Beer Marketer's Insights
Why 1 Regulator Likes 3-Tier; Craft Issues Wide-ranging panel with 4 state regulators included comments on need for separation of tiers. Nebraska's Hobert Rupe cited 2 reasons he likes separate supplier/distrib tiers: 1) eases tax collection, tracking volume; 2) in situations like 4 Loko where product had to be removed, easier to work with in-state distribs he has relationship with rather than out-of-state suppliers he doesn't. As each regulator described "what's new" in their states, 3 of 'em included craft-centric issues: raising cap for self-distrib in Ill, growler issues in Calif and Neb. NM going through "complete overhaul" of alc bev regs; legislators "seek to modernize," said Jennifer Anderson of NM ABC. That opening of Pandora's Box historically a recipe for untold mischief.
In Ill, bill that banned big brewer branches included language about suppliers' "control" over distribs. That prompted liquor commission to explore "how invasive" brewer-distrib agreements are, genl counsel Rick Haymaker said. "We think certain things cross the line. Others are fine." Review did not come from distrib assn (ABDI), Haymaker pointed out, but internally. Turns out ABDI, Beer Inst and Illinois Craft Brewer Guild spoke at recent hearing, telling comm that franchise law protects distribs and covers any control issues, that there's no need to act. Still, ILCC could end up preparing "advisory" as Va and Calif did back when MC intro'd new contract in 2008.
All Policies Are Local? While NBWA and others like to talk about primacy of state-based regulation of alc bevs, "trend is more local control and less state control," at least in Calif, ex-state ABC director Jerry Jolly said. Public health advocates embrace local restrictions as more achievable/effective, but local control creates problems of "consistency" of rules and rarely discussed but real oppy for "corruption." In Chi, state liquor comm takes "second place" in licensing to city officials, said ILCC's exec director. Retail consultants Michael Brewer and RJ O'Hara have even less patience with how "ad hoc," "NIMBY" and other local groups exploit zoning and other laws to "stifle" licenses, raise costs and limit operations. They gave examples of San Fran retailer "blackmailed" into buying 2 licenses and canceling 1 to achieve a "net reduction" in the nabe. Elsewhere, "deemed-approved" statutes allow localities to place restrictions retroactively on existing licenses and "preservationist groups" in Philly seek "pre-signed agreements" with new licensees to restrict activities. RJ and Michael also supported the corruption warning. "I don't see corruption at the state level," said RJ, but there is "petty corruption in local areas." Mark Arabo, prexy of assn that represents indy stores in Calif, said his assn is seeking state pre-emption over locals in some instances and filed lawsuit to limit local groups. "The smaller the city is the more corruption" is likely, he insisted.
Pot Parallels Continue Apace During very first presentation at CLE, atty Carrie Bonnington mentioned several times that we may look back on marijuana regulation in US as similar to alc bevs. For example, WA liq control bd is regulating alc bevs and had Calif legalized pot, state ABC would have been regulator. She also pointed out that during Prohibition there was lotsa abuse as docs prescribed spirits for myriad ailments beyond any rational connection, just as docs in medical marijuana states are accused of now.
Since Calif is "such a trendsetting state," as Luiz said, that has to be cause for concern for AB. AB lost 1.1 mil bbls, 12% in last 4 yrs there and shipments down 3% again in 1st half this yr. AB has gone from a peak of 50 share in early 90s to under 40 (39.6) in 2012. In no other large state has AB suffered comparable share loss.
The issues are principally, just as Luiz noted, the rise of craft and Hispanic consumers. And these challenges ain't going away anytime soon. Modelo Especial is on fire in Calif. Its $$ sales up 30% in Calif IRI foodstores thru Aug 25. And Crown just introducing Modelo Chelada, aimed squarely at AB's highly profitable Bud and Bud Light Chelada brands. Then too, San Diego, near where CBBD meeting held, an epicenter of craft phenomenon. The city has 75 operational brewhouses and 39 in planning, according to Westsider SD mag. INSIGHTS visited Stone's World Bistro at Liberty Station, a vast food/drink emporium, which seats 800 and was full without a Bud in sight. There are currently just about 400 small breweries in Calif alone. Yet Luiz emphasized AB's view that ABI "always lives up to the expectations of our consumers" and "we believe in making great beers…. Every one of our brands is a craft beer. We care about each one of them."
