Brewbound Podcast: A Legend Returns, a Cannabis Company Buys a Craft Brewery and Distributors Dish on Bud Light

[00:00:00] Zoe Licata: Next on The Brewbound podcast, a legend returns, a cannabis company buys a craft brewery, and distributors share their true feelings about Bud Light. Hello and welcome to The Brewbound podcast. My name is Justin Kendall. I'm the editor The Brewbound and I'm joined by Zoe Licata, Brewbound reporter extraordinaire. How you doing, Zoe? Hello, I'm glad I'm not in New York City. Well, our colleagues from BebNet are right now, so good for them. Yeah, good luck to everybody dealing with any fallout from the Canadian wildfires that have luckily been not too bad here in Boston. You've changed from calling it Canadian smoke to Canadian wildfires, and I much prefer the Canadian smoke name because I think that would be a hell of a good product name. Yeah, we should trademark it. It's too late. We've already given it away here on the podcast to somebody. Our Brewbound podcast listeners are loyal and they would never steal from us. You just wait till we see this Canadian smoked beer. Damn it. Well, hopefully they don't steal that, but we're not going to get rich off of it. We know better than to get into the beverage industry. Let's get into the, some of those reasons after we, we do a quick plug, which is our next brew talks event is coming up on July 12th in Boston. We've started really put together a solid lineup of speakers. Yeah, some of the speakers that we've most recently announced include Megan Parisi, who's the head brewer at Sam Adams' downtown Boston taproom, Dave Williams from Bump Williams Consulting, and Dino Farnari from Vitamin C, which is a Massachusetts-based brewery. So they're joining. We already announced Sam Calagione is going to be there from Dogfish Head, Adam Romanow from Castle Island, and Kimberly Galinsky from Warentown Brewery. Couple more names that we're going to be adding to the lineup, but already some pretty decent heavy hitters in there. Yeah, you can go The Brewbound.com right now. Get your tickets. We'd love to see you there. It's going to be a fun afternoon of business talk and networking and beers. So come join us at the Samuel Adams Brewery, Jamaica Plain, July 12th. Well, let's get into this week's news and it really starts with Sierra Nevada. Big breaking news story last week. Ken Grossman, the founder of Sierra Nevada is back in as interim CEO and Jeff White is out. He's going to retire, but not just yet. He's going to stick around and make sure that their CanDo Innovation Center gets up and running right. Yeah, this news comes when they're set to open that facility pretty soon, right? The new capacity space. I believe so. And that's going to be pretty much focused on Beyond Beer offerings. And then some of their partnerships, like earlier this year, they announced their partnership with Riot Energy. Whoever comes in as the next CEO, whoever they find to fill in is going to be kind of helping usher in this kind of new chapter with a lot of new capacity and that beyond beer focus, which is going to be interesting to see. But congrats on Jeff on retiring. I'm sure he's earned it. Yeah, 38 years in this business. He's definitely earned it. And the next CEO in the search is underway. So you know, get your resume updated. This will be only the third CEO in the history of the company. And you know, not not counting that asterisk next to Ken Grossman's name. Yeah, Jeff was the the first CEO other than Ken. So this is quite big shoes to fill for whoever comes in next. Yeah, and they've definitely seen some turnover in their leadership roles over the years. VP of sales, Ellie Pressler, came on not long ago, or maybe I just can't remember anything during the pandemic era of beer industry journalism anymore because everything's coming fast and furious. But significant hire there not too long ago. Yeah, lots going on at Sierra, which is the third largest craft brewery by volume, according to the Brewers Association. And, you know, some good beers coming out of there, too, in that Little Things series. New ones, including a lager. I think Zoe's been preaching a year of the lager. That's out now. And so is their Summerfest lager, which returns by fan demand. Thank you, fans. Appreciate you and the support for the logger. Let's talk about something other than loggers and that's F&Bs are hot right now. Yeah, that, I mean, we know this, we've talked about this a couple times, but we got some data to back it up recently from Baum-Williams Consulting. Baum-Williams himself put out their monthly report, or monthly industry update, as they call it, and Baum kind of highlighted both the top growing brands, so brands that have the most incremental growth in both beer and spirits, as well as the top new brands. And within the beer category, more than half of those top new brands are F&Bs. This is data through May 20th, all NIQ-tracked off-premise channels. A lot of those brands are from those convergent products that we've talked about a lot. So Beast Unleashed from Monster, they have three different SKUs in that top 25 new beer brands. Simply Spiked has a handful in there. From Molson Coors and Coca-Cola, we have Bojangles Hard Sweet Tea, which we talked about Was that a few weeks ago, a month ago or so when that Appalachian deal came through? That now feels like ages ago because so many have happened since. But that's from Anheuser-Busch and Appalachian Mountain with a licensing agreement with Bojangles and Lipton Hard Ice Tea from FIFCO and PepsiCo. So a lot of these new convergence Brands are putting out new products, extending those brands, and they're all doing pretty good for at least their beginning early stages. We'll see if they make it onto the growth drivers list and have incremental growth. The number one new beer brand yesterday, though, was not one of those brands. It was Modelo Cholada variety pack from Constellation Brands and followed closely behind by an actual beer product, kind of New Belgium's food arranger, Fruit Force. That one sort of rattles the line.

