Brewbound Podcast: A Mid-Year Beer Report; Plus Earnings SZN Begins

[00:00:00] Justin Kendall: Next on the Brewbound Podcast, a mid-year beer update. Hello and welcome to the Brewbound Podcast. I'm Justin Kendall.

[00:00:19] Zoe Licata: And I'm Zoe Licata.

[00:00:21] Justin Kendall: And this week we have a lot of news to catch up on. And I've been away, but before we get into all of the news, please like and subscribe to the podcast. It helps us out. We really appreciate it. But, uh, Zoe, you've been doing the job while, uh, I've been slacking or, you know, taking time off to go to Comic-Con. Thanks for the coverage. And thanks to Jess, who isn't here, who is taking this week off.

[00:00:50] Zoe Licata: Yeah, we're all just swapping responsibilities throughout the next few weeks. So yeah, glad to do my part now and glad to give it all to you guys next week.

[00:01:01] Justin Kendall: Well, I know you're on edge because you're going to the Bahamas and you're tracking that tropical storm.

[00:01:08] Zoe Licata: Yeah, very intently watching to make sure we don't get blown away, but we'll be okay.

[00:01:15] Justin Kendall: Are you going to get out of here? Do you think you're going to make it?

[00:01:18] Zoe Licata: We'll definitely get out of Boston. We'll get to the Bahamas. The real question is if we'll be able to get from our initial destination to our main destination, which is like a 30-minute small plane ride on Friday, which is allegedly when, if there is a potential storm, it is going to hit. That one I'm less confident about, but we're putting out good thoughts and hopefully we'll be fine.

[00:01:47] Justin Kendall: Well, hopefully you can get out of here and have a more relaxing time than I did at Comic-Con, which was nonstop from Wednesday through Saturday and then home after midnight on Sunday.

[00:01:59] Zoe Licata: Two very different experiences. There will be significantly less people and things happening in the Bahamas.

[00:02:08] Justin Kendall: Yeah, I read the Barb's and Sean McNulty's weekend newsletter about, you know, what else would I do but go to a convention with a hundred thousand people plus and spend my time there. But, you know, first time experience. So I got to go on the Voodoo Ranger pirate ship. I got to see. Greg Koch's comic book in person. I did not see Greg Koch at the convention, but you know, I wasn't looking for him either.

[00:02:40] Zoe Licata: You can't escape beer. You can't escape work fully, apparently, even at Comic-Con.

[00:02:45] Justin Kendall: No, I will say I was impressed by the pirate ship though, because it was the one sort of craft beer thing that stuck out at the convention. And I mean, you had to go behind the convention center to see it, but you couldn't miss it. And you could see it from the second level of the convention. So like giant Voodoo Ranger sails, and it was right next to the IMDB boat. which I guess popular and sort of on the way to the adult swim area that was outside. I saw an AEW wrestling show. They meet WOD and Mr. Frog wrestled Orange Cassidy and yeah, it was. It was kind of a good.

[00:03:31] Zoe Licata: Those are all just words. Yeah, that sounds like a AI generated event schedule.

[00:03:38] Justin Kendall: Yeah, you'll be happy to know that Orange Cassidy and Willow won the, I believe it was the battle for the booty.

[00:03:49] Zoe Licata: Congrats to them.

[00:03:51] Justin Kendall: Anyway, lots to catch up on, but first let's talk a little bit about Brewbound Live. That's coming up December 11th and 12th in Marina Del Rey, California. I cannot promise that there will be a pirate ship there, but maybe we should talk to New Belgium.

[00:04:06] Zoe Licata: We are right next to the water. We could get something going.

[00:04:11] Justin Kendall: It's possible, but I don't want to promise anything that might not be there. You can check out the lineup that we're putting together already, or at least the speaker lineup so far. There's going to be more speakers. There's going to be a lot more to do there, and it's going to happen fast. And the other thing that's coming up fast is the NBWA annual convention. And we'll be there recording podcasts, sort of like we did at GABF, maybe a little scaled back, maybe not so much of a marathon, but we'll be there.

[00:04:43] Zoe Licata: Yeah we're gonna be like kind of near the main entrance right before you get on to the convention floor so it'll be hard to miss us so definitely come by say hi or if we're recording come watch and eavesdrop on whoever we're talking to.

[00:05:00] Justin Kendall: See, that's what Comic-Con was for me. It was just a precursor to this convention. You know, I was just scouting it out. I guess one more thing we should mention about the NBWA annual convention is we know the keynote speaker as well, and that's gonna be former Barstool Sports CEO, Erica Ayers Baden, and she's gonna talk about connecting with young LDA consumers, and Barstool has obviously done a great job of that because I believe they said that What was it, like two-thirds of their audience is under 30?

