Brewbound Podcast: NBWA CEO Craig Purser Previews 2022 Legislative Conference and Priorities

[00:00:00] Jessica Infante: What's on the docket for the NBWA's annual Legislative Conference next month? CEO and President Craig Purser is here to discuss.

[00:00:19] Justin Kendall: Hello and welcome to the Brewbound podcast. My name is Justin Kendall and I am the editor of Brewbound and I am joined by Jessica Infante, the managing editor of Brewbound. Hello, Jess.

[00:00:29] Jessica Infante: Hi Justin, how are you?

[00:00:31] Justin Kendall: I'm fantastic.

[00:00:33] Jessica Infante: Are you?

[00:00:34] Justin Kendall: You know why? Oh, I know why you're fantastic, but you should tell us. The Iowa State Cyclones men's and women's basketball teams are going to the Sweet 16. And I could not be happier. I am thrilled for you. I am much happier than the four month old child that I live with who is screaming throughout the game. But I was also screaming, but much more happy screams from me.

[00:01:00] Jessica Infante: I mean, maybe she was excited for them.

[00:01:03] Justin Kendall: Maybe she was just pissed that she wasn't watching the game. That's possible.

[00:01:07] Jessica Infante: I wouldn't either.

[00:01:08] Justin Kendall: That child has been mostly a good luck charm. If I had the Cyclone fandom that she's getting, I would be ecstatic. Instead, I've had lots of bumps in the roads, lots of kicks to the groin, and I've survived. I'm sure everybody loves hearing about the Cyclones, but we've got to bring in, not a Cyclone, Zoe Licata. How you doing?

[00:01:35] Zoe Licata: I'm doing well. Not a Cyclone. Can't say that Emerson is anywhere near March Madness.

[00:01:41] Justin Kendall: We'll accept you. Hop on the bandwagon while you can, because we're going to the Sweet Sixteen, hopefully the Elite Eight, and then the Final Four, but we'll see.

[00:01:52] Zoe Licata: I'll be rooting for you.

[00:01:54] Justin Kendall: It's March. We're Cinderella.

[00:01:58] Jessica Infante: What seed were you guys?

[00:01:59] Justin Kendall: 11.

[00:01:59] Jessica Infante: 11. Wow. That's always like nebulous territory.

[00:02:04] Justin Kendall: Yeah. Scary times where you're like, are we going to make it? Are we on the bubble? We're not in the bubble. We're in.

[00:02:10] Jessica Infante: My team have been bubble dwellers for the past few years, but we're not even in the NIT.

[00:02:16] Justin Kendall: Sorry, Syracuse.

[00:02:17] Jessica Infante: Isn't there a New Jersey team that's been doing really, really well? I was just going to bring this up. So St. Peter's University Peacocks were a 15 seed upset Kentucky, and now they're on their way to the Sweet 16 as well and departed Souls Brewing in Jersey City. We're going to tie it back to beer. owned by Brian Kulbaki, who has been a guest on the videos that we were doing before Frontlines. But in the early days of the pandemic, Brian was gracious enough to tell us what's what and what was keeping him up at night. And Brian is renaming his light rail logger, which is the logger they sell in their taproom, named for the light rail that runs between Jersey City and Hoboken. They are renaming it Busted Bracket and they've got a cool label with a peacock, a very muscular peacock, shoving a basketball in the face of a cat. So if you're in and around Jersey City and you're interested in this beer, Departed Souls has it.

[00:03:16] Justin Kendall: I will say you out Cinderella'd me there with St. Peter's, but did you know Iowa State broke the last or busted the last brackets. Their victory in the first round busted all the remaining like perfect brackets. So I want to say, you know, the Peacocks and the Cyclones combined just wiping out brackets left and right.

[00:03:40] Jessica Infante: Kindred spirits.

[00:03:42] Justin Kendall: Very much so, I'm sure.

[00:03:43] Jessica Infante: I'd hope a Peacock is never stuck in a Cyclone.

[00:03:46] Justin Kendall: We would hope not. But what we are heading for, and this is a terrible transition, is we're heading for Minneapolis. And we're going to be there on Monday, May 2nd for BrewTalks. Yes, BrewTalks is back in person in Minneapolis. We're putting together the program now. BrewTalks will be presented by Dogfish Head and FinTech. Tickets are on sale right now. We don't have the venue. We're not ready to release that yet, but it could be really, really rad. I'm very excited about this venue. And we're going to take place from 1 to 4 p.m. Central Time on Monday, May 2nd. Tickets on sale. Get them at Brewbound.com. Some of the proceeds will go to the Minnesota Craft Brewers Guild. Very excited to give to another guild. We've given a lot to the Colorado Guild in recent years because that's the only place that we've been, but we're going to hit the road. We're going to help the Minnesota Craft Brewers Guild out a little bit, and we hope to see all of you there. We're working on that program, but we got some very exciting things going on that we'll tell you about very soon. With that, we'll get to some very exciting things that are actually happening on Brewbound.com.

