Nearly 90% of Wholesalers Expect Trade Down in 2023; Say Spirits-Based Seltzers Will Grow Volume +9% in 2023
The vast majority of wholesalers (88%) are seeing drinkers in their markets trade down, or are expecting them to, according to a survey from financial services firm Jefferies.
“Some 90% of distributors have either seen or expect trade down in the next 6-12 months, with the majority of respondents citing malt-based seltzers (< 80%) and craft beers (< 75%) as most at risk, followed by super premium (> 40%), premiums (> 35%), premium lights (> 35%), and Mexican Imports (>30%),” Jefferies equity analyst Kevin Grundy wrote.
Only 12% of respondents do not expect consumer trade down to affect their market.
Wholesalers expect total beer category volume to decline -1% in 2023, with the bulk of those declines driven by malt-based hard seltzers (-5.5%), craft (-2.5%), cider (2.5%) and domestic premium (-1%).
The negative projection for malt-based seltzers marks a departure from wholesalers’ responses to Jefferies’ spring survey, in which they called for “flattish growth” for the segment.
“Some 75% expect the category to lose shelf space in 2023 with RTDs [ready-to-drink canned cocktails]/spirits-based seltzers the biggest beneficiaries, followed by beer and spirits,” Grundy wrote.
Respondents expect spirits-based seltzers to gain the most volume at +9%, followed by non-alcoholic beer (+8.5%), Mexican imports (+6%), domestic super premiums (+3.5), flavored malt beverages (FMBs) excluding hard seltzers (+2.5%) and other imports (+0.5%).
The economy segment will be flat, wholesalers said. Year-to-date through November 27, domestic sub-premiums were down -0.5% in dollar sales and -6.7% in volume compared to the same period last year, according to market research firm IRI. In Jefferies’ spring survey, respondents said they expected economy beers to decline -4%.
The outlook of wholesalers who sell the Constellation Brands portfolio (which includes popular Mexican import brands Modelo, Corona and Pacifico) has become even sunnier than in past Jefferies surveys and compared to Wall Street predictions for the segment. They expect the segment’s volume to increase +8% in 2023 and +7% in the next three to five years. By comparison, Wall Street firms forecast increases of 6%-6.5% in 2023 and 5.5%-6% in the next three to five years.
Constellation (STZ) and Molson Coors (TAP) “remain preferred U.S. beer stocks,” Grundy wrote, adding that “trade down remains a watch point,” which is a positive for Molson Coors and Anheuser-Busch InBev, which both produce economy brand families, and a potential negative for Boston Beer (SAM) and Constellation, which do not.
Half of respondents are “willing” to distribute Bang Energy, which Grundy called a “struggling brand.” The willing distributors lean more toward the Molson Coors network (60%), though some A-B houses (40%) said they would pick up Bang even after the energy drink company “spurned” them when it “abruptly left” for the PepsiCo network in April 2020.
“Distributors (appropriately) cite myriad factors for Bang’s recent implosion, including incoherent/inconsistent strategy (55%), distribution fits/starts (55%), brand equity issues (45%), and competition (40%),” Grundy wrote.
Monday Night Brewing Debuts Rebrand, Ditches ‘White Collar Male Vibe’
Monday Night Brewing is undergoing a full rebrand after more than 11 years.
The Atlanta-based brewery debuted a new logo, new branding and packaging for seven of its core offerings, launching in 2023. The logo omits the Monday Night businessman silhouette and features a new “hand-drawn word mark” that “feels more ‘craft’” and “more inclusive,” according to Monday Night co-founder Jonathan Baker.
“Our original logo has served us well,” Baker said in a blog post. “We were all working white collar day jobs, wearing neckties to work, making beer for our friends and family. But it’s time to ‘get out of the menswear business,’ as our design partners at Matchstic so eloquently put it.
“We want everyone’s first interaction with our brand to make them feel like this is a craft beer for them, and we realize that such a strong ‘white collar male vibe’ could be masking our true heart for people,” he continued.
Baker noted the change in the craft beer scene from when Monday Night started in 2011, with more breweries and beer styles than ever before. However, the company isn’t “rebranding just because the industry has changed.”
“More importantly, we have changed,” Baker said. “We have grown as people, grown in our knowledge and grown as a brand.”