[00:07:04] SPEAKER_??: Yeah.

[00:07:06] Zoe Licata: Hence the kinda in there. But yeah, that was number two and that only launched in like February while number one, the gelato variety pack launched in August. So it had a couple months headstart ahead of fruit forest. So we'll see if that rises in the ranks. The number one beer growth drivers and bump is all about, you know, there's innovation, but what's actually driving incremental growth, that was Modelo. So number one year to date through that May timeline. Yeah, well, and other craft breweries were driving some growth as well. And that was Sierra Nevada with the hazy little thing rotator and bells with its hearted IPA variety pack and then the founders all day variety pack. And then in the spirits category, I mean, it was all about the RTDs, but specifically there was a lot of the spirits-based extensions of hard seltzers. So High Noon Sunsips was both in the Growth Driver and New Drink or New Beverage, New Spirits brand top 25. They just came out with their new tequila-based High Noon extension. Truly Vodka Soda in there for new brands. And then White Claw's version with their White Claw Vodka Plus Soda in there in the top 25 new spirits brands. So they're kind of really overtaking traditional spirits. And Bump did put a caveat in there that yes, traditional like bottled spirits are still kind of the top, top of the list when it comes to growth drivers, but RTTs are slipping in there and they're populating the majority of the top 25. The point you made earlier, too, about the hard teas popping up on here, that's gonna be an interesting space to watch going forward, too, as more and more entries get in there and you see some of those brands already popping up there. And then we just reported on Voodoo Ranger has launched its hard-charged hard tea, a 7% ABV, 24-ounce can, single-serve, targeted brand. Yeah, keep an eye out on the BevNET website for the latest issue of BevNET Magazine. There's a piece that I have coming up in there that's focused all on hard teas. And they're really driving the growth for F&Bs and just becoming increasingly populated. I think we got some data from Bump Williams on just the number of hard tea brands that are in the market now. And just over the past three years, the number of heart tea brands have grown from 80 to 150 so far in 2023 and the number of SKUs has grown from 161 in 2020 to 216 in 2023. So just in that what barely two and a half year period it's grown exponentially and seems to be that sure, yeah, Twisted Tea is still the big dog and has 90 something percent of the hard tea market, but there are some people trying to scratch at that lead. And a lot of those brands that we mentioned earlier of like coming from already existing big non-alcoholic beverage producers are having the most success in that so far.

[00:10:22] SPEAKER_??: Yeah.