Luiz also praised the state of brewer/distrib relations. "We are very impressed with NBWA," said Luiz. "We are glad we are beyond" the CARE Act. He reiterated: "Let me be clear that we as beer producers are not the ones trying to change the system." Tho AB and NBWA "on opposite sides on some things… what we can agree on, we collaborate." The beer biz "has a lot more leverage when we do that." Anyway, the "biggest threats are from outside, not inside," Luiz added. He talked about wine and liquor and "their attempt to go into our space." Beer needs to "reverse the trend of equalization." Beer Institute has made "some progress" and "learned a lot" with Brand Beer. "You'll see more and more coming from" Beer Inst. He criticized as "cause for concern" spirits cos marketing cereal, bubble gum, fruit loops and gummy flavored products.
Curtailed Coupons Could Fly in Calif When asked by an MC distrib if ABI would favor a Calif bill like the one in Fla that addressed couponing, Luiz said: "We see that [Fla bill] as an improvement. We need to level the playing field." Previously, coupons could be used "in the wrong way," said Luiz, with "big frauds." So if a Calif bill "helps improve the business and level the playing field, we will be in favor." Luiz added: "We follow the law…. Anything that eliminates unnecessary costs, excessive discounting, we'd be in favor." (Editor's note: These comments occur against backdrop where there's a lot of noise about excessive use of "barbucks" by AB branches and others in parts of Calif.) At presstime, what could be the 1st full-fledged price hike in Calif in years is mostly holding, tho last year's was ultimately rescinded some months later. In Calif, AB already pulled back on some of its front line increases in the hi-end, notably Stella.
The big volume winners continued to be Crown and Boston Beer. Crown volume up a striking 11% and Boston up a smokin' 34.5% for 13 weeks. The two cos were by far the industry's biggest $$ share gainers too: Crown up 0.6 share and Boston Beer up 0.4. HUSA scored 2.9% volume gain for 13 weeks, an uptick from 1.9% yr-to-date. Yuengling back in positive territory; up 1.5% for 13 weeks. That's just about same gain pace as Pabst. Mark Anthony also up 2%. But Diageo and NAB remain down 8% for 13 weeks, about same as YTD pace.
Even as AB's top brand trends improved, $$ share loss steepened. Bud Light volume down 1% for 13 weeks and Bud down 2%. But they lost 0.9 and 0.4 share of $$ respectively. Still struggling Natty Light volume down 7.5% and dropped 0.4 share of $$. So AB's top 3 brands lost 1.7 share of $$ last 13 weeks. Bud Light Lime Straw-Ber-Rita grabbed 1.15 share of $$, but that wasn't enuf to offset the losses. And Bud Light Lime-A-Rita actually down slightly in share last 13 weeks. What's more, Ritas receding a bit with time. Lime-A-Rita down 17% latest 4 weeks. Straw-Ber-Rita shipped 696,000 cases for 4 weeks, a clear deceleration from 2.8 mil cases for 13 weeks. A big bright spot: Michelob Ultra, which grew volume nearly 8% and $$ 12% in period.
MillerCoors volume struggled more than AB's so far in 2013, but it lost less share. Coors Light up 1.6% in IRI for 13 weeks (tho still down overall YTD). But MC's #2-5 brands all down 3% or more same period. Lite down 5.1%, Key Light down 3.1%, High Life down 10% and Icehouse down 6.5%. As MC bets big on Miller Fortune, it seeks reinvention of Miller name. Almost all lead Miller brands suffering big losses in 2013. Miller legacy brands down 4.6% in IRI thru Sep 8. But that includes new entrants like Redd's, Third Shift, Batch 19 as well as fast-growing Leinie's. Lead Miller brands collectively down significantly more YTD: Lite -5%, High Life -11%, Miller Gen Draft -13.9%, Miller 64 -10% and High Life Light -22%. Miller name hasn't been ticket to success in recent yrs. But Redd's picked up steam; grabbed 0.55 share of $$ last 4 weeks, compared to 0.35 YTD.
Mexican imports won big over the summer. All Mexican imports jumped $$ sales 12.9%, $92 mil last 13 weeks in IRI. That was an even greater $$ increase than craft's 20% and $87 mil. Mexican imports climbed to 63 share of import $$. That's up 3.25 share of segment. Key to that growth: Modelo Especial and Dos Equis each gained more than 25% in $$$ last 13 weeks. But even Corona up 10% in $$ for 13 weeks. Trading up continued at blistering pace. High end segments gained over 3 share of $$ last 13 weeks to over 35 share of $$, while premiums lost almost 2 share of $$ and subpremiums lost 1.1 share. FMBs gained the most; volume up 30% and share of $$ up 1.3 points to 6.2. Craft volume up 18% for 13 weeks. Share of $$ up 0.8 to 6. Total imports gained almost ½ share to 15. Cider doubled and gained 0.4 share of $$ to 0.7.
