[00:00:11] Zoe Licata: Hello and happy 2024. Welcome back to the Brewbound podcast. I'm Brewbound Managing Editor, Justin Fonte. And I am joined by my delightful colleagues, Zoe Licata. Hi Zoe, how you doing?
[00:00:25] Speaker 1: Hello, happy 2024.
[00:00:27] Zoe Licata: Happy 2024. And Brewbound Editor, the man in charge here of this questionably seaworthy ship, Justin Kendall. Hi, how are you?
[00:00:38] Justin Kendall: Worse now that you're pinning all of this on me.
[00:00:42] Speaker 1: I know, was that kind of an insult? The leader of our possibly, like, seaworthy ship.
[00:00:48] Zoe Licata: If I'm insulting anybody, I'm pretty sure it's myself because I'm steering us today. I'm just kidding. This ship is perfectly seaworthy. We've had quite a year. We're looking forward to another one. And we thought the best way to ring in a new year is to look back at the old one with some friends. So, here to break down all the bell-bottom news that matters most of late are Beer Marketer's Insights, Craft Brew News Senior Editor, Christopher Shepard. Hi Chris, how are you?
[00:01:13] Christopher Shepard: Hi folks, doing grand.
[00:01:15] Zoe Licata: Great. And Kate Bernot, the lead reporter for Sightlines, a good beer hunting publication. Kate, hi, how are you? I'm feeling festive, I guess. I'm good. Thanks for having me. Thanks for being here. I'm sorry. You guys telling me that we were doing this live to tape got in my head and I've now made it all awkward, but I'm going to press on. Never. So here we go. This conversation could easily go on until 2025. So we have picked a few topics to zero in on, and I'm sure you can guess what they are. But to save you the time, we have got BevElk and non-Elk convergence and related category blurring. Craft beer struggles as it enters a new era, which includes leadership changes, brewery openings and closings, and the many forms of M&A, partnerships, platforms, et cetera. And the thing that has gone on all year, although I think all of us are a little tired of talking about it, is Bud Light's tumble from the top of scans and AB's epically terrible PR wrangling.
[00:02:16] Christopher Shepard: Can you repeat that? I'm not certain I know exactly what you're talking about.
[00:02:23] Speaker 1: It's just something that happened to a little known brand.
[00:02:26] Christopher Shepard: Cool. I'm sure I'll catch up. Just Google it really quick. No one will know. Yeah, I definitely haven't spent like 30% of my entire life this year thinking about that.
[00:02:36] Justin Kendall: Oh, man, that's a rough percentage.
[00:02:41] Zoe Licata: So to make this fun and festive, because we are recording it on December 20th, let's play a round of categories and go around the table naming ALK and Bev-ALK crossover products. I think you guys know how this works. The first person to completely blank was going to have to go next in the first question. But yeah, ALK, Bev-ALK crossover products just in general don't have to have been introduced in 2023. Perfect.
[00:03:05] Speaker 1: Helpful. Everyone get your brains ready.
[00:03:08] Kate Bernot: Anybody wants to open that, that Google doc you already have going.
[00:03:15] Zoe Licata: Fair, fair. I should have thought about that. This is why I have to go first. Okay. Um, Arizona hard iced tea. Chris.
[00:03:22] Christopher Shepard: Oh, uh, Jack and Coke.
[00:03:25] Zoe Licata: Good one.
[00:03:26] Kate Bernot: Zoe. Sunny D vodka seltzer. Also a good one. Kate. Uh, newly announced Minute Maid spiked. Good one, Justin.
[00:03:35] Justin Kendall: Empirical Doritos Nacho Cheese Spirit. Disgusting.
[00:03:41] Zoe Licata: Creative, I'll give it to you.
[00:03:43] Justin Kendall: Peace Hard Tea.
[00:03:44] Speaker 1: Oh. Ooh. KFC 11 Spice Rum, I believe is what they called it.
[00:03:56] Justin Kendall: Kate. Sponsor of the show.
[00:04:00] Kate Bernot: We love it. Thanks. Hard Mountain Dew.
[00:04:04] Justin Kendall: Sonic Hard Seltzer, if it still exists.
[00:04:07] Zoe Licata: Yeah. Fair question. Am I playing, too?
[00:04:11] Justin Kendall: Yes. Sure. Jump in.
[00:04:13] Zoe Licata: Go for it.
[00:04:14] Justin Kendall: I think you've said one already.
[00:04:15] Zoe Licata: I did. I said Arizona. So now I'm going to follow your lead and say Tampico Hard Punch.
[00:04:21] Christopher Shepard: The Beast Unleashed?
[00:04:23] Zoe Licata: Yeah. Good one.
[00:04:24] Speaker 1: Yeah. I don't think you said this yet, Jess. Fresca Mixed.
[00:04:28] Zoe Licata: I have not said that. Good one.
[00:04:31] Kate Bernot: That was mine. Lipton Hard Iced Tea.
[00:04:36] Justin Kendall: Does Nasty Beast count as something different? I think the rules are really amorphous.
[00:04:41] Zoe Licata: Yeah, I think you could go with it.
[00:04:43] Christopher Shepard: I have a potentially rule-breaking one I've been sitting on too.
[00:04:46] Zoe Licata: All right, I think Nasty Beast is acceptable, thank you. I am going to go with Absolute and Sprite, which is not in the United States, but elsewhere.
