Brewbound Podcast: Bump Williams Consulting Breaks Down Craft Trends Halfway Through 2022

[00:00:00] Justin Fonte: Heading to CBC? Kick things off the day before at 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 to Brewbound.com slash lovecity.rsvp. And don't forget to catch the Brewbound team at booth 956 during CBC. How has craft fared halfway through 2022? Find out next on the Brewbound podcast. Hello and welcome to the Brewbound podcast. My name is Justin Kendall and I am the editor of Brewbound. And I am joined by the one and only Justin Fonte, managing editor of Brewbound, who is leaving New Jersey.

[00:00:58] New Jersey: Yeah, you know, I am not the one and only Justin Fonte of New Jersey. I found out this weekend one of my friends from down here at the shore went to college with the Justin Fonte and I think that's rude.

[00:01:09] Justin Fonte: It's an imposter.

[00:01:10] New Jersey: Yeah, for sure. But I'm excited to go back north.

[00:01:15] Justin Fonte: Well, we're excited to have you back North and well, I'm not even back North yet. I'll be back North by the time everybody's listening to this. So also joining us from the North is Brewbounds resident Khaleesi, Zoe Licata. You have a new webcam that nobody can see because this is a podcast and we went through before people even joined or we even joined this that you were looking very Game of Thrones-y.

[00:01:45] Bump Williams: Yeah, yeah, I gotta do some color adjustments, but I'm feeling like I maybe need to acquire a dragon. I think you should get three. That might be a little much for I mean, that's kind of was a little disastrous for her. So I don't know if I'll start with three at once, but TBD.

[00:02:08] Justin Fonte: I know a guy, so I think he can score you one, so. Or at least some dragon's milk, maybe that. So anyway, we've got a big show this week. We're going to be talking craft trends halfway through the year with Dave Williams and Brian Kruger from Bump Williams Consulting. So stick around for that. But we're going to hit the news right after we plug why we're all going to be traveling back to Boston Beer by the time you are listening to this will actually all be in Boston and will be at the Samuel Adams Brewery and Jamaica Plain, 30 Germania Street for Brew Talks, right in Boston, live and in person. Three conversations, a lot of networking and some beers.

[00:02:54] New Jersey: It's going to be great. I'm excited. I'm excited about these panels. So it'll be good to see you guys.

[00:03:00] Justin Fonte: Yeah, I mean, it'll be good to see you and it'll be good to do work and it'll be good to be on stage again. We've got leaders from Castle Island, Medusa, Boston Beer, White Lion, Craft Beer Cellar and Dogfish Head, which is Boston Beer, but you know. This is our last like sort of hard sell. So, you know, check us out on the live stream. If you're not in Boston, come out. If you are in Boston, 3 to 6 p.m. on Wednesday, July 27. Tickets are on sale at Brewbound.com. And this is the last time you'll have to hear us talk about it that, you know, sales. We'll talk about it next week.

[00:03:39] New Jersey: We can get lunch from Chillicothe's. It's great. Down the street from the brewery. Great little taqueria.

[00:03:46] Justin Fonte: I guess we have our first stop. So also a little bit of housekeeping news. We talk a lot about Kraft Trends and we've got a new series that we're going to run quarterly on Brewbound.com exclusive to Brewbound insiders. And that's three up and three down with three tiered beverages. And Jess, you wrote the first one.

[00:04:09] New Jersey: Yeah, I did. So our friends at Three Tier, they're a Chicago-based Bev-Alk data management firm. They are gonna work with us every quarter to select, you know, three things across beverage, alcohol that are up and then three things that are down. So for our first go round here, they identified as their three up, non-Alk beer, surprising to nobody. Non-Alk was up 16% in dollar sales in the 13 weeks that ended. June 18th, while general beer was roughly flat about down one. So that's a huge success story for non-ALC. The second item was that convenience stores are outperforming other channels and sales growth. They also have an opportunity for spirits and RTD options. So that's something to keep an eye on if you're a craft brewer. Maybe consider, you know, developing a kind of an RTD that can play well in the C-store space, because that typically, historically really, you know, belongs to beer. And the third up item was imports, also surprising to no one. Longstanding trend extending a while back, I'm quoting Stephanie Roides, the three-tier product analyst that we worked with for this month's edition. She says that imports are expected to end the year roughly $500 million larger in 2022 than in 2021. That's nothing to sneeze at. Leading the three down is Hard Seltzer, which seems to have hit its ceiling. If you are curious about the rest of the list, you can check it out at brewbrown.com. It's available to insiders only. Really excited to launch this new project with our friends at Three Tier, so check that out. But Hard Seltzer hitting the ceiling dovetails really well with another news story that you guys covered this week. Zoe, what can you tell us about what went on in the Boston Beer Earnings Call last week?

[00:05:59] Bump Williams: Uh, yeah. So we had a lovely late afternoon Boston Beer Q2 earnings call last week. And the, the big news was they are changing their guidance and truly is a big reason for that. So previously Boston Beer has been really solid on, you know, we're going to have volume growth between four to 10%. And that's, it doesn't matter if truly grows and truly declines, we'll still be able to hit that guidance. Turns out it's not so much the case. They've changed that to a loss of between 2% and 8%, and Truly is really the major factor there. They expect Truly to drop like 20%, possibly more this year. Overall, they expect the hard seltzer segment to drop between 15% and 20%, and Truly is losing share, so it might have a larger drop. So thing they've kind of this is something that wasn't necessarily a surprise. I think analysts have been kind of pushing for them to change their guidance for a while now, and haven't been very confident in truly. And so they finally just. Decided, yeah, you know what this we, we can't make this yet. They are going to try to make some adjustments to the Truly brand to help bring it back into favor with people. They are going to add real fruit juice to their core flavors. Citrus is out now, that citrus variety pack. Berry is going to come out in August. And they also, Dave Berwick teased some SKU rationalization that might happen. So no concrete answers on what might be, what they're going to get rid of quite yet, but I have some guesses.

[00:07:39] Justin Fonte: What's your guess?

[00:07:41] New Jersey: Well, my guess is Truly T. Yes.

[00:07:44] Bump Williams: I think we have some ideas.

[00:07:46] Justin Fonte: Yeah. Even though it's in the picture, I'm with you.

[00:07:49] Bump Williams: Dave did not mention Truly T when he was talking about any of the winners or losers, which I think is a telling sign that, like, if you're not talking about this, then it's probably going away. I mean, he didn't really talk about Bevy the last time we heard from him, and then Bevy went away.

[00:08:06] Justin Fonte: So what's what's striking to me here is that this is a complete reversal from quarter one when they were adamant. And and I mean, adamant. I don't know how many times I heard. We don't need truly to be in the black for us to grow in 2022 and a quarter later. And this is like the second year that they've had the second quarter blues here where they've had to be like, oh, wait a second.

