Last Call: Wholesaler Purchasing Bounces Back in May; Terry Hopper Exits Vermont Cider Co.

Wholesaler Beer Purchasing Rebounds in May

The National Beer Wholesalers Association’s monthly Beer Purchasers’ Index — which surveys distributors’ monthly buying behavior — bounced back from a dismal 35 reading in April to an overall index of 66 in May.

“BPI saw a significant rebound in the May index across all segments from April lows,” the NBWA said in a release. “Most notably, the below premium segment hit a record reading of 71 in May. At the same time, premium lights and below premiums saw significant jumps and are reporting higher index readings. The high-end segments of imports and craft also rebounded, along with the FMB/seltzer segment which returned to a 90 reading.”

An index of 50 points or more indicates that purchasing in a segment is expanding, while a reading below 50 indicates contraction.

After posting a record-low reading of 14 in April, the craft index bumped up to 42 in May, although the segment remained in contraction and down from the May 2019 reading of 55.

FMBs and hard seltzers posted a 90 reading in May 2020, up from a 79 reading in May 2019.

After contracting in April, the imports index returned to expansion with a reading of 53 in May.

The NBWA’s BPI covered the period from May 10 to May 20, as on-premise retailers remained shut down due to the COVID-19 pandemic.

“With many on-premise retail outlets slow to restart or still shut down, the ‘at-risk inventory’ index (inventory at risk of going out of code in the next 30 days) for total beer remained elevated at 69 but was significantly below the reading of 80 in April 2020,” the NBWA reported.

Constellation Brands Staring Down Out of Stocks

Constellation Brands executives have been making the rounds with analysts over the last couple of weeks. CFO Garth Hankinson and VP of investor relations Patty Yahn-Urlaub met with analysts from Credit Suisse and RBC Capital Markets and provided updates on how COVID-19 is affecting the Corona and Modelo maker’s business, the slowdown in production in Mexico and the potential for out of stocks.

Supply issues aren’t unexpected as the Mexican government had restricted production due to the novel coronavirus, although the government has allowed beer production to ramp up as of June 1. Nevertheless, it will take about two weeks for the company to get fully going.

Credit Suisse analyst Kaumil Gajrawala noted that Constellation’s production had ramped down to as low as 20%, and as the company rebuilds its inventories, it is focused on core SKUs in larger pack sizes.

“Out of stocks expected in summer months as the shutdown overlapped with critical inventory-build window of March-April-May,” Gajrawala wrote. “Typically, breweries produce 30% in excess of demand in those months to build 60 days of inventory into the peak summer season. Missing these precautionary measures suggests that even with shipments improving in the near-term, inventory may not recover for 3-4 months to fully cover demand.”

In a late May virtual conference hosted by RBC, Hankinson and Yahn-Urlaub said the company is focusing on its top 20 SKUs and some out of stocks of certain pack sizes could be expected during the peak selling season. However, the company expects Corona and Modelo products to remain in stock, although 6-packs may be in short supply.

According to both firms, Constellation executives cautioned that scan data is overstating the company’s actual trends, as the data skews more to large-format stores and doesn’t fully capture independent markets such as New York City, California and New Jersey.

The on-premise accounts for as much as 15% of Constellation’s overall sales, which were virtually all lost with the shutdown of the on-premise due to COVID-19. There was also one fewer selling day in the first quarter, leaving management expecting first quarter depletions growth to be up low- to mid-single digits and volume to decline low- to mid-single digits.

“As long as STZ is able to get back up to full capacity by July, we think we should see a sharp reversal in shipments to rebuild inventory,” RBC consumer staples analyst Nik Modi reported. “For F2Q we are modeling +6% shipments and +3% depletions.”

National trade group the Beer Institute (BI) reported Thursday that imports from Mexico declined 28.5% in April 2020, compared to the same time period in 2019, and have declined 3.8% year-to-date. The BI cited the Mexican government’s restrictions on beer production due to the COVID-19 pandemic as the reason for the decline.

IWSR: COVID-19 to Set back Global Bev-Alc Industry by 5 Years

Research released by IWSR — a London-headquartered firm that offers analysis of the beverage alcohol market — says it will take five years for the global beverage alcohol industry to recover from the COVID-19 pandemic.