[00:04:55] Christopher Shepard: I don't think this breaks the rule, but can we do White Claw Zero? Ooh.
[00:05:01] Speaker 1: Ooh.
[00:05:01] Zoe Licata: Yeah. Yeah, I think that goes the other way.
[00:05:03] Speaker 1: I feel like that's acceptable. Yeah. Yeah.
[00:05:05] Speaker: Yeah.
[00:05:05] Speaker 1: I'm staying on the food theme and going with the Eggo sipping cream.
[00:05:10] Zoe Licata: Oh, that's also disgusting. Thank you.
[00:05:14] Kate Bernot: A really gross part of my brain wants to try it. Did someone say Simply Spiked yet?
[00:05:20] Zoe Licata: No, nobody said that. Good one. All right. Simply Spiked.
[00:05:23] Justin Kendall: Topo Chico. Do we have that?
[00:05:26] Zoe Licata: No. And I don't know how we didn't. I think we're all trying to out obscure each other.
[00:05:29] Christopher Shepard: How far back do we get to go at this point?
[00:05:33] Justin Kendall: Back to Zima.
[00:05:35] Christopher Shepard: That doesn't count. I'm going to say that does not count.
[00:05:38] Zoe Licata: Oh, I am going to go slightly obscure, kind of a deep cut. The Wawa hard iced tea that Kate Mae Brewing made.
[00:05:47] Christopher Shepard: Yes. Similarly, Dunkin Donuts, hard coffee and tea.
[00:05:52] Speaker 1: That was going to be mine. It's called Duncan Spiked, by the way.
[00:05:59] Speaker 2: Whatever.
[00:06:00] Speaker 1: Thank you very much. Oh, no. Now I'm rattled. Tick, tick, tick, tick. I know. I think this is where we have to end it anyway. I think this is out.
[00:06:11] Justin Kendall: Budge Angles.
[00:06:12] Speaker 1: Oh, Budge Angles.
[00:06:15] Justin Kendall: No, we can end since I went out of turn. Aggressive Bojangles. I just wanted to say Bojangles.
[00:06:20] Zoe Licata: I mean, I think staying in the South, we could also go with Cheerwine, but I feel like this is a noble place to end. I'm so impressed with all of you. Excellent, excellent work, my friends and colleagues. Our brains are sober again.
[00:06:32] Justin Kendall: I'm proud of you, Zoe, for being the one to end it, which shows that your brain space is being devoted to something entirely more important than this.
[00:06:41] Speaker 1: Necessarily, but we can pretend that that's what's happening. Sure.
[00:06:46] Justin Kendall: Just take the compliment.
[00:06:47] Zoe Licata: Thank you. All right. So, Zoe, you you earn the dubious honor of the next question. First, which of these products do you see as having the most potential staying power?
[00:06:58] Speaker 1: I mean, this might be a little bit of a cop out answer, but I feel like either like a Simply Spiked or the Topo Chico hard seltzer that I feel like we've seen them been able to stick around for a little bit. Simply Spiked, I think I would go with number one out of that. Like, it's still doing pretty well. And I mean, people want their flavored, juicy alcohol, I guess, still, somehow. They sure do.
[00:07:28] Christopher Shepard: That feels like a good bet to me. I'm gonna go in a similar vein in terms of supplier and say Jack and Coke because it's a thing that people have been ordering forever. That was a thing. One of the more interesting comments I think that the folks at Coke and Red Tree Beverages made sort of recently was this acknowledgement that like the thing that they're paying attention to is like, what are the brands that we have that people already mix with alcohol? And it sort of becomes a duh at that point. So yeah, Jack and Coke for me is just clear. Like that's probably going to be in the market for a while, you know, barring wild developments in terms of the availability and sort of viability of spirits based RTDs and that somehow blowing up completely, which doesn't feel like that's going to happen. But that's a separate conversation, really.
[00:08:23] Justin Kendall: My recency bias says Arizona hard tea. There's not a strong number two in that area, and I hate the phrase right to win. I don't believe anybody has a right to win, but it's a natural progression for them, it at least feels like, so we'll see.
[00:08:44] Zoe Licata: They certainly have a right to play.
[00:08:46] Speaker 1: Yeah, I like how all of our answers are not crazy, ridiculous ones. So like there's definitely a pattern through all of them where like Chris was saying, it's the ones that people most likely were already making their own version of at home.
[00:09:02] Zoe Licata: Yeah, like something crazy, like 50% of Fresca drinkers were using it to make cocktails anyway. Oddly enough, Fresca Mix is one that I still have not tried because it came out while I was pregnant. And then a million other things happened after I was able to drink again.
[00:09:18] Christopher Shepard: It's also a little bit more focused, isn't it? I feel like its availability is not quite as broad as some of the others. And that's a little bit on purpose.
[00:09:27] Zoe Licata: Yeah, definitely. I mean, I know they have a partnership with Andy Cohen, which is interesting.
[00:09:31] Christopher Shepard: Yes, that's right.
[00:09:33] Zoe Licata: This is going to debut on January 3rd, so we will have the answer to this already. But I wonder if he'll be drinking on New Year's Eve.
[00:09:41] Speaker 1: Oh, are they allowed again this year? I know there was controversy. He was making a plea to CNN.