[00:08:32] Bump Williams: uh yeah we're gonna have to revise that guidance they didn't pull it this time but it was a big change and just they were so confident before and they're saying they could hit that higher end of the guidance with truly not growing so like that's a big big difference

[00:08:52] Justin Fonte: There are a couple of reasons here. And one of them is that they're not going to do as well with hard Mountain Dew this year as they expected. And that's because not because the product's not doing well. It is doing well. It's because Pepsi's blue cloud distribution is has been delayed in getting alcohol licenses. So it's slowed the rollout there. And then, yeah, Truly is definitely underperformed at a level that I guess they weren't even expecting. But surprise, the analysts weren't as flummoxed as they were last year at this time.

[00:09:31] New Jersey: Yeah, I think that call just kind of broke all of them and maybe made them have no expectations coming into any of these because they were never really sure what they were going to hear. That would be my guess.

[00:09:41] Justin Fonte: Every time you say that, I hear the old MADtv lowered expectations. It's a deep cut for like a bad dating service.

[00:09:53] New Jersey: Here is the the brew bound generational divide is, you know, popping up again. But that sounds like it was probably really funny.

[00:10:01] Justin Fonte: So he's never heard of mad TV. So there we go.

[00:10:05] Bump Williams: I'm aware that it existed.

[00:10:07] Justin Fonte: Wow. You were zero a, you were zero years old when it existed, I'm sure.

[00:10:15] New Jersey: I feel good about the real fruit juice edition. I think that's going to be a difference that makes a difference. I think that's the thing that people... I know people, at least anecdotally I hear from people, they like real high noon because they think it's quote unquote more real than hard seltzers. And I think they're equating probably somewhat erroneously the real fruit juice with the vodka. So I think adding that flavor and mouthfeel to seltzer could potentially get some people to come back into the fold.

[00:10:47] Bump Williams: Yeah, it was interesting when they were asked, you know, where is this, like, what is hard seltzer losing share to? And it was like, mainly it was those like premium light beers. And let's talk about RTDs. They're like, we're not really threatened by RTDs. And the main factor there is because the things that are making up the most share there are vodka seltzers like High Noon. And I mean, Boston Beer is going to have its own truly vodka seltzer coming out that they're going to include in its truly growth if that does well. But the decision to add the real fruit is to, their strategy there is to remind people what seltzer has and that can be flavor variety that light beers don't have. and they want to really focus on these core flavors of hard seltzer that have kind of been ignored and can give drinkers what they originally were seeking for with this segment. So it's an interesting approach that I think is probably on the right track. Yeah, wild to me that people are going back to light beer.

[00:11:51] Justin Fonte: Didn't Dave sort of cite price as one of the reasons why they're filtering back?

[00:11:56] Bump Williams: One of the reasons why people are turning to light beers, yes, is the price factor. But he said they're not going to do anything about price. They're not going to change anything with price. They're not going to take the price approach to bring those drinkers back. He doesn't think that's the way to do it. So he said on average, there's a 7% price gap between hard seltzers and premium light beers. So he says there is an economic factor there about why people are going to that segment instead of hard seltzers, but he doesn't see it as the way to get them back is through price, which was interesting. Bossa Beers actually has expects price increases between three and 5% nationally this year, so.

[00:12:38] Justin Fonte: I'm just looking at the year to date Truly brand family is up $1.76 per case if I'm looking at this right.

[00:12:48] Bump Williams: So yeah, and I'm not sure if that's going to go up more with the addition of fruit or not. I would expect it would, but.

[00:12:57] Justin Fonte: Unconfirmed yeah, I think if I'm remembering right, they had 3 to 5% price increase is what they're expecting this year. So yeah. Yeah, for all of Boston Beer still a bright spot though

[00:13:15] Bump Williams: Yeah, Twisted Tea is still doing well. A big part of that is they're just have expanded the distribution of their 12 packs. So it's becoming less of less thought of as like a regional brand is what they were saying and more of this national entity.

[00:13:33] New Jersey: I mean, that's it. That's a lot to ask of Twisted Tea to make up for all of Truly's, you know, shortcomings this year.

[00:13:39] Bump Williams: Twisted Tea's increased volume 21% year to date. Just in the last four weeks, it's increased 39%. And they've increased distribution from like around 25, 30% of all ACV to now around 58%. So they've really accelerated or increased how many places it's distributed. But yeah, I think the Hard Mountain Dew thing is really what's kind of like Twisted Teak maybe could combat all the seltzer losses, but not this lack of expected growth for Hard Mountain Dew as well.

[00:14:15] Justin Fonte: And the rest of the portfolio, because shipments and depletions were down almost across the board, right? For Samuel Adams, Dogfish Head, Angry Orchard, I'm sure I'm forgetting something else.

[00:14:30] Bump Williams: Yeah, everything was down. Everything was down except for Twisted Tea and Hard Mountain Dew for shipments and depletions. So every single other thing in the portfolio was down. But yeah, sucks about Hard Mountain Dew, it was supposed to be in so many more states and now they've kind of pushed them all to 2023. Right now it's in seven markets. It's gonna be in 10 by the end of the summer and 12 by the end of the year. The rest, it's just gonna be pushed into next year.

[00:15:00] New Jersey: I mean, building a distribution network completely from scratch, like was going to be an enormous undertaking. So I personally am not surprised.

[00:15:11] Justin Fonte: One of the things that surprised me too was usually when they put out these press releases for the earnings, there's these giant quotes from Jim and Dave, and they were a lot smaller this time around, which is the first time in a long time that I've seen that. Even in the days before they were growing with Truly, they were still very long-winded quotes within these press releases, and now it's just like, very much toned down.

[00:15:43] Bump Williams: Well, I think they've learned a little bit from the past as well. It's just, it's probably better to keep, I mean, even Dave said, like, he's learned to never really predict anything at all, which is why he's not being too overly, um, I don't know, excited about Twisted Tea because he can't make any predictions as he's learned, which is, it's probably a good idea to maybe tone it down a little bit, just in case.

[00:16:10] Justin Fonte: Yeah, the hard life of a publicly traded company. Well, they at least did very well in the Tamaron wholesaler survey. They always do. Yeah, I don't really want to focus on like the winners and losers here, because who really cares like other than the companies that won or lost? I think what the key to this for everyone else out there is what the wholesalers said the suppliers could improve upon. And you hit a lot upon that, Jess, in your story on this. And what were some of the key takeaways that you got out of there?

[00:16:46] New Jersey: Yeah, like the biggest takeaway, I think, is that wholesalers are really looking for their supplier partners to step it up in terms of national accounts. Wholesalers taking the survey said that they had, you know, the 10 behaviors that the survey asked wholesalers to rank breweries on. Of the 10 behaviors with the lowest scores, half of them were related to managing growth in chain national accounts. Three of them were about on-premise related things, two for off-premise. Account staff training was identified as the biggest opportunity for the industry to improve upon again in 2022, Tamron wrote in their own report. So they're looking for training, both in terms of the product and I'd assume promotions and campaigns. They're also looking for supplier partners to improve in category management, which is something that's been talked about quite a lot this year with regard to the Treasury report. But they're asking for people to execute a category management strategy that drives growth in the beer category and builds value for on-premise national account customers. as well as measure and evaluate national accounts performance. So, you know, the bigger companies absolutely have these really sophisticated, complex national accounts teams, but I think this is something that everybody can learn from. Building relationships with national accounts and chains is a solid way to help your business grow.