“Simplifying” the logo also allows Monday Night to “give each beer more of a personality,” which is highlighted in its new, graphic and bright colored can designs. The first beers to get a refresh will be year-round beers: Blind Pirate blood orange IPA (7.4% ABV), Death Raptor IPA (6.9% ABV), Drafty Kilt Scotch ale (7.2% ABV), Dr. Robot blackberry lemon sour (5% ABV), Slap Fight IPA (5.8% ABV), Space Lettuce double IPA (8.1% ABV) and Taco Tuesday Mexican lager (4.5% ABV).
“Change is never easy; we get that,” Baker said. “As the guy who brought the necktie-loving brand into existence, this is especially hard for me. But the more I have thought about it, the more I am convinced that our logo and look needs to do a better job representing who we are as a company and how incredibly amazing our beer is.”
Monday Night produced an estimated 23,000 barrels of beer in 2021, a +3% increase year-over-year according to the Brewers Association (BA). In early 2023, the company will open a taproom in Charlotte, North Carolina, its fifth location, joining two taprooms in Atlanta, one in Birmingham, Alabama, and one in Nashville, Tennessee.
pFriem Family Brewers Moves to Columbia
Hood River, Oregon-based pFriem Family Brewers is moving its Washington state distribution business to Columbia Distributing.
pFriem’s partnership with Columbia is expected “to strengthen its on-premise draft business which is critical to their strategy, and at the same time will help them broaden their package distribution to new classes of trade,” the companies said in the release.
Josh Pfriem, pFriem co-founder and brewmaster, said the company is thrilled to work with Columbia in Washington.
“Their commitment to high-quality service and a deep distribution footprint will help us get pFriem beer to all the places where our customers are looking for us,” he said in a press release. “Timing is everything and now is the right time and place for us to make this move in Washington.”
“We’re honored that the pFriem family and its ownership team have put their confidence and trust in us,” Columbia president and CEO Chris Steffanci added. “They may be new to the Columbia family, but we’ve been watching their growth closely over the years and we know they have many fans and a big following. Columbia is proud to continue building on that here in Washington.”
Goose Island to Move From Clybourn Brewpub to New Development
After 34 years, Goose Island is planning a move from its iconic Lincoln Park brewpub to a new development called the Salt Shed in a former salt factory in Chicago, Eater reported.
The new brewpub is expected to open by the end of 2023, with the original Clybourn brewpub remaining open “as long as possible,” according to comments made by Goose president Todd Ahsmann to Crain’s.
“We are excited that this new location gives us a great opportunity to evolve with Chicago, and is only a short distance from the birthplace and namesake of Goose Island,” Ahsmann told Eater in a statement. “It also connects us with live music and entertainment, which has always been such a defining cultural aspect of Chicago. The Salt Shed has already begun to reshape the Chicago music landscape with fantastic shows and they’re just getting started. I can’t wait to welcome everyone to the new space and cheers to the future.”
Anheuser-Busch InBev owned Goose Island operates two other locations in Chicago: A Fulton Street taproom and brewery, and the Goose Island Barrel House private event space.
Bernstein: Supply Cost Pressures Will Continue in 2023, But Beer Expected to Remain Resilient
Input costs for U.S. brewers will continue to rise in 2023, according to financial analysts at Bernstein, reiterating sentiments shared by BA chief economist Bart Watson last week.
U.S. malting barley prices are expected to increase +36% in 2023 versus 2022, requiring brewers to increase price about 200 basis points (bps), according to Bernstein analyst Nadine Sarwat. Additionally, aluminum supply will “be a headwind” in 2023.
“We estimate that brewers will once again need to take more than their usual 1-2% pricing in
order to maintain their gross margins,” Sarwat wrote. “However, the magnitude remains an open question and depends on: (1) how much more can the consumer take, and (2) how much will the market leader ABl take?”
However, now may not be the time to panic. Despite the continued cost pressures, analysts expect beer to remain resilient, with only some downtrading occurring in the market.
“We are not economists, and so won’t attempt to forecast the U.S. macro outlook,” Sarwat wrote. “But our analysis shows that beer is a (relative) winner over spirits in a recession and that downtrading is (relatively) modest and temporary.”