Brewbound Podcast: A Rash of Closures, A Big Rumor & The Treasury Report

[00:00:00] Zoe Licata: Heading to CBC? Kick things off the day before The Brewbound's meetup at Love City Brewing in Philly, Sunday, April 19th from 5 to 7 p.m. Connect with beer industry leaders, grab a drink, and catch up with The Brewbound team. It's free to attend and walking distance from the convention center. Head The Brewbound.com slash lovecity.rsvp. And don't forget to catch The Brewbound team at booth 956 during CBC. A rash of closures, rumors of a big deal, and the long-awaited Treasury report on competition. We're going to talk about it all on The Brewbound podcast. Hello and welcome to The Brewbound podcast, your upbeat, all good news all the time. Listen of the week. My name is Justin Kendall and I am the editor The Brewbound and I am joined The Brewbound reporter Zoe Licata. How are you doing, Zoe? I'm doing swell. How are you? I'm doing well, and we're going to mix it up with our intros here. So keep people on their toes. Caught off guard. I know. And also joining us The Brewbound Managing Editor, Jessica Infante. How are you doing, Jess?

[00:01:23] Jessica Infante: I am splendid, splendid. How are you?

[00:01:26] Zoe Licata: Just rainbows, sunshine, and puppy dogs over here. And we also have a guest. Joining us today is Sean McNulty. You might know him from the Selling Craft Beer podcast, as well as the The Brewbound Insider email on Saturdays. How you doing, Sean?

[00:01:45] Sean McNulty: Doing well. Glad to bring some more Jersey to the podcast. You know, just off the cushion, a little thank you, Jess. Very nice. You know, it's about time. Zoe, we are outnumbered.

[00:01:54] Jessica Infante: I know. This is what happens when you give us no respect.

[00:01:59] Sean McNulty: I heard some pizza talk. I had to write this. I don't know. I heard some talk. I was like, I got to come on and, you know, stand up a little bit for Jess.

[00:02:07] Zoe Licata: Who's disrespecting Jersey on this podcast?

[00:02:11] Jessica Infante: No, you guys are pretty good. You're decent ambassadors.

[00:02:14] Zoe Licata: You would cut us.

[00:02:16] Jessica Infante: That's also true.

[00:02:18] Zoe Licata: And cut us off from all the treats that you make all the time for special occasions.

[00:02:23] Jessica Infante: That is not true. I am not violent. I would not cut you. You could lose treat privileges, but you also haven't gotten treats in a while, so. Yeah, we have to actually go into the office for that.

[00:02:34] Zoe Licata: Yeah. Well, let's talk a little bit about what you're doing, Sean. Tell the folks what you've been doing for us, because it's very similar to what you've been doing in the past, just for us this time.

[00:02:46] Sean McNulty: Yeah, in written format. So it's a weekly recap of the weekend beers. So basically the idea, we all get the stories every day, daily emails, but sometimes it's good to have a catch up on the weekend and everybody's busy weeks, what have you, or just a quick overview and hopefully a informative but entertaining read just for the highlights of the week in the beer world. Some fun beer culture stuff in there, various week by week, but just a nice little recap to have on a Saturday.

[00:03:12] Zoe Licata: Yeah, and that's exclusively available The Brewbound insiders slash subscribers. So if you want that email and if you are a subscriber insider, you've been getting it in your inbox and hopefully you've been enjoying it. If not, let me know.

[00:03:28] Sean McNulty: Yeah, let me go to Justin. So that's where that was our deal. Yeah. Or I'll cut you. Or I'll send Jess, you know, whichever you want.

[00:03:36] Zoe Licata: Zoe might also summon a Boston Dynamics robot to go after you at this point, because I think they're pretty tight. I have that connection now. I can call them up. I am afraid of Spot, and apparently there's very good reasons to be afraid of Spot. Another housekeeping note for Brewbound Insiders, Brewbound Frontlines is returning this week. The episode will be out by the time you hear this. Jess and I are interviewing Erwin Simon, the CEO of global cannabis firm Tilray, which also owns Sweetwater, Green Flash and Alpine. So we're going to talk about their interest in craft beer, their future plans for craft beer and cannabis and everything in between. That is likely up on the site right now.

[00:04:22] Jessica Infante: Yeah, it was a good chat with Erwin. He's a fascinating guy. And I know he's got some big ideas about what cannabis can eventually become should it ever become legalized. So definitely check that out.

[00:04:36] Zoe Licata: Yeah, and some news coming out of that is they're looking at opening a brew pub, I believe, or a tap room in California, right?

[00:04:44] Jessica Infante: Yes. He did say that. Gosh, that feels like 50 years ago now. When did we talk to him? Last week?

[00:04:50] Zoe Licata: I think it was last week, maybe less than a week ago. And the reason that it feels like a week ago or actually a year ago at this point, the reason it feels like a year ago at this point is if you've seen the news lately, it's not been a lot of great news out there. And we're going to kick that off and talk to Jess about the news that hit on Monday evening. And that was that Modern Times is closing for locations, Portland, Oakland, Santa Barbara, and Los Angeles. Those tap rooms will close by the end of this week. So Jess, you were able to get a few more details about what was going on here outside of what they've put on social media.