[00:09:50] Christopher Shepard: That's got to be branded too, right? Like that's got to be, someone pays for that.
[00:09:54] Speaker 1: For sure. For the earlier part of the night. I'm sure as it gets later, closer to midnight. You're just pulling stuff out of purses.
[00:10:04] Zoe Licata: Well, what non-ALC product that has not gotten the boozification treatment yet would you most like to see crossover? Dr. Pepper.
[00:10:12] Kate Bernot: Kate, what a great answer. Diet Dr. Pepper. I love me a little Diet Dr. Pepper. A little bit every now and then for myself as a treat. It's just such a unique flavor. Ollipop has a, you know, there's a million like faux Dr. Pepper flavored things. Where's the rum and Dr. Pepper or what have you? I'm waiting.
[00:10:34] Justin Kendall: Didn't they do a like alcohol free, but was it like a whiskey barrel aged non-alc Dr. Pepper version? Sounds vaguely familiar to me.
[00:10:44] Kate Bernot: That sounds delicious. But actual whiskey. Yeah, right.
[00:10:49] Speaker 1: Not non-alcoholic whiskey.
[00:10:52] Justin Kendall: Give me some Twinkies vodka whips. Let's just burn the whole thing down.
[00:10:58] Kate Bernot: Chaos agent. No. Twinkie whippets.
[00:11:02] Speaker: Okay.
[00:11:04] Justin Kendall: Twinkie the kid just wants to lasso you into that vile category.
[00:11:08] Kate Bernot: I just thought of another one. Actual Jell-O shots. Jell-O brand.
[00:11:14] Christopher Shepard: Oh, wow. Jell-O branded Jell-O shots. Oh, yeah, yeah, yeah. I feel like we're a month away from that press release.
[00:11:21] Kate Bernot: I need to go call some people, including a lawyer, so I have to go right now.
[00:11:28] Christopher Shepard: You've manifested it. The question was, do you want, and I have zero desire. I don't care. No. Because that's a personal question, you know what I mean? There are plenty of things that people will buy, but in terms of what Christopher Shepard wants to see in the world, no. I don't care.
[00:11:46] Speaker 1: I would like another coffee brand other than Dunkin' to try their hand at the spiked coffee, since that didn't quite satisfy what I was looking for. Maybe Starbucks can throw their hands in there. But yeah, I want a legitimate spiked coffee, not a spiked sugar syrup with a hint of coffee.
[00:12:05] Christopher Shepard: Does Starbucks already do a liqueur?
[00:12:08] Zoe Licata: I think they do. Probably. I've definitely seen that.
[00:12:12] Christopher Shepard: Because that feels like a bunt for them.
[00:12:15] Zoe Licata: Yeah, I would love, I know we're seeing a bunch of hard refreshers come out, but I would specifically really enjoy a Starbucks pink drink with, I don't know, vodka, maybe? White rum? I don't know. I don't know what that's looking for, but something. I love a pink drink.
[00:12:32] Christopher Shepard: That also feels like a bunt.
[00:12:34] Zoe Licata: How very millennial of you. Right? I tried to order it once by its ingredients and the woman at the counter was like, I was like, well, hello, can I have the strawberry acai refresher and with coconut milk? And she's like, you want the pink drink? And I was like, yeah, please. Thanks.
[00:12:47] Kate Bernot: We know what I'm here for. Don't make me say it.
[00:12:50] Zoe Licata: Well, so Chris, I think you are the absolute perfect person to shoot this next question over to. Has all of this convergence gone too far?
[00:12:58] Christopher Shepard: Has anything gone too far? Like answering a question about whether things have gone too far at this point in time sort of feels silly. It's like the world is really great at topping itself in all sorts of ways lately. So, I mean, for me as a consumer, sure. But like as a beverage analyst, there's still plenty, oh gosh, there's still plenty of juice left in this lemon. As I think about this, As I've thought about this before this call, it's like a lot of the growth happening in Bev-Alc at this point is happening in this convergent space in some form or another, regardless of what segment you look at or category you look at. it's where the growth is. And I also have the sense that that's bigger than beer, right? Like we talked about some of those sort of novelty items that are coming in. We also have things that like popped on my radar a few months ago, around the same time were like Cheetos, Kraft mac and cheese, and like water flavored Gatorade. And so it's not just Bev-Alk where these sort of crossover products are generating attention. And part of it is the attention, but like when it comes to the whole Gatorade thing, part of that is the sort of insight that like not everybody wants, the sort of flavors associated with that beverage. And so I don't see that ending really soon. And as our previous discussion already suggested, some of these products probably have a longer lifespan. I kind of hope that these types of beverages don't have the sort of power in terms of growth for as long as they've had, and as much as they've had this year in particular. But it's hard to predict that. And I think that hope comes from a place of like, I'm not sure how great that is for Bevalk, for beer, for wine, for spirits, for humans figuring out their relationship to alcohol, to sort of connect with it in these sort of novelty ways. But I don't see this going away real fast.
[00:15:10] Justin Kendall: This feels like the Spencer Giff storification of alcohol. That is a perfect throwback.
[00:15:17] Christopher Shepard: Can I get my ears pierced? Well, absolutely.
[00:15:22] Kate Bernot: If you drink the Beast Unleashed, your ear gets pierced automatically somehow.
[00:15:27] Justin Kendall: Cartilage. Cartilage. That's what they pour on it to clean it.