[00:18:10] Justin Fonte: Yeah, it struck me too that nearly a third of the respondents said that brewers should practice understanding and listening to their distributors. That's a third.

[00:18:21] New Jersey: Yeah, I kind of feel like the Tamron survey is wholesalers like annual chance to be able to, you know, like got a lot of problems. Yeah, I've got a lot of problems with you people and now you're going to hear about it.

[00:18:33] Justin Fonte: The airing of the grievances. Other grievances include e-commerce and digital marketing, data and insights, localized planning and measurement. I'm going back to my Iowa pronunciations here. Hot brands and timely innovation. I support that. And supply chain efficiencies.

[00:18:57] New Jersey: Yeah, another thing that I thought was really interesting was the number of brands included in the wholesalers that participated. The average number of brands had gone down a good amount, but the number of SKUs went up a lot. Yeah, the average number of brands sold among respondents of the survey was 297, which is down 13 from last year, but the average number of SKUs increased by 96 to 1,371. That is a lot of individual SKUs. So yeah, work on your national accounts game, figure out digital marketing, and just ask your wholesaler partners how they're doing.

[00:19:38] Justin Fonte: Well, we talked about non-alcoholic beer at the top of the podcast. And a couple of weeks ago, I mentioned that Jon Moxley, AEW world champion, was fishing for an athletic sponsorship. And apparently, they dumped a ton of product on him. It popped on social media. And I was working hard for you, Mox, behind the scenes here. I was like a nerd. I watch the AEW media scrum after a pay-per-view a couple, about a month or two ago. And when he was drinking athletic on stage, I started sending screenshots to Bill Shufelt and one of my buddies over there, Chris Fernari, who used to be with Brewbound. And Yeah, it sort of started some wheels turning internally there. So I'm not going to say you're welcome, Mox, but I'm glad you got your non-alcohol beer. So with that, we had a ton of other stories on Brewbound.com. Loganitas has done a brand refresh. You guys hopped on the phone with Giant, a hard kombucha maker that's actually going to be a modern alcohol company. And helping them modernize is our buddy Dave Macon, formerly of Firestone Walker. That's up there. Jess, I believe you wrote about Mark Reef, the founder of Atwater, who sold that to Molson Coors, his new beverage company. How do you say that? Fuel.

[00:21:13] New Jersey: Fuel.

[00:21:14] Justin Fonte: but there's no e and there's an umlaut over the u and so all that's up at Brewbound.com and zoe you're kicking out a story too on on hops from our friends at barth haas

[00:21:29] Bump Williams: Yes, we just got today their annual report on global hop acreage increased again this year for the eighth consecutive year, which normally when we talk about increases seems really exciting, but this one is a little concerning for some people because Barthas is saying the market is oversupplied. And really they're looking for next year there needs to be a decline or decrease in acreage. Right now we're at or as of 2021, we're at 155,395 acres about when doing the conversion from hectares. So a lot of interesting little tidbits in that report. We got to look at some of the big global beer producers. Of course, AB is still number one. They grew 8.6% beer production wise in 2021 year over year. A lot of big beer increases in that top 20 list. Excuse me, they grew 9.6% year over year. a lot of production growth in 2021. Not too many declines in those big numbers across the globe.

[00:22:38] Justin Fonte: And then Jess, you had a story also earlier this week on Sierra Nevada closing shop in Berkeley.

[00:22:47] New Jersey: Yeah, the Sierra Nevada Torpedo Room, SNOMAS. The Torpedo Room was their, you know, as you said, their Berkeley tap room, which was a way for them to have a physical presence in the Bay Area, which is the closest major metro to Chico, where they're headquartered. About 160 miles away, so it's not terribly close. But they opened the Torpedo Room in November of 2013. They only served Sierra Nevada brewed beers, so they didn't brew on site, a limited food menu, about capacity for 45 people, different tasting events and stuff like that. But, you know, after two different periods in which they had to shut down this year for a lack of staff, once in March they shut for couple of weeks, but reopened. And then on June 30th, they shut down again due to a lack of staff. And I think they thought it was going to be temporary, but realized it's time to just call it and decided to make that closure permanent. They're far from the only people to have to do this. We've seen a lot of large brewers, large craft brewers have to walk away from other taprooms they've opened outside their home markets. So It can be something that goes really well, or it could be something that lives its life and runs its course.

[00:23:55] Justin Fonte: Yeah, and I think the key here is the stress that the lack of staffing really drove this.

[00:24:02] New Jersey: Yeah, yeah, it sounds like that was a really big problem for them. And I asked how many employees were affected, and the spokesperson I was talking with said very few people, because this is why we can't stay open.

[00:24:14] Justin Fonte: All right, well, On to some other trends that may not be that great, but we'll talk them through with our friends and featured guests from Bump Williams Consulting, Dave Williams and Brian Kruger. Let's get to that interview.

[00:24:33] New Jersey: Okay. Our guests today on the Brewbound podcast are no strangers to this space. Always a delight to have them both here and talk beer. Please join me in welcoming some of the team from Bump Williams Consulting. We have Dave Williams. What's up, Dave?

[00:24:45] Dave Williams: Not too much, just white knuckle in my way through the summer like everyone else is this year.

[00:24:52] New Jersey: Oh my God. Yeah, accurate, accurate. With us as always, a delight to have Brian BK Kruger. BK, how are you?

[00:25:01] Williams and Brian: Doing great, Jess. Thanks for having us again. Like Dave said, just hanging on, seeing what's going on this year and forecasting that into what's going to happen next year.

[00:25:09] New Jersey: BK, we just saw each other in four columns for a hot second at a conference in early June. And I can't tell if that feels like it was last week or last year.

[00:25:18] Williams and Brian: Last year, definitely.

[00:25:20] New Jersey: Like time is nothing. So yeah, you guys just put out your media craft report and a lot of really interesting stuff in here. So let's just hop in. The thing that really struck me the most, and I ended up writing a story about it, but in the report, hazy, imperial, double, triple IPAs, lead craft styles by growth, dollar sales increased by nearly 130%, not even close in terms of other craft styles. So what are some of the brands that are driving this trend for big hazies?

[00:25:49] Dave Williams: I think whenever you think of hazy imperial IPAs, your mind immediately, at least lately, shifts directly to what New Belgium's been doing in building out their voodoo family. That tends to be the brand that's leading the bulk of just the absolute incremental growth among the hazy imperial IPA space, but it certainly doesn't end there. When you look at the data, I think most of the top growth brands, it's simply because there's so much new still hitting the shelf. I know that the craft segment overall has been contracting or slowing a bit from a brand growth perspective in total, but that does not mean that new brands don't continue to hit the shelf with every reset or every tweak along the way. Firestone's been able to put some points on the board with their Mindhaze double IPA. So that's been an addition to that building Mindhaze family that they have. And then there's some local ones. And I say local in the context of just not national or not super regional, but rather a little bit more localized. Still some new brands hitting the shelf in that. So it's a mix of the brands you know, but it's also a mix of a lot of new still finding its way onto the shelf at retail.