[00:05:06] Zoe Licata: So I got to do a very exciting story last week, and I got to talk to the founder of Loma Brewing, Kevin Uchulis, who is also, of course, a Red Sox legend. It was a little bit of a fan moment talking to him about all that's going on over there. Loma Brewing in Los Gatos, California, They are starting a new or have started a big project on a brand new facility that is set to open in 20 end of 2023 that's going to be in Manteca, California, and it's going to be a giant both Production facility, tap room, huge outdoor space, potential to increase their production to 2,000 barrels in the first year it's open. Right now they're around 700 barrels, just under 700 barrels. So it's a really exciting project. Kevin is super stoked about it. It's been in the works for a long time. Before the pandemic they wanted it open. probably around this time. And it's, of course, had to be pushed back, but they're just trying to get out of Silicon Valley a little bit, get more of those blue collar workers, bring some beer to them and create a very cool craft beer scene over there in Manteca.

[00:06:20] Justin Kendall: Nice. Yeah, I'm very excited for Kevin. He's he's been a supporter of Brewbound for a while, and he's also got a new gig.

[00:06:29] Zoe Licata: Yeah, he just announced that he will be doing 50 games for Nesson as a color analyst for Red Sox games this season. Just started last week for some of the preseason games and he did pretty good. I've seen some good reception for him. I thought it was really well done. Also potentially could mean that Loma could be coming to Massachusetts sooner rather than later because he will be over here more. He said he's really trying to get some connections to bring Loma beer to Red Sox fans. So he's just trying to figure out how to do it in a way that doesn't take away from Loma's brand, just trying to expand too quickly, do it in the right way, but possibly in the future.

[00:07:10] Justin Kendall: And also in the news is another California craft brewer, and that's Stone and the ongoing lawsuit with Molson Coors. Bianca Bruno has been doing a fantastic job of covering that case for Courthouse News Service, and she's going to be a guest on this program in the coming weeks. We're going to talk about the lawsuit and all the shakeout from that, which hopefully will have a verdict sooner or later and we'll probably have our friend Brandon Palfreyman who you heard last week back to discuss the results but some jaw-dropping reporting going on here and that coming from the testimony with Stone CEO Maria Stipp. It was revealed that Stone owes its investor VMG Hell House $464 million, and there is a June 2023 repayment coming up. So the clock is ticking there, although Stipp testified that BMG and Hill House have been a little lenient on getting that repaid. So there's no real timetable, I believe she said.

[00:08:18] Jessica Infante: Yeah she said they've been flexible but holy smokes that number is crazy town. So Maria during her testimony their lawyer had asked have you considered having to do things like sell the company and she said yes. So I don't know that that's necessarily a secret. I feel like people have kind of talked about them potentially being a target for a long time.

[00:08:45] Justin Kendall: There have been whispers about what they're going to do because this is all coming from the investment that VMG made. It started with a $90 million investment and that has ballooned to this $464 million figure, and I guess everyone sort of wondered what they're going to do. And so there's been whispers, you know, is Stone for sale? There have been whispers, is Stone distributing for sale? They've shot those down. And here we are with more of this sort of playing out in front of a jury of nine. And we're all a popcorn gif right now. Just Big E from WWE's New Day just shoveling the popcorn in as these news reports come. That's how I am with it. But, you know, That's me.

[00:09:30] Jessica Infante: You just said GIF. You said GIF, so I think that means I now win our GIF-GIF debate.

[00:09:34] Justin Kendall: All right, sure. No further commentary on the matter. I give up. And get well soon, Biggie.

[00:09:40] Jessica Infante: The thing about, I mean, stone is that they are stone brewing and stone distributing. And you got to think about who wants to buy those things together. Like who could afford at this massive dollar amount to buy both of them? Because there are people with big pockets that are looking to make big brewery acquisitions, but do they need distributing? No. And there are also people with big pockets to make distributing acquisitions. And do they need the brewing side? No. Where do we go from here? Who knows? I mean, I feel like the common wisdom would be to split them up, but I've also heard that that's not really on the table for them. They don't want to do that.

[00:10:16] Justin Kendall: That's a hard dollar figure to repay, especially when part of your defense is that sales of your top beer have plummeted and overall business has declined 20% since 2017. But nobody wants to see anybody struggle like this. And I don't know what the answers are for them. So I guess we'll see how this lawsuit plays out.

[00:10:40] Jessica Infante: And all the snaps to Bianca for doing an awesome job keeping this informed. And I'm sure she doesn't usually cover the beer industry this in depth, but she's doing a great job. Bianca had a story that went up on Friday and an expert witness that Stone had put on the stand, a marketing researcher, said that Stone should recover, quote, at least the $42 million that then Miller Corp spent to rebrand Keystone Light. They brought on a University of Washington professor, Robert Palmatier. He said, quote, it would take at least 100% of what Keystone spent to rebuild their brand, meaning Stone, back to where it was, but that would not account for lost profits or revenues.

