Reporter’s Notebook: Beer Insights Seminar; Big Beer Execs Optimistic About Beer

Executives from Anheuser-Busch InBev (A-B), Molson Coors Beverage Company and Constellation Brands all championed core beer during Beer Marketer’s Insights’ Beer Insights Seminar Monday in New York City.

Each exec touched on their respective companies’ plans for their core beers in 2023, and how they will address innovation.

Additionally, Boston Beer founder and chairman Jim Koch addressed the company’s partnership with PepsiCo, which some Boston Beer wholesaler’s have found controversial.

Molson Coors: Revitalization Plan Working, Chain a Large Priority in 2023

Three years into its revitalization plan, Molson Coors is confident its refocus on fewer, core brands is working, Brian Feiro, Molson Coors incoming U.S. president of sales, said Monday.

Feiro, who has served as Molson Coors chief commercial solutions officer for several years, will officially take over as U.S. president of sales in January, following the retirement of Kevin Doyle after nearly 40 years with the company.

“There were a bunch of skeptics when we launched our revitalization plan, but things are working for us as a company,” Feiro said. “We’ve had six straight quarters of revenue growth as a company. We’re up 0.12 share of the industry as a company. … Seven out of our top 10 brands are growing revenue.”

Feiro credited a great deal of the company’s success to consumers returning to the Molson Coors portfolio during the COVID-19 pandemic.

“We learned during the pandemic that in times of uncertainty, people go back to brands that they trust and they came back to our portfolio, which feels really good,” he said. “They came back to our portfolio because our brands are incredibly relevant.”

Feiro also shouted out the work of chief marketing officer Michelle St. Jacques and her mission to make brands that people “give a shit about.” St. Jacques joined the company in early 2019. Her strategy to make Molson Coors’ brands “relevant” through its marketing efforts has “allowed us to be more focused on the things that we execute both with our chain retailers and for our distributors,” Feiro said.

Chains will continue to be a targeted growth channel for Molson Coors in 2023, with the goal to “grow the overall size and value of the category” across all channels “while taking a disproportionate share of the growth.”

With its focus on core brands, Molson Coors will still keep diversity in its portfolio with beyond beer offerings such as Topo Chico Hard Seltzer and Simply Spiked. If there are “two escalators in the [hard] seltzer segment,” Topo Chico is on “the right one,” while Simply is “on a rocketship to the moon,” Feiro said.

When asked how consumers are responding to Molson Coors’ second price increase this year, Feiro said it was too soon to tell. However, he noted that conventional wisdom on elasticity and the impact of price hikes on beer volume have been thrown sideways this year.

“In the past we understood when you took price, there was always an impact on volume,” Feiro said. “This time, we’re seeing pricing at unprecedented levels, and there’s minimal impact on volume.”

A-B: 2023 Innovation to be Led by Nütrl Vodka Seltzer and Kona Big Wave

Nütrl Vodka Seltzer will be A-B’s “biggest innovation of 2023,” according to Kyle Norrington, A-B’s U.S. chief commercial officer (CCO).

Labatt Breweries, A-B’s Canadian subsidiary, acquired Nütrl in 2020. A-B launched the vodka-based, ready-to-drink canned cocktail (RTD) in the U.S. at the end of 2021.

This past year, A-B has been “working out the kinks” for the RTD brand, including getting the supply chain and flavors “right” and “educating [its] wholesale system on how it comes to market,” Norrington said. Now that everything is ironed out, A-B is “betting big” on the brand for 2023.

“We know consumers are trading up from traditional [hard] seltzers and we see this as a big opportunity,” Norrington said. “We’re No. 2 today, but we see a big opportunity for us to grow our distribution and our rate of sale on that brand.”

A-B isn’t only looking at beyond beer when it comes to innovation. Another “big, big bet” for the company in 2023 will be Kona Big Wave. A-B acquired Kona through its merger with Craft Brewer Alliance in 2020, but had to divest itself of the company’s business in Hawaii.

“It is a relatively small brand when you think about its size versus other brands, but that’s the point,” Norrington said. “We have an amazing brand in our hands: why not continue to grow that?”

“Beer innovation is back” so a “mega brand” such as Kona has the potential to be a “aspirational lifestyle brand in the marketplace” and a competitor in the high-end lager space, Norrington added.

Beyond innovation, Michelob Ultra will be the No. 1 priority for A-B in 2023. The brand, as well as Bud Light, will be the company’s main plays to connect to a more diverse consumer base, specifically younger and Hispanic legal-drinking-age (LDA) consumers.

“Our two biggest brands in our portfolio are very, very relevant with a growing Hispanic consumer base,” Norrington said. “We actually see Michelob Ultra in Hispanic ZIP codes performing even better than it does non-Hispanic ZIP codes.”

