Traditional beer is expected to decline -2% in the next five years, Boston Beer founder and chairman Jim Koch told wholesalers Tuesday during the company’s annual business plan meeting with northeastern wholesalers.
“We say a prayer for the big brewers because they’re the ones that really build the trucks that we can then fill out, but I think the reality is it will probably not grow in the lifetime of the people in this room,” he said.
Beer won’t be alone in its projected decline over the next half-decade: Traditional wine is expected to decline -1%, while traditional liquor will be flat, according to Koch.
However, Boston Beer estimates that beyond beer – hard seltzers, flavored malt beverages, and spirits-based, ready-to-drink canned cocktails – will grow by +5%. And the company expects that growth to buoy its business enough to double in the next 14 years, Koch said.
“We positioned ourselves to ride the wave and we’ve been doing that,” he said.
Boston Beer’s volume leans heavily toward the beyond beer offerings in its portfolio: Twisted Tea and Truly Hard Seltzer. Combined, the brands account for 4.43% of total beer category dollars spent at off-premise retailers tracked by market research firm IRI year-to-date through October 2. During that period, the Twisted Tea brand family’s dollar sales have increased +30.3%, while Truly’s have declined -17.3%.
One threat to that expected growth is the spirits industry’s push for tax equivalence and expanded market access for spirits-based canned cocktails with ABVs similar to beer.
“One of the big issues is continuing to maintain the favorable tax and distribution policies that beer as the beverage of moderation enjoys,” Koch said. “Because if the state tax difference that exists today between beer and hard liquor is removed, [High Noon maker E. & J.] Gallo is on record for predicting if that happens, they’ll be able to take 25% of our volume.
“Our business will be 25% smaller in 10-12 years if we lose the current favorable tax,” he continued.
As the nearly 40-year-old company prepares for its future, it is fully embracing the beyond beer space and the role it plays as the parent company of the No. 1 hard tea and the No. 2 hard seltzer.
“Our portfolio has changed tremendously, as you all know, in the last few years, and our overall national portfolio actually skews very heavily to beyond beer,” CMO Lesya Lysyj said. “So we really feel we are very well-positioned to take advantage of this growth.”
Speaking to wholesalers from the company’s New England and Atlantic (New York to Virginia) divisions, Lysyj noted Boston Beer’s volumes in those regions have a higher ratio of traditional beer (about 70% beyond beer and 30% traditional beer) due them including the home markets of Samuel Adams and Dogfish Head.
Lysyj pointed out the differences between craft beer drinkers and beyond beer drinkers. About 75% of craft beer drinkers are men who are overwhelmingly white with an average age of 45. By comparison, beyond beer drinkers are evenly split between men and women and are younger and more diverse.
“They’re looking for variety, they’re looking for fun, they’re looking for sessionability,” she said. “They’re looking for brand first, and then they look for style after brand.”
Digging into hard seltzer and its drastic slowdown that began last year – which spurred lawsuits from Boston Beer investors – Lysyj called out several problems facing the segment: its over-proliferation of SKUs, the departure of its older drinkers who returned to drinking light beer, and retailers’ embrace of spirits-based RTDs.
‘Mega Brand’ Truly Partners with US Soccer; Ramps Up for Vodka Seltzer, Tequila Seltzer Coming in 2023
At nearly 11%, Truly has the highest household penetration rate among drinkers aged 21-34 of major, established hard seltzer brands, including Mark Anthony Brands’ White Claw, Anheuser-Busch InBev’s Bud Light Seltzer and Constellation Brands’ Corona Hard Seltzer, senior director of Truly marketing Matt Withington said.
“If hard seltzer is the beverage of the new generation, then Truly is the brand for the new generation,” he said. “We have a huge opportunity to activate the space going forward, to create more moments throughout the year for drinkers to think about Truly.”
Boston Beer has begun to view hard seltzer through the prism of “hint of flavor” offerings – fruit-flavored sparkling water – and “full flavor,” spiked, carbonated lemonade, tea and punch. The Truly portfolio accounts for 59% of sales in the latter category, but only 14% in the former, so the company plans to “share that spotlight evenly” between its products.
Truly reformulated its portfolio late this summer to include real fruit juice, which Withington said provides “the perfect moment to talk about light, refreshing, crisp styles of seltzer from Truly.” To restore focus on the “hint of flavor” packages (Berry, Citrus, Tropical), the company is asking wholesalers to build displays that are 50% those packs and 50% fuller flavor offerings, such as Lemonade, Punch and Margarita. Truly Vodka Seltzer is to be merchandised separately to drive incremental sales.