[00:11:20] Justin Kendall: We'll see if the jury agrees. And other news of breweries that are for sale, and this one's definitely for sale, that's Milwaukee Brewing Company. And no sale price is up, but they're being offered as a turnkey operation by New Mill Capital. Milwaukee Brewing has 75,000 barrels of capacity. They have a license to produce up to 200,000 barrels of capacity. And this is a production facility that is located near First Serve Arena in the part of Milwaukee that Iowa State now owns after beating Wisconsin at First Serve Arena. This is a big, big production facility up for sale. And they're also offering a 15 barrel microbrewery that is on the riverfront. So they have two locations. They're being offered either together or separately.

[00:12:19] Jessica Infante: What do they make? Is that a dumb question?

[00:12:22] Justin Kendall: No, they make everything. The brochure said that they're capable of making beer, hard cider, hard seltzer, RTD, canned cocktails, all of the above. I am unfamiliar with Milwaukee Brewing Company's portfolio. And you could probably hear me typing in the background as I try and ferret out what they produce.

[00:12:44] Jessica Infante: Does it include the best? No, right?

[00:12:47] Justin Kendall: This is like- No. Okay. No, no, no, no.

[00:12:50] Jessica Infante: What about a contract?

[00:12:52] Justin Kendall: They do do contract brewing according to the brochure. They also have distribution in the market, but I think I looked it up in the New Brewer and I think they said that they produced around 5,000 barrels.

[00:13:05] Jessica Infante: Well, best of luck to them in the sale.

[00:13:07] Justin Kendall: Yes, best of luck to them in their sale. Anything else you guys want to talk about?

[00:13:13] Jessica Infante: No, it's really nice to see both of you on Friday.

[00:13:16] Justin Kendall: Yeah, it was nice to get rid of some beer.

[00:13:18] Jessica Infante: You're welcome and thank you.

[00:13:20] Justin Kendall: What's the verdict on some of the beers that I gave you? Anything?

[00:13:24] Jessica Infante: The single speed like Mexican donut beer. Delicious.

[00:13:28] Justin Kendall: Yeah, I had some single speed as well over the weekend there. Hellis and there. It's like a passion fruit guava goes. I believe or sour like I can't remember. I'm sorry, but it's been a long weekend, but it was a good beer. Also had one of the BKS beers that a friend shipped to me. We won't say how he shipped it because. We'll say he shipped it to me and it made it here. Had that and probably another beer that had the word juicy in it.

[00:14:02] Jessica Infante: Nice. Well, I'm excited to get into the rest of those.

[00:14:04] Justin Kendall: That's all they make anymore, right?

[00:14:06] Jessica Infante: It's all the kids want.

[00:14:07] Justin Kendall: Yeah.

[00:14:08] Jessica Infante: So what'd you drink this weekend?

[00:14:10] Zoe Licata: I tried some of the June Shine can cocktails that I also got from Justin, the tequila margarita one and the passion fruit vodka soda. Compared to some of the other can cocktails that I've had, it didn't have the weird canny taste, a lot more fruit forward. I actually enjoyed them. But you got to be careful because they are still like 10% ABV. Yeah.

[00:14:36] Justin Kendall: Yeah. Those are what? Two shots per can?

[00:14:39] SPEAKER_??: Yeah.

[00:14:39] Zoe Licata: their zippers yeah did not have more than like one or two a day but mix those in with some of the the truly margarita pack which also made its way for our saint patrick's day celebrations excellent and so darties were had Darties or had a lot of fun games. Lawrence or Reverend Lawrence drink athletic for the party. He decided to forego the alcohol. Really liked it. Felt included. He said it was like the best thing. So shout out to them. Came through for him this weekend.

[00:15:14] Justin Kendall: Which athletic?

[00:15:15] Zoe Licata: Which one is it? It's like a golden ale or something.

[00:15:19] Justin Kendall: Okay. Upside down?

[00:15:21] Zoe Licata: Upside down, yes. He wants to try the new light beer too. He said that might be a good mix in with the other beers this summer. It is really good.

[00:15:30] Justin Kendall: You're fixing to make another trip over here for a beer run. So you're welcome to stop over and I'll load you up.

[00:15:39] Jessica Infante: Sounds good. I picked up a 12 pack of their flagship IPA, whose name is escaping me right now. Run wild.

[00:15:46] Zoe Licata: Run wild.

[00:15:47] Jessica Infante: Yeah. Sorry. Yeah. On Friday. Well, so on Friday, Zoe, you and I had lunch with Don and Joe from three tier. Then I stopped by Justin's and met Sophie. She's so cute. And then I went Amanda Huang out with my husband's coworkers who were supposed to be watching basketball, but were hanging out outside because it was one of the first nice days, but I did all of this driving. So I was like, well, let me grab some athletics so I can hang and feel like I'm having beers with everybody else. And it was great. I just felt like I was hanging with everybody. Yeah.