A-B has laid out a 10-year plan to capitalize on opportunities with Hispanic consumers, including plotting its brand in “the right places” and ensuring it’s marketing the “right brands” for the “right occasions.”

In a similar vein, A-B recently announced its partnership with Novamex, the maker of Mexican soda brand Jarritos, to launch Cantaritos Hard Sodas. The brand will specifically target the “young LDA Hispanic consumer,” starting in Southern California, Texas and Arizona, Norrington said.

Constellation Brands: Core Brands Should be Considered ‘Traditional Beer’

Constellation Brands reported net sales growth of +15%, to more than $2.1 billion, in its Q2 2023 earnings call with investors last month. Jim Sabia, Constellation’s EVP and beer division president, credited the company’s growth to being “focused,” “disciplined” and “consistent.”

Included in that is less focus on innovation or SKU proliferation compared to some of its competitors. The company now has 79 SKUs, generating about $94 million per SKU, according to Sabia.

“We’re very focused on not having too many SKUs [and] having SKUs that are effective,” Sabia said. “Innovation is critical, but what we’ve learned in this space. … Most of the brands that are very successful, they take time and they take patience.”

Going forward, Constellation will continue to prioritize its core brands, including Modelo and Corona, followed by “next wave brands” Pacifico, Modelo Cheladas and Corona Premier and Modelo Oro.

Sabia pointed to the growth of Modelo Cheladas, which has been viewed by some as “an overnight success,” but Constellation has sold the brand family since 2010. While initially thought of as a brand for primarily Hispanic drinkers, it has resonated with “a lot more general market” and its drinkers are “a lot of more female.” The company plans to introduce a 12 oz. can variety pack for the brand next year to speak to more occasions.

“So innovation plays a very important role, but we do it in the sense of not trying to throw too much against the retailers and distributors until we know how effective was the cannibalization, what’s the incrementality, how many resources [we have, and] who are we targeting?” he continued.

Modelo will be the No. 1 focus for the company through the rest of fiscal year 2023 and into 2024. The brand has a 33% share of the beer market in California, bigger than Budweiser, Bud Light and Miller Lite combined in the state, according to Sabia.

Asked to address the idea that traditional beer will never grow again in our lifetime – a theory presented multiple times this year by Boston Beer’s Koch – Sabia said the definition of “traditional beer” needs to be reevaluated.

“Pacifico is 120 years old, Corona and Modelo is 97 years old,” Sabia said. “What’s traditional beer? I think that’s pretty traditional.

“We focus on our beers and our beers have grown,” he continued, noting that the company’s beer has grown for 51 consecutive quarters. “I think beer has grown, I think traditional beer has grown, and I think we have traditional beer.”

Jim Koch Addresses Blue Cloud Controversy

Boston Beer Company and PepsiCo have faced criticism over the past year for the creation of Hard MTN Dew and its distribution through Blue Cloud Distribution, the wholesaler network PepsiCo established recently, rather than Boston Beer’s existing network.

Koch responded to the criticism and his thinking behind the decision to partner with the hard soda giant:

“There was no question in my mind, they [PepsiCo] were coming into this business. Whatever we told them, they were going to find a partner and it wasn’t gonna be that hard. And they wanted to be a distributor.

“We weren’t going to keep them out of this business. There was going to be a Blue Cloud whether they partnered with us or somebody else.”

Koch’s prediction was backed recently when Boston Beer refused to partner on an alcoholic version of Lipton Tea, as it would directly compete with Twisted Tea. As a result, PepsiCo partnered with FIFCO USA.

“We are all better off with us as their partner because we are very committed to the three-tier system,” Koch said. “And we are very committed to trade practices. We know we don’t want slotting fees to creep in here.”

The roll out of Hard MTN Dew has been slower than initially anticipated, as Blue Cloud has faced regulatory roadblocks in several states. Koch estimated about 20-30% of states could prohibit Blue Cloud from distributing.

“We’re the supplier, who do you think’s gonna get the volume in those states? The Boston Beer distributor,” Koch said. “At the end of the day, this is an experiment. I hope they’re successful and good, but if they turn out not to like this business or not to work out – which, they’re a partner, I hope it does work out for them – if it doesn’t work, where is that volume gonna go? We’re the supplier, we can determine that.”

Koch also addressed concerns that Hard MTN Dew is being merchandised with traditional MTN Dew and/or with products targeting children. Asked who was responsible for the overlap, Koch assured it was not PepsiCo or Boston Beer.

“Pepsi is very freaked out about that kind of thing,” Koch said. “They are more scrupulous than certainly we were as a distributor.

“I don’t know how frequently they happen,” he continued. “I’m sure they happen with Topo Chico or Simply. Retailers can do whatever they want with product, but those are not – believe me – not coming from Pepsi.”