[00:15:33] Kate Bernot: But I think that's a really interesting point. These aren't beverages that you like develop. I mean, maybe some people do, but like some kind of like long term, like affinity or like pairing with food or the kinds of like real relationship building that cement people within like a category, which we know probably isn't happening anymore anyway. But these certainly aren't getting people there either.
[00:15:57] Christopher Shepard: know, I think there are real challenges, certainly for beer and wine in terms of transitioning consumers from these beverages to to core beer and wine brands.
[00:16:08] Kate Bernot: You don't go from beatbox to Bordeaux.
[00:16:10] Christopher Shepard: That's not I would love to see data from beatbox on their ability to do that. Although but you know, those companies aren't trying like why would they?
[00:16:19] Kate Bernot: No, you keep drinking beatbox.
[00:16:21] Christopher Shepard: Yeah, exactly. So yeah, I think beer and wine in particular, I think spirits has an easier time because so much of those cocktails are always sort of playing around with flavors in ways that are different.
[00:16:37] Speaker 1: Let's move on to what took up a lot of our time this year that wasn't a big light lager brand. craft and all that is happening with craft beer. And I'm going to give full credit to Jess for this reference. But you know, Taylor Swift wasn't the only one with eras this year. Craft beer has added a new era to its lineup and has a lot going on right now, possibly some growing pains. And one of the big things we saw that Jess mentioned at the top was a lot of leadership changes. We saw some at New Belgium, Sierra Nevada, Rheingeis, Rogue, Lawson, Suenta, Indeed, Summit, probably a lot more that we're forgetting. But, you know, Kate and Chris, we're fortunate we don't have to lead any of these companies ourselves, but from the outside observing perspective, you know, is there any advice that you would give to some of this new leadership about, you know, shepherding craft beer, if you have any?
[00:17:37] Christopher Shepard: Dig in.
[00:17:37] Kate Bernot: Yeah, if I knew the answer to this, I would be the CEO of something. Do you want to be the CEO of something? No, absolutely not. I think there's an interesting question of whether this new generation of leaders is going to be asked or expected to lead the industry as well as their own individual companies in the way that those breweries sort of used to, right? Like, the way that Sierra Nevada or New Belgium stood in, you know, as the leader of like craft more so than just New Belgium. I don't know, I'm not seeing this like new generation kind of come up to replace those national figureheads. Not to say they don't exist, but I think craft is just so much more localized and splintered and diversified that we're not necessarily asking leaders to be the spokesperson for the whole industry the way we once were. So it's kind of a different assignment, right? It's like, keep your company on the rails. you don't necessarily have to speak for everyone. Or would it even be possible? I don't know. I would love someone to like, see it differently, maybe or maybe I'm off base there.
[00:18:53] Christopher Shepard: But no, I refuse to see it differently. I agree. I think it's like me. No, no, I do. I agree. I think that that task isn't being sort of asked of the new leaders. And I think that that's probably okay. I don't necessarily think that that's a problem either. Which, you know, to add a little color to my sort of two-word answer, like, dig in. Like, I think if you're one of these leaders that is stepping in, the opportunity that is ahead of you to me, seems to be achievable by digging deeper and sort of going harder into sort of where you are, rather than the sort of dreaming bigger, sort of wide-eyed, shooting off into the sky, the way that growth was a decade ago.
[00:19:44] Speaker 1: With all of the changes that we've seen, there's been a couple sound the alarm bells headlines or panic in the industry of like, What does this mean for craft with all this happening? But change doesn't always mean bad things. And I think this relates to what you were saying, Kate, about there needing to be new forms of leadership for what craft is looking for from leadership right now. So do you all see this change as a good thing for craft? Is it a neutral thing? Is it a downfall, scary situation that people might be worried about?
[00:20:16] Christopher Shepard: it's a necessary thing more than anything to me and like so does that make it good does that make it sort of painful but also ultimately good it seems like it's a part of the sort of long anticipated correction that is still being sort of overwrought and written about in sort of overly flamboyant and sort of ways that exaggerate what's going on. But yeah, there's a lot of pain out there. There are a lot of companies that are struggling right now that's impacting a lot of people's personal lives and their livelihoods and things that they have put all of their energy and money and sort of everything into for a long time. And that's obviously incredibly painful, but Kraft sort of needs this moment to push through. I have thought back so, so many times. It was actually going to be, I was going to give a talk in May at some point, and it was going to be based around this idea that Tony McGee from Agonitas, who is no longer at Lagunitas and hasn't been for a long time, sold it years ago at this point. But he said, I want to say soon before the sale, but like was one of the many, many people eight years ago or so that was like, there needs to be a kind of reset. Like we're going to go through this period of growth, that growth is going to go away because that's what happens just like it did in the late 90s. There's going to be a reset period of seven years or so. And then Kraft will figure out a new wave of growth. I think in terms of timeline, like the pandemic sort of shuffled up how long that reset period lasts and the sort of shape that it takes, obviously. But that still feels right to me. And I mean, the thing about Tony was he was incredibly prescient and predicted a lot of things that worked out really well for Lagunitas.
[00:22:11] Zoe Licata: In a lot of ways, I think Tony won.
[00:22:13] Christopher Shepard: Clearly one.
[00:22:15] Zoe Licata: Right? Like get all that Heineken money and then just like head to the beach somewhere. God bless.
