF's Dandelion Chocolate, wild-foraged candy cap mushrooms and maple syrup. It all made for mix of approachable and experimental brews that, explained patiently to drinkers over 3 counters around Bay Area, should build following for brand, Woods believes.  

Craft beer becoming real "liquid gold" these days, as there's real money in the libation, as well as in tea and cider. Especially if you're the CEO or chairman of the #1 craft brewer whose sales and stock price have soared. While northeast was in deep freeze over last 2 weeks of Jan, Boston Beer prexy/CEO Martin Roper kept warm by exercising stock options. From Jan 13 thru Jan 31, in 14 trades, Martin exercised options on 140K shares, acquiring 10K shares per day, at avg price of $146.50 and selling 10K shares/day on open market at avg price of $215 or so. When he started, Martin had options of 151K shares. That was down to 11K by end of mo, but difference between his option price to buy and sale prices added up to $9.6 mil. And Martin clearly has oppy to build option stash going forward.

Other Boston execs exercised and sold, but not to same degree. For example, Chairman Jim Koch swapped out 25K shares of his Class B stock for 25K shares of Class A back in mid-Nov. Over next 2 mos, Jim sold approx 11K of those shares for avg price of about $237 per, for $2.6 mil. And he still owned more A shares in mid-Jan than in mid-Nov (32.5K vs 20K).  

Proposed Hawaii Senate Bill aims to "support the growing craft beverage industry in Hawaii" by considerably reducing gallonage tax on beer, wine, and liquor produced by small manufacturers. Bill defines "small brewery or brewpub" as one that "produces not more than sixty thousand barrels of beer per taxable year," aligning state with federal small brewer cap. If bill passes, all beer produced by small breweries or brewpubs would see tax reduced to $0.23 per gallon. That's a $0.70 per gallon tax reduction on "beer other than draft beer," and a $0.31 per gallon reduction on draft beer. This act would "take effect on July 1, 2014" and would apply to taxable years beginning in Jan of 2015. It doesn't specify whether brewery has to be local to Hawaii, and doesn't yet define annual production cap for small wine & spirits producers, which would also receive tax break. Maui Brewing founder Garrett Marrero told Senate committee he pays "more than four times what his competitors in California pay and more than 10 times what he would pay in Oregon," reported Associated Press. Hawaii is home to 10 craft breweries "and eight more are preparing to open in the coming year," Garrett added. Meanwhile Tim Lyons, a lobbyist representing ABI, submitted testimony stating "we all need relief."

In Fla, new bill proposes sweeping changes to taproom, brewpub and other brewer-as-vendor licensing, regulations. Bill also covers guest taps, collaboration beers, tastings, growler sizes and self-distribution. Hearing on tap for next week and amendments very likely, we hear. Lotsa jockeying as big brewers, small brewers and 2 different distribs assns review proposed changes. More to follow as bill takes final shape.