[00:16:15] Justin Kendall: With that, we've got a featured interview. So let's get to Craig Purser.

[00:16:20] Jessica Infante: Okay, and here today for our featured interview on this week's Brewbound podcast is our esteemed guest, Craig Purser, the President and CEO of the National Beer Wholesalers Association. Craig, what's up? How are you?

[00:16:33] Craig Purser: It's great to see you guys. It's great to see you as we celebrate March Madness, which people sometimes forget is a beer holiday. And we're especially glad to be doing it because we're having real basketball with real people in person. And that is such a welcome relief from having a cancellation two years ago, and then one with lots of restrictions last year. It's just so wonderful to see beer-centric events and people coming back together.

[00:17:00] Jessica Infante: On the topic of this conversation that we've just started having right before we started recording, I'm gonna throw an audible to my colleagues here and go to the bottom of the question list and ask you, NCAA tournament, definitely a beer-centric holiday. So is St. Patrick's Day. So St. Patrick's Day is in the rear view mirror. We're halfway through the tournament. These are huge on-premise occasions for the beer industry. What are you hearing from members about the state of draft business at bars and restaurants across the country?

[00:17:25] Craig Purser: One word, improving, and that's against the backdrop of, again, so many fits and starts, so much difficulty for our on-premise partners, a true lack of consistency. I mean, if we just go to the recent past, a holiday season that was disrupted by the Omicron variant, You know, if it didn't close places again, it's definitely kept them home. We had a rough start to the year. January and February were both very soft, but the days are getting longer. Spring is in the air. We are feeling very, very optimistic about this return to a new order, a new regular order, and a return to the on-premise. Having lots and lots of success helping arm beer distributors with selling beer against some of the other occasions and categories. And our Beer First movement has been central to that. It's just been terrific. The distributors that are utilizing those beer-centric sales tools all are reporting really good results.

[00:18:28] Justin Kendall: That chart that Lester posted on LinkedIn was just, it was kind of jaw-dropping. What, 105 weeks since the beer industry last saw draft beer volumes, its share hit 8%. That's a wild number to see. And it just shows that we're starting to see that rebound in the on-premise.

[00:18:51] Craig Purser: Absolutely right. I mean, the numbers don't lie. And if we were having this conversation two years ago, and we were going to say what the industry would be facing, what we would all be experiencing over the next 24 months, I think a lot of people would have run for the exit doors. But the resilience is a huge part of the story. It doesn't discount the terrible disruption and difficulty that the on-premises faced. but the industry at large and the industry as a whole has, you know, I would sum up the on-premise mark in one word is improving. I would say going backwards, if I were to describe the whole industry with one word, it would be resilient.

[00:19:31] Justin Kendall: Let's get to the reason you're here, and that's the NBWA's Legislative Conference is coming up April 3rd through the 6th. You guys are going to hit the hill. You're also going to have a lot of discussions on what your priorities are. But give us a little sneak peek at, you know, what those legislative priorities are this year.

[00:19:50] Craig Purser: First priority really is kind of a reintroduction of the industry to these members of Congress. I mean, we have not had an in-person fly-in since April of 2019. And so we have an entire class of members of Congress that were elected in 2020 that maybe they've had a warehouse visit or maybe they've had a Zoom meeting with their beer distributor constituents, but they haven't had an in-person Legislative Conference. So getting back into the swing of these things is really, really important. We're thrilled with, we've got nearly 500 folks that are coming, which is a great success for any fly-in. We've always been one of the biggest in D.C., but we're very happy about that. in no particular order, kind of introducing the members of Congress to what our members do is something that some people would say that our members don't need any introduction, but they really do. They need to understand, members of Congress need to understand what our folks do, what the system does. The whole notion of a three-tiered independent distribution system has been wildly successful for an industry that's watched the number of brewers proliferate from fewer than 50 in 1983 to more than 11,000 today. That's a rocking success story. So being able to tell that story and talk about what distributors do as it relates to providing choice and variety and ensuring that thirsty consumers have a sense of normalcy in what's been a very abnormal time. We're also going to talk about the whole notion of workforce because one of the things that was probably most unexpected from the last two years has been the disruption to service industry employees. You know, this past summer for the first time, we, in addition to having a shortage of CDL drivers, and we'll be talking about a legislative solution that we think can grow the CDL pool by getting younger drivers trained and into the CDL workforce. But this summer, we had a shortage of warehouse personnel, of sales supervisors, of merchandisers. In many marketplaces, we couldn't find people to load beer trucks for $20 to $25 an hour. I've been working in this industry for a long time, and we've never seen something like that. So we'll be talking about workforce and transportation policies, kind of setting the predicate as to, are there ways that we can look at some of these laws and regulation where we can drive greater efficiencies for employers? One of the things I'm most proud of is over the last two years, beer distributors, by and large, kept their employees employed. even though they saw an account-based reduction, even though they saw the on-premise closed, they kept those workers getting paid feeding their families. We also are going to be talking about something that's kind of an emerging issue, which is the necessity of understanding the differentiation of beer, wine, and spirits. It's kind of interesting. We're watching the distilled spirits industry swing for the fences as they talk about some ambitious kind of new policy pursuits, including lower excise taxes on distilled spirits-based products. The entire licensed beverage industry at the manufacturer level got a tax cut that was made permanent during 2020. Congress has spoken to this issue. We think it's very important that policymakers understand that the origin of the alcohol matters. Jess was with me for a regulator conference last week and the National Alcohol Beverage Control Association, which is the group of states where the state serves as the distributor, in many cases, the retailer for distilled spirits. They hosted a panel and it was called It's All About the Base. And I think they put it perfectly when you talk about the fact that beer, wine, and spirits are taxed differently today, and they've been taxed differently since colonial days. And increasingly, they're taxed differently in other jurisdictions all over the globe.