[00:05:32] Jessica Infante: Yeah, and shout out to Zoe for her good work jumping on this story. And we were able to get this story up. I think I clocked it at like 40 minutes from first seeing it to publishing. But we did get some extra details. So they are closing these four taprooms, as you noted, the ones in Portland, Oakland, Santa Barbara, and LA. This is gonna amount to the loss of about 73 employees. And in addition to those 73 employees being laid off and a few other voluntary exits, their head count is now at 175. It was as high as 266 in November. So that's a really sharp drop in a really short amount of time. And the thing that really struck me the most here was the blog post that they shared. They announced new leadership a little over a month ago. They have a new CEO in Jennifer Briggs who came on an interim basis in October after joining as a member of their board of directors last July. And we can get into all of their leadership changes in a little bit, but the note where they describe the situation really kind of shook me. So I'm just gonna read it for you guys. Quote, as new leadership has stepped up and taken the helm over the last few weeks, it became clear that the financial state of the company that we are now tasked with directing is not just unsustainable, but in immediate and unavoidable peril. the note that I wrote to Zoe in our Google Doc was yikes bikes. So those are pretty serious words. And I think it's important that a brewery that expanded so rapidly so far with so many physical locations really comes to reckon with the fact that like If you can't sustain all those places, that's a lot of money and time and effort to sink into things that aren't really working. They also, in addition, are retrenching some of the states they distribute to. They're pulling out in the Pacific Northwest. They had some distro in Washington, Oregon, and Idaho. And they are retrenching from those states, maintaining the rest of their footprint. Big news, tough news, hard week. And those weren't the only closures we heard about. But if you guys want to stay on Modern Times right now, we can certainly do that.

[00:07:40] Zoe Licata: Yeah, I definitely do, because some of those locations, or at least maybe not the ones that actually closed, but there were delays in a lot of the Modern Times locations that were being built or opening up. And they seem to drag on for a very long time before some of those locations opened. And I can't remember them off the top of my head, but you couple that with the last couple of years of COVID restrictions in one of the most restricted states, which is California. Plus, you know, a slower on premise return and just the cost of doing business in California. It ain't cheap.

[00:08:21] Jessica Infante: No, no, it's definitely not. And one thing that I have noticed about Modern Times is that they have a distro map on their website and they tell you what wholesaler reps them in what county. And I think for a big old nerd like me, that's really interesting, but they have a vast and varied distribution network. So no shade to any of those distributors or anything, but you just got to think about how much work they're putting in just to maintain everything when everything is so diverse and not necessarily streamlined.

[00:08:51] Zoe Licata: In that Portland location to that was a second life that was a hermit crab as you like to say of the commons brewery and I was there when it was the commons brewery and it needed some some upgrades to get it to be a place you could sit in in the heat of summer because it didn't have AC before.

[00:09:09] Jessica Infante: I was there when it was Modern Times. I don't really remember. In June, too, I was out for homebrew con. I don't remember the state of the air conditioning, but I do remember the gigantic paper mache pinata-esque, larger-than-life-size macho man Randy Savage hanging from the ceiling.

[00:09:26] Zoe Licata: Yes, if there is any way that could make its way to my home, I would love it and I would keep it forever. But I mean, I'm looking at the Modern Times website right now and they've got this giant mural of the Macho Man that should live within my home, you know, or at least Sophie's bedroom. Make an offer. That's it. I'll see what I can do.

[00:09:47] Sean McNulty: Now's the time. Now is the time.

[00:09:49] Zoe Licata: It sounds like. Strike while the iron's hot. Yeah. Yeah. I don't know. Is there anything you guys want to add on Modern Times?

[00:09:57] Jessica Infante: Well, so the other thing about Modern Times that we haven't mentioned that we hinted at a little bit with their leadership changes is they were one of the more higher profile breweries mentioned in the beginning of the reckoning that the craft beer industry started going through in May after more than a dozen complaints about Modern Times fostering a hostile work environment that was rife with favoritism and some harassment. surfaced on Instagram and the Instagram account of Brianne Allen at Rap Magnet and also on Emboldened Act Advanced. And their founder and CEO, Jacob McKean, was one of the first people to resign in the wake of this. So in addition to the aforementioned operational, financial, economic struggles we've discussed, they've also had that happening. So it just adds a bit of turmoil to the whole situation. And we spoke with Jen and she seems really inspired and ready to lead. And she told us that she really admired the women who came forward and talked about the situation, but also stayed on board. And I assume she's poised to really kind of take control, which is what we're seeing here. You don't shut half your tap rooms if you're not ready to make some big bold decisions as a leader.

[00:11:04] Zoe Licata: Right. And they are also an employee stock owned company. Not 100 percent yet, obviously, that that takes a lot of time. I can't remember what the last figure was, but that's another facet of this story is this was a company that had was working toward, you know, employee ownership.

[00:11:22] Jessica Infante: Mm-hmm, yeah, it was. And it's definitely not majority. The majority shareholder is still Jacob.

[00:11:28] Sean McNulty: Yeah, something to keep in mind, yeah. And one thing you had in the piece, guys, which was interesting to me was the BA numbers. 2017 plus 22%, 2018 plus 36%, 2019 plus 3%. That's when these tap rooms mostly opened in these other locations on those time. 2020 minus 9%, 2021, no data. So, you know, obviously maybe it's not reported yet, but it does have that aura of expansion during the times and maybe the projections just didn't pan out as to what they, you know, what they were planning on. And the new CEO comes in and is like, all right, we're, you know, we're, we're cutting bait here.

[00:12:06] Zoe Licata: Yeah, we've seen, not to zero in, well to zero in on Portland, we've seen a number of craft breweries close in that market, and a lot of them being legacy craft breweries. And I know that Modern Times isn't, you know, an Oregon brewery, you know. put in a tap room there, but then you see one of the legacy brewers this week announced that he was going to retire, Alan Sprintz from Hare of the Dog, and they're going to shut down their operation there. I think they said on their website they do around 600 barrels a year. Very small operation, but that's not the only legacy brewer we've seen pack up in Portland in recent years and also just in general this year. I think Marin Brewing did around the same amount of barrels in California and another legacy craft gone.

