Light lager brand Montucky Cold Snacks is “a big anchor” within Gallo’s total beverage alcohol strategy moving forward, as the wine and spirits giant enters the beer category, Gallo EVP and general manager Britt West told Brewbound.
West added that the acquisitions of ready-to-drink canned cocktail (RTD) brands Waterbird and Salt Point in April, along with existing Gallo offerings High Noon Sun Sips; VMC, a tequila-based canned cocktail partnership with boxer Canelo Alvarez; and Fishers Island Lemonade, which the company acquired last year, are all pieces of the larger puzzle that the company can build around moving forward.
“Now you’ve got a portfolio,” he said. “We feel that these are all very different consumer propositions that have a very different reason to exist. And so here we are.”
Read more: Gallo Makes ‘Strategic Investment’ in Montucky Cold Snacks
Montucky founders Chad Zeitner and Jeremy Gregory told Brewbound that Gallo registered its interest last year in the light lager brand, which is produced at City Brewing’s facility in La Crosse, Wisconsin.
“We believe Gallo is the perfect partner to take Montucky where we have always thought it could go and help us do a whole lot of good along the way,” Zeitner added. “We couldn’t be more excited to see where it goes from here.”
Brewbound spoke with West shortly after the announcement of Gallo’s “strategic investment” in the top 50 brewery. Here are excerpts from that conversation.
Why is now the right time for Gallo to get into the beer category?
West: The data is clear: Consumers consume across categories.
We’re big in wine, of course. It’s our foundation. But we’ve grown very big in spirits. By volume, we’re the third-largest spirits supplier in the U.S. And we certainly have a robust RTD business that’s growing.
And we felt though we had the opportunity, particularly with Montucky. We scoured a lot of beer, and we really felt Montucky was a one-of-one. And so we were excited that we could come to an agreement with Chad and Jeremy and that they felt good about the fit.
What was it about the Montucky brand and being single style that was attractive to Gallo?
West: I’m highly attracted to brands that stand for one thing and are very clear about what they stand for. Our shopper data shows us very clearly that Montucky recruits and retains legal-drinking age to 44-year-olds 72% better than traditional beer brands.
That to me is the No. 1 fact. In a lager space that is dominated by big, big companies – I’m under no illusions about who the competitive set is here – this is a brand that is resonating with a new generation of lager drinkers. That’s exciting.
And I don’t think we’re trying to be a massive, massive portfolio of beer. We’re a branded company, and we like brands, and Montucky is a brand that resonates.
What does the next level look like for this brand?
West: The majority of the business is done in three states [Colorado, California and Texas]. But looking at that attraction in that key consumer demographic, it’s how do we take that and put that at scale? We have a lot of ability to lean on our customer development team. But in working through this, we’ve also been listening very closely to our malt network partners talking to us about where they think the opportunity is, how to scale, how to build it out.
Standing up a malt network has been a project that’s been in the works for a minimum of 18 months, maybe even longer, that’s now coming to fruition. So we’ve tried to lay a lot of the groundwork.
Someone once said to me, “You alcohol guys always think about markets. Why don’t you just try following consumers?” And that’s really good advice. If we know where the brand is resonating with consumers, meaning what types of consumers, let’s go and look for look-alikes around the country, and make it important to them so that it truly is a once in a generation brand.
How fast are you looking to scale this brand? And where do you see the greatest opportunities outside of those core states?
West: The brand was built and founded … [for] people who love to be outdoors, outdoor enthusiasts, who are also involved in their local communities. And that’s at the core ethos of this and what we plan to continue to do. Where do we find pockets of 21- to 40-year-old outdoor consumers, outdoor enthusiasts who really care and respond to the giveback portion of this brand in their communities?
Tennessee is an example of where they’re seeing enormous growth. It’s not at scale yet, but they’re seeing a lot of growth opportunities there. I live in Montana. Because of the population, [Montana] will never be a huge state for it. But I’ve watched how this brand has grown, evolved organically, and I think we can continue to do the same.
So it’s not about “Oh, to make a financial model work, we’ve got to blast it all over the country.” It’s about patience. And they’ve been at this for over 10 years. We’ve been at it for 24 hours. Let’s make sure we get it right with the target consumer.