[00:24:00] Zoe Licata: Recently, we saw the Treasury Department's report on state competition, and they touched on spirits a lot in that too, and tax equality. There's been different reactions to that report, and you're going to be seeing some people who are going to be, this is what they know about the beer industry before your guys' conference. What are your understandings or opinions of what was found in that?

[00:24:22] Craig Purser: Well, it's interesting because, you know, when we look at the competition report, we characterized it first is in is inaccurate because there are a number of things that they missed. I mean, right off the bat at the initial part of the of the paper. It's a 64 page paper. they don't even get the number of breweries in the United States correct. It was interesting. It's like this, well, we know that the report was written by a committee, so there was a lot of inaccuracies as it relates to the paper. We know that it was incomplete. There were a lot of things that different stakeholders brought forward that did not get attention. And then we also know that it was inconclusive. In several of these parts of the paper, they very appropriately point out that some of these policy issues are not the federal government's business they're actually best left to the states to decide. So we characterize it as as inconclusive but but more than what we have said about the paper is is what others have said about the paper. You know the beer Institute had very strong language talking about the competition that exists in the industry and and we happen to agree with them we don't agree with them on everything, but we agree with them when they talk about how competitive the industry is America's beverage licensees. which is the retail organization that represents both on and off premise retailers, had an awful lot to say, once again, about some of the inconsistencies and challenges in the paper. One of the things that was ignored or maybe not given full coverage was the fact that so many craft brewers have both distribution and retail privileges. They enjoy differential treatment that other segments of the industry doesn't appreciate or maybe doesn't get to participate in. We also saw some of the antitrust, some of the folks that are critics in that arena also opine about the fact that this was just a very kind of unusual and incomplete paper. So I would call it widely panned. I think there've been a lot of folks that have criticized it, but it's certainly gonna be something that we'll be talking about. I think nobody would disagree with the fact that the industry is competitive. We've watched this growth in the number of participants. We know there are certain constituencies that don't like different laws or don't like different regulations, and that's why we have a robust debate currently occurring in all 50 state legislatures about these very issues.

[00:26:52] Jessica Infante: Craig, you just made up a great point about how there are so many more participants in the industry today, but in one area that there may be fewer, and we talk about this a lot, but we talk frequently about how middle-tier consolidation affects craft brewers' routes to market, but how has the elevated activity of the last few years affected your members, and what do they make of the fact that they have fewer peers than they used to?

[00:27:14] Craig Purser: In some cases, when you're talking about scalable or you're talking about legacy brand distributors, that's accurate. Certainly with the bigger brand families, there are fewer distributors. But when you add in the fact that in most states, those brewers have the ability to self-distribute, we're watching a whole host of new distributors being born. We're watching two guys in a truck type models be developed. And when I say guys, I mean people, but two humans in a truck that absolutely are figuring We're figuring out a way to go to market. We're finding non-traditional routes to market. We're watching other beverage distributors, and certainly we'll talk about that. One of them is a very, very large soft drink company, get into beverage distribution. So there are a lot of market forces at work that are taking place. One of the things that's been a part of this all-in-government review that Treasury Department of Justice and the FTC and the alcohol industry's part treasury, but those two primary regulators of antitrust and of competition, part of what they've opined is greater scrutiny for mergers. And there's a piece of policy that's out there. I think it was the senior senator from Massachusetts, Senator Warren, wants to see no mergers of companies larger than $5 billion. Certainly these kinds of policy issues are going to get consideration as we look at everything as it relates to consolidation. But I think there are more choices and there are more routes to market than there have ever been, especially when you look at whether it's self-distribution to retail or it's direct to consumer sales, particularly at the premise. I made mention of the distilled spirits industry's ambitions. They've been extremely outspoken in their interest in going direct to consumer. And they've done this against a backdrop of incredible growth in their segment of the industry. If there's a segment that won COVID, it's the hard liquor industry. Absolutely. increased sales, increased volume. But I think that the policies that they are advocating for to address that, such as sending hard liquor through the United States Postal Service, are outrageous. And that's another issue we'll be talking about at our Legislative Conference next month.