[00:05:35] Zoe Licata: Yeah, she also saw the company through quite a bit of change. The initial owners, Dave Portnoy, he sold it and then he bought it back a couple of years afterwards. But she's been pretty vocal about when they had the new ownership before Dave bought it back, there was a lot going on, a lot of change there and how she navigated that and kind of the leadership qualities needed to do that. There is some overlap and just being able to navigate potentially turbulent times that she can possibly speak on for folks.

[00:06:11] Justin Kendall: Yeah. Speaking of sort of turbulent times, we've got a mid-year beer report and not just one, we had two of them. And you and Jess covered those, one from the Brewers Association, Bart Watson did one about an hour, I think it was.

[00:06:30] Zoe Licata: They were back to back, literally like Bart at one o'clock and then we had the MBWA Lester Jones at two o'clock. It was a lot of data to dive into last week. But yeah, Bart was the first one and he naturally focused on craft stuff and he had some data from the Brewers Association's mid-year survey of members as well as some TTB data, some scan data, trying to gather as much information as he could to get a gauge of how craft is doing through the first six months of the year. And it boiled down to specifically independent craft. So like what the Brewers Association considers craft is down around 2% so far this year. And the segment is following very similar trends to what was happening in 2023. So he's saying it's not too different from when we last talked about the segment, when he was giving the rundown at CBC of what was going on. Brewery growth also pretty static. It's where the number now is around 9,528 breweries, and that's up by like 50, 60 versus the end of 2023. It's what Bart's been telling us about. It's craft is at this plateau that happens naturally with industries, and there's no big spikes or collapses that should be expected either direction. What was pretty interesting, I think, or one of the most interesting parts of the presentation was he really emphasized, you know, we should be looking at specifically, I mean, of course, he is the BA, so he's going to say this, but specifically independent craft to gauge what trends are affecting the majority of craft. participants or members or businesses, because things like scan data, which include a lot of the large folks or like craft brands owned by big brewers, are gonna get skewed by some of those few companies making decisions. So total craft down around 3% if you're looking at scan data, but independent craft down 2%. So the smaller craft guys are not having as big of a declines as you would think looking at just the craft scans. As I mentioned in the survey, the majority of those respondents said they're actually up versus 2023, but that could potentially be skewed a bit because the folks that are responding to these surveys are normally trying to emphasize that they've had a lot of growth and those who are struggling a bit more may not respond.

[00:09:03] Justin Kendall: Anything else from BART that we should cover?

[00:09:06] Zoe Licata: that's the highlights of it. You can check out coverage on brewpound.com if you want to get into more of the numbers. We also have the coverage of their latest Harris poll, which he presented with his colleague Matt a couple of weeks ago. So definitely check those out as well, because that had a lot more consumer data rather than just what the brewery numbers are.

[00:09:27] Justin Kendall: And then the other mid-year report from the NBWA is Lester Jones and FinTech VP of Distributor Strategy, Eric Kaiser. What are some takeaways from that one?

[00:09:41] Zoe Licata: Yeah, they dove in a lot more into just general beer trends, both in on and off premise. Their on-premise data was using, you know, FinTech's account data and invoices. And the thing that stood out the most to me was looking at the on-premise trends. And we've been hearing draft is really struggling. It's not anywhere where it needs to be, but kegs have regained the majority share of retailer purchases, at least within FinTech accounts. So that was kind of exciting to see. So they have 50.5% of retailer purchases through Fintech now. They were at 45% in 2023. So that's a pretty big jump, I would say, in a relatively short amount of time, particularly with how we've seen drafts forming lately. He also pointed to who these suppliers are for a lot of these kegs and 13 suppliers account for 92% of those invoices. So it's not a lot of companies contributing that. So yes, draft is doing well, but that doesn't mean that it's going great for her. Everybody, it's probably a good handful of these bigger suppliers are seeing benefits now. I mean, AP alone has 10 of the top 29 draft brands through Fintech and that's 36.6% share. So AB is like more than a third of those draft accounts, which is crazy.

[00:11:10] Justin Kendall: Did they say how much that's maybe changed over the last year or did they get into any of that?