Living in Montana, is that how the brand got on your radar? Or was it on your radar before that?
West: The true story is, I like to fly fish a lot, and I saw all the fly-fishing guys drinking it. I was fishing one day with a buddy and he had it in his cooler. I said, “Let me try that.” I hadn’t even tried it. This was probably eight or nine years ago. But what struck me is, you see a brand that just gets adopted so fast, in a very, very competitive category. And you say “OK, there’s something more to that.”
And as a skier and somebody who takes their kids skiing on the weekends, I’ve searched my whole life in this business to have a brand that people are willing to wear proudly on their clothing. But I was looking at the mountains and I saw people wearing these fluorescent Montucky onesies all over the mountain proudly. And it’s like a branded billboard on the mountain.
And the after-ski moment, you see everybody enjoying Montucky, and to me, it’s a sign of just how much the brand resonates with its core target audience.
With Salt Point and Waterbird, are you shifting production to Gallo facilities? And how are you viewing the route to market for those brands?
West: No. The first thing in this game is do no harm.
Obviously, we have a Modesto headquarters and Salt Point was really built in Northern California. [Salt Point founder] Heather [Wyatt] wanted literally bar quality cocktails in a can. And that was her litmus test. She’d been at it for eight years. Before any of this RTD stuff was really starting to pop, she’s been at it a long time. We knew of the brand because we saw our own employees coming in and saying, “Hey, this is really good. You should try this.”
It is somewhat a predominantly California brand, but the velocity numbers and the [NIQ] or [Circana] channels, really strong in California and on the West Coast. So different consumer usage occasion, high ABV, full flavor, looking for a true cocktail experience. We think the brand has a lot of room for expansion out of a regional setup.
Flip it to the other side of the country. What’s really interesting about Waterbird is it’s not a complex cocktail like Salt Point. It’s very simple. It’s very one-to-one. No complexity in what it is, right? But low ABV.
So, again, it’s not the full cocktail moment that you’re looking to consume. It’s fuller flavor than a seltzer but still low ABV. And so [founder] Wilson [Craig] had built a nice business, particularly in the southeast, and we thought we could grow it.
Will the Salt Point and Waterbird teams continue on?
West: Heather has some other ambitions and some other RTDs that she’s working on. So she is limited to helping us through a transition period.
Wilson, on the other hand, is very excited and motivated to stay on and help that brand. He’s really at the heart of it, and he wants to stay and continue to help us grow.
How many states is Montucky distributed in?
West: Forty, but a lot of that is still fairly in its infancy.
How much overlap with Montucky and your existing distributors is there?
West: Not a lot. As beer franchise laws go, we knew what we were getting into. From my observations as an outsider who didn’t grow up in the beer industry, there’s opportunities all along the way to try to consolidate your wholesaler network. But that takes time and patience, and we accept what the routes to market are.
When you look at the five-year plan for this portfolio that you’ve built, where do you see it going?
West: There are gaps that we’re going to fill. There was a good question yesterday of what’s Gallo’s ambition in this space? It is a space that is dominated by very big and very capable suppliers.
Being family owned, we have to be committed to it for the long term, and that was a strategic decision all the way at the board and the family level. We will be committed and in this business for the future. So that’s No. 1. When you don’t have to answer quarterly shareholder calls with Wall Street and you can think about the business from that type of long-term perspective, it creates an endless number of possibilities. But we’ve stood up a sizable portfolio. We need to focus on it.
Gallo has also been very good at homegrown innovation. If you look at the High Noon success, homegrown internal innovation. If you look at VMC, homegrown internal innovation. Apothic wine, homegrown innovation. New Amsterdam Vodka, homegrown innovation.
It’s in our DNA that we believe that through a very methodical and steady process, we can develop new brands. We don’t have to just be at the mercy of M&A. We can develop new brands internally. We have the patience. Now the network to go out and do that and that’s why having this platform and having some scale … everybody knows Gallo, but in the malt world, I’m very small. So I needed some level of scale to then be able to start to put through some of our own internal innovation and things that are whitespaces that we were excited about.
Safe to say Gallo is not done innovating in the beer space?
West: 100%.