[00:29:40] Jessica Infante: We just talked a little bit about non-ALK players crossing over. And during the convention in Vegas, you told members that their operations in cold box access are the envy of the entire beverage industry, both ALK and non-ALK. Setting aside the spirits makers and their sky-high ambitions for right now, we've seen the crossover of traditional non-ALK players into the Bev-ALK space. It's only ramped up since we were together in October. What do you think products like Fresca Mixed and Simply Spike mean for your members?

[00:30:09] Craig Purser: how these folks choose to go to market does matter. And I think that's interesting because, you know, Coke is a Fresca product. They've announced that as kind of their second rollout following what I think has been wildly successful in their combination with Molson Coors of the Topo Chico seltzer. You know, they're announcing a Fresca product. Coca-Cola has expressed an interest in using the existing alcohol distribution network to go to market. You know, they happen to have, they've refranchised their distribution over the last 10 years to where now over 80% of their volume is distributed by independent Coke bottlers or Coke distributors. PepsiCola is taking a different act. They currently own nearly 80% of their distribution volume. And when they announced a product, a line extension, an alcohol beverage extension for an existing product, they decided that they wanted to handle the distribution. Of course, they formed Blue Cloud. And so kind of two very different ways to go to market. Because Blue Cloud has now been in the trade, I think, for a couple of weeks. We are seeing reports all over the place. I know that they've been in Florida. I know they're in Iowa. They're in a couple of other states. But it's really interesting because we're seeing kind of a lack of understanding either at distribution or at retail or a combination that's extremely troubling. We've seen pictures of hard Mountain Dew in between the salty snacks and the candy. And I think that's just. because the alcohol industry, beer more specific, has had a long time, a long road to hoe of experience of ensuring that beer products are kept with beer products and that they are clearly labeled and marked. And I'm not saying that the package isn't marked. I'm just saying, when I see a photograph from the trade of a store in Iowa that has got hard Mountain Dew between Frito-Lay stacks And candy, I think that's a big, big whiff. And that's the kind of thing that for from an alcohol industry standpoint, we cannot have. There's a sensitivity. And we talked about this at convention, Jess, you alluded to it. I mean, I said this in my speech, so it's not anything new. But you know, it's different. Topo Chico was, you know, I think A lot of people, I will claim guilty, were mixing Topo Chico with tequila. That's part of a great experience of a cocktail. Topo Chico didn't have that much awareness, certainly not the kind of brand awareness like an iconic product like Mountain Dew. And when I see these kinds of mistakes in the trade, I really hope that they're moving quickly to correct those.

[00:33:02] Justin Kendall: Is that an issue with Blue Cloud's merchandisers or is that grocery employees? Where does the responsibility fall there?

[00:33:10] Craig Purser: I don't know, Justin. I don't have any idea. It's just a reminder that when you have this brand that's recognized as a non-ALC product, Everybody needs to be on point. Everybody's got to be on guard. Everybody's got to understand what this is. I mean, you know, 20 years ago, we watched the expansion of the beer category with the introduction of flavored malt beverages. Many of those products actually were spirits brands. So there was an awareness that they were alcohol beverages. This is just different. And I'm not passing judgment on that. I am loudly and clearly saying we must ensure when we're going to market with these products that we do so in a responsible way.

[00:33:54] Justin Kendall: Have you had discussions with Blue Cloud? And if so, what have those discussions really centered around?

[00:34:01] Craig Purser: We have, we've had several discussions with them and I think they're trying to find their way. It's been good to watch them kind of evolve in understanding the landscape and the regulatory system better. And I think be more full-throated and more clear in how they're trying to go to market. We were told, as we understand it, as they shared with us, their plans were to segregate their warehouse, their plans are to segregate their delivery. those were not supposed to be coming in on Pepsi trucks per Blue Cloud or per our conversation with them. But I don't know, you know, and this is, it's early in the process. I know that some of the product had a good introduction, kind of the responses varied, but that's what you expect with a new product. Some people like it, some people don't. But when I saw that picture, that definitely, that sounded an alarm bell to me to ensure that we're all behaving responsibly. Had they inquired about membership Yeah, it's interesting because we did have that discussion with them. And, you know, I think they could be an associate member of ours. But interestingly, we don't have a membership category for brewery branches, we have a requirement to be a distributor member of NBWA, you've got to be an independent distributor. Now, obviously, you can distribute larger brands, but the ownership of that distribution asset is an individual. It's somebody that's at risk in the marketplace or an entity that is dedicated to being a distributor. And so they said, well, we'd like to join in as a wholesaler, as a distributor. And I said, well, we don't let Anheuser-Busch or Molson Coors join as a distributor. So currently, we don't have a membership category for you beyond something in the associate member arena. But it's interesting because they're not the brewer. They're not the owner of the brand. They're not the manufacturer. Boston Beer is. Boston Beer is an associate member. So I'm sure we'll work that out if they continue to keep the product structured this way. Who knows? But we'll always take the meeting and always take the phone call.