[00:13:02] Sean McNulty: Yeah, and it's also this hospitality cost. Everything's just going up. And those are two companies. I think Hair of the Dog was 29 years. Merim, I think, was about 33. So they're hitting that three-decade mark. And it could just, at some point, these kind of owner, tradition-led locations just don't want to enter into whatever the next realm of hospitality and beer is going to be at that point. sad to see him go, but it is time for change in some regard. And so you're just seeing it all kind of happen in a condensed amount of time. It feels like

[00:13:33] Jessica Infante: Yeah, I mean, the hair of the dog situation is similar to what we've seen at a few other breweries, which is the founder wants to retire and there's nobody else to take the reins. So the best thing to do is to just close up shop. So I think we'll start to see a lot more of that, particularly from that era of brewer, just as people hit retirement age and as the craft beer landscape looks a lot different than it did when they started. So perhaps younger family members are not interested in the industry.

[00:14:01] Sean McNulty: Well, it's a shift in mindset of people wanting to degrade resignation. This whole people taking stock now, and we're coming out of this, and everybody's like, maybe I don't want to be doing what I was doing. And Frank Peter's not going to be immune to that line of thinking. It's not easy.

[00:14:15] Zoe Licata: Another of those legacy crafts to pack up at least one of their extra locations is Magnolia in San Francisco, their dog patch location is closing. And that's another situation. Well, this is a situation where it sounds like the lease was coming due and they decided that it wasn't worth it to maintain that location that they're gonna retrench to their Haight-Ashbury location.

[00:14:42] Jessica Infante: Yeah, and that location they opened in like 2013. And they had really made some some pretty big investments there to add like a private event space that they opened in July of 2019. So they didn't even get a year's worth of use out of the 6500 square foot space.

[00:15:00] Zoe Licata: And that and Magnolia. went along with New Belgium to Lion Little World Beverages, which is owned by Kieran. Magnolia's ownership turned once they went from bankruptcy to, I think it was Dick Cantwell, New Belgium had a share in that, Ode Bruin had a share in that, and there may have been something else, but then once the Lion acquisition of New Belgium went down, they took control of Magnolia as well, so. It lives on, and there's a San Francisco location of New Belgium as well that used to be little creatures.

[00:15:40] Jessica Infante: Right, and it's in the neighborhood that's right next to Dogpatch. It's in Mission Bay. Also this week, news surfaced that Oscar Blues' taproom in Boulder, Colorado closed. Very little other information about this out there in the world. But it seems to have shut down. All of his social media profiles are down.

[00:15:59] Zoe Licata: Yeah, they just like up in the night, shut it all down and like Baltimore cult style. Uh, yeah. Right. Yeah. Moving trucks were, were out there, I guess.

[00:16:10] Jessica Infante: Yeah, and it does seem as though it was included in the sale to Monster, according to Westward, Denver Alt Weekly, because anything that had a liquor license that was attached to Oscar Blues' Longmont Colorado production facility was included, but there is a family of Oscar Blues branded restaurants that are not included. And the Oscar Blues website says that their outposts in Austin, Texas, North Carolina, and obviously Longmont are all still open.

[00:16:40] Zoe Licata: I want to sort of recap why some of this is happening and get sort of a deeper view of maybe why we're seeing this. And some of it, you know, in Alan Sprint's case, like you had said, there's nobody to take over. He wants to retire. It seems like a happier ending for him than some of the other ones that we're seeing. Oscar Blues, that appears to be, well, deal's not done, but that would appear to be a move by Monster or toward that end. Magnolia, leases up. And I think we're gonna see a lot of that. People have their leases coming up, and if they don't have the debt and they don't have to keep going to make it work, they're gonna get out. And I think we're gonna see a lot of that, unfortunately. And if you don't have the debt and you're not forced to keep going, I don't blame you at this point, because I've talked to some folks and it's rough out there. And I hear a lot of it coming from like blue states too, because they were the ones to implement some of the stronger restrictions. And let's face it, a lot of folks are still spooked on going out. And I don't know that that's gonna come back. And the really unfortunate part of this is, With inflation the way that it is, I don't see any more government assistance coming for restaurants and bars and brewery tap rooms. I just don't see it at this point. Hopefully I'm wrong. And I know the BA is working toward it, but that's a problem. That's a big problem. Yeah, and I don't think people, even if for some chance that does come out, I don't think people are super optimistic that they're going to benefit from it either, because there were still struggles with this last run that we had of people actually getting the funding. We're two years into all of this now at this point. I mean, if you sign like a five-year lease on something, that's half of your lease. Why are you gonna re-sign again when you could potentially waste half of that time? So I think these are all like natural patterns that typically happen. And if it were any other year, people would be like, okay, we're gonna either take over or we're gonna re-sign. But because we're coming up on these patterns and still another year of real uncertainty, it's just people are gonna, take advantage of being able to exit in a potentially more positive way than they could have later on. Yeah, that's a great way of putting it. I want to hit on the new rumors, new new rumors of Monster and Constellation possibly maybe again for real this time. merging, getting together, whatever they want to call it. Bloomberg once again has these rumors. They had them in late November. They have them again right now. This was new as of Monday. And, you know, they have people feeding them the story that this could be weeks away. We're so close maybe, but maybe not. They just want to keep us on our toes and constantly in a potential panic of having to write about it. But maybe it's just a rumor right now, but yeah, I'll stay alert and stressed out. It's just funny the way that Bloomberg put it, because it's like the sources are telling them that, you know, this could come together in weeks. And then it's like. The deal might also take longer to reach or could still fall apart. Well, of course it could. Let's cover all our bases in case this doesn't happen. And our friends at Beer Marketers Insights are like, who is leaking this? That was my favorite line from them is like, who is leaking this? Because clearly someone has an agenda. And I don't know if it's coming from Monster. I don't know if it's coming from Constellation. Who knows where it's coming from? We can get a lineup going of usual suspects here.

