Brewbound Podcast: Teamsters and A-B’s Tentative Deal, Boston Beer’s CEO Swap, Hard MTN Dew Going National, Blue Cloud Pivoting

[00:00:00] Justin Kendall: 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. Welcome to a special breaking news edition of the Brewbound podcast. I'm Justin Kendall.

[00:00:44] Justin Fonte: I'm Justin Fonte. And I'm Zoe Licata.

[00:00:48] Justin Kendall: And we have a lot of news to cover. And we didn't want it to get too old before next week. So here we are with a special breaking news edition of the podcast. And that's because Wednesday night, the Teamsters and Anheuser-Busch have reached a tentative agreement on a new five year contract.

[00:01:06] Jacqui Brugliera: Yeah, I think everybody was watching this to see what was going to happen. And now we mostly know contract still needs to be ratified. But what is included is a increase in wages, $4 per hour in the first year, $8 per hour over the life of the contract. That amounts to about a 23 percent raise according to the Teamsters. A big thing for the Teamsters was the the end of this tiered health care system in which some AB employees had better packages than others. So the tiers are gone and the Teamsters now say that all workers will have access to quote the same high quality Teamsters health care coverage. Union members are going to get a ratification bonus of $2,500 once this is ratified. They also have restored retirement benefits for both retired and active members. This deal is going to increase pension contributions and benefits and brings members maximum vacation accrual to eight paid weeks.

[00:02:06] Justin Kendall: This is a pretty big shift in tone from what we were hearing early Wednesday when we released our last podcast and we talked about, yeah, this strike appears to be eminent. And then hours later, six hours later, they've got a deal. So it looks like Anheuser-Busch came back to the table a little more willing to negotiate and When you see their U.S. numbers, which Zoe covered from their full year and Q4 earnings call, you can see why.

[00:02:38] Justin Fonte: Yeah, U.S. numbers were not great at all, but they are a global company, so their total numbers were pretty solid. And so they can afford to do things like raise some wages for people. But yeah, in the U.S., shipments down 12.7% for 2023 and depletions were down 11.9%. Revenue down nine and a half percent. We expected rough numbers for AB for 2023 with all that happened there. But then they also recorded their highest total revenue ever in 2023. If you include all their sales, $59.4 billion in 2023. From pre-pandemic days, that's still up 14%. So they're doing pretty well despite everything that's happening here.

[00:03:23] Jacqui Brugliera: Yeah, important to remember on AB is that their biggest brand in the US obviously had a real rough year, but they are a global company. So a lot of other markets for them to perform well in.

[00:03:37] Justin Fonte: And North America isn't even their biggest market, like not even close anymore. So they're, they're doing okay.

[00:03:44] Justin Kendall: Well, this contract will go to Teamsters members starting on Sunday. That's when the vote will start and it'll go through Tuesday, March 5th. So we should have the results of that very soon. The other big story, well, stories coming out. We're from Boston Beer and it starts with CEO Dave Berwick. He is retiring in April.

[00:04:06] Jacqui Brugliera: Yeah, Dave has been in the role since 2018. He's going to be replaced by Michael Spillane, who is a member of Boston Beer's board of directors, which is a pretty familiar pipeline as that's exactly, you know, how Dave got his current job. So Dave had been on the board since 2005. Michael joined the board in 2016. He's also the lead director. So Michael, very familiar with the company will be stepping in his day job when he's not, you know, board directing is at Nike. And he's he's done a lot at Nike. Another company that I think we'd all do well to remember is not Justin Fonte brand, but many. And he had led their Umbro business, which little mid 90s soccer player Jess would be very excited about.

[00:04:50] Justin Kendall: And as you reported, Jess, Dave's tenure included several things, including the transformation of Twisted Tea and Truly Hard Seltzer into billion-dollar brands, the acquisition of Dogfish Head, and the formation of partnerships with PepsiCo and Beam Centauri. It's been an up-and-down road, though, for Dave and his tenure there.

[00:05:12] Jacqui Brugliera: Dave oversaw Boston Beer's transformation into a beverage company, which they're never gonna change their name. They will always be the Boston Beer Company. But really over Dave's time is where we saw, you know, Truly and Twisted Tea really come into the spotlight. And that's, you know, I ran the numbers on some Cercana data about them just to figure out, you know, how much of their scan business those brands account for. And in Cercana off-premise scan data, which again is not complete picture of all of their business, truly in Twisted Tea combined to make 80% of all the dollars that Boston Beer sold in grocery stores, multi-allet, mass retailers, and convenience stores last year. So that's really, I think, pretty emblematic of Dave's time there.

[00:05:58] Justin Fonte: I think we should also note that this is now the third executive to step away from the company in less than a year. Frank, the CFO, stepped down just a little less than a year ago, like around this time last year. And then their chief sales officer, John Geiss, also announced he would be leaving his executive role last year. He's staying on as like a senior advisor. But that's a lot of shifts in their leadership in one year's time.

[00:06:27] Jacqui Brugliera: Great call, Zoe. Definitely important to note.

[00:06:31] Justin Kendall: And the other big news coming out of the last couple of days was that Hard Mountain Dew, which is produced under license by Boston Beer Company from PepsiCo, is going to go national. It's going to be in all 50 states. And that's because Blue Cloud distribution is shifting its purpose. It's not going to be a distributor anymore. It's going to be more of, what would you say, like an alcohol licensor?