[00:22:20] Kate Bernot: The fact that no one knows where he is means he won.
[00:22:23] Christopher Shepard: He's in a bar playing guitar probably is my bet at least.
[00:22:28] Justin Kendall: And the fact that he hasn't resurfaced to try and start another brewery or another alcohol brand or anything else. Seemingly I maybe is, and I don't know that he's invested in something, but good on him for having the good sense to stay away and, you know, hopefully ride that money train.
[00:22:50] Kate Bernot: That's the dream.
[00:22:51] Zoe Licata: walk into the sunset. Yeah, I mean, he was Kraft's, like, chaos Muppet for a while. Yeah. I have a whole theory about Kraft Brewers as various Muppets. We'll get into it another time. But, like, he was animal, you know?
[00:23:03] Justin Kendall: What does that make Greg Cook?
[00:23:05] Zoe Licata: Oscar the Grouch. She says, obviously.
[00:23:08] Christopher Shepard: I love that the spreadsheet is in your brain.
[00:23:12] Kate Bernot: This is like the special Muppet Christmas Carols version of your theory.
[00:23:18] Zoe Licata: Well, Ken Grossman is Kermit. Anyway, he was like so loud and so around. I mean, like I was working at Boston Beer at this time, when he had made all those comments, but he was so upset about like rebel IPA and whatever. And I'm sure this conversation looked different to people who were not at Boston Beer at this time. So you guys can tell me about this over a beer at another time. But you know, he just like, Justin, you're right. Like he hasn't tried to do anything. anything since selling the company. He's just living his best life at open mic nights at various bars. He's the guy with the guitar and that's the dream.
[00:23:53] Speaker 1: Along with the leadership changes we saw this year, we've seen a change in craft, bringers and acquisitions. And, you know, we're not seeing 10 figure ballast point deals anytime soon. And I don't know if any time in the future or should we, as Chris whispers under his breath. But we are seeing a lot of these, what they're sometimes calling craft platforms or craft on craft deals, creating new parent companies, or we're seeing things like Tilray is buying a crap ton of brands. And we heard on stage at Breed by Live that Ty Gilmer from Tilray is getting phone calls multiple times a day from brands asking, can you buy our brand? Kate, what do you think about this whole M&A landscape and craft right now?
[00:24:44] Kate Bernot: I think anyone who says they're not for sale is lying. I think everyone is quietly or not so quietly and lately not so quietly kind of shopping around. I mean, yeah, this is like an inevitable market. reaction to what's happening, like this would happen in any other kind of industry. Craft tends to be very inward looking and think that it is different from other industries in certain ways, but in this big picture sense, we would expect this to happen. And I think What we are seeing now is now we have data on some of the next year, two, three, five, seven after these mergers and acquisitions, and now we're starting to see where the pitfalls are, where the success points are. If the industry can learn from what's come before it with these M&A, that's going to be really helpful. to the next round because this isn't going to slow down, right? So it's like, please study the ones that have succeeded and the ones that have failed and see where the pressure points lie and where the cultures clash or where the infrastructure doesn't make sense because not all of them are slam dunks at all.
[00:26:04] Christopher Shepard: That's a really great point, Kate. And I think that in particular, the Tilray AB deal, there's so much to learn about that from that. A.B. went from not playing really in craft other than sort of adjacently with Shocktop to the largest player by volume by far, at least as we measure it at Beer Marketers. what is it, two and a half million barrels or so at the end of 22 as we measure it. That might be a little bit old, maybe closer to three. I don't remember. I should keep those numbers in my head. But then going to sort of selling off a huge chunk of that, which is fascinating, and sort of a recognition of frankly, the different place that Kraft is in, but sort of as Tilray comes in and takes on a bunch of those brands, one of the big questions I have is about infrastructure and what breweries need to exist and what breweries don't need to exist and how they're gonna make all of that work. And I think it's still really early innings in terms of them sort of figuring that out and making those decisions. I mean, listen, There's a huge amount of capacity out there, folks. Like, there's a huge amount of capacity out there. And that is a craft question that is also a total beer industry question in terms of the amount of large-scale and smaller-scale facilities that are in operation. And that gets tough real fast. because it's also not always in the right place or sized in the appropriate way or built in the best way for the volume that exists. And there's still some capacity that's still coming online. Like, especially when we start talking about those crossover beverages that we spent so long on and the kinds of equipment and the kinds of facilities that are built for those kinds of beverages. And it's a very old sort of beer industry thing is that like, you know, Underutilized capacity is a death knell for whoever is holding that capacity, right? Not necessarily for the industry writ large, but for whoever's holding it. And desperate attempts to fill capacity is never a great thing.
[00:28:18] Justin Kendall: So you're saying we're going to see some Spirit Halloweens in breweries in the future. Oh my God.
[00:28:25] Christopher Shepard: Now that's the crossover all been waiting for, Justin. Jess mentioned it a couple of weeks ago to give her credit. Well done, Jess.
[00:28:35] Speaker 1: Yeah. Well, we've seen a way that some breweries are addressing that capacity is with these craft on craft deals or strategic partnerships as a lot of them have been characterizing it. We heard recently, just covered the Bart Watson webinar, that was a bit of a downer of all the issues that Kraft is dealing with right now. Do you all see that those type of partnerships, is it going to have an impact on that? Could that potentially help or does it go way beyond just that infrastructure?