[00:10:22] Zoe Licata: definitely a space that everybody wants a piece of if they can get it and they see opportunity, but it has been a hard space to really carve into with Twisted T dominating it the way that it does, so. We'll be watching that and we'll also be watching just as a Constellation Brands talks down about its cannabis investments. Bill Newlands, I think it was about a week ago during a chat with Nadine Sarwat had said that the canopy growth investment was a horrible one. And we talked about it last week on the podcast. You've got a cannabis company in Texas buying a craft brewery. Yeah, Texas is apparently excited, or companies in Texas are still excited about cannabis, despite those comments and concerns. We discovered yesterday that 8th Wonder Brewery, which we've talked about a couple of times, I think most notably was when they came out with a Delta 8 hard seltzer in 2021. But they've been acquired by Bayou City Hemp, which is a also Houston, Texas based cannabis company. It seems like they're the largest cannabis company in the state. they've worked together for two or three years now. They've worked together on that Delta-8, excuse me, not a hard seltzer, a Delta-8 non-alcoholic seltzer, very important distinction. But they worked together on that project. They launched Eighth Wonder Cannabis, which is a cannabis extension of It's 1 debris and then a couple of months ago announced that they were going to be working together on creating. Cannabis related products to be in both on and off premise distribution. So they've been together for a long time and decide, yeah, we're going to operate under 1 roof. With bio city as the parent company. Consolidation is the theme in craft beer this year. It is not slowing down. If you're not buying back your brewery, you're buying somebody else's brewery or you're selling your brewery to somebody. It's just unreal how this summer has unfolded. Yeah and there was again with this transaction we were hearing a lot of the same things which we've heard over and over again with these other brands of we now have shared resources, we have shared capacity, like this just works out best for everybody to sustain growth, to drive future growth, to just have distribution resources, just there's so much where people need to collaborate now to be able to succeed and it's not going to stop. I guess now we know what we're going to be, our theme The Brewbound Live is really going to be this year. Yeah. If we were looking for one, we've got it. And, you know, not knowing too much about these two companies, I've seen enough releases with these two companies names in the same release that, you know, just being an outsider, I was like, how are they not linked already? So totally makes sense. Yeah, total sense. And so the CEO of BioCity is going to be the CEO now of everything of this new executive leadership team. And then the founders of Eighth Wonder are going to join that team as chief operating officer and as chief brand and marketing officer. So they're still going to have that collaboration that they've been having for years now. It just all makes sense. Well, we also got domestic tax paid shipment numbers in for April, and it's kind of ugly. Yeah, a lot of negatives in the latest economic reports from the Beer Institute. On the tax paid side, so these are all for April 2023, tax paid's down 4% versus April 2022, and import volume's down 11%. that import decline should have a little asterisk on it and that that's being primarily driven by Mexican imports, which are down 9.1%. And that is because they had really tough comps. We're now starting to get into that period where they're lapping that huge growth that they had last year. So it might be a little misleading there. But yeah, April domestic shipments estimated about 13 million barrels. And as we know, that will change a little bit as final numbers come in at the end of the year, but still in the decline. And then shipments to wholesalers also down about 4.5% year over year to 15.9 million barrels. Year to date shipments to wholesalers are around 60.7 million barrels, which is down 1.8%. And there, Danelle Cosmo, who's the VP of Research at the Beer Institute, tried to make sure nobody freaked out too much. I mean, so this number for shipments to wholesalers in April 2023 is the lowest shipments have been in at least five years. But Danelle likes to always remind people that the beer industry is cyclical and whenever there's big declines like this, they're generally followed by some growth and by things bouncing back. So she expects a pretty positive summer. So don't get too dismayed yet, but it's going to be interesting to see if that bounce back does happen like it has in the past. it's going to be a lot harder than it has been in the past. And there's no two ways of putting it. It's the upheaval with Anheuser-Busch and Bud Light that's really causing a shockwave through the industry at the moment. And some of that was evident in a couple of surveys of beer distributors from financial firms, Jeffries and Goldman Sachs. And we have some of the data there, some of the responses there that really paint a picture of concern that this may be a permanent thing for the Bud Light brand to come back from. And there are a lot of different ways of looking at that. And I mean, you can look at it from the data position and the insights that they're gleaning from wholesalers. And then you can see on a consumer level, you know, if you've looked at one video or if you've been sent one like TikTok video of somebody making fun of Bud Light, The algorithms on these social media accounts are going to send you hundreds of other TikToks or Reels or whatever platform you're using. I don't use TikTok, so I don't really know because I'm an old person. Yeah, I think that's something interesting that I'm sure someone much smarter than us will have a better explanation of how this has impacted things socially. But I think it counts for some of the reason why this has so much more staying power than maybe some controversies had in the past is because everything now, once you watch something that's related to this, it's going to pop up everywhere on all of your feeds that are all connected now. So it has a little bit more staying power, it's getting more eyeballs because of that for a longer period of time. And just as a reminder to everybody, so these numbers from April, this was the month that that controversy started. It started April 1st was when that influencer partnership video went out with Dylan Mulvaney. So it should be kind of the heaviest declines, but we're seeing now that there are some out of stock problems that could potentially be happening with some of these players that are benefiting outside of Anheuser-Busch. So it might not mean that shipments are going to get better next month or so. It might actually remain as bad. We'll see how they handle things. Yeah. Well, let's get into some of what we know from these Jefferies surveys, and this is what beer wholesalers are telling them. 32% told Jefferies that they believe that the damage to Bud Light could be permanent. 65% of distributors surveyed said that the Bud Light downturn could last at least another six months. So that's a starter point, and then Goldman Sachs found that Most respondents are pessimistic about a potential full recovery for the brand because they believe its equity and market share have been damaged so much by this conservative boycott. And those who do see the potential for a turnaround believe that it could take three to five years. That's a long time for a turnaround. Yeah. On a brand that was already declining before this. Right. The other things that are factoring in here is that it was already on the decline and the handling of the situation by AB made this a problem with now they weren't just having problems with one consumer type. It was kind of then impacting other consumers who didn't believe they supported LGBTQ plus communities strong enough when they were faced backlash. So there's just that kind of angered everybody and it's affected their brand value and how just consumers in general see them. So it seems like distributors are confident that has pretty solid sticking power. Well, on a positive note, as we enter the summer selling season, distributors told Bonnie Herzog from Goldman Sachs that Memorial trends met or exceeded expectations, but they're not talking about Anheuser-Busch and Bud Light trends when they're talking about that because Herzog heard that AB inventory levels at wholesalers are reaching a record high. So, again, those Memorial Day trends are, there's no halo effect, apparently, for Anheuser-Busch out of this. Right. Molten cores, Constellation brands, they're the ones that are really experiencing the most success at this time. Also an interesting part of your coverage on this was you pulled out the study that Nick Modi did on the consumers that are really pulling away from the Bud Light brand, which also makes this kind of interesting, but you put it out as a lot of lower educated, older consumers, The type of consumers that we've been preaching for years that beer has too much of, I don't know is the right word, but they need to be targeting other consumers. And now we're seeing, well, those consumers that you're leaving behind a little bit still have some impact on your sales. So how do you balance that is quite a task. But he had a lot of details more on like exactly who those consumers are. The ones that everyone likes to use is like, oh, you're leaving the beer consumer behind. These are the very specific people that they're talking about. Yeah. So Nick cited numerator insights. And here's the quote. Compared to the rest of the beer-drinking population, these recent lapsed Bud Light consumers over-indexed to lower-income households, and in parens it says under $40,000, tend to be 55 or older, are primarily white-Caucasian, and have lower rates of higher education. college graduate degrees. So that's who are the primary consumers who are leaving Bud Light behind. And those drinkers, they primarily over-index on TV and radio for their media consumption. So you can probably guess that they're getting a steady diet of, you know, Fox News would be my guess in this, and maybe some Newsmax and whatever, you know, depending on their cable and satellite provider. Beyond that, we know that this industry is doing a poor job of reaching women and minority consumers, people of color. And this whole controversy sort of illustrates You can see almost the thinking of. We got to get younger and we got to evolve this because we've got an older consumer base and you know, it's running at about 30% lapsed. That was what it was in 2022, according to Nick Moody and numerator since early April, it was 39% lapsed. So that's up 33% new consumers, 28% repeat. Yeah, I mean, this kind of shows you in some weird way as shown how beer not speaking to those consumers directly impacts it because when you have such a specific consumer type and such an undiverse consumer type, when you've done something to anger them, they now are going against you and it's affecting your business. If you have a more diversified consumer base, maybe you wouldn't be facing this problem.