[00:20:41] Jessica Infante: This is such a wild accusation to make with nothing on the record. Like this is huge news that they're just like insinuating might happen and like no shade to anonymous sources because they're super important and a lot of things wouldn't happen without them. But like I don't think I would personally feel comfortable writing this story sourced as it is.

[00:21:02] Zoe Licata: I mean, they must feel fairly comfortable with it because they keep doing it. Yeah, they keep doing it. Clearly. Then you look at, you know, the analysts take. And I think Kevin Grundy is like, this still doesn't make sense, you know, and it's like Nick Moody from RBC is sort of gamed out, you know, how a merger of equals could work. But, you know, then why did they need canarchy if they're just going to get together with Constellation? It doesn't make much sense.

[00:21:31] Sean McNulty: or someone has a vested interest we don't know about that is feeding this like to try and just stoke it for a payout or for something that you know who knows who that source is and who knows what their motivation is just as you said it's like okay this is very very tenuous at best and keeps coming around and there's no information like a source to just point needs to be anonymous that's great a source also has to give you some credible information this is yeah this might happen this might not happen i could give you that source That's not really great information. So I don't know. There's no news in this. Other than that, a guy told me that, oh, that maybe they've had a phone call. That makes no sense. And I'm curious what Constellation's even appetite is for new deals at this point. So it hasn't worked out great for them to be making, especially now that it would involve cannery, presumably, or I don't think they're excited to get back into more brewers at this point. So it just seems ignorant.

[00:22:22] Zoe Licata: And there's some thought that it's maybe to see what the Wall Street reaction would be. And clearly, that hasn't been the strongest reaction of excitement for this. It's more like bewilderment and like, what are y'all doing? If it's to force Coke's hand in some way, which Coke's the largest shareholder or one of the largest shareholders, a monster at around 20% or whatever, then I guess, you know, but I'm gonna have a whole lot of energy drinks, you know, Mexican imports, craft beers, card seltzers, cannabis, maybe if with canopy, like, I don't know.

[00:23:02] Jessica Infante: It's a chaos Muppet running around somewhere at either Monster and Constellation.

[00:23:07] Zoe Licata: Yeah, it's a Kaiju of Convergence. Oh, that's a beer name for you right there. Yeah, there you go. The Convergence Kaiju is here, if I'm saying that right. Coming soon.

[00:23:20] Jessica Infante: To Sean's point, I don't think Constellation Brands much appetite for getting back into craft, and they've said as much on their earnings calls. I think they learned a lot from Ballast Point, and they lost a lot. not related to any of these things, but tangentially related to Constellation, my brother went to the Super Bowl and paid $20 for a tall draft of Modelo, which I'm number one impressed that he could find Modelo at the stadium.

[00:23:46] Zoe Licata: CTB's making sure of that. That's what we know.

[00:23:48] Jessica Infante: Exactly, exactly. But yeah, Marc Infante's not really a beer guy, so.

[00:23:53] The Brewbound: Yeah.

[00:23:54] Zoe Licata: Yeah, some of those prices that they were putting out for the beers at the Super Bowl was Well, made me nauseous.

[00:24:01] Sean McNulty: We're also going to get a corner for $20. So what are you talking about?

[00:24:05] Jessica Infante: Come on, gotta get your commemorative aluminum bottle, your $7000 ticket and your $20. He went with work. He did not pay for that.

[00:24:16] Zoe Licata: Well, in other Constellation Brands news, Jess, you and I jumped on the Bueno Beverage layoffs. You did the work, you know, but we initially found out through Sun Gazette story that Bueno Beverage in California said they were going to lay off permanently 68 workers. And this is all coming as Constellation Brands forcing termination of their distribution contract, likely trying to move that to Reyes, as usually is the case, may not happen, may happen, definitely is getting terminated. Those layoffs were supposed to take place on Monday. And that number got revised to around 43 in a subsequent story. But this appears to be, you know, the second, you know, the fallout of what a termination can do.

[00:25:11] Jessica Infante: Exactly. Yeah. So Buena, which is based in Basalia, California, and Antioch, California-based Markstein Sales Company, both received what our friends over at Beer Marketers Insights call the Black Rose from Constellation. Like you said, they're getting terminated. And in California, Constellation's the biggest beer category supplier and Modelo is the number one beer brand in most markets. Losing the ability to sell these products can be existential for these wholesalers. And we've seen this play out for years now where independent wholesalers, usually in the bud network that have been carrying Constellation Brands for 20 years, get the ax from Constellation Brands as the Reyes Beer Division has been able to expand its reach within California. It's just easier, more efficient, what have you, to get your beer into a more unified network. But like you said, the fallout can be like 43 people losing their jobs because Bueno's catalog is just Constellation Brands AB, and that's it.

[00:26:13] Zoe Licata: It was jaw dropping, right? That portfolio page, it was jaw dropping. I mean, I'm sure there are wholesalers like that across the country that are a couple brands, but wow, just two suppliers.

[00:26:27] Jessica Infante: Yeah, well, I mean, so years ago, AB's was, you know, very big on their wholesalers, not taking on anyone else. So the fact that these wholesalers in, you know, Markstein and Bueno that have held on to the Constellation Brands for as long as they have, likely in the face of maybe some pressure from their other supplier, like, and they were loyal to Constellation probably, so I don't want it to sound like I'm carrying water for these guys. I'm not, but just to lay out the situation, like, They probably have been hearing it for years from AB, why are you selling these guys? And, you know, Beer Marketers Insights at their conference in November, they had some analysts discussing the wealth of wholesalers and basically were able to show that over several decades through not taking on other brands, AB wholesalers missed out on a lot of money. No successor wholesalers yet. Reyes is not confirmed here, but that's usually the case.

[00:27:23] Zoe Licata: It's usually the case. And then in sort of the wake of the Beer Summit, the Beer Business Daily's Beer Summit in San Diego, where Bill Newlands was on stage, you were there.