Next year, Truly will become the official hard seltzer of U.S. Soccer’s men’s and women’s teams, which will allow the brand to create experiences for drinkers and trade partners as well as provide broadcast, digital and in-game activations, according to a press release. The deal comes as Truly begins to “reimagine our partnerships,” Withington said.
“It’s no longer just an opportunity to get our name out there,” he said. “As we look ahead for partnerships in the future, it’s about aligning our values, the values of our partner, and moments and partnerships that matter to our shoppers.”
The sponsorship’s four-year term will include the 2023 FIFA Women’s World Cup and the 2026 tournament, which will host games in 11 U.S. cities. U.S. Soccer’s logo will appear on the packaging on the Q2 offering (tentatively titled the Dream Pack) of Truly’s new limited-release family, which will include four variety packs that cycle in and out on the same UPC.
“We’re bringing a constant stream of news and new experiences inside of these packs that our drinkers have never had before,” Withington said.
To continue to expand the Truly consumer base, Boston Beer is investing heavily in Truly Vodka Seltzer, which launched last month.
“This is not about replacing traditional seltzer with spirits seltzer,” Withington said. “This is about opening the Truly brand to speak to as many shoppers as possible, bringing our expertise and innovation into a new product segment.
“This is about opening the aperture of who we’re speaking to as a brand, creating more moments for truly to be bought during the year and leveraging our conviction and expertise across all of the segments of hard seltzer today,” he continued.
Hard seltzer consumers skew younger (under 35), more diverse and low- or middle-income, while spirits-based offerings skew older (35+), less diverse and higher income, Withington said.
Boston Beer tested over 200 recipes and samples over 2,000 drinkers before landing on its Vodka Seltzer recipe, crafted to respond to three desires from RTD consumers: unique flavor combinations, premium vodka and real fruit juice. In an April survey of 400 consumers who tested the offering, 89% expressed the intent to purchase the product and 92% identified it as a “unique offering,” giving Boston Beer the belief that the offering will perform well in the market, Withington said.
The company is so confident that it announced its next spirits-based Truly iteration yesterday: Truly Tequila Seltzer. The tequila-based seltzer will launch next spring with four flavors: Pineapple Guava, Grapefruit, Spicy Watermelon and Lime. The offering will be in direct competition with High Noon Tequila Seltzers, which have yet to be announced, but have been filed with the TTB with four flavors: Passionfruit, Strawberry, Grapefruit and Lime, Good Beer Hunting’s Bryan Roth reported last month.
Boston Beer also plans to lead its on-premise Truly strategy with Tuly Vodka Seltzer and its Blackberry Lemon flavor. The brand is being supported by a multimedia marketing campaign that debuted during Monday’s NFL game, with an emphasis on the offering’s vodka content and the slogan, “There’s vodka in this?”
Twisted Tea Targets Total Beer Share Growth; Closes Gap with Mike’s Hard Lemonade in Larger Formats
Boston Beer’s 2022 golden child Twisted Tea plans to continue its growth trajectory in 2023, setting its sights beyond leading the flavored-malt-beverage (FMB) segment to gaining share of the total beer category.
Twisted Tea became the No. 1 FMB in off-premise channels in 2021, gaining +15% share of FMB dollar sales since 2017 to 27.5% share of the segment, according to the brand’s marketing director, Erica Taylor. That growth was supported by a +35% increase in retail space this year, but there is still a lot of runway left for the brand, CEO Dave Burwick said during the Q3 earnings call last week.
Boston Beer has mainly expanded distribution of Twisted Tea’s larger formats such as 12-packs, which are now at 64% ACV. The brand is quickly closing the gap in share of large format FMBs in the off-premise channel with Mike’s Hard Lemonade (Mark Anthony Brands), from a gap of nearly 15 share points in January 2021, to 0.2 points in the last two weeks, according to Taylor.
With the FMB battle looking like it’s coming to a close (for now), Boston Beer is focused on gaining Twisted Tea’s share of total beer.
“What we’re really focused on is all of beer,” Taylor said. “We can’t just talk about FMBs anymore. We’re a big player, we’re in the big leagues, and we have to talk about all of beer.”
Twisted Tea is the 11th largest beer brand in the off-premise after its sister brand Truly (No. 10) and Mark Anthony Brands’ White Claw (No. 9), but is the top growth driver of the top 25 beer brands, Taylor said. In its home market of New England, Twisted Tea is the No. 2 beer brand.
“Our commitment to you guys is we’re going to compete like a big beer brand,” Taylor told wholesalers. “That means year-round media, year-round programming [and] innovation that continuously makes sense.”
For innovation in 2023, Twisted has three focuses. The first is to treat its “undeveloped core like innovation.” That core includes its four 12-packs: Original, Party Pack, Half & Half and Light.
