Virginia Breweries Closer to Self Distribution
Virginia moved one step closer to allowing self-distribution for some breweries Tuesday.
A Virginia House of Delegates subcommittee unanimously approved House Bill 2258, which would establish the Virginia Beer Distribution Co. (VBDC) – a new division in the state’s Department of Agriculture and Consumer Services – that would allow breweries to self-distribute up to 500 barrels of beer a year directly to retailers, Richmond BizSense reported.
The VBDC would function similarly to the existing Virginia Wine Distribution Co. (VWDC) – established in 2007 – serving as a “nonprofit, nonstock corporation” which would “promote, develop, and sustain markets for brewery and limited brewery licensees,” according to the bill.
The Virginia Craft Brewers Guild (VCBG) and the Virginia Beer Wholesalers Association (VBWA) have been in discussion about the proposed legislation since August, according to Richmond BizSense. VCBG president and CEO Brett Vassey and VBWA president and CEO Phil Boykin reportedly spoke in favor of the bill Tuesday, calling it a “good deal,” despite negotiations on details of the bill being “difficult.”
H.B. 2258 would also prohibit spouses of “an officer, director or principal stockholder of a brewery” from owning a beer distribution company. However, any spouses granted a wholesaler license prior to January 1, 2024 will be exempt.
Valley Wide Beverage Completes 2-Year Expansion Project to Support Constellation Portfolio Additions
Valley Wide Beverage, a Fresno, California-based beverage distributor, has completed a facility expansion and the integration of Constellation Brands’ portfolio, The Business Journal reported.
Valley Wide acquired the distribution rights to Constellation Brands’ portfolio in Central Valley – which included import brands Modelo, Corona and Pacifico – in March. The acquisition increased the distributor’s business by 15%-20%, according to the Business Journal. The more than 2 million cases moved to Valley Wide were previously distributed through Bueno Beverage.
At the same time, Constellation also moved its portfolio from A-B wholesaler Markstein Sales Co. in Antioch, California, to the Reyes Beer Division.
Valley Wide now sells more than 1,300 SKUs, including large beer brands Heineken and Coors Light (Molson Coors), craft beer brands Sierra Nevada, Bell’s Brewery and Heineken-owned Lagunitas, and beyond beer brands White Claw (Mark Anthony Brands), Truly (Boston Beer Company) and Smirnoff Ice (Diageo).
To help support its expanded portfolio, Valley Wide just completed a two-year, 150,000 sq. ft. warehouse expansion project, the Business Journal reported. The project, which began in 2020, also includes the addition of 50 new employees and 20 additional loading docks.
Drizly: Non-Alc Offerings Increased +56% YoY; NA Beer +26%
Non-alcoholic (NA) adult beverages increased share of dollar sales on Drizly +56% this month versus January 2022, according to preliminary data from the alcohol e-commerce platform.
While Dry January isn’t over yet, NA beverages have also increased share of Drizly sales +124% so far versus January 2021.
The growth follows the total NA category increasing share of Drizly dollar sales +200% YoY, from 0.1% to 0.3%, in 2022, making it one of the platform’s “fastest growing categories” last year, according to Drizly’s 2022 in Review report. The number of NA brands within Drizly’s catalog also increased from about 70 in 2021 to more than 120 in 2022.
The “most substantial uptick” within the NA category was credited to NA spirits, which increased sales +129% year-over-year (YoY) in January 2023 versus January 2022, and +433% versus January 2021. The fastest-growing brands on Drizly within the segment include CleanCo, Lyre’s Non-Alcoholic, Spiritless, Owen’s and Ritual Zero.
NA beer, which has the largest share of NA beverage sales on Drizly, increased its share of sales +26% YoY and +81% versus January 2021. The fastest-growing NA beer brands in the last year include Untitled Art, Rescue Club Brewing, Stella Artois, Flying Dog and Busty Lush.
NA wine increased its share of sales +70% this month versus 2022 and +200% versus 2021. The fastest-growing brands include Wölffer Estate, Leitz, Tost, Dr. Fischer and Martinelli.
Molson Coors to Cut Around 45 Jobs in Georgia
Molson Coors will lay off around 45 workers at its production facility in Albany, Georgia, starting January 30, according to WALB Channel 10. The job cuts are expected to occur over an eight-week period, with affected workers receiving unemployment benefits, health insurance and other assistance, the outlet reported.
Ippolito Christon & Co. Urges Distributors to Beware of Monster’s the Beast Unleashed Contract
Wholesaler valuation firm Ippolito Christon & Co. has cautioned distributors about the proposed contracts for prospective distributors of The Beast Unleashed, the new flavored malt beverage from Monster.