[00:27:33] Jessica Infante: He talked about- Well, Bill Newlands was on Zoom.

[00:27:36] Zoe Licata: On Zoom. I stand corrected. But he talked about the terminations. And You reported on that and that after his comments, the California family beer distributors, which represents a lot of AB family wholesalers, had sort of a, you know, clap back, I should say.

[00:28:00] Jessica Infante: So what Bill said was that the company is, quote, very focused on aligning with groups that are going to invest behind our business and are going to be long-term partners. But homie, Bueno and Markstein were selling your beer for 20 years. What is that? Not a long-term partner? You haven't even had these brands for 20 years.

[00:28:20] Zoe Licata: Who had them before?

[00:28:22] Jessica Infante: Groupa Modelo.

[00:28:23] Zoe Licata: Groupa Modelo, which is owned by Anheuser-Busch.

[00:28:27] Jessica Infante: Anheuser-Busch. Yeah, and the whole reason that Constellation Brands these brands now is because of, you know, interference from the Department of Justice. They said, A.B., you can't have all of this market share, so you got to divest yourself. And so that was how the Mexican import brands landed in the Constellation family. And we can get into the Treasury report, but the Treasury pointed to, in this recent report that they dropped on us last week, the divestment of Corona, Modelo, and Pacifico was great evidence of the benefits of government intervention. Because since they forced AB to divest of them, Constellation Brands tripled their production capacity.

[00:29:09] Zoe Licata: Now, Modelo is the number one selling beer in California, right?

[00:29:14] Jessica Infante: And the number two selling beer in the U.S. Yeah, actually, I went out for a quick dinner at the sports bar down the road from us that used to be a Pizza Hut. And sometimes I wish it were still a Pizza Hut. Clearly a wholesaler rep was doing a Corona Premier promo, passing out samples of Corona Premier in Modelo branded cups while wearing a Pacifico branded quarter zip. And he comes to our table and I was like, oh, Corona Premier, the low carb one? And he was just like, yeah, whatever, here's your beer lady. I'm like, I'm here to engage with you about your brand and make your Friday night work a little bit more interesting.

[00:29:46] Zoe Licata: Do you know who I am? Do you know who I am?

[00:29:52] Jessica Infante: I would like the record to show I said nothing of the sort.

[00:29:57] Zoe Licata: Here's my business card.

[00:30:00] Jessica Infante: I did not. I almost took the tray from him to continue passing out the samples because he seemed to be terribly bored. And then he was like, oh, I have swag. Do you want a bottle opener or a koozie? Like, no, those are the last things my home needs.

[00:30:16] Zoe Licata: Yeah. Don't you have to do a yearly inventory of your koozies?

[00:30:21] Jessica Infante: I have to do like a quarterly inventory of my koozies. Yeah, Ryan pulls them all out of the cupboard where the coffee mugs are, which is also where they live. And it's like, pick, you can keep 10. It's helpful. Honestly, it's very helpful.

[00:30:35] Sean McNulty: Yeah, I'm sensing another newsletter item come like late March, just Jess's quarterly koozies. Who makes the cut and who has to go over to Justin's house probably. I don't know where she's at. Send them all to Zoe.

[00:30:50] Zoe Licata: He should at least let you keep like 12 so you can have one for like each beer in a 12 pack. Zoe, Zoe, I'm going to bring that up.

[00:31:00] Jessica Infante: Good call. I'm trying to get rid of like any bottle ones, because who needs that? Yeah, no offense to bottles.

[00:31:05] Zoe Licata: We've already been through this on bottles during the Blue Sox. We do not need to go back there. So why don't we just move on to the Treasury report?

[00:31:15] Jessica Infante: Let's please move on to the 62-page Treasury report.

[00:31:21] Zoe Licata: The Treasury Department finally released its report on competition in the beer industry at the behest of President Joe Biden's executive order from July 2021. We've all been anxiously awaiting it, not eagerly, Promoting Competition in the American Economy. That was the title. The result? What they found, two big takeaways, lots of breweries, proliferation of breweries across the country. Yay, craft beer. That's essentially what they said. A lot of small brewers. I think their number was like 6,400, 6,600, somewhere in there, which is low in comparison to what the Brewers Association has been putting out there. Although you would probably think that that number is on the decline as the opening of this podcast would have you believe, but I don't know if that's the case. The second part of this is they're concerned about consolidation. They did a lot of pointing to AB and Molson Coors holding 65% of the market. They offered a lot of suggestions that who knows if they're viable. One of them was about the three tier system, how state legislature should maybe re examine that. I know that there are a lot of people unhappy about that one. And I don't know how much of this is viable and where this really goes from here. And that's something that we're going to talk about next week with our our special guest Brewers Association President and CEO, Bob Pease. But if you look at this report, a few people are happy. That's the Brewers Association and discus so far that I've seen. someone is short of outrage, which was the Beer Institute. And also the NBWA is likely not too happy here. I think they called the report incomplete. So there's a lot to sort of digest in this thing. The BI sort of picked it apart, you know, they called it a disappointment. They said that the competition is vibrant and, you know, innovative. The Treasury neglected that, you know, the large brewers have lost 17% of the market share over the last decade. And, you know, the report is replete with references that actions or behaviors might, may, or could adversely affect competition. These words express possibilities and theories, not certainties, yet Treasury uses them freely to support alleged adverse inferences regarding competition to the alcohol industry. And that's from BI president and CEO Jim McGreevey's blog post on this. I'm out of breath. What's your takeaway on this, Jess?

[00:34:09] Jessica Infante: Well, my first and immediate takeaway on this is that you need to start reading this report to Sophie to help her sleep at night.

[00:34:15] Sean McNulty: Seriously. I will second that.