Twisted Tea Light – the brand’s answer to the better-for-you trend – will act as an incremental driver of total Twisted Tea growth, bringing both new drinkers and “rejectors of the brand” back into the fold.
“This is an incremental buyer, who may have switched into something lower calorie, lighter, but still wants big flavor,” Taylor said.
The company also plans to continue its c-store growth with 24 oz. single-serve cans, prioritizing six flavors: Original, half & half, peach, raspberry, light and pineapple, which is a new flavor launching in February. The company is targeting an average of one additional single-serve SKU per off-premise account by June 30.
The second focus for the brand is the on-premise, with the company taking a “simple” approach to the channel. Boston Beer is only prioritizing Original on-premise – in both cans and draft – making it “really simple for drinkers to think about [Twisted Tea] when they go to an on-premise account,” Taylor said.
“This is a change for Twisted Tea,” Taylor said. “It used to be an off-premise brand. We’re going to be an on- and off-premise brand in the future.”
So far, Twisted Tea is “on-fire” in the on-premise, according to Taylor.
“If Twisted Tea were a hard seltzer in the on-premise, it would be No. 3,” she said. “If it were a craft beer, it would be a top 10 craft beer brand. And it’s the No. 2 growth driver per share in the on-premise.”
The third focus for 2023 will be introducing new innovation where “opportunities” arise, including regional releases through partnerships. In November, the brand will release a new Frozen Cherry flavor in partnership with the NHL and in March, the company will bring back Sweet Cherry Lime in partnership with the Boston Red Sox.
Additionally, Twisted Tea will launch a Light variety 12-pack in February – an announcement that drew a round of applause from wholesalers in the room.
For 2023 activations, Twisted Tea will continue its “tea drop” campaigns year-round. The company launched its tea drops last year as part of its first year-round campaign for the previously summer-focused brand.
In the summer, the company is bringing back its “America Parties with Tea” campaign, and will launch the Americano Party Pack variety 12-pack, featuring a new pack-exclusive flavor. Rocket Pop – inspired by the red, white and blue summer treat – will have flavors of blue raspberry and cherry along with the brand’s lemon tea base. The offering is Twisted Tea’s first LTO flavor.
Fall and winter activations will have a “game day” focus, kicking off 2023 with a “Grab Big Flavor for the Big Game” campaign in time for the Super Bowl.
Dogfish Head Aiming to Double Cocktail Business; Will Launch New ‘Crush’ Variety Pack
Dogfish Head’s mantra for 2023 is “standing out in the crowd,” and the brand alreadying embodying that message is the company’s culinary-inspired canned cocktails, Dogfish Head marketing director Jennie Baver said.
The brand’s ready-to-drink canned cocktail (RTD) offerings started 2022 as the No. 8 spirits-based RTD in the off-premise and is now the No. 6 brand, increasing dollar sales +80% year-over-year, “outpacing the category.” Dogfish Head plans to double its cocktail business in 2023.
The driver of Dogfish Head’s RTD growth is its Bar Cart variety 8-pack, which is the No. 1 8-pack by dollar share in the canned cocktail segment, according to Baver. The SKU will remain the company’s No. 1 priority in 2023, with a new addition to the lineup – Cran Apple Vodka Mule – launching in January.
“[Dogfish Head’s] got a reputation for great quality and for innovation and for culinary ingredients, and it has a unique positioning in some ways in this very crowded RTD space,” Burwick said during last week’s investor call. “So, we feel very good about the strength of the Dogfish Head brand, both in the mature craft category, but also as a unique vehicle for us to bring something special to RTD canned cocktails.”
Baver also announced that Dogfish Head has partnered with Southwest Airlines, with the company’s Strawberry Honeyberry Vodka Lemonade now available on every Southwest flight.
Dogfish Head plans to continue this success with a new 8-pack innovation, the Crush Pack, launching in March. The variety pack will feature Dogfish Head’s RTDs inspired by “The Crush”’ cocktail – a spirits and freshly-pressed juice cocktail popular in the brewery’s home state of Delaware.
The 8-pack with feature Dogfish Head’s two existing 7% ABV Crush flavors – Lemon and Lime Gin Crush and Blood Orange and Mango Vodka Crush – as well as two new flavors: Pineapple Rum Crush and Grapefruit and Pomegranate Vodka Crush. The latter will also be available in a single-flavor 4-pack next spring.
Blood Orange Vodka Crush will also be prioritized in Dogfish Head’s on-premise accounts, which will be supported by consumer engagement opportunities, Baver said.