[00:27:06] Williams and Brian: Just going to add on to that, that when you're looking at kind of from the mind of the retailer what's getting put on the shelves which is driving a lot of these trends as it is some of those up and coming locals, not the ones that have been established for 10 to 15 years, but the newer ones coming at you with more of those hazy profiles, whether it be in the or we're seeing it really across all the entire country. It's also good to see like some hazy variety packs that are out there that are kind of adding to, hey, another occasion for that craft drinker layout. We already know they like hazy, they like IPAs. You combine that with an IPA pack, some brewers are seeing growth in that as well.

[00:27:44] Justin Fonte: That's something I was definitely curious about was how much of this is a group effort versus how much of it's coming from those top brands. I feel like you guys pretty much answered that. Seems like the tail is carrying its weight as well.

[00:27:59] Dave Williams: It is it is not certainly not to the magnitude of you know the top handful of the brands in this space. But you know this might be a common theme but there is still a way to find incremental success. at retail through chains for the smaller size suppliers across the US. Definitely pockets or avenues into chains.

[00:28:22] Bump Williams: What about like the package size within this place? Is there anything, is it like, I mean, we talked about Voodoo Ranger, is there anything like, is it singles? Is it, you know, those variety packs that are mainly bringing that growth?

[00:28:34] Dave Williams: You know, singles is certainly playing a big role in this, but at the same time, we're starting to see 12 packs crop up for these higher ABV brands. Now, there's not a lot of those, but even 12-packs are starting to pop up for this space. But I think it's still primarily the sixes, the 416s, and the singles doing a lot of the growth here. But because of the popularity and because of the concurrent popularity in these other format or pack size formats within other pockets of craft, kind of merging together for the suppliers that are able to or have the flexibility to expand their portfolio on a certain brand or a certain family into these multiple configurations at retail so it is a little bit across the board but you know maybe not as much as the lower ABV or more quote unquote traditional options that you might see.

[00:29:30] Williams and Brian: Yeah. When we're talking hazies and Imperials, you have to prove yourself in a smaller format, not being just 19 twos as that smaller format, but then sixes and then move your way up. So you build up that demand. It's a big investment, not only dollars, but ABV wise to get a 12 pack of some of these hazy Imperials and some of these larger style hazy. So it's kind of that next step of that product life cycle, getting into those higher packages, because you've got a proven story in the 19 twos, or if you're a four 16, that you can then present to the retailer showing that that consumer is there and you can stand out in a space that doesn't have a lot of competition so far as far as those larger ABVs in the higher pack sizes.

[00:30:13] New Jersey: Are there any brands that are popping in this style that were surprising to you guys? Anybody new?

[00:30:18] Dave Williams: In the hazy and imperial or the hazy imperial specific? I know we're adding a lot of attributes together now when we're continuing to pick apart craft I don't know if it's one specific brand, but I think it's just a fact that this hazy world continues to evolve as a whole. and there continues to be not just some new, but a lot of new entries, brands that are new to me reading the data, brands that I'm familiar with for other parts of their portfolio that are now spreading into this hazy imperial world. I don't know if it's Justin Fonte specific one that I would say, but just the fact that this hazy conglomerate continues to bleed over into now the higher ABV, now the pale ales, now the loggers, it just continues to swell and swell, and it's not completely shocking, but the fact that there's this influx to this magnitude today, it's encouraging to see that there's still brewers experimenting and getting a shot to succeed and chain in this space.

[00:31:23] Williams and Brian: It's really cool to look at it at that regional level where we look at things nationally and say, okay, the top 25, you can kind of guess who's going to be in there. When you look at a regional, you can kind of guess the top 10 to 15. And then that other 10 to 15 that are going to be in there are always of that regional variety. And it's interesting to see how much that change is going region for region and really seeing that that consumer is there across the total country. and they're embracing it across not just hazy IPAs or imperial IPAs, hazy imperials, but like Dave was saying, into hazy PAILs, into hazy loggers. So you see a good mix depending on where you're looking in the country.

[00:32:02] Bump Williams: Another craft style that is doing pretty well so far this year, other than the Hazys, is those traditional imperial double, triple IPAs. And you guys report said dollar sales have grown almost 7% so far. What are the brands within that style that are making the most impact?

[00:32:20] Dave Williams: Stop me if you heard this before, but Voodoo Ranger continues to lead the pack in just those in magnitude of incremental growth in that traditional Imperial IPA. And then this is where you start to see a lot of those top ranked craft families pop with either a brand they've introduced recently or coming to the table with something new to kind of piggyback on the success of what they've dropped in. So, you know, you're seeing the Sierras, the Lagunitas out there. ABIs obviously made a splash with a lot of entries through their various craft families under their umbrella. You're seeing some other names come back. A name like Red Hook is now coming back to the table with success in the Imperial IPA format. So some names you probably would come to expect, some that are nice to see topping the charts again from an incremental standpoint. And then to BK's point, it's a lot of those regional craft brewers that maybe up until COVID were pretty content doing a lot of direct-to-consumer or very local market sales. COVID either accelerated their plans to get to chains or they saw an opportunity to grow their volume bigger. So you're seeing regional or more localized craft brewers coming to the market with these double IPAs that are also ranking toward the top of the list when it comes to year over year incremental dollars. Again, in this space, because of the swell that's been in this style, a lot of these are, once again, new entries. And obviously, with an influx of new entries, someone tends to pay the price on the back end in that space if you've got those consumers who are style shopping and not so much brand shopping. So you do see some ups and downs from that point from these new entries coming in. But it is a mix of the familiar faces, the big names, as well as some of the more localized players getting getting a seat at the table, so to say.

[00:34:17] Justin Fonte: For the players that you guys haven't mentioned and are sort of seeing this play out, where do you see the opportunities for them? Can they come in and play in both of these spaces at this point, or is it a game of catch up that they'd be playing?

[00:34:34] Dave Williams: I think with IPA, there's always an opportunity to come in and carve out some success. You know, IPAs have grown to be so big collectively, you know, shedding any specific attribute tied to it, whether it's ABV or hazy or not. I think that IPA umbrella is big enough where you do see a lot of rotation taking place, people trying new brands, people trying a brand they haven't had. from a familiar name. So I think there's always a chance to get that trial out there. The hardest part that was getting that repeat after that trial. And that's why you see a lot of the cycling and life cycles in general of brands that were, you know, once the bell of the ball are now kind of almost forgotten about and they're getting DC a lot quicker, whether that's by choice or not. It's always trying to stay current in this Frankly, that could be true for most styles, I guess, but IPA in general, because of how deep it is, I think there's a shot, but it's tougher to stick around for that long haul.

[00:35:37] Williams and Brian: Yeah, we do know that that consumer likes to sample around in that category more than almost any other category that's out there. The hop varieties and the advancements technologically as far as hops and brewing, it's a perfect delivery vehicle for that. of what consumers come to craft beer for in a lot of ways now is I am going to experiment. I'm going to experiment not only amongst styles but within a particular style amongst all the breweries. They may have a kind of a stable of go-to beers that they go to. It's like hey I'm going to stock my fridge with this But chances are they're always picking up a new 416 or they're trying something, they're going and getting a crowler from their local brewery, trying to see what else is out there. And IPAs have always been known, especially the last 10 to 15 years, for pushing those boundaries and really keeping that consumer engaged. Doesn't mean that they're totally locked into one, but they're engaged in the style and they're going to try the ones that are out there.