[00:34:18] Jessica Infante: The one thing that they they did point out was a lot of the acquisition acquisitive activity of the last like decade plus but they say that. Smaller acquisitions such as the Myriad Deals, AB, and Molson Coors pursued with craft brewers in the middle of the last decade have allowed large brewers to quote, extend their market power and to hinder the growth of competitive brands. And I think if we talk to a smattering of independent craft brewers, they'd probably agree. You know, like I assume if you're in a house that also sells AB or Molson Coors, it's probably a little bit harder for you to get market share or mine share or both when AB and Molson Coors were buying up a bunch of other craft brewers because those guys have the volume to command the attention. And if you're smaller, you don't always get that. And you don't always get the meetings and the promos and the displays and all the stuff that goes along with being one of those big guys. They also pointed out that after Miller and Coors teamed up, prices went up and not down, as though they believed that these companies were gonna get together and lower the price of beer.

[00:35:33] Sean McNulty: Like that's... That always happens, Jess. What are you talking about?

[00:35:37] Jessica Infante: Like has any capitalist institution ever been like, ah, yes. Like I would like to make less money for the people.

[00:35:43] Sean McNulty: We're charging far too much here, fellas. What are we doing?

[00:35:47] Jessica Infante: Exactly.

[00:35:47] Sean McNulty: Yeah.

[00:35:48] Jessica Infante: So yeah, I don't know. It was long.

[00:35:51] Zoe Licata: It's what, you know, the arguments of illusion of choice and all of that. But, you know, look at the supply chain and the way it is right now. Like, we're going to see some price increases for sure. Like, it's just a given. Totes. And I don't know if that keeps up with other consumer product goods, but that's just a given. And another thing that sort of came out of this is they're asking for more scrutiny of these mergers and acquisitions. And what have we been talking about for the last forever? Lion gets in and they've acquired New Belgium and Bells, and they're trying to be a competitor with some of the larger ones. You've got numerous Anheuser-Busch acquisitions. I mean, they've merged with Crap Brew Alliance. Molson Coors has bought up breweries, like Constellation Brands- Bought and sold. Yeah, bought and sold. And sometimes a test case of what not to do. But then, monsters in the process of acquiring canarchy and monsters also supposedly in talks with Constellation Brands constellations got its hooks in canopy We're heading for an even bigger M&A environment than just beer. It's not just beer companies acquiring beer companies at this point. It is CPG getting into alcohol and it's getting wild.

[00:37:25] Jessica Infante: Yeah. I mean, like, look at Tilray. Right. Acquires three breweries and one distillery. What happens if Constellation acquires Monster Then is cannery no longer a BA-defined craft brewer?

[00:37:40] Zoe Licata: Yeah, right?

[00:37:42] Jessica Infante: I'm still salty about that.

[00:37:44] Zoe Licata: You can bring it up with Bob next week.

[00:37:46] Jessica Infante: Oh, I will.

[00:37:47] Zoe Licata: We'll have an airing of the grievances.

[00:37:50] Jessica Infante: We want Bob to still talk to us. But yeah, no, that's a great thing to talk about with Bob. One thing that I did think was interesting in the report where the treasury basically acknowledged that the rules as currently governed the alcoholic beverage industry were created, you know, for the alcoholic beverage industry of 1933, in which they were all trying to prevent over consumption, domestic violence, and organized crime. So we're working with these rules that were built for something that looked entirely different than it is today.

[00:38:21] Zoe Licata: I think the argument's always going to be there needs to be modernization of these rules. I don't think anybody's going to argue for a complete dismantling of the three-tier system. I just don't see that.

[00:38:37] Jessica Infante: No. Look, craft beer couldn't exist today without the three-tier system. I know a lot of breweries engage in self-distribution and that's like all fine, but nobody would have ever have been able to grow to the size of Sierra Nevada or Sam Adams or New Belgium without distributor partners. It's just not possible. And then we've also seen some craft distributors get in the game and then get out. Like look at Night Shift Distributing. They thought like, hey, here's something that we can do to help elevate these small brands. And they realized, shit, distribution is a really hard business. It is. It's very hard. It's very capital intensive and it's,

[00:39:13] Zoe Licata: But there also has to be some happy medium here because wholesalers don't want your entire catalog, you know, like they're not gonna take it all. So there's gotta be something that we figure out where there's a route to market for smaller players to establish themselves. Exactly. I'm not talking about, you know, shipping thousands of cases of the Allagash White across the country, you know, like when we're talking about shipping beer, you know, we're talking about your one-off bottle of whatever that you're selling for $40 plus shipping, you know, to make it work. We're not talking about your volume drivers.

[00:39:54] Jessica Infante: No, and like the more consolidation there is in the middle tier, the harder it is to get to market for smaller players.

[00:40:01] Zoe Licata: look at what's happening with these markets as they consolidate. It's not just the brewery tier that's consolidating. We hit on it somewhat, but as California consolidates, that's one of your two biggest beer states in the country with what? The most craft breweries in the nation, around a thousand craft breweries, give or take.

[00:40:26] Jessica Infante: What's hard about middle-tier stuff is that, for the most part, consumers have no idea what it is or that it exists. So you can't really get the public outrage going that exists when, say, brewers get acquired. Not that that happens anymore, but it used to. Like, you remember when, I mean, I think that story in Boston Magazine about the- Yeah, it's the Sheehan's, where it was like- The Sheehan's, thank you.

[00:40:50] Zoe Licata: You wouldn't know what's happening in this building, but they, you know.

[00:40:54] Jessica Infante: Off Route 3 South on your way to Cape Cod, there's a building that houses a business owned by one of the richest families in America. But like, yeah, man, like most people have no idea what a beer distributor is or does.

[00:41:08] Zoe Licata: Yeah, it's not Area 54, you know, like that's how they treat it, though. It's like, oh, yeah, they're doing science experiments down there with the aliens, too, you know, while they're distributing beer.