Scanner data shows improvement off-premise over the summer too with trend reversing from negative to positive. For 13 wks thru Sep 8, volume +0.9% in IRI multi-channel + convenience data. That cut yr-to-date dropoff to -0.5% in these channels (more below). On other hand, on-premise trends worsened over the summer. Beer volume on-premise dipped 4.6% in Q3, GuestMetrics data showed, following 2% drop in Q2, 4.3% decline in Q1. So despite better summer, add it all up and US beer biz sure seems stuck in that -2% trend.
no. 17 table
| Jan-Jun 2013 Volume Trend - By Region 42 "Reporting" States | ||||||||||
| NE | MA | SE | ENC | WNC | WSC | Mtn | PAC | 42 Sts | Total | |
| AB | -2.5 | -5.0 | -2.5 | -2.4 | -4.5 | -3.1 | -2.2 | -2.9 | -2.9 | -3.4 |
| MC | -2.7 | -5.2 | -4.4 | -4.1 | -5.4 | -6.3 | -2.6 | -0.7 | -4.0 | -4.0 |
| Pabst | 2.9 | -5.1 | -3.2 | -8.4 | -9.4 | -3.8 | -2.9 | 4.0 | -3.8 | 0.0 |
| Crown | 2.6 | -3.0 | 4.5 | -3.6 | -4.1 | 2.9 | 5.1 | 12.0 | 4.7 | 2.9 |
| HUSA | -6.9 | -10.5 | -0.8 | -7.3 | -6.1 | 5.4 | 1.2 | 2.3 | -0.8 | -2.9 |
| Others | 7.4 | -3.9 | 4.1 | 1.8 | 12.5 | -10.2 | 3.7 | 3.0 | 2.3 | 2.4 |
| Total | -0.2 | -4.9 | -2.1 | -2.9 | -3.5 | -3.7 | -1.0 | 0.8 | -2.1 | -2.3 |
| Jan-Jun 2013 Volume Trend - Top States | ||||||||||
| CA | TX | FL | OH | MI | GA | IL | AZ | PA | WI | |
| AB | -3.2 | -2.6 | -1.4 | -1.8 | -2.8 | -2.2 | -1.5 | -2.6 | -4.2 | -3.1 |
| MC | 0.2 | -6.7 | -4.2 | -2.1 | -1.3 | -5.5 | -6.0 | -2.1 | -4.6 | -5.0 |
| Pabst | 8.5 | -2.1 | 2.6 | -3.4 | -12.5 | -7.5 | -10.3 | 7.1 | -4.1 | -7.1 |
| Crown | 12.8 | 3.3 | 6.2 | 0.0 | -4.1 | 4.0 | -3.3 | 15.1 | -1.6 | -6.8 |
| HUSA | 3.0 | 6.6 | -1.0 | -7.1 | -10.9 | 0.0 | -8.9 | 4.3 | -8.5 | -3.6 |
| Total | 0.9 | -3.5 | -0.7 | -1.2 | -2.7 | -2.6 | -3.7 | -1.7 | -4.0 | -2.9 |
Join Us Nov 11 in NYC for the 20th Annual Beer Insights Seminar; Industry Thought Leaders on Tap
Our focus on pot as potential challenge to beer last issue coincided with important position statement by Dept of Justice that it would not seek to enforce fed law (pot is illegal) in Colo and Wash which have legalized. That's likely to spur more states to pursue legalization. On Sep 10, Senate Judiciary Comm held hearing looking into issues of state and fed law conflicts on pot. Parallels between pot and alc bevs didn't dominate hearing, but popped several times. Most explicitly and negatively, anti-drug expert who worked in several White House admins, warned about pot sellers inevitably targeting youth. "I think we are positing that in a country with a First Amendment, in a country that has seen the alcohol and tobacco industries relentlessly target kids -- and by the way, target addicts, because these industries do not make any money off of casual users." Alc bev and tobacco bizzes, he repeated, "make money off addiction." Ouch. That's very much the rhetoric public health advocates use when they target alc bev biz and not at all what the industry wants to see go in Congressional Record. Recall too that pro-legalization advocates argue strenuously that alc bevs more dangerous than pot, so beer getting hit hard from both sides in this debate. That will make it even dicier for industry to respond.
Same expert also insisted underage will inevitably see internet advertising for pot and that products will include such items that are "you know, gummy, candy-shaped, attractive to kids." On other hand, Colo gov's chief legal counsel and Seattle sheriff countered that their states have adopted "significant restrictions on packaging and labeling," prevented "vertical integration" in the biz, limited advertising and # of licenses retailers can have, all to "make sure marijuana is not sold, marketed to people under the age of 21" or used by them "in any way shape or form." Both states adopted THC limits to determine impaired driving. Also, Colo will put proposed tax scheme before voters to raise money for prevention/enforcement and has 141 pages of regulations. Does this sound familiar?