[00:11:15] Zoe Licata: I'm sure they did and just handled this one a bit more, so I don't have too many details on it. But I can give you the numbers on what actual brands those are within it. And it's not Bud Light with that majority share, it's Michelob Ultra. within AB's portfolio. Michelob Ultra has 16% share of that, followed by Bud Light, which was 9.7%, Stella is 4.3%, Bush Light 1.5%, Kona 1.4%, Budweiser 1.1%, and then you have Goose Island, Golden Road, Elysian, and Michelob. Not Michelob Ultra, and Jess and I were trying to figure out what that could be. Potentially, it's one of their Like they have that special Michelob gold thing going on, but those all have less than 1% share.

[00:12:03] Justin Kendall: Pop quiz coming later.

[00:12:05] Zoe Licata: Yeah, please. And then Molson Coors is next. 27% of all keg invoices through FinTech and Miller Lite was the number one with that. They have 11.2%. So that's more than Bud Light.

[00:12:19] Justin Kendall: Where's Blue Moon fall on that? Or do you know?

[00:12:22] Zoe Licata: Blue Moon is 6.4 percent. So they're behind, within its sibling brands, behind Miller, behind Coors, and behind Micultura, Bud Light, looking at Constellation, also below Modelo. Modelo is 8.4 percent, so that is below Bud Light, even though Modelo is above Bud Light in scan data. But it's creeping its way up there. And we know Constellation has talked a lot about how they have not capitalized on the on-premise as much as they would have liked or should be given how much share they've gave in the off-premise. So that can definitely go up.

[00:13:05] Justin Kendall: And then we should, I guess, talk a little bit about non-alcoholic beer here.

[00:13:10] Zoe Licata: Yeah, I mean, we knew Athletic was doing well, but I think it was noted in the presentation that passed Heineken 0-0 in Off-Premise NA invoices through FinTech. So it has a larger share of the Off-Premise than Heineken 0-0. So we, I remember when I first started and we like did a first, one of my first stories was on Athletic and they're like, yeah, we're like the number one Craft and they had to really emphasize that it was because they're craft. It's not a number one, but this is there. They've passed the big boy now, at least in this particular data. So they had twenty six percent share. Hennigan zero zero had nineteen point one percent share.

[00:13:55] Justin Kendall: Well, this sort of dovetails a little bit with the Boston Beer earnings call, I think, because one of the things that came out of that was it sounded like they admitted that they lost sort of sight of their on-premise activity and draft.

[00:14:13] Zoe Licata: Yeah, Jim Cook acknowledged in his remarks, it recognized that they're not really talking about their beer brands at all, really, in a lot of these past earnings calls. And the strength of beer in the past has been the on premise and draft. And they deprioritize that a lot, particularly, you know, with COVID, they were focused on the off premise, and then they focused on Truly and Twisted Tea and making sure they were gaining off premise accounts there. And so that really took their eye off of the on-premise. They've now shifted the priority of some of their sales folks to the on-premise to try to gain some of those accounts back, to try to gain some of that share back. But there's still focus on what is making the money right now, which is Twisted Tea and potentially now this new product, Suncruiser, which has been doing well since it launched a couple of months ago. Also a hard tea product, but vodka-based. That was like the only real two brands that were giving them any growth in this most recent quarter.

[00:15:20] Justin Kendall: What did the FinTech and BWA data show as far as Boston's share of draft?

[00:15:29] Zoe Licata: I mean, it was very little. We had Sam Adams had 2.2% share, and then you have Angry Orchard, their hard cider had 0.7%. So the Sam Adams is on par with Yingling, same percent share. It's below things like Dos Eques.

[00:15:48] Justin Kendall: Jess, we're here. You would hear about the battle between Yingling and Boston Beer for tap handles in Boston.

[00:15:56] Zoe Licata: Yeah.

[00:15:56] Justin Kendall: Tap handles in general. Anyway, we don't have to go too far down the rabbit hole there. But one of the other things that sort of came out last week was how big tea is now for Boston Beer.

[00:16:10] Zoe Licata: Yeah, a couple days before Boston's earnings results came out, Bernstein did a kind of dive into just how big Pusatea is now for Boston Beer. So Twisted Tea in 2020, so four years ago now, was 20% share of Boston Beer shipments. It went up to 23% in 2021, up significantly more to 30% in 2022, 41% in 2023, and Bernstein thinks by 2026, it could be as much as 55%. which is massive. And to give a perspective for another brand within that portfolio, Truly peaked at around 51% in 2021. That was the largest it got to, and it fell all the way down to 31% by 2023. And Bernstein thinks it'll be about 25% at the end of this year. So two very different paths for those two brands.

[00:17:15] Justin Kendall: And what was the expectation for Twisted by the end of the year?