[00:23:35] SPEAKER_??: Yeah.

[00:23:35] Zoe Licata: It's been a long time coming for a long time, which is very repetitive. Well, yes, but look at what is Bud Light's biggest competitor right now or coming up trying to be the number one beer right now is Modelo. Who is Modelo speaking to? A much more diverse consumer base, a much younger consumer base. There's a reason why they are having the success they are having. Yep, they're winning in California, they're winning in a lot of places, they're winning in the latest four weeks, according to Circona data in the off-premise. So, yeah. And then you have Coors Light and Miller Light, and their marketing over the last couple of years as well, under the leadership of Michelle St. Jock's, they have tried to appeal to women and People love color. Look at the advertising. It speaks for itself. There's the Coors Light bra ad. There's the Blue Moon ads that they've run with female leads in them. Coors Light marketing period has done a better job of trying to reach out to a more diverse consumer. And it's showing up in the numbers in a positive way. Well, it was starting to show up in the numbers, yes. And then this has definitely accelerated it. So now they're pulling in some of these lapsed consumers over on the Bud Light side. And we don't need to talk about this anymore. Let's move on. I don't want to get doxxed. Yeah, let's wrap this up. Let's play Another Round of Another Round or Tabbing Out and this one is going to be the softest of softballs and I hate doing that because I already know the answer but Philadelphia's Two Robbers is partnering with Boston's Grillo Pickles on a pickle hard seltzer. Zoe, are you buying Another Round or are you Tabbing Out? I am absolutely buying Another Round. I am all for this. I had a pickle seltzer in New York last year and it was one of the greatest things I've ever had because it was just like drinking out of a pickle jar. And I know you think that's disgusting, but I absolutely love it. So two robbers, I would love some, please and thank you. Grillo's is based in Boston, so maybe I have to go knock on their door, but I'm all for it. I am Tabbing Out. I'm leaving the bar. I am just hiding in a dark closet from this. I appreciate what Two Robbers is doing. I think they're a fantastic company, but I just can't with Pickles. It is... You can stand outside the bar and watch me and Jess and anyone else who wants to come enjoy our delicious pickle hard seltzers and have the best time of our lives. I would not do any of that. I would rather be anywhere else in the world. Missing out? I apparently am, but do you have anything else? Do you have Another Round that you want to No, I need someone to come up with another really obnoxious beverage for me to rant about. Normally I would say don't, but like, let's get some exciting stuff over here. Tell us your crazy ideas. Yeah, we need something to juice this up other than pickle juice. We need something to juice this segment up a little bit. So we will work harder on it. And if you have suggestions, you can email us at podcast The Brewbound.com. With that, let's close it out for this week. That's our show. Thanks for joining us. We'll be back next week.