[00:36:33] Justin Fonte: Are retailers looking at it as like a one for one swap basically within the IPA category then? Like if they're looking at bringing a new product in, something from that tail that's not performing, getting disco'd?

[00:36:48] Williams and Brian: Oftentimes, yes, but the ones that have proven themselves are also the ones that are pretty safe and stable on that shelf. And a lot of the brewers that are getting more savvy with that mind of the retailers you were talking about are the ones that are programming that in. They're programming in variety. They're curating the next brand even before that. So they're not saying that they're DCing it on their own, but they always have two to three to back it up to keep that retailer excited. They've probably had success with one in their portfolio before. They know that they can have that conversation with the retailer and say, hey, this is the next one that is having legs in the tap room or when we go out to samplings. So they're bringing that up and making that mind and the choice of the retailer a little bit easier of a decision. But oftentimes, yes, it is a swap. But we're seeing that kind of length and that brand cycle continually get shorter and shorter. So you have to be ready to plug something else in there. So that's kind of the name of the game versus two to three years ago, where things were a little bit more shelf stable and you might be able to ride it out for two years. Now it's six to nine months and you're already planning on the swap out on your own or you're planning for the next reset in the spring.

[00:37:58] Justin Fonte: Would you consider that less stable than we've seen historically at retail? Less stable in what way? Buyers and retailers giving brands more more time on the shelf to prove themselves.

[00:38:12] Williams and Brian: Yeah, I I think it is less stable. You have less of an opportunity to go in there and make your case for having something stick onto the shelf and you have to be more forthright and more kind of discerning in your conversations with that retailers. Why you need to be a part of that assortment and what you're doing as far as helping them achieve their goals. within their store. If it's a variety-based store, you need to play to that. If it's a stability-based store, you need to have something in there. But it is a pretty volatile environment right now, and it takes a little bit more planning and a little bit more curating, to be sure.

[00:38:46] New Jersey: So, I mean, we talked a lot about like how big hazy's I'm just going to start calling it big hazy because I feel like imperial double triple hazy IPA is a mouthful. So big hazy is really on fire and regular hazy's have really been gaining a foothold. How big can the hazy fam get within general IPAs in the next few years? Like is there a time where they overtake not hazy IPAs?

[00:39:13] Dave Williams: you know, that's hard to say because it keeps growing. So it's kind of dumb to try to put a cap on it. Uh, or it would be risky to try to put a cap on it. But I think if you still look at the list of the top growth brands, there are still plenty of the more traditional IPAs still doing well and moving volume to the point where even though they might be down overall, I think there's still a lot of love for that style. In addition to hazy where that's, I don't think that's at risk of shrinking to the point where it falls down the ladder. I think you're still going to see that have a very, very long lifespan in the world of craft beer.

[00:39:51] Williams and Brian: Yeah. And when you look at kind of that style reviews, IPAs are still three times the size of those that are classified as hazy IPAs and almost three times the size as those that are classified as Imperial double and triple. So what you're seeing is an IPA fan base and they are shifted right now more into the hazies and the Imperials. But I think it's important to keep that in mind as far as the scale, that it's still only a third of all of the rest that are classified as kind of the standard IPAs, if you will.

[00:40:20] New Jersey: That's really, really helpful context. Thank you. So, outside of IPAs, what non-IPA craft brands have been popping into data lately?

[00:40:29] Dave Williams: So, you know, when it comes to outside IPAs, I kind of looked at this at a higher level of what other styles of craft have been gaining share. in the space, they might not have the collective growth rates behind them that IPA or these subsets of IPA do, but there are some other pockets in there. We talked about the hazy pale, but I'm gonna try my best not to mention the word hazy for this next section of this conversation, because some of the other areas where we're seeing that have done well are in the, what's classified as the American wheats, and particularly within that umbrella, It's a lot of fruited wheat ales or wheat beer out there, typically a citrus or a tropical flavor. Going back to a brand like Blue Moon, what they're doing with their Light Sky family, we know there's some low calorie, better for you type attributes attached to that. But then there's a lot of brand like mango cart, which continues to grow and grow across the USA and do well because it's bringing that, you know, approachable style with that flavor component that is kind of pervasive across beer right now. When you look at common attributes that seem to be having success, it's a lot of the citrus or tropical flavors infused in the beverage. So we're seeing brands like that in the wheat beer space do well. Not necessarily a ton of Shandy's, but rather some of the more traditional ales or that kind of world is picking up the pace. I even checked the data and I saw Sam Adams Cherry Wheat is up through year to date 22. So there's a blast from the past that's found a bit of a resurgence behind this swell of consumers or drinkers looking for a certain profile in their craft beer. Beyond that one, there's that other pocket of more approachable or easier drinking styles, the lager space. I know that the conversation around craft lagers growing and sticking is something that's cropped up every now and again over time, but it's working right now. We're seeing some new brands enter this space. We're seeing a lot of classic style lagers come into play and put up some volume. On the board, I know New Belgium, again, has had success with that. Shiner, Odell, some of those more classic loggers that they've been bringing into their portfolio. And the thing with the loggers lately is that a lot of these top selling brands or top growth brands are coming in at generally lower price points versus the craft average. So I don't know if that coincides with what's going on from an economic standpoint right now. but I'll bet that some people find a bit of a lower price point, you know, more approachable for certain occasions, not all, but, but possibly some. And then also under this umbrella, you know, we can include some Mexican inspired or Mexican themed loggers or surveys that feature the lime and or salt component in their profile. A lot of the growth brands, when you extract IPAs out of the picture, they tend to fall into those buckets that I listed out there, you know, can talk about Pilsner's, could talk about German inspired loggers, which is a smaller and more seasonal component. But again, we're seeing a lot of innovation in that space and we're seeing brewers put some incrementality in their portfolio if they're timed and executed well, you know, around a particular time of year as well. You know, that's a little bit of a distance from the high ABV hazy world that's kind of putting the big points on the board. But when you start to look beneath the surface and sift through the other styles in there, those tend to be some of the common themes, attributes and sub styles or however low you want to start slicing it that we're seeing pop on the list from a brand or style perspective.

[00:44:17] Williams and Brian: Yeah, I think it's important to take a look at the consumer. And while we did spend a lot of time talking about IPAs and hazy, they're also looking for kind of ease of drink and accessibility. And that's why you see kind of the imports growing behind like the modellos. And with the pricing environment that we're in also right now, we're kind of domestic pricing has started to creep up, all pricing has crept up. And I know we'll talk about that again in a little bit, but bringing a craft lager in it, more of that kind of import Mexican lager pricing. A lot of breweries are seeing a tremendous amount of success with that and the consumers are latching onto it and is becoming more of that 12 pack beer. And then they go to a different style for their six pack.

[00:44:59] Bump Williams: Even though we've seen these styles and specifically these IPAs doing pretty well in year over year growth, craft is still down, it's down 7.4% for the first half of this year compared to last year. Is there a specific segment that you're seeing is making the biggest impact and taking the most away from craft sales in the off-premise?

[00:45:20] Dave Williams: You know, we haven't done any direct switching studies recently, but we did do a handful of craft consumer surveys last year. And I think a lot of learnings from those surveys are very applicable to what's going on today, both what they answered at the time, but kind of reading the tea leaves and how things have changed from even the summer of 21 to the summer of 22. You know, for these surveys we conducted, we looked particularly at lapsed consumers, consumers that used to drink brand X, but have not had that brand in the last three to six months or past year. You know, it did vary on the, on the timeframe there, but we asked a flat out simple question. Well, what else are you drinking now that you've stopped drinking this particular brand? And there were a handful of other craft brands mentioned, both mainstream, national, regional, local, et cetera. So there's a lot of in-segment switching, but that's not gonna hurt craft, right? Because in theory, it still stays within that bubble. What we also saw a lot of responses go to were seltzers. And at the time last year, seltzers were still a pretty big growth engine for beer. As you fast forward to now, and you could maybe make a hypothesis that some of those seltzer drinkers have transitioned into RTD spirits or canned cocktails. I think that could be a landing area for a lot of these cross-category drinkers who have either replaced or reduced their craft occasions. To BK's point, like he mentioned before, another destination were major Mexican import brands. I mean, that space has been on fire for a long time and continues to be today. So I think that could be, based on these survey responses, another landing place for a lot of these consumers. And then finally, a lot of domestic premium brands were mentioned. A lot of the macro loggers were mentioned as landing destinations. And again, lately, over the latest quarter, particularly over the latest four weeks, we've seen some promising trends for not just domestic loggers, below premium loggers as well. Now you bring price into the equation for 2022, some of those drinkers that were bouncing down to domestics, maybe they drop down one more tier to those below premium or sub-premium brands, and that's where they're drinking currently, not all, but some occasions. I think, and unfortunately, it's not a one target answer, but In these surveys, we learned that a lot of these drinkers drink two to three to four to five categories pretty regularly over the course of a year. So those occasions and those drinkers are going to bounce around in different areas depending what fits the occasion they're buying for. the price point they're looking for, the style, et cetera. I could list all these out, but I think those are the likely landing zones for some of these lost occasions that are hurting Kraft, at least in the off-premise. That's where this conversation focuses on, the off-premise trends right now.

[00:48:18] Williams and Brian: Yeah, I think when you're looking at where is that consumer going, if you pay more attention to the share and the changes that are going on there, then you'll see like import over the last four weeks is the leading gaining shares amongst those segments. And then right behind that is FNB. So when you're talking about where other consumers going, They are going to a little bit of wine, a little bit of spirits. I know we've seen declines there, but within the beer category, the two biggest winners right now over the last four weeks are those imports and FMDs.

[00:48:49] Justin Fonte: Guys, when did you first start seeing that segment popping pop in your data or in your surveys? And is it accelerated in the last year or so? Because it just feels like last couple of years, it was hard seltzer. And now it's like hard seltzer is not cool enough. And now we're on to RTD canned cocktails. And next year, we'll be on to something else. So when did you really start to see that? And has it accelerated?

[00:49:20] Dave Williams: You know, I think we've seen the cross category curiosity of shoppers. You know, it's been around for a little while, but Justin, that's a great point. I think the fact that, I mean, Seltzer was a brand new segment that just exploded, you know, in the last, I don't want to say handful of years, a little bit more than that, but it really came into what it is today, you know, in the last handful of years. And I think you're continuing to see new styles, carve out a space. And every time something new hits the shelf or a new category is created to try to attract shoppers, that's just what it does. It's going to attract shoppers. So it's a little bit, it started with nibbles and now it's taking big bites as these emerging segments, you know, namely lately RTD, you know, spirits or canned cocktails, however you want to phrase it. And what happens when all these new segments and categories get developed is they start to eat into the shelf space for craft. You look at the leading families or the leading brewers or brands, you know, not all, but a good portion of them are seeing their distribution levels in chains. So they get chipped away. You know, retailers are doing the best they can to add shelf to that linear feet, to make room for some of these new categories or new brands. But in some cases they're working with fixed space, particularly fixed cold space. And as these new categories come out in, warrant space on the shelf. I think craft has felt the squeeze maybe more than most from a available skew available brand your available package or facing count on the shelf. So I think all those in conjunction with just lost occasions it's kind of a perfect storm of craft getting squeezed or you know kind of pick that from a lot of different angles. Not to mention, if we're looking exclusively at off-premise trends, and you talk to a lot of craft brewers, you read what's going on out there, you see on-premises recovering, or in some cases recovered, on-premise in that sense. So we're seeing what happened in 2020 with that massive shift in occasion slowly get shifted back out. So it's almost, like I said, this perfect storm of what's happening in chains, on shelf, and outside that channel, all working together to result in what we're seeing happen with craft trends through chains today.

[00:51:43] Williams and Brian: And I'll bring it back to something we talked about last time. We talk about the shelf quite a bit, but when you look at the floor and the display of the space, which is kind of that velocity multiplier, what are you seeing this year that you weren't seeing last year? That's what the retailers are behind. The shelf space, no matter what it is, what you put on the floor is going to have a multiplier. That velocity is going to increase. that retailer knows that that's what that consumer is coming in there for. So automatically, when you start to look at kind of what the floor space is like this year versus last year, it supports a lot of these trends. It actually leads a lot of these trends because you come in now, you see a lot of RTDs, you see a lot more FNBs, you're seeing a lot more non-alcoholic than you ever were in the past. That's kind of where the small battles are really being won by the other categories right now. And they have a hot story and retailers are definitely going to ride that and they're making decisions because of that, because the consumers are chasing it.

[00:52:37] Dave Williams: One thing I do want to add, BK, and you just bringing that up triggered this thought in my head is, you know, what's this, quote unquote, farm team of legal drinking age consumers drinking most regularly now? And if it's not craft beer as much as it might be some of these other new segments that, you know, was their first trial or their first foray into beverage alcohol, then that You know you can start to question what kind of butterfly effect that has down the road if the younger generation is not back filling what the older generation of the prior generations did when it comes to consumption patterns and behavior. So if they start to category hop or maybe are more loyal to segments that are different than what we used to see. That's a whole other chain of events that you have to wonder how that's going to manifest down the road. I'm not saying anything's a direct threat based on what consumers of today are drinking versus yesterday, but it is that other component. We just listed off half a dozen, if not more, factors that could all work together to influence one trend at the end of the day.

[00:53:41] Justin Fonte: Yeah. But the consumer flavor profile is the new consumer flavor profile is seemingly completely changed from I think what a lot of us were used to when we were growing up.

[00:53:53] Dave Williams: Yeah. And I mean and you know we're relatively I guess I would still say young. So you know how's what we like change from what you know our parents like to. So it's that trickle down effect and it keeps changing and you just got to stay on your toes and try to see it as it develops and get behind it if you can or work against it or pivot against it and prepare for competition coming from that angle.

[00:54:18] Justin Fonte: So one of the things coming out of the pandemic was a lot of craft brewers transitioned from draft into canned package. And there were a lot of retailers at the time who were picking them up. And seemingly in your latest report, you sort of point to local sort of losing some of those placements now that they once had. Can you go into that a little bit deeper and on why that's happening and what's happening there?

[00:54:46] Dave Williams: Yeah, I think, you know, in their latest report, we do have some, some what we call tiers of crafts. You know, we have the mainstream brands, the national brands, and those are ones that are available, you know, pretty much coast to coast, regional, which are any of those remaining families that have, you know, 20% or higher national distribution. So you can get them in a lot of states, not all. And then everything else is what we're, we're calling, you know, our quote unquote local bucket. you know, that's a handful of states to localize to one state or market. And it's true that that last collective is showing some of the steepest declines of any of those previous tiers. And there's reasons behind that. You know, the mainstream tier, you know, Blue Moon's done a lot of great things in the craft space lately. So they've seen some growth that's you know, that's kept them above the craft average. National includes the New Belgium, Sierra, Lagunitas, that continue to bring new things to the table, where that innovation helps keep their trends a little bit more favorable than the craft average. And then you get to everyone else. And this is where that shelf space battle that BK alluded to really starts to manifest itself, because you're right. You can look at local in one way, as familiar face, went to change, they came with a reputation, They came with a known quality product, a proven product, and now it's made available at chains. And they're doing well. So in that sense, local is doing really well at chains. They're still getting ads. They're able to open up new markets, and they're able to get a bigger reach. And this is where that word local, you can have a lot of fun putting boundaries around it. But that's kind of one way to look at it. On the flip side of things, it's the local that was on the shelf before that's maybe getting elbowed out of the way to make room for this next wave of local that's hitting the shelf. So it's a trade-off. And I think right now the trade-off from all those, let's just say anyone outside the top 25 craft brand families, the declines are outweighing the gains. If I look at the entire space of craft in general, I think we're tracking over 2,400 brand families in the data, less than a third of that entire space is up on a year to date basis. So, you know, winners, whether that's big, medium, small, or micro winners in general are kind of hard to come by in the chain space right now for craft. And it just so happens that that shuffle on the shelf is taking place on those lower levels with out with the old in with the new, if you're not performing, you're not meeting this hurdle rate, unfortunately you're out in the next candidate gets put in that spot. And you know, that's, That's unfortunate. That's why we always say if you've got a winning story, make sure you're communicating it frequently and loudly so your partners know that you're doing well and what you're bringing to the table. Because it's it's retailers are getting quicker to fine tune their shelf to really hit on what's hot. What's now? What are people looking for? You know, just in an unfortunate reality.

[00:57:58] New Jersey: So it sounds to me like fall resets are going to be a bit of a bloodbath, huh?

[00:58:02] Dave Williams: The word is that some local craft are still finding their way onto the shelf in these fall resets. But based on what we've seen from the front half, just on a national distribution level, craft has felt the squeeze a bit more than most. And I don't know if that would change given what's, you know, what the trends we've seen so far are. And that's a case-by-case basis, of course, market-by-market, region-by-region, chain-by-chain. But just if I'm making general sweeping statements, yeah, it's craft has been getting the squeeze as of late.

[00:58:36] New Jersey: So is, I mean, is there a blind spot in channel strategy for craft brewers that they're maybe not aware of right now?

[00:58:43] Dave Williams: You know, I think it really just goes back to really the basics. It goes back to what I mentioned a second ago. If you've got good news, you need to be sharing it. You need to be having regular meetings with your distributors. And hopefully that that messaging trickles up to your retail partners and let them know, here's what we're doing. Here's what we've done. Here's what we envision. Here's what we're bringing to the table. And it's got to be a tactical ad or a tactical change. There's got to be a business purpose for it. And it always helps if you communicate the incrementality or the incremental value behind the decisions you're making. We want to run this promo because we think we can produce X more cases or X more dollars, depending who the audience is. Some like volume, some like dollars. You've got to come really prepared for reasons why you're making a shift or a compelling sell story behind what you've done, because memories are unfortunately getting short. So like I said, if you've got those success stories, you really want to be loud and clear about what you've done and what you've been doing.

[00:59:52] Williams and Brian: Yeah, that goes for the retailer for your distributor, everyone needs to be telling that same story and for them to tell it you have to be able to construct that. So it means that you have to have access to some data to be able to say how am I doing against the competitive set. Who am I most concerned about? What shelf space do I deserve more than somebody else? Because that retailer is used to more and more savvy presentations and people coming in, making their cases and exactly what Dave was saying, showing them what this simple decision means as far as number of cases and number of dollars going through the store. So when you talk about a blind spot, it may be a little bit of a blind spot, but it's definitely a big opportunity on the local side is now that you're playing in this national accounts chain game, you have to be able to speak the language you have to come to come to these meetings prepared and not just say hey this is how good I'm doing in my tap room, it has to be able to forecast into what that retailer is trying to accomplish and what is going on in that market and how you play a leadership role in that, not necessarily just following along and saying, hey, I know this style is hot. I have one of these, you need it. There needs to be more to your story than that.

[01:01:06] Justin Fonte: And those suppliers should be sharing their story to adjust Zoe and me. That'll help it get in front of not only retailers, the wholesalers and folks like you guys.

[01:01:16] Dave Williams: 100%. I fully support having regular conversations with you and the team. We always enjoy it, so I'm sure any other supplier out there would as well.

[01:01:26] Justin Fonte: Absolutely. We'll clip this part and put it on social media or something.

[01:01:33] New Jersey: So before we started recording, and I feel like that's sometimes like the best stuff happens, not that everything that we've talked about since we hit record has been great. But you guys mentioned how Q2 is do or die for craft brewers. And that's not really something I ever thought about. So it was really interesting to me. Can you just explain for the audience about why that is?

[01:01:50] Williams and Brian: Yeah, I don't know if it's necessarily do or die, but it's crucial time. I mean, this is where you're looking at six months worth of data. You need to be preparing your decks and your plans for 2023 because you have presentations coming up before Q3 closes and before you have a look at what that data is. You need to be very aware of what's going on within your portfolio, within the categories, within the styles, and whatever innovation or tweaks you're making within your portfolio and your brands are going to have. You're making your bets towards the end of this time period that we're in right now based off of six months of data or rolling 52, however you want to make it. This is when the planning really starts in earnest and you have to be locked in. You don't want to go into a presentation in the next six weeks, and then have to kind of back yourself back out of and say you know what, we're going in a completely different direction because distributors are making decisions. Retailers are making decisions based off of the data that you have right now. And this is when it's at its freshest. And this is when you have the time to take action on it and develop the supporting materials, the presentations, and your plans and goals and forecasts for next year. So may not be do or die, but this is really where the rubber meets the road as far as this time of year.

[01:03:07] New Jersey: I'm glad you put that in a much friendlier sense than I did. So craft beer overall is increased price by $1.20 per case on average, but some brands in the top 25 have gone up several times that amount. Does craft run the risk of outpricing its consumers?

[01:03:25] Dave Williams: Yeah, I think if you look at the data now, the average price per case for craft is now over $40. A lot of those brands that were sub 40 in years past have steadily crept up and you know most of the brands in craft now fall within that 40 to $49.99 average price to consumer price tier. And that's been the best trends within Kraft. They've shown the slowest rate of declines in that sweet spot. That's where a lot of the innovation has landed. That's where a lot of the big brands that have been having success have settled. So that's kind of our middle ground right now that I'm going to work up and down off of. The thing is, though, if you look at the trends at $50 a case or higher, They're slightly steeper than the craft average, but not increasingly so. So what that tells me is that there's not this precipice where you hit a price point and craft just falls off. I think you've got those loyal craft consumers that are going to remain craft consumers. We've said in the past that price appears to be less of a deterrent. for the craft shopper than some of the other segments. And I think for the loyal shoppers, I think that still holds true. It doesn't appear to be as much of a trigger as one might expect for those regular shoppers. However, when you go back to what I talked about earlier about those cross category drinkers, the ones that are willing to dabble within craft but also do shop outside, I think that's when you do have to start wondering if pricing has gotten to the point where Doing the math at the shelf for that trade down becomes a much more receptive idea than it might have been in years past. Again, not all, but certainly for some occasions. It's interesting that craft continues to climb, all segments continue to climb, that's true, but everyone's got that sensitivity to it. Some shoppers are just higher than others. But on the flip side, you see the trends of craft. They're declining at a pretty steep rate ahead of almost any other segment that's not hard seltzer. And that's another higher priced segment as well, at least compared to the category average. And then you see the trends for premium below premiums showing signs of life as of late. So you do have to wonder that it can't be a complete coincidence. There's gotta be some of that math being done. So I think it goes back to separating the loyalists versus those willing to substitute. And I think you are gonna see some trade down across the board.

[01:05:57] Williams and Brian: I think, again, kind of putting things into context as far as the craft segment, like 82% of craft is sold between $30 and $50, with almost half of it being in that $30 to $40 range, and then a third of it just above a third in that $40 to $49. So when you're talking pricing, that is the sweet spot. But it's also important to remember, as Dave was saying, when you're in that 30 to 39.99, then you're starting to get more into kind of the imports and the domestic premium range. So swapping out between what you may be getting a six pack of and then going to a 12 or a 15 pack because something else is on deal starts to become a little bit more in range. So very important to remember and kind of put those things into context like that.

[01:06:43] Bump Williams: So there's a lot in your guys' report that we could keep talking about for a while. But now that, you know, Beville companies have looked at how this first half the year has gone, is there one question that they should be asking themselves going forward?

[01:06:57] Dave Williams: Yes, I have a great one because it's one that we ask ourselves, you know, internally here all the time is, you know, what exactly does the consumer want in their drink today? We love doing a lot of survey work because you get to ask a lot of open ended questions and you get some pretty candid feedback. In addition to the more structured panel reports that we also like to dig into. But the big question is it's you know beverage alcohol companies in general need to understand who their consumer is. but they also should probably get a learning of who their competition's consumer is. Let's use a craft brewer. You want to know who's drinking your beer, but you also want to know not only who's drinking your fellow competitor's craft beer, but what else are they drinking at the same time? Because then it boils down to attributes within the beverages that they're looking for. How do they make decisions when they get to the shelf or if they're deciding to buy beer for a certain occasion? What attributes are most important? If it's simply taste and flavor, all right, we can hammer home the message that we've got a pretty good product. But where does price fall in that? Where does ABV fall in that? Where does package configuration format? What other attributes, health and wellness attributes out there? Non-ALK, organic, you're talking ingredients, there's a million different attributes that can be communicated, but which one should be communicated? Which message do you want to craft about either your product today, or where you're thinking about heading down the road? Quite simply, why aren't they drinking your brand right now? So understanding the consumer, what does my consumer want? That would be the question I think is of the utmost importance today, as well as years gone by.

[01:08:50] Williams and Brian: Yeah, that is absolutely the question and then taking that one step further and being able to translate that into your conversations with retailers and showing how that aligns with what your retailer is trying to accomplish or gaining knowledge for that retailer and how we would translate into their overall success story. It absolutely starts with that consumer and it's a lot of times like Dave was saying, not just your consumer, but where your consumer is also shopping as far as categories, segments, how they're making their decisions.

[01:09:23] New Jersey: Awesome. Well, we know it's been a bit of a bumpy road the first six months of the year, particularly for Kraft and Hard Seltzer. How do you anticipate retailers viewing those segments in the back half of this year and into next year? What's the sentiment out there in the world?

[01:09:37] Dave Williams: Yeah, I think they're both still vital components of the beer sets, right? I mean, you know, double digit dollar shares for both of those.

[01:09:46] SPEAKER_??: So

[01:09:47] Dave Williams: you don't want to shoot yourself in the foot by eliminating or really squeezing that part of your aisles out because there's still plenty of shoppers in Seltzer and Kraft that are vital. And in a lot of cases, the basket rings for those shoppers still rank toward the top, right? When you think about the average price or the average basket ring. So I would hope that nobody abandoned ship on things like that or does anything drastic. But I think it's really going to be more about OK, we gave them a ton of runway. Now we're going to have to start fine tuning things. And then you talk about efficiency. You know, how much are you generating for the space that you're occupying? You know, it really does, at the end of the day, boil down, not always to the math, but that's certainly a major component of it. And just, yeah, can these products that we're putting on the shelf increase our foot traffic? or draw traffic in from other stores into our stores. I think they're going to use it that way because it's still still a margin game. It's still a value game value in the sense of the amount of dollars they bring to the table. So I think it's just going to be more essential. just fine-tuned moving forward.

[01:10:56] Williams and Brian: What role does craft play in my assortment? In the past, it may have had more of a variety role or an innovation role, and now they're getting that from other segments. With that in mind, what role does craft play? Is it a price leader? Is it something that I'm going to get the highest ring? Is it bringing in a different consumer that may have a higher basket ring with other things in the cart than picking up something else? So understanding that is really what retailers are looking to be educated on and to make their decisions off of.

[01:11:29] New Jersey: Awesome. Well, Dave BK, always great to have you guys here. Thank you so much for taking the time. I love nerding out and be with you too. And I'll do this whenever. So hopefully we'll see you soon.

[01:11:40] Dave Williams: Thank you for having us. This is always fun as well. I couldn't could not agree more. Absolutely. Always a pleasure.

[01:11:46] New Jersey: And we'll see you guys out on the road probably soon.

[01:11:49] Dave Williams: I hope so. That'd be fun.

[01:11:50] New Jersey: Okay, well, that's our show. Thank you, Justin and Joey, for hanging and Dave and BK for being here. Thank you to our one-man audio team, Joe, for making this palatable to the ear. And thank you to everybody for listening. If you like what you heard, we'll be back next week with another episode like Rate Review. If you've got any questions, comments, suggestions, want to tell us a funny joke, Brewbound, no, no, no, podcast at Brewbound.com. There we go.