[00:29:08] Christopher Shepard: Well, it certainly goes beyond the infrastructure question, definitely. One of the things that I'm super encouraged about seeing are more regionally focused things and attempts. Right now, we also watched recently in the South, the Made by the Water and the Foberg sort of collaboration that not necessarily go the way that they really wanted it to. It's not like it's a slam dunk in any way, but I think when we talk about craft and we talk about sort of the challenges it faces, carefully structured partnerships or platforms that have a more geographic focus sort of pencils out, it seems to me.
[00:29:51] Justin Kendall: And it's filling some of that excess capacity. So while some of these mergers are just non-cash mergers, they are keeping some of these brands alive and they're filling some of that excess capacity.
[00:30:07] Kate Bernot: I think it's about sizing everything correctly, which is what we're talking about with these regional plays. Also, it seems to me that a lot of these M&As, everyone wants to be these very equal partners in them, which is, I guess, understandable on an emotional level. But from a business perspective, I think there's going to be a lot of, you've got to kill your darlings here. does brand A need to be all region wide while brand B can stay really local and brand C is like only DTC or something? I think there has to be really strategic thinking about how all those brands play together. And maybe not everyone is going to get the equal play, but that's hard when you're a brewery being brought into this collective. You're like, I want to also have the exact same seat at the table as everyone else. But I think that's not a recipe for success in every case. So I think it's going to have to get like even more narrowly focused and like some breweries are just your pinch runner. That's all they do. They do this one specific job. And so like removing a little bit of that emotion and ego might keep some of these brands alive for longer and like allow them to thrive in a more narrow lane.
[00:31:18] Justin Kendall: Hard yes. So speaking of Bart's webinar, he mentioned one of the biggest problems, and that's Craft Beer has a problem that its consumer demand is waning. So is there something out there that you've seen so far that you believe could help fix this issue of appealing to consumers within craft?
[00:31:44] Christopher Shepard: one thing no i mean if you can come up with one thing the point that i'm trying to make there is like it can't be one thing it has to be lots of things and it has to be organic sorry about it otherwise it's sort of defeating the whole point of the thing and so it's got to be many smaller things that eventually build and add up it seems to me
[00:32:09] Kate Bernot: Yeah, this year did seem to be sort of like the return of like beer hospitality, right? And we see a lot of breweries grow this year by like opening really well done locations that aren't, you know, the industrial garage that's like 10 degrees too cold and has those terrible stools we all hate, like places that can really deliver an experience that your brother wants to go to and your mom wants to go to and your sister-in-law wants to go to. Those places probably function more just like restaurants, right? But I think we kind of saw... Look at Big Grove in Iowa, look at Prost opening another location in Colorado in an already very saturated beer market. If you're creating an experience that people want to go to, I think for consumers like that, we're refocusing on like, people think of their local brewery as like a taproom they can go to, and have like, an enjoyable, comfortable family experience. And I don't know, going back to basics on that seems to be a good thing for a lot of folks. But again, that's like not everybody's model that doesn't solve your like chain retail problems. But I think that was kind of a bright spot this year is to see some breweries grow by, yeah, having like real nice places for people to visit.
[00:33:27] Zoe Licata: That's a great point, Kate.
[00:33:29] Justin Kendall: Thalia is a good example of that, too. I think it's got to go beyond the industrial space, like you pointed out. It can't just be, you know, oh, I've been to a brewery.
[00:33:39] Zoe Licata: You, me, same brain. That's exactly what I was going to say. You know, I stopped by Thalia's original taproom last month, and it was just such like a breath of fresh air as a taproom experience, because it's literally like bright and airy. You don't feel like you're in a garage. There were purse hooks under the bar, which is key. And they just opened their fourth location in New York City yesterday, today. They're doing it. And I think their lead style in terms of volume is like an Italian pilsner. They're not really playing the funky out there game.
[00:34:19] Christopher Shepard: And I think what's interesting about something that you just said, Kate, about sort of back to basics on that is that I think on the opposite end of the scale spectrum, it's also that, and this is something that Bart's been saying for, I think, a couple of years now, but it's this going back to basics on branding, right? Like if you're trying to work at scale, you've got to build a brand and the, Brands and craft that are growing right now are growing because they are brands. And I think that's a way forward and is a difficult way forward. Like that's not necessarily an easy thing to do and is certainly counter to I think what a lot of breweries were doing for a long time. Because it's not as simple as just sort of making a portfolio of beautiful beers underneath a brewery name. It's a different set of skills and it's a different set of challenges. But again, for the things that are working, for the bright spots in craft, which again, are namely high ABV IPAs and single serves, mostly named Voodoo Ranger, and non-ALC, mostly named Athletic, right? There's a reason why those are the two winners in craft for now gonna be, I think the third year running, because they're brands and they're connecting with consumers as brands.
[00:35:39] Zoe Licata: Yeah, and the consumers are tired. They've got a lot going on. They can't keep nearly 10,000 craft breweries, you know, brands in their head. If you can give them a family of things that are similar but different. you'll win almost every time. Another thing that Bart covered in that webinar and the BA reported this year is that at least 385 breweries closed while only 420 opened. So still more openings than closings. And we saw a higher number of closing breweries in 2020. I believe it was maybe 435, Bart had told me via a spokesperson. He told us they were bigger closing to opening ratios in the early 2000s. But, you know, none of us were really covering the industry back then. But, you know, all five of us swim in this fishbowl every day and the closing announcements certainly feel large. Do you think we should be making more of these closings or is craft beer just shifting into a more normal market trends? It's hard to know if we should feel like the sky is falling or if this is just a normal thing that happens when you're not growing double digits anymore. What do you think?