“Monster’s Beast is just one of many bitter pills recently unleashed in the fast-growing flavored malt beverage [FMB] and ready-to-drink [RTD] categories,” Andy Christon wrote in a memo. “Many of the introductions are coming from aggressive non-beer suppliers seeking to partner with established local beer distributors to gain immediate and meaningful access to the alcohol beverage marketplace.”
The Beast Unleashed is Monster’s first alcoholic beverage release following the energy drink company’s acquisition of CANarchy Craft Brewery Collective last year. It is a 6% ABV FMB with flavors similar to those of the non-alcoholic Monster energy drinks. The company is rolling it out in waves during Q1 2023.
Christon warned that the contract Monster has proposed is “weak on traditional exclusivity and perpetuity provisions.”
“This sets up the distributor for a severe valuation discount for lack of marketability (DLOM) if that brand franchisees sold one day,” Christon wrote. “Without the right financial analysis and a properly negotiated distribution agreement, adding such products to your portfolio also may open Pandora’s box by eroding the value of your total business over time.”
In addition to the inclusion of “numerous provisions that undermine the exclusivity and perpetuity pillars of value that are typical for traditional malt beverage contracts,” the Beast contract “burdens the distributor with ‘no fault indemnity,’” Christon wrote. This would allow Monster to ask for reimbursement of surprise costs; the contract does not guarantee rights to brand extensions and “provides no objective standard for transfer or sale of the brand.”
The proposed contract also allows for convenience termination without cause, which is “unenforceable” under many franchise laws. But Christon called out that “the Beast is an easy contract to terminate because it contains numerous performance-based obligations that can be breached easily.”
Monster specifies a 3X gross profit payment for contract buyouts, which is lower than multiples typically reported. In addition, Monster asks partners to spend $2.50 per case on marketing, Christon wrote.
“The key to success for beer distributors would seem to be 1. choose new partners wisely; 2. understand the brand’s value; 3. have a strategy to protect new brands and to realize an appropriate ROI for building them; and 4. develop analytical tools and models to help decide which opportunities will deliver a worthwhile return,” he concluded.
Cannabis Delivery Platform Lantern to Cease Operations, Citing Regulatory Hurdles
Lantern – a Massachusetts-headquartered cannabis delivery platform, formerly owned by Drizly – will cease operations at the end of the month, citing regulatory hurdles, Lantern CEO Meredith Mahoney announced on LinkedIn.
Lantern launched in May 2020 as a sister company to Drizly, using the e-commerce alcohol delivery platform’s technology to deliver cannabis products. The company does not own its own permit to handle cannabis products, but instead provides dispensary product listings on its website, and then coordinates orders and deliveries with licensed operators.
Lantern spun off from Drizly in 2021, when Uber acquired Drizly in a $1.1 billion deal. Lantern received a $40 million parting investment from Drizly in the deal, with Mahoney appointed as CEO.
“While our Boston-area business continued to grow and serve the expanding cannabis community with the best selection, lowest prices, and convenient delivery, it proved difficult for Lantern to expand outside of Massachusetts, due to both the speed of legalization and the challenging regulatory framework that affects all cannabis businesses, both ancillary and plant-touching,” Mahoney wrote. “We wish every state approached ancillary third-party tech companies the way our home-state of MA did, but unfortunately that’s not how regulations are being proposed in key northeast markets such as New York.”
Lantern operates in Massachusetts, Colorado and Michigan, which will all shut down after this month. The platform had been attempting expansion in New York, but the state prohibits third-party cannabis delivery services, requiring cannabis retailers to have their own delivery service if desired, CommonWealth Magazine reported.
Lantern also housed an incubator program for local delivery firms, helping state-licensed recreational delivery companies develop business plans and network with investors.
All 15 of Massachusetts’ delivery firms are owned by entrepreneurs from “disenfranchised communities,” as part of an effort to counteract historical racial disparities in drug arrests, The Boston Globe reported. However, the state prohibits delivery companies from accepting investments from platforms such as Lantern, according to The Globe.
“Part of our mission at Lantern was to support and advance social equity founders in cannabis,” Mahoney wrote. “As a team, we remain and will continue to be fierce advocates for strong, meaningful social equity policies.
“Specifically, we’re confident [Massachusetts] will make the social equity delivery licenses more sustainable businesses by, among other things, reducing the 2-driver rule to 1-driver,” she continued. “We’re also supportive of NY’s roll out prioritizing opportunities for social equity entrepreneurs at the outset, but hope those businesses will be given the tools to succeed and reach customers.”