[00:07:00] Jacqui Brugliera: Yeah, it seems a lot more similar to what Coca-Cola is doing with Red Tree Beverages. Yeah. And I think this makes sense to all of us, you know, Blue Cloud has been much discussed, particularly by distributors. I mean, it was really interesting to watch it happen because, you know, the middle tier is something that's entrenched in the American beer business. And to watch an entity attempt to take shape from whole cloth was, quite something, but as we have now seen with this news, was not to be.

[00:07:32] Justin Fonte: Yeah, it really, from the beginning of the launch of Hard Mountain Dew, we started to see some issues because of them going through Blue Cloud. Initially, when they announced this new product, they announced all these markets that they wanted to go into, and then it only ended up being a handful of those because states were being like, I don't know if you can actually bring your product here with Blue Cloud. And then we saw all of the backlash from beer wholesalers. Every time we went to any event for them, they were talking about this, talking about potential conflict because, you know, regular soda can pay what we think of as slotting fees for those products. You can't do that with alcohol. They were raising concerns. Maybe they're using or leveraging those relationships for better placements. Also, all that drama with, oh, hard Mountain Dew, is this like catering to cheap And that added a whole nother level of controversy to everything.

[00:08:26] Justin Kendall: The photo, the Hot Wheels photo, that was one of the emblematic moments of this whole thing was there was a photo that was shared. Was it at the NBWA annual convention that they brought it out? It was. That showed hard Mountain Dew displayed next to a display of Hot Wheels cars.

[00:08:46] Justin Fonte: Yeah. Was regular Mountain Dew in the mix too? They showed a handful of photos. I feel like one of them was showing how close the alcoholic product was to regular non-alcoholic product. But yeah, it was like this huge thing that they were showing, hey, look, I think partially to say, hey, look, this is not a beer wholesaler. So they are doing things that we as an industry would never do. And they're potentially causing harm and could cause harm to us as an industry overall, because you're, you know, opening us up for criticism and for potential problems of underage people getting their hands on these products.

[00:09:25] Justin Kendall: They've never been to my target.

[00:09:27] Jacqui Brugliera: Yeah, and then this form of merchandising, like states were creating legislation to ban this, saying that if you have a brand on an alcoholic beverage that's also on a non-alcoholic beverage, you cannot have them together. I believe that's in Virginia. Yeah. Which coincidentally was also one of the states where they ruled that because Boston Beer had an existing relationship with its other wholesalers in the state, it could not then send one of its products to Blue Cloud. So Virginia, who knew?

[00:09:53] Justin Fonte: Yeah, and those things I think would have happened anyway, the things around like where you can place your products when it's so close related to a non-alcoholic one. I think that would have happened anyway, but I don't know if it would have happened as fast as it did because large groups such as the MBWA were drawing more attention to it and being like, hey, you need to fix this ASAP.

[00:10:16] Justin Kendall: That challenge by Blue Ridge Beverage and premium distributors of Virginia, that was huge though, as you pointed out, because that sort of set the tone of where things were heading. And once the Virginia ABC ruled that Boston couldn't take Hard Mountain Dew to Blue Cloud, that they had to go through their existing wholesalers, I feel like that was just a huge domino.

[00:10:39] Jacqui Brugliera: Yeah, that whole thing was just so weird to me, knowing how important Boston Beer knows its wholesalers are that they did this. But, you know, we tried it out and it's not happening. But interesting to me that all these news items broke on the same day. And you know, hard Mountain Dew is not the only thing that Blue Cloud was doing. They also have a deal with FIFCO USA to make Lipton hard iced tea. So that will go to FIFCO's distribution network.

[00:11:11] Justin Kendall: And this is all going to play out too. We will see if these actually go to the beer network, because as Beer Business Daily reported, there are some bottlers that believe that they have first dibs on these. So are we setting ourselves up for a repeat of everything that we just went through?

[00:11:30] Justin Fonte: I hope not. Boston Beer has said that they are going to do it in their existing network, but I'm sure it's going to continue to cause trauma. I would love to not talk about it anymore. I'm curious what's going to happen with Hard Mountain Dew in general, like if they can even Is it too late at this point for them to have any sort of impact in the markets that they're going into? This product has been out for a while now, and I don't know if consumers in the States who haven't gotten it yet still have as much anticipation to get their hands on it.

[00:12:03] Jacqui Brugliera: I think they'll get like a big bump whenever they open a new market. But so you're right. And we had this conversation, like my brain is, is applesauce. So I'm not really sure how long ago we had this conversation, but I know we had this conversation on this podcast where we talked about how Clearly Hard Mountain Dew was developed in a time when the gold standard for such a beverage was a hundred calories and 5% alcohol. And then drinkers started to go a bunch of different ways. So Boston Beer is keeping to that lightly flavored stuff with Truly, which I'm sure we'll get into probably next week, because I don't think we need to cram all of that into this conversation. But drinkers also are interested in more flavor. And that's where you're seeing stuff like Monsters the Beast Unleashed is 6% alcohol and God knows how many calories. I think that land is something that would be much more comfortable and make much more sense for Hard Mountain Dew. So will they reformulate while they get ready to rejigger? I don't know. free advice from me and what do I know, but that's the way that I would take this product where I in charge of this product, but thank heavens I am not.

[00:13:06] Justin Kendall: We'll save you some headaches so you don't have to be in charge of it and have to go through all this, but we will report on it and you can read all about it at Brewbound.com. If you're an insider, you can read all of these stories. There's so much more as Zoe pointed out, but with that, we're going to say that's our show. Thanks for tuning into this breaking news audio and thanks to our audio team for making it happen. Thanks to Jess and Zoe and thanks to all of you for listening. We'll be back next week.