[00:17:19] Zoe Licata: I didn't have the exact number for 2024, but I think they're pretty close to 50%, if not 50%.

[00:17:28] Justin Kendall: So basically 75% of the business is in Twisted Tea and Truly. Yeah. And I don't know where Suncruiser, if they folded Suncruiser into any of the tea, but... Yeah.

[00:17:42] Zoe Licata: So Twisted Tea will be 48% is what they're at for 2024 expected. 18% will be their beer brands.

[00:17:56] Justin Kendall: What a change.

[00:17:57] Zoe Licata: Yeah. And there's a really great graphic in Jess's report that she pulled from this Bernstein analysis that has, you know, 2000 and I mean, even 10 years ago, 2014 beer was 62% of the brand's portfolio mix. So it has gone down significantly. And of course we know when Boston Beer started, it was all about the beer. So, you know, you can go back even further to like 2007, 2008, it's like 90 something percent.

[00:18:27] Justin Kendall: Let's keep on the earnings track here and talk a little bit about noted Canadian craft Beer and Tilray.

[00:18:37] Zoe Licata: Yeah. Normally when Tilray Brands their earnings, it's mostly cannabis talk. And that's still kind of true for this most recent one. They had their Q4 slash full year or fiscal year 2024 financial release and earnings call on Monday of this week. And they touted their BevElk brands a bit more. I mean, they got that boost we know now, because this is the first fiscal year that has included the eight beverage brands they acquired from AB, including seven craft beer brands. And Q4 marked the first quarter that Tilray's BevElk business actually passed its cannabis business in terms of revenue contributions. So it was a milestone year for that company and they're really focused on being, they use the word lifestyle brand a lot, of being able to have a presence in wellness, cannabis, non-alcoholic adult beverages, Bev-Alc, Boston Beer and spirits and everything in between. So they're trying to have some hand in basically everything. They have said several times, you know, we want to be able to do cannabis products and cannabis beverages in the US and these craft brands that we have could help us do that if it ever gets legalized. But obviously there's been hurdles there, so they haven't done anything yet, but we might see the first kind of slow roll of that with some new Delta 9 products that they have already formulated and are just figuring out how to best roll them out. Looking at New Jersey and Texas as potentially the first two markets to roll those products out. And we've seen a handful of breweries and other beverage companies dabble in their hemp-derived THC-infused beverages with mixed regulatory guidelines across states on what you can do with those. So they're definitely aware of it. They said their distributors are really excited about those kinds of products. Like they want to distribute them through beer distributors and or also sell them e-commerce, but distributors are asking for it.

[00:20:47] Justin Kendall: Absolutely. I've heard the same thing in my conversations with some wholesalers. And I think the issues that they are dealing with is just, you know, the shaky legal ground, I guess, that these beverages exist on. Because you could see something happen like in Iowa, where things just get upended on you, you know, in a few months time.

[00:21:10] Zoe Licata: Yeah, a lot of these products are able to be created and sold kind of through these loopholes because it's hemp-derived products. The language that's in a lot of the regulations allows hemp products. And so regulators are still trying to figure out, okay, what is this hemp-derived product? What does that mean? Do we need to write different exemptions or different language for this? And so, yeah, things can change very quickly. And producers just kind of have to figure it out on the fly, be ready to adapt if things do change, while still balancing wanting to be some of the first folks on the scene, wanting to take advantage of consumers looking for these products. So it's a very fragile balance.

[00:21:59] Justin Kendall: Well, and the other thing that I believe they mentioned as a highlight is Tilray Brands cut Shock Top declines in half in the eight months since the brand's acquisition. And it finished Q4 with dollar sales, what, minus 13 and a half percent year over year.

[00:22:18] Zoe Licata: Yeah, I remember when we were writing about the acquisition of all those brands and Shock Top's declines were kind of scary. And I think even some of Tilray's leadership was a little alarmed to see some of those numbers, but they have been very confident in Shock Top and thinking that it can still bring consumers in, that it's this legacy brand that can still have a prominence in the craft world and even in beyond craft beer beverages. And so yeah, they've cut them in half. We know they launched Shocktop Lit, Long Island iced tea, and they seem really excited about that still and future innovations for Shocktop. So it's worked so far, at least in like curbing some of those declines, but We'll see what the lasting effects are for that. But yeah, they're super excited about their innovations, and we've seen them come out with a lot of innovations very fast. Everything from non-alcoholic beer to canned water to flavored malt beverages.

[00:23:25] Justin Kendall: It's like an Aldi strategy. It's sort of like the brand that you know, but it's not that.

