Last Call: Financial Analysts Project Additional Hard Seltzer Growth; FIFCO USA Pulls Plug on Pura Still

Credit Suisse, Evercore ISI Project Further Hard Seltzer Growth

The hard seltzer category could reach about 10% of the beer market in the next few years, according to research reports from two leading financial services firms.

Earlier this week, Credit Suisse managing director of equity research Kaumil Gajrawala wrote in an analysis of Truly Hard Seltzer maker Boston Beer Company that the firm expects “seltzer to double this year,” and grow to between 8 and 10% of total beer industry volume by 2023. He added that hard seltzer currently makes up 2.6% of the beer industry’s volume share.

The Credit Suisse report pointed to several hard seltzer growth drivers as reasons to expect the value of Boston Beer stock (SAM) to continue to increase:

  • Hard seltzer’s growth began in the off-premise channel, where alcohol trends typically slow down after launching in the on-premise.
  • About 40% of the seltzer category’s growth is incremental to the beer category.
  • Seltzer’s household penetration rate is just 1%, whereas the penetration rate of flavored malt beverages is 7%.

Category leaders Mark Anthony Brands’ White Claw Hard Seltzer and Truly both encountered out-of-stock issues in 2019, which hindered their growth and yet the selzer category more than doubled last year, the report continued. To remedy this, both companies have invested in increasing capacity, including Mark Anthony constructing a pair of new facilities.

According to Credit Suisse, Truly could account for 5 million barrels, or 60% of Boston Beer’s portfolio by 2023. The brand could also make up more than half of Boston Beer’s earnings.

Meanwhile, Evercore ISI analyst Robert Ottenstein estimated that hard seltzer could grow nearly 144% in 2020 and account for nearly 11% of total beer volume share by 2022.

Ottenstein wrote that White Claw and Truly could cede about 16% of share to newcomers such as Bud Light Seltzer and not-yet-launched Corona Hard Seltzer this year. In his projection, White Claw remained the category leader, with around 55% of the market, while Truly held a little more than 19% of the market. Meanwhile, Ottenstein suggested that Bud Light Seltzer could claim a little more than 10% of the market, while Corona Hard Seltzer could take around 5%, leaving almost 10% to the growing number of other seltzer brands.

Bud Light Seltzer launched in January and sold nearly 200,000 cases in U.S. off-premise multi-outlet and convenience stores through January 26, according to market research firm IRI. Anheuser-Busch InBev supported the launch with a Super Bowl ad starring rapper Post Malone as well as $23 million in advertising.

Corona’s seltzer is expected to launch later this quarter.

FIFCO USA Abandons Pura Still

FIFCO USA has stopped production of Pura Still, the 95-calorie, 4.5% ABV spiked still water brand after less than two years, according to a memo sent to wholesalers this week.

“Pura Still has had an uphill battle competing against high demand seltzers and flavored malt beverages that are in established and growing categories,” chief sales officer Josh Halpern and beyond beer director Jennifer McCauley wrote in the email.

FIFCO USA will redirect its focus and financial support to its established Seagram’s Escapes brand, citing that franchise’s decade-plus of growth.

“By making the decision to immediately re-allocate resources and effort to focus on Seagram’s Escapes, we are investing in a winning portfolio that has demonstrated strength and staying power as the market has changed,” company leaders wrote.

The news of Pura Still’s demise came as a bit of a surprise, following FIFCO USA’s national sales meeting in November where McCauley urged wholesalers to stick with the brand despite “fatigue.”

“We still believe it has incredible potential,” she said at the time, while announcing plans to move Pura Still into cans and work with “micro-influencers” on college campuses to promote the brand.

In the message to wholesalers, FIFCO USA also touted the upcoming launch of a Seagram’s Escapes 100-calorie Tropical Rosé flavor, which will be promoted by Chris Harrison, the host of The Bachelor.

PicoBrew in Receivership, Up for Sale

PicoBrew, maker of in-home beer-brewing appliances, has entered into receivership after failing to secure additional funding, according to food and tech news site the Spoon.

Co-founder and CEO Bill Mitchell told the outlet that the company had taken out a bridge loan from new and existing investors but needed to secure additional funding in December. When PicoBrew could not close that funding round, the bridge investor group called the loan and forced the company to find a buyer.

Mitchell said he expects the investor group to buy the company, barring any higher bids.

PicoBrew’s products include the Pico C and Pico Pro for homebrewers and the Z Series for commercial use.

Big Storm Takes Minority Stake in Bloody Mary Mix Maker

Clearwater, Florida-headquartered Big Storm Brewing Company has acquired a minority stake in Blood Brothers Bloody Mary Mix, also based in Clearwater, according to a press release

“There is no better Bloody Mary that we’ve tried than Blood Brothers, and it’s always awesome to support another local business right here in Tampa Bay,” Big Storm co-owner L.J. Govoni said in the release.

Brothers Dax and CK Hoover founded the Blood Brothers brand in 2015 using a family recipe.

Blood Brothers employees will tap into the Big Storm’s resources to grow sales and distribution, the release added. Cocktails using the mix will also be available at Big Storm’s Clearwater taproom.

Heineken Reports Volume and Revenue Growth in 2019

Heineken N.V. reported global beer volume growth of 3.1% and a 3.3% increase in net revenue per hectoliter in 2019.

“We delivered another year of superior top line growth with continued strong performance in the second half,” CEO Jean-François Van Boxmeer said during a call with investors and analysts.

The news wasn’t as good in the U.S., where the company’s volume declined mid-single digits.

Heineken’s craft offerings, including Lagunitas, grew volume by mid-single digits, to 5.6 million hectoliters, driven by growth in Europe. The Lagunitas brand is now sold in more than 35 international markets and being produced in the Netherlands and Brazil, in addition to the brand’s hometown of Petaluma, California, and its breweries in Seattle, Washington, and Chicago, Illinois.

Iron Heart Canning Acquires Michigan Mobile Canning

Iron Heart Canning, the country’s largest mobile canning service provider, announced today an agreement to acquire Michigan Mobile Canning.

Iron Heart, headquartered in Manchester, New Hampshire, operates 50 canning lines from 24 locations from Maine to Florida. The addition of Michigan Mobile Canning’s two locations in Kalamazoo, Michigan and Indianapolis, Indiana will extend Iron Heart’s reach into Illinois.

“We are extremely excited about the opportunity to bring our industry-leading canning services and expertise into the Midwest,” founder and CEO Tyler Wille said in a press release. “Indiana, Michigan and the greater Chicago area are incredible markets in the craft industry, and we are eager to begin building new partnerships within the region.”

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