Dogfish Head is already investing behind a multimedia, multi-platform marketing campaign for its RTDs, which will launch in the Atlantic and New England divisions in the coming weeks. The brand will activate at retail around two focus periods next year when it highlights its Crush family in the summer months and the Bar Cart pack in Q4 with a holiday-centric campaign that encourages consumers to “bring the bar cart to the party” for the holidays. In markets where Dogfish Head’s large bottle spirits are sold, displays will be merchandised with those and RTDs, as well as holiday recipe cards.
Jim Beam Kentucky Coolers a ‘Big Bet’ for Boston Beer; Variety Pack Launching in January
Yesterday was the first time Boston Beer openly discussed its new FMB, Jim Beam Kentucky Coolers – the latest innovation from Boston Beer’s JV with Beam Suntory – since the product debuted earlier this month at the National Association of Convenience Stores (NACS).
Previously launched products out of the Beam Suntory partnership include Truly Flavored Vodka, Sauza Agave Cocktails and Twisted Tea Sweet Tea Whiskey.
Kentucky Coolers are “the most simple, the most turnkey, the most straightforward opportunity” that Boston Beer “for incremental innovation volume in 2023,” Rob Kreszswick, senior director of strategic partnerships and commercialization, said yesterday.
“Jim Beam is the No. 1 selling bourbon in the entire world and we have an opportunity to bring that brand into the FMB space next year,” Kreszswick said.
The 5% ABV FMB will launch in January in a variety 12-pack featuring four flavors: Black Cherry Lemonade, Sweet Tea Lemonade, Strawberry Punch and Citrus Punch. Each flavor checks in at 120 calories. Black Cherry Lemonade and Strawberry Punch will also be available in single-flavor 6-packs and 24 oz. single-serve cans.
The innovation launch will be supported by a “significant investment” in digital and retail media, mobile sampling and “two major programs” in February/March and the summer.
Kentucky Coolers will compete with Jack Daniels Country Cocktails, which is produced by Pabst under a licensing agreement with Brown-Forman. Kreszswick asked wholesalers to bring Kentucky Coolers to any account that sells their Jack Daniels competitor.
“If Jack is present, Jim Beam is present,” Kreszswick said. “There’s a large number of accounts out there that carry the Jack Daniels Country Cocktails. If they’re there, Jim Beam should be there. They’re like brands, similar propositions, different drinkers.”
Kentucky Coolers are one of five “big bets” for Boston Beer in 2023 which will have a national distribution focus, according to chief sales officer John Geist. The other four include Twisted Tea, Truly, Sam Adams seasonals and the company’s spirits-based RTDs (Truly and Dogfish Head) – all brands that Boston Beer believes can drive “long-term, incremental volume.”
“As we are trying to become better portfolio managers, we have to realize that we’re going to ask you [wholesalers] to do a lot, so what do we really want you to focus your time against,” Geist said.
Geist acknowledged that the amount of innovations launched by Boston Beer in 2022 may have overwhelmed wholesaler partners, and that FY22 hit several “speed bumps” when some innovations didn’t perform as expected. He called out Bevy Long Drink – the Finnish long-drink inspired FMB which was discontinued in June – and Sauza as two of those speed bumps that led the company to rethink its strategy.
“We learned from 2022,” Geist said. “We’re going to focus our efforts on innovation in a different way [and] we’re going to take things very small.”
Angry Orchard Aims to Return to Growth, Expand Hardcore Imperial Cider
Angry Orchard has appeared as a slightly forgotten middle child within Boston Beer’s portfolio, with very few mentions by the company on earnings calls this year. That is expected to change in 2023, with Boston Beer aiming to return the No. 1 cider brand to growth next year.
“I am confident we can do this,” Angry Orchard’s senior brand manager Kat Hayes said. “We have an incredibly strong brand and brand awareness.”
To support the brand, Boston Beer will focus on Angry Orchard’s core style, Crisp Apple, which will be heavily promoted through the company’s Shopper Interrupter Program (SIP) – a off-premise display strategy that encourages impulse buys and results in a +80% lift in Angry Orchard sales on average per location, according to Hayes.
The second priority within the Angry Orchard portfolio will be its newly launched Hardcore Dark Cherry Apple imperial cider. Launched this fall, the 8% ABV offering hits on “two major trends happening in the industry: full-fruit beverages and high ABV,” Hayes said. Boston Beer hopes to make the offering the No. 1 imperial cider on the market, with marketing and distribution support in both the on- and off-premise.
Angry Orchard will also double down on the seasonal push of hard cider with a 360 campaign to “own October,” including prominent Halloween-related activations.
Brewbound’s coverage of Boston Beer’s 2023 brand plans will continue tomorrow with a story about Samuel Adams and Dogfish Head’s beers.