[00:36:07] Justin Kendall: Well, it sounds like their ambitions are even higher because they've talked about in earnings calls taking on brands outside of the hard Mountain Dew or whatever, you know, Pepsi products are being produced.

[00:36:21] Craig Purser: that's gonna be probably driven somewhat by state-by-state decisions, because in a number of states, large brewers are not allowed to be a distributor. And that is straight up around the issue of market access, but more importantly, competition. And so the idea is we don't want these big players in places that have so much marketplace influence that they get to decide who's winners and losers. One of the additional issues, I think, for Pepsi is the fact that they are a big payer for shelf space in the non-alcohol and in the food category. This is footnoted in annual reports for big retailers like Walmart that recognize the influence that a big company like Pepsi-Cola, PepsiCo has in food and beverage. Beverages is iconic from Pepsi to Mountain Dew, but other products, bottled water, Tropicana, Gatorade, Quaker Oats, Salty Snacks, Frito, Dorito, all of these iconic brands, they're just a massive player. So kind of squaring that circle, I think, is going to be real important.

[00:37:37] Jessica Infante: this product is just breaking so many norms. It's just such, you know, I think this is really going to be the first one through the wall. But I remember, you know, we would always design beer campaigns that would help secure cross-merchandising and placements by like the steak section or like other parts of the store. And you know, when your product is a beer name, that's been a beer name since the eighties, that's easy to do. But when your product is named for a soda that's been around forever and is popular, with people of all ages, it's things are going to get a little wild.

[00:38:11] Craig Purser: I think we're just watching this begin to unfold. But, you know, I think regulators have got to take note. I think policymakers have to take note. Certainly the marketplace is taking note and we'll see. But in the meantime, that's why they call it work. There's plenty to go around.

[00:38:27] Justin Kendall: One of the issues that keeps coming up for your members are forced terminations. And we've seen it happen a lot in California. We've seen it happen in some other markets already. Is that going to be a focus of the Legislative Conference? Is there going to be a greater push at a state level for franchise reform, franchise laws? Like, where do you see this going?

[00:38:53] Craig Purser: Well, for those of your readers that are interested in franchise reform, terminations without cause do nothing but reinforce the validity of those laws. I mean, when you have a longtime partner that has continued to meet their number and do what you need them to do in the marketplace that has grown your brand, in many of these cases, for 20 or 30 years, and you summarily terminate them without cause, That just absolutely sends everybody else in the other 49 states a message of these laws really do matter. Because, you know, it's kind of like a politician who says, I'm with you till the end. And then the phone rings and they say, this is the end. And I think the same is true for these relationships. So make no mistake about it, this is an issue. When it comes to franchise laws, they're a state issue. We don't have a national franchise law. So we are not going to talk about that on Capitol Hill. We are going to talk about the fact that states need to continue to be the primary regulator of this industry because it's worked so well for so many. And I think that's, again, kind of my warning when folks want to, you know, let's go take on all this. Let's go charge the hill and, you know, talk about making this competition report, once again, that's inaccurate and incomplete and inconclusive, a reality. All of these are debates and discussions that we're going to have, but we got to look at the facts and the facts are this is a doggone competitive industry.

[00:40:27] Jessica Infante: Speaking about how things vary at the state level, beer distributors can carry spirits-based RTDs in most states. So is it accurate to say that the rise of these higher margin products is likely a boon for most members? Would that be correct?

[00:40:42] Craig Purser: Well, I think it's going to depend on where the state is. you know, it sometimes drives national manufacturers crazy to have to play in 50 different markets. But again, I think that the facts say that that's part of what reinforces the competition. You don't get any one player to be able to run the tables on everybody. And so it's clunky and it's frustrating to some, but it's actually competitive. But Make no mistake about it, ready to drink cocktails, we're not against the product. As a matter of fact, there is a place for a portable cocktail to go in many, many markets. And being able to enjoy that product in the right setting is awesome. And so there's absolutely, I think, a place for some of these products. What we're seeing, once again, is the distilled spirits industry seeking a lower tax rate and they've said it at the state level, but they're communicating with Capitol Hill about this as one of their top legislative priorities. So we've got an obligation to tell the rest of the story when it comes to why these products are different. But back to your point, Jess, it depends because a lot of states have an existing provision in their code where lower proof spirits has an existing rate that's lower. And that's part of what you've got to respect when you look at how to take these products to market.

[00:42:07] Zoe Licata: If these spirit-based RTDs expanded their market access, what would that mean for NBWA members?