IWSR said the worldwide shutdown of bars and restaurants is not being offset by off-premise and e-commerce sales, leading the firm to project double-digit declines in 2020. Those losses won’t be recovered until 2024, and it could take longer for the recovery in the United States and United Kingdom, the firm added.

“While we’re still assessing the full impact of the current COVID-19 situation, it’s very clear that the pandemic is set to cause a deeper and more long-lasting after-effect to the global drinks industry than anything we’ve experienced before. Even the downturn following the 2008 financial crisis was less severe than what we are seeing now,” IWSR CEO Mark Meek said in a release. “In many ways, 2019 was perhaps the last ‘normal’ year for the drinks industry.”

IWSR noted that worldwide beer volumes increased 0.3% in 2019, while value increased 2.2%, driven by non-alcoholic beer (+15.2% in volume over 2018). Worldwide beer volumes aren’t expected to reach 2019 levels until 2024, and IWSR said the bounce back for beer is expected to be better than wine and spirits.

“As restrictions ease, long-term recovery is expected to be slower than the initial bounce back – driving a ‘Nike Swoosh’ rebound shape,” Meek added. “Like many other industries, it’s incredible how a few months of lockdown will result in several years of recovery, but beverage alcohol has proven to be remarkably resilient in previous downturns, and this should be no different. A strong focus on innovation, premiumisation, and new routes to market such as e-commerce, are all factors which will help contribute to the industry’s rebound and future growth.”

Terry Hopper Departs Vermont Cider Co.; Bridget Blacklock Named Interim VP of Sales and Marketing

Long-time Vermont Cider Co. executive Terry Hopper is exiting the maker of Woodchuck Hard Cider, effective today, according to a memo shared Thursday with wholesalers, retailers and industry associates.

Hopper, whose tenure at Vermont Cider dates back to November 2005, has held several roles within the company, but he has been the long-standing VP of sales for the brand.

“Terry leaves with our very best wishes and we thank him for his considerable contribution to our business,” the memo read.

Bridget Blacklock, Vermont Cider’s VP of marketing, has been appointed interim VP of sales and marketing. Blacklock is also a long-time Vermont Cider employee, working in various marketing roles for the last 16 years.

“I’m excited for the opportunity to build on the energy we’ve gained the last few years under Terry’s leadership.” Blacklock said in the memo. “We’re seeing really solid trends in syndicated with Woodchuck growing +11.5% and Magners trending +1% in the last 52 weeks. More recently, our brands are outpacing the segment with Woodchuck and Magners both growing double-digits and Wyder’s trending +7.2% in the latest 4 weeks. I have a lot of passion for these brands and look forward to working with the team to continue this momentum.”

Vermont Cider said the structure of its sales organization would not be impacted by the change. Blacklock and general manager Ben Calvi will continue serving as the company’s executive team and report to C&C Group plc.

A-B InBev Sale of Carlton & United Breweries to Asahi Completed

Anheuser-Busch InBev’s divestment of its Australian subsidiary, Carlton & United Breweries, to Asahi Group Holdings was completed on Monday in a deal valued at 16 billion AUD (nearly $11.2 billion).

“Despite the challenging environment, our colleagues working on this transaction showed great dedication and remained focused on delivering to its completion,” A-B InBev CEO Carlos Brito said in a release. “I would like to thank them and also the CUB team for their continued commitment and resilience.”

The sale of A-B’s Australian business to Asahi was first announced in July 2019.

Through the transaction, Asahi gains the rights to sell A-B’s portfolio of global and international brands in Australia. Asahi borrowed the $11 billion for the acquisition from Sumitomo Mitsui Banking Corp, Reuters reported.

As for A-B, the company said it would use the proceeds to pay down debt.

For more on the competitive aspects of the transaction, read Australia’s Brews News report.

Lickinghole Creek Closes Richmond Taproom

Lickinghole Creek Craft Brewery has permanently closed its satellite taproom in Richmond, Virginia, Richmond Biz Sense reported.

CEO Lisa Pumphrey told the outlet that the novel coronavirus was a deciding factor in not renewing its lease on the space, and the company will pivot into adding distilled spirits to its portfolio, which will be produced in addition to beer at its production facility.

Lickinghole Creek’s taproom closure is more permanent from those of Three Floyds and Flying Dog, which each announced indefinite closures of their taprooms.

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