[00:41:20] Jessica Infante: Hard to get the people fired up for middle tier changes.

[00:41:23] Zoe Licata: Yeah. Sean, are you excited to write about all of this or round all of this up into this week's newsletter for our insiders?

[00:41:33] Sean McNulty: Yeah. I'm maybe not going to lead with that. So this is the kind of example where, yeah, if I can condense it down to two or three sentences that mean something, then great. Otherwise, the United States government not acknowledging that there are 50 different sets of alcohol laws in this country. And then when I propose, you want to propose a national law, go right ahead, my friend, but you want to change the alcohol. I'm like, it's a 50, you have 50 different sets of rules. All these businesses operate on different ones. You want to change the, you know, in Jersey, you can self distro to your heart's content. You go to Pennsylvania, it's state run. OK, you want to make those businesses both happy with some. It's just an exercise. And I don't know what the point of the whole thing was, acknowledging that the 1933 beer laws need to be changed. I'm like, yeah, thanks. And this whole report reeks of, like, 2017 beer business. I'm like, Bud and Miller. I'm like, 6,000 breweries. I'm like, you're four or five years off here, man. Like, I don't know that Any of this stuff really, I mean, outside of, yeah, some reform is great, and I'm glad that they recognize certain things about the Kraft Brewery explosion, but I don't know that this has any, what's going to come of this? It's like, that's why I don't, there's no brass tacks of this thing where it's like, well, we saw these two things. we're not putting a bill out forward, we're not changing legislation about it, then what's going to change? Nothing. It's market forces. I don't know. Zoe, you might get a loan on that.

[00:42:58] Zoe Licata: You know, this thing could be impactful if they took a look at just making it easier to operate a business. That seems like what you could boil it down to. There are ridiculous laws out there about like, if you turn on a TV in your New Jersey brewery or whatever it was, like that counts as an event. Like, come on. Change those laws.

[00:43:23] Sean McNulty: Correct.

[00:43:23] Zoe Licata: Exactly. Yeah. Yeah. Just make it easier to open and operate a business that is in a sector that is struggling. You know, like, We talked about all about it at the top of this, you know, like how hard it is for some of these businesses to run. You don't want your main streets to be ghost towns, then make it easier to operate a business, help business owners. That's what can help competition. I think we do need to point out there's probably one thing that might come out of this is related to spirits and DISCUS, which is the Distilled Spirits Council seemed pretty happy with this report because it seems to back up what they've been pushing for, which is that federal excise tax change. So in the report, it said that there is a competitive disadvantage for distilled spirits based drinks. compared to beer and wine-based drinks with similar alcohol content. And so if anything comes out of this report, it might be along those lines.

[00:44:27] Sean McNulty: And that's something they can change.

[00:44:29] Jessica Infante: Yeah. Yeah. Discus has had quite a few events, webinars lately for the members of the media, and they are really beating the drum on making sure that they are advocating for fair tax rates. And they'll say, they don't like to say equivalence, the easiest way to talk about it is calling it tax equivalents. And Chris Swanger, CEO of Discus will say that they're just on the side of the consumer and like, yes, that's all true. But one of the things that they brought up on that most recent webinar that I watched was in Arizona, their tax code, let's say you have a 5% ABV RTD. Now, if that RTD were made with a malt base, consumers would pay one and a half cents for a 12-ounce can. For wine base, it's 7.9 cents for a 12-ounce can. And if it's spirits base, it's 28.1 cents taxes on a 12-ounce can. But, Sean, to your point, every state has different excise taxes. So these are 50 different sets of taxes.

[00:45:29] Zoe Licata: And also your beer trade groups are gonna argue all alcohol isn't created equal.

[00:45:37] Jessica Infante: They will say that beer is the beverage of moderation.

[00:45:41] Sean McNulty: Yes, even though they're all 5% ABV, but it doesn't make any sense. Yeah, I just tried it.

[00:45:46] Jessica Infante: Yeah.

[00:45:47] Zoe Licata: That is a lot of what's going on right now. And in the next 10 minutes, I'm sure it'll all change too.

[00:45:57] Jessica Infante: Sean, I would like to tell you that I really enjoy the Insider Newsletter. And I particularly appreciate your emoji game. I think you're excellent at that. And I have a special request. Can we start adding, like just sneak in a funny one?

[00:46:11] Sean McNulty: Oh, like a rando or like, like just a little left field, like what's this doing here? Like this one's for Jess kind of thing. All right. I'm picking up what you're putting down. Don't worry about it. I'm good. Yep.

[00:46:22] Jessica Infante: I most appreciate the animals.

[00:46:25] Sean McNulty: I'll trade you for some baked goods. We'll make it, we'll make it, we'll make a thing, you know, come on. Speaking of which, how did Valentine's Day baked goods go? I didn't even get a report on this.

[00:46:34] Jessica Infante: Oh, oh, so my husband is a high school teacher and teachers have had a real shit time with things lately. So I thought my teacher friends could use some love.

[00:46:43] Zoe Licata: Sorry. We're getting you a swear jar.

[00:46:49] Sean McNulty: Sorry. You're getting a poop emoji in this next newsletter.

[00:46:56] Jessica Infante: I'm sorry, I'm trying to get all my profanity out before I have to go speak at career day at my all girls Catholic high school next month. I just made some brownies with a box mix brownies, but I made the frosting because I've tried to make brownies and it's just not worth it. The box stuff is good. It's really good. And what I can make is not as good as that. So I made brownies with cream cheese frosting that I dyed pink. So cute. So cute. The teachers liked it. But Zoe made these cookies for the Superbowl. In like the colors of the Bengals, did you make Chargers cookies, not Chargers Rams? Yes.

[00:47:36] Sean McNulty: Sports ball. She bakes for winners. That's it.