Recall that Colo gov, early craft brewer John Hickenlooper, did not support pot legalization. His counsel did not mention craft biz, but did point to the "integrity" of pot entrepreneurs (dubbed "ganjapreneurs" by a beer friend of ours) he's met: "I would compare them to folks that you've all met as you've toured wineries in Napa or gone to distilleries in your state," mentioning rye whiskey makers in Vt to Comm chair Sen Leahy. This reminds us of statement by premier pot seller in Denver in Rolling Stone earlier this summer that "I really compare this to the microbrew industry." RS wrote that "Denver's pot pioneers are modeling themselves on a product that's modest, artisanal and, well Denver," craft brew. Veteran pro-legalization academic Ethan Nadelmann seconded that emotion in RS: "Give me my choice - I want the microbrewery or vineyard model" for legal pot sales, "I'm not fighting for the Marlboro-ization [of] marijuana."
Heineken USA is "winning in a changing beer landscape," asserted prexy Dolf van den Brink in Sep 6 presentation to investors. HUSA depletions down 1.7% in 1st half but 0.9% selling day adjusted. So HUSA gained share of depletions nationally. That was Dolf's concluding point: "Our strategy is working. We are gaining share." Rolling 12-mo share trends hit bottom in Sep 2011, Dolf showed. HUSA's share climbed very slightly but steadily since then. Its 12-mo share now at 4.45. That's up a little more than 1/10th of a point over last 2 yrs, but a big improvement from steep drops in 2009 (when Heineken brand depletions down 9%, showed Dolf). Heineken depletions trend flattened out last yr, grew in many areas, especially Southeast. Almost a 10 point swing in 3 yrs. But Heineken brand down a bit again in 2013. Heineken brand 50-60% of HUSA biz, so tuff to grow if that brand isn't flat. Dos Equis growth in Nielsen data accelerated to 26% in 2012, Dolf showed and still over 20% so far in 2013. Ambar now up double digits too. Yet Dos still only at 58% distribution nationally, so plenty of "runway," sez Dolf. HUSA also looks to "win in the sunbelt with Tecate." Tecate franchise trends have turned with liftoff of Tecate Light, up 44% in Nielsen. Tecate regular dropoff slowed to -2% in Nielsen YTD (down 12% in Nielsen in 2010). Another key is Beers of Mexico, "largest variety pack in Costco" and fastest-growing variety pack overall. Strongbow nearly doubling in recent periods in Nielsen, and sourcing more than half its volume from outside beer.
Heineken sees big oppy with its biggest customers. In Walmart, HUSA's #1 off-premise account, HUSA up 30% in 2013, growing over 2x category rate, said Dolf. Brand Heineken up 25% and Dos Equis up 36% in Walmart YTD 2013. Forty % or more of HUSA biz is with multicultural consumers, basically Walmart shoppers. But HUSA also focusing on other key accounts. In Buffalo Wild Wings, #1 on-premise account, HUSA volume up 34% in 2012. Grocery chain HEB is #1 account for Dos Equis, where it's bigger than Corona or Heineken.
AB and MC Down Across Regions, Big States in 1st Half; Crown Mostly Up; Pabst/HUSA Spotty
Much of Crown's 1st-half gain came from its biggest mkts, as we've noted. While overall shipments up 183,000 bbls, 2.9%, Crown up 180,000 bbls, 8.5% in Calif alone (where Modelo especially hot), 29,000 bbls, 6.2% in Fla, and 19,000 bbls, 3.3% in Tex. Crown also up 15% in Ariz, 4% in Ga. But Crown had some soft spots in 1st half too. Lost volume in NJ-Pennsy, and in 2 Midwest regions. Slipped 3-4% in Ill/Mich, 7% in Wisc. HUSA did well in west, but soft in east. Up 6.6% in Tex, 3% in Calif and 4.3% in Ariz, states where HUSA'a Mexican portfolio strongest. But down 1% in Fla and took big hits in several Midwest states and Pennsy, down 8-11% in Mich, Ill and Pennsy. Pabst posted solid 4% gain on west coast and 3% in New Eng, but down in 6 other regions. In big states, Pabst up sharply in Calif and Ariz, almost 3% in Fla, but down double-digits in Mich and Ill, 7-8% in Ga and Wisc. All Others' numbers tend to get revised. But available data shows suppliers below top 5 collectively gained ground in 6 of 8 regions. Trends ranged from +3-4% in western regions and southeast to +7.4% in New Eng. While craft strong across US, some other second-tier brewers not doing as well in 2013. Chart available here.