[00:23:32] Zoe Licata: yeah it's very much giving like those white label products it's trying to give you a maybe cheaper or maybe more familiar type of product but based on something else that's doing well right now like liquid love their canned water in Still and Sparkling, very similar to Liquid Death. So there's a lot of similarities. Runner's High is their non-alcoholic beer. Athletic Brewing started as a non-alcoholic beer for runners. So there's a lot of similarities to other existing products, but they're capitalizing on the consumer trends that are happening and what they're reaching for. Even like they had a Smirnoff Ice Challenger brand that came out through 10 Barrel.

[00:24:19] Justin Kendall: Yeah, it's a pub thing, right? Pub ice.

[00:24:22] Zoe Licata: Pub ice, yeah.

[00:24:24] Justin Kendall: Yeah.

[00:24:24] Zoe Licata: So we'll see if people start icing their friends with pub ice instead of Smyrna.

[00:24:31] Justin Kendall: A trend I do not welcome. Do not ice me, bro. Before we ice this episode, let's talk a little bit about the Wholesalers Association that happened in your neck of the woods, and that Southern Glazers is going to acquire Horizon Beverage in what, Massachusetts and Rhode Island?

[00:24:53] Zoe Licata: Yep. So Horizon based out of Massachusetts, but they have operations in both Massachusetts and Rhode Island. Pretty big beer portfolio for them. They have Molson Coors, Constellation, Boston Beer, a bunch of craft stuff, which A lot of people were pointing out Southern Glaciers has seemed to be drifting away from beer a little bit and now this acquisition seems, or planned acquisition anyway, it's not closed yet, seems to suggest that they're more interested in beer again. They see some potential there. So it's not closed. It has to wait for it to be approved really by regulators. If it goes through, then those two businesses will become Southern Glacier businesses in name, Southern Glaciers of Massachusetts and of Rhode Island. All the leadership from those companies are going to stay on at least for the immediate future, it seems. So no big layoffs or anything at this time.

[00:25:52] Justin Kendall: Quite the portfolio too that they get if everybody signs off.

[00:25:57] Zoe Licata: Yeah, I mean they have Harpoon, Sweetwater, Narragansett, Tynekin, the bigger guys that I mentioned before, they've got a lot of brands that they'll now have their hands on. Yeah, we'll see. You know, Southern Glaciers is dealing with a good handful of things right now, so hopefully none of those cause hiccups for them to get this approved. You know, they're still dealing with the FTC investigation and, you know, there's allegedly some sort of consequences coming out of that soon. We don't know what those are yet, but Those are pending. And then Southern Glaciers also has a lawsuit with Pro-V that is going on that just recently judge said it can move forward. So they got a lot on their plates.

[00:26:53] Justin Kendall: Yeah. Well, now they've got an acquisition to close on. Did they say when it will close?

[00:26:59] Zoe Licata: Nope. Just pending regulatory approval. No date.

[00:27:04] Justin Kendall: And for my own edification, any case numbers?

[00:27:08] Zoe Licata: No case numbers. We know that they have 800,000 square foot warehouse space. They do 100 delivery vehicles, 600 employees. And when it gets approved, Southern Glaciers will now have a presence in 46 states plus DC. So they're getting real close to that 50 state mark.

[00:27:31] Justin Kendall: Yeah, big map. Well, I think that's pretty much it for this week so far. Anything else that I'm missing?

[00:27:42] Zoe Licata: No, that was a lot. A lot happened. We had a bunch of new scan data up on the site. So check that out. We got some craft stuff as well as big beer and top brands and vendors. So if you want to dive into even more numbers, that's up on the site as well.

[00:28:00] Justin Kendall: Yep. Lots up at Brewbound.com for insiders to dive into. We're going to have earnings reports all week. Anheuser-Busch reports this week. Ball reports this week. Anybody else report this week?

[00:28:15] Zoe Licata: We have the Heineken numbers in our Tuesday edition of the Brubant Insider newsletter, so make sure you see that. And if you're not an insider, become one, join, and you can get that kind of extra information because we have a bunch of stuff that is in those newsletters.

[00:28:33] Justin Kendall: Yep, jam-packed with numbers, insights, all of the above, and pictures from Comic-Con.

[00:28:39] Zoe Licata: Yeah.

[00:28:40] Justin Kendall: Just what everybody wants. All right. Well, with that, that's our show for this week. Thanks to Zoe for everything she does. Thanks to Jess for everything she did to sort of get us to where we are this week. Thanks to our audio visual team. And thanks to all of you for listening. We will be back next week.