[00:36:44] Kate Bernot: I see it as related to the growth and also related to the age of a lot of founders of some of these breweries like if you've been at this 20 years. things are markedly harder and cost of goods are markedly more expensive. And you're like 65 right off and you know, pull a Tony McGee except minus that $1 billion minus that Heineken money. But you know, maybe it's just like, it's been a good run. You got through the pandemic ish, but like, it's just kind of different now. And your your heart's not in it the same way. So I see a lot of that too, at least just like, locally here, I see a lot of like pioneering craft breweries in Montana, like not closing, but like their founders are older. And if there's not a clear succession, then I don't know, maybe that's just a logical, like maybe that's just what happens with the business. So I think it is a mix of the closings are concerning in a small sense, because it's never like that's not super duper positive. But on the other hand, maybe it's just, yeah, it is a little bit natural. And maybe that also like it provides a little course correction, like maybe if that pie of demand is not growing, then maybe we spread the drinkers around a little more.
[00:37:56] Christopher Shepard: Yeah. This isn't sky is falling to me. This is what happens. And it is weird, right? And it's different, right? Which is why it's worth talking about and reporting on.
[00:38:08] Justin Kendall: You mean we shouldn't believe those doomsday headlines out there? Is this doomsday for craft? Just like it's been for the last decade.
[00:38:16] Christopher Shepard: Just like that bubble's been popping for as long as I've been doing this job. When will it burst? It's not a bubble. Sorry about it. Chris, how long have you been doing this job? 13 years. Wow. Which is very confusing.
[00:38:32] Zoe Licata: Yeah. That's funny. That's when I had my first craft beer job. So look at us. Who would have thought? So we don't want to dwell on this. We all know what happened last spring with Bud Light. I'm not going to make you rehash it, but the lasting effects on the biggest beer brand of the last 40 years cannot go unmentioned on a year in review beer podcast. I will say my first day of maternity leave was May 31st and my first day back at work was September 18th. And I was honestly gobsmacked that this was still a thing we were all talking about, but here we are. You know, we've been through it now. We're kind of, you know, Bud in particular has swung back the other way. And now that AB is sponsoring UFC and making whole commercials centered around, you know, BLs in the rain at country music festivals and Kid Rock has told his minions that enough is enough and they should go back to drinking Bud Light. Is this enough to save Bud Light?
[00:39:30] Christopher Shepard: Sorry, I didn't I didn't mean to just laugh at that question. No, you should. I'm not sure that anyone is, and I mean it when I say that, I'm not certain that anyone is under the illusion that Bud Light will actually regain anywhere close to the volume that it lost. And regardless of what the company said sort of in the middle of the year, when they needed to, in order to sort of just keep morale up, sort of say, we're getting every case back. But again, those, you know, those are more sort of morale boosting kind of statements to sort of rally the troops and sort of focus everybody with aggression on, you know, the thing that they would really love to do, but again, I don't know that anybody is sort of under the illusion that that's happening, and that's not the path that we're on right now. The goal behind this is to make sure that when April 1st rolls around next year, that if there's a negative number still on those sales, that is a very small one. And ideally, that there's at least a period in the spring and summer of 2024 when the number on Bud Light is positive. That's what this is about, is making sure that as soon as they start cycling the down 25, down 30 numbers in April, that there's growth and not further declines.
[00:40:57] Kate Bernot: Yeah, agreed. And I think also, these efforts are not enough to necessarily like, save Bud Light because this one controversy was not, it's not like it toppled Bud Light from like a position of growing strength.
[00:41:12] Christopher Shepard: Exactly.
[00:41:13] Kate Bernot: There were forces at work working against Bud Light for long before the entire world figured out who Dylan Mulvaney was. And nothing that I've seen about what ABI is doing here is going to claw that back either, right? These are like persistent, long term sort of consumer trends that have nothing to do with Kid Rock and minions and Instagram and shooting guns at cans of beer. So yeah, I think Chris is dead on that. You don't want to cycle the comps and it looks like a continued bloodbath. But like, this is just the longer term trajectory.
[00:41:52] Justin Kendall: It's an acceleration of something that was already happening, except some of those longtime core drinkers are gone.
[00:42:01] Speaker 1: They just tried something else for the first time in their life and maybe found something they like better.
[00:42:07] Kate Bernot: And, you know, I like that for them, honestly. Yeah. Expand your horizons. That's just like, that's beautiful to me. Yeah. They drank a Modelo and were like, holy shit, you guys.
[00:42:18] Justin Kendall: That didn't happen. I'm not sure how many of them did, frankly.
[00:42:22] Speaker: No.
[00:42:23] Kate Bernot: They drank a Beast on Leash and were like fucking up families.
[00:42:29] Christopher Shepard: That might have happened to a larger degree.
[00:42:31] Speaker 1: Yeah.
[00:42:33] Christopher Shepard: A lot of those core drinkers, I think, went to other brands like Coors Light and Miller Lite, which got record growth this year, right? And the big question facing Molson Coors is to make sure that come April 1st of next year, those numbers aren't negative and that they stay positive, which is still a major question mark. But listen, a lot of the barrels are just leaving the industry. Bud Light is going to be down based on current trends. We're talking about 7 or 8 million barrels of beer lost from a single brand. AB was down almost 10 million barrels for for six months or something like that. And that's the decline of total beer for 10 months of the year, like through October, 10 million barrels. It's the largest barrel decline that Beer Marketer's Insights has tracked in 50 plus years. It's probably the largest single year barrel decline of the beer industry since Prohibition. And so that means that all of those barrels that Bud Light is losing are not being picked up. And that's one of the reasons why the stock market reacted the way that it did to a lot of the third quarter reporting for Molson Coors and Constellation. They were like, what do you mean you're not getting all those barrels? What do you mean your growth isn't through the darn roof? And so that's the real concerning thing. And I, you know, to mention Bart's webinar one more time here, to me, the metric that the beer industry should be like laser focused on is the drafts decline, right? Is the fact that draft beer is an absolute disaster. That's terrible. And nobody really seems to care.
[00:44:22] Kate Bernot: place that beer has like, a lock on like the thing that beer does that nobody else does. And you're letting it slip through your hands.
[00:44:31] Christopher Shepard: And there are tons of reasons for that, right? Like, and I understand some of them, but like, it's a major problem. It's a major problem.
[00:44:40] Zoe Licata: I know we're getting close on time and I'm kind of sorry, but like you said, this is a major problem. Another huge thing is that declining keg sales that Bart mentioned. He said that next year, 2024, we'll see draft beer reach its lowest point since World War II. So the question I had originally written for all of you that we skipped for time, but let's go down the hole here. That sounds bad, but is it actually that big of a problem? So Chris, I'm going to guess that you say yes. And Kate, I would think that you agree. And I see both your points that like this has been beer's lock is draft lines. but not so much lately. It's small, but there's still draft, you know, wine, cocktails. I'm trying to think of where I just was. Oh, I had brunch this weekend at a fancy gastro pub in my town that had Aperol Spritz on tap. So I don't know where I'm going with this, but like the draft lines, they be dying, but some of them are resurrecting with other stuff that's not beer.
[00:45:43] Kate Bernot: And there's new technology that's making keg cocktails that hook into beer lines like DIY. Like bartenders don't have to be making keg cocktails anymore. The minute you can just plug something into those lines at stadiums. Like think about how much beer sales happens at venues just because it's the only thing there. once you start giving people like truly acceptable and again remember when you're at a stadium it does not have to be like mixology quality experience. If you give people something decent, fast, that is like a draft cocktail. I mean, that is volume that I think beer should be extremely concerned about. And yeah, again, there's just like new opportunities for venues in particular to never put beer back through those lines, if they don't want to.
[00:46:39] Christopher Shepard: Yeah, it's the combination of those lines being that were, you know, think of them as shelf placements, right? Like think of them as points of distribution, right? That no one but beer could touch. Now other beverages are touching them and taking them. At the same time that I think also at those sort of event venues, there's a shift to a lot more of those single serve packages. And like beer is selling a bunch of them, but we all know that space is less and less just beer as our discussion began today. I think, to me, the World War II point that Bart made is mind-blowing, because how much did the population grow? How much did the 21-plus population grow between the end of World War II and 2023? So, on a per capita basis— There was a baby boom? Yeah, I was like, there were a few. We have the two largest generations are now over 21 and neither of them existed at that point. So on a per capita basis, the draft number I think becomes even more staggering, right? And I'm sure Bart would be able to whip that up for us in about a half a second in terms of that measurement. But like, that to me is what's really crazy. And that was his sort of other point is that like, a lot of younger consumers just don't like what a draft what like that word just doesn't mean anything to them. And then another point that he and other people have made about this is that at a certain point, then you just start seeing restaurants built without the infrastructure. They won't even serve it. Like, why should I even bother? And then rebuilding that and getting into those accounts and convincing people actually there's real value here becomes that much harder and that much harder.
[00:48:25] Justin Kendall: That's the nightmare scenario.
[00:48:27] Christopher Shepard: Yeah. Well, Happy New Year, folks.
[00:48:30] Zoe Licata: Welcome. Oh, well, let's land this plane on a somewhat cheery note. Was there anything that you saw in Bevalk this year that gave you the warm fuzzies?
[00:48:43] Kate Bernot: I think there was so much anxiety over the summer about what inflation would do for buying and like, consumers are gonna freak out and stop premiumization and everyone's gonna buy like Bush light by the truck full. We didn't see that despite there being like, there's still economic anxiety, like consumer sentiment is not great right now, even though like the economy is fine. It's weird, like the vibes are off. It's not great. But people are still spending money on alcohol. Again, there were pockets of trading down whatever, like this wasn't a completely across the board thing. But people have shown that when they like something, they'll spend money on it. And I think that's encouraging for premium products and for the industry overall. Is that bright?
[00:49:31] Christopher Shepard: Is that good? Yeah, yeah, yeah. No, I think that's a great answer, actually.
[00:49:33] Kate Bernot: People will spend money on booze still?
[00:49:36] Christopher Shepard: That's probably the best answer, honestly. As I sort of thought about, like, what my answer is, again, this