[00:47:40] Zoe Licata: Yes, I made Rams and Bengals cookies. I made jerseys and just little circles that were decorated in their colors and I do it every year, but it's a two day process so I can only do it once a year.

[00:47:51] Jessica Infante: You pipe and flood. Oh yeah. I did cut out Oklahoma, New Jersey for my brother's, my sister-in-law's bridal shower And I feel your pain, man. You get hand cramps after that for like a week. Yeah.

[00:48:04] Zoe Licata: Yeah. It's like physical labor to make these cookies, but I got good feedback. People said they were delicious. And now they just, this is like, this is the second or third year I've done them for the people I've been watching the Superbowl with. So it's expected. So I have to do them. I have to go through the pain.

[00:48:22] Jessica Infante: You do. What were people drinking at your Superbowl party and what commercials did they like the best?

[00:48:28] Zoe Licata: Surprisingly, someone came in with the Bud Light next. But when we asked him about why he had it, he was like, I don't know, I heard they were healthy. And then he drank like half the thing in like an hour or two. So I was like, I don't know how healthy that is, but that's their marketing now. It's healthy, I guess. Other than that, the usual suspects. Someone had a Truly Margarita pack and then there was Bud Light Seltzer there. I did not drink anything this year, surprisingly. The cookies wore me out, I couldn't add to that. Commercial-wise, no one was really paying attention too much this year, I've noticed. Nothing really got people's attention for them to stop talking or anything this year. So I don't know if that's a mark on all the ads for not getting people's attention. The only thing was that... I'm sorry if I offend anyone, but the dumb QR code crypto thing, people would just look at it because it was on the screen for far too long and why did our TV break or something? and appreciation for Boston beers robots. No one was fans of the Michelob Ultra ads. They just were kind of confused. Most of us can't recognize all those athletes from all those different sports. Yeah, so overall, I mean, I guess let down by the commercials this year. How much did you buy in Bud Light next NFTs? Nothing. Well, I mean, I guess they sold out in like the first hour before the Super Bowl or something. At what 399? Yeah, so I guess I didn't have an opportunity to but I don't think I would have wanted to anyway.

[00:50:09] Sean McNulty: Somebody put a note in the calendar, April 2, check the price of those. Just put a little note as an article idea for about six weeks, maybe less than that. But yeah, I'm very curious what the value of those is over time.

[00:50:25] Zoe Licata: I don't think it's going to be great. Yeah, that's a great newsletter content.

[00:50:32] Sean McNulty: It's the kind of things you get if you're an insider.

[00:50:34] Zoe Licata: There you go. Yeah. Sean tracks Bud Light Next NFTs.

[00:50:40] Sean McNulty: Not Bud Light Next, just the NFTs.

[00:50:43] Zoe Licata: Just the NFTs.

[00:50:46] Sean McNulty: Did you have a Bud Light Next?

[00:50:48] Zoe Licata: I didn't try one.

[00:50:49] Sean McNulty: Has anybody here had one?

[00:50:51] Zoe Licata: No one's had them yet. I don't know. I'm not intrigued by them enough to be like, okay, I'm going to commit to drinking one of these.

[00:51:01] Jessica Infante: The weird thing to me was that that commercial communicated almost nothing about the zero carb. You spent 10 years working on a beer to have no carbs and to have its big debut, you just, I don't know. What was that? What happened?

[00:51:17] Sean McNulty: It was kind of like the Bon and Viv Super Bowl ad, where it was like, this isn't really about the product. I remember that from the Super Bowl ad, but with the mermaids and whatever.

[00:51:26] Jessica Infante: Mermaid shark tank?

[00:51:26] Sean McNulty: Yeah, which was like, oh. That at least had a storyline. True, I guess, but I mean, like, not really for a new product no one's ever heard of. I'm like, not the time to go esoteric here, guys. I think you want to maybe, I don't know, what do I know about video marketing?

[00:51:42] Jessica Infante: Brendan Whitworth, our current North America CEO, has said that they tested the liquid in groups as a McUltra product, and they tested it as a Bud Light product, and people liked it far more as a Bud Light product. So I guess they were like, well, our regular McUltra drinkers don't give a fig. I don't know, man.

[00:52:00] Zoe Licata: Yeah, I just the fact that like the person came into our party and no one knew what they're like, Oh, what is that? Oh, okay. And like, no one was like, Oh, cool. And then even after the commercial played, no one really quite understood what it was or what the point of it was is not so great for the commercial. Yeah, that's a lot of money to spend on four minutes of airtime to not get your message across. But hey, depends on who was watching.

[00:52:25] Jessica Infante: I'm sure your agency will enjoy themselves on the award circuit.

[00:52:29] Zoe Licata: Right at age. Liked it, I guess they said four stars or or then what was it USA Today? Pretty much it was near the bottom of the ad meter and Bud Light didn't have a top 10 when I think their highest was 11th.

[00:52:45] Sean McNulty: Even the Clydesdales were at the bottom of a lot this year. That was directed by Chloe Zhao, who was one best director last year, by the way. I didn't know that. That was new that I found out.

[00:52:55] Zoe Licata: Just emotionally abusive ad, though. Yeah, that was a woof. You're gonna put that horse down? Like, seriously. Don't you dare.

[00:53:05] Sean McNulty: Not to make a Budweiser analogy, but yeah, you know, it's like, okay.

[00:53:13] Jessica Infante: I'm afraid of horses. They're scary.

[00:53:15] Sean McNulty: Well, you said it, so. Yeah, I'll leave it where that'll just make your own connection on that. But yes, exactly.

[00:53:21] Zoe Licata: Well, let's wrap this up with that. This is our show for this week. Hopefully next week is a little bit brighter. A big thank you to our one man audio team, Joe Caracci. Thanks to all of you for listening. Please like, rate, review. We will be back next week with Brewers Association President and CEO, Bob Pease. Until then,