[00:42:15] Craig Purser: I think it depends. I mean, I think we've, we've watched them expand their, their access or expand their market share for sure. And we've been pretty bold with, with saying what they want is they want on, you know, they want in our members truck and they want in our members cold box and they want in the channels where beer is. And so we've, you know, we've been pretty transparent about ensuring that our members are considering that. And the place where they have that discussion is in their state with their state's regulators to determine what that looks like. So it's like so many answers, it kind of depends.

[00:42:49] Jessica Infante: I mean, it's something that we're not really gonna see a clean resolution to anytime soon, I'm sure, especially because the tax issue keeps coming up and then not passing in some states. But I wanna go to something that Craig, you touched on in the beginning, but you and I had a nice conversation about this months ago about the truck driver shortage. And, well, we didn't have a nice conversation about the truck driver shortage. But we talked a lot about trade education and training for young people as they enter the workforce and just opening up options. Now, I know this was something that was high on the organization's list recently, but is the truck driver shortage still a concern? And is the NBWA still pushing for a few legislative changes that could potentially ease it?

[00:43:28] Craig Purser: Absolutely, absolutely. You know the CDL driver shortage was between 50 and 60,000 drivers before March of 2020. And so, as we've watched the, you know, some call it the great resignation I'm not sure that that's true. We watched a combination of some demographic changes. We had fewer people that were entering the workforce based just on birth rates from 22 years earlier. We've watched just an expansion in trucking period, whether it's everything from the expansion of the big box or the expansion of the digital folks, the Amazon phenomenon. We've watched more trucking kind of take place and be needed. We've watched demographics. We've also watched a shift in immigration policy. We are not populating the nation with new Americans or guest workers, all of which feed into these different piles of population. And there's a certain constituency of folks entering the workforce that don't want to drive a 53-foot truck. So our consideration and our policy that we first started supporting nearly four years ago, three years ago, was a change to the commercial driver's license to allow 18-year-olds to enter that driver pool. There is a test that's been ongoing of a pilot program. We should be having the results of that within the year. These things take time, but we think Getting the pool more populated with more drivers will help everybody. We're also watching our members make changes to their delivery route. We're watching some folks experiment with shorter or lighter vehicles where you don't need to have a commercial driver's license or you can get by with a different classification. We're also looking at other technology and other safety policy proposals where we may be able to make a change to the size or weight limitation. Those are all issues that we're looking at as we're trying to address this kind of phenomenon that was bad before but definitely has gotten worse in the last two years.

[00:45:33] Justin Kendall: Well, this has been great, Craig. One last question for you. We talk about convergence. We talk about, you know, the soda giants getting into beer. We talk about the energy drink giants getting into beer, alcohol, whatever, you know, variety of products, the mixture of spirits and beer, everything's converging, blurring. So in the next three to five years, What do you expect to be on beer distributors trucks? And I guess this probably fits in with your American beer and beverage distributors name change.

[00:46:09] Craig Purser: Yeah, it's a great point. And that shift from America's beer distributors to America's beer and beverage distributors, very deliberate. We didn't take it lightly. We were being very strategic because I do think, and I said this at the convention in the fall and I still believe it to be true, our members demonstrated over the last two years that they get through. They get on store shelves. they built brands against a backdrop of a closure of the on-premise segment, which people never thought could happen. New products, that means line extensions, that means new alcohol and non-alcohol products. So to answer your question, Justin, I think the next five years are going to continue to see that kind of proliferation, that kind of expansion of the beverage industry and of what our folks are doing at distribution. I do think I'm still bullish on beer. I said this just this fall, beer pays the bills, beer gets it done. And I think that's going to continue to be essential and central to what we do. But as we've watched the beer category expand, and I'm talking seltzers, I think you can include ciders in that. And as we're looking to add other products that are looking for a better way to go to market, that may include wines and spirits. I think we're going to see that. I think you're going to see a continuation of ready to drink products, especially those that are good, that have good equity, that have good qualities. But I also think you're going to see folks that look at the beer distribution industry and say, you know, maybe that's where I want to be. Maybe I would be happier with a change to that distribution. I also think non-alcohol products are going to continue to proliferate. I think the better for you category is going to continue to grow. I'm very, very, like I said, I'm bullish on beer, but I'm bullish on beverage.

[00:48:04] Jessica Infante: Well, Craig, thank you so much for joining us and thank you guys for inviting me to the office last week so I didn't have to kill an hour at the airport. That was great.

[00:48:11] Craig Purser: We gotta get the rest of the team the next time you guys are in DC. Come with us. This was a Tuesday afternoon. If I remember Jess and I think we we need to make it into the week. We need to have a beer.

[00:48:23] Jessica Infante: We do need to have beers in the 70s. It was perfect.

[00:48:25] Craig Purser: All right. Cheers, you guys.

[00:48:27] Jessica Infante: Thanks. Thanks, Greg.

[00:48:29] Justin Kendall: Thanks, Greg. With that, we'll say that's our show for this week. Thanks to our one man audio team, Joe. Thanks to Jess and Zoe. And thanks to all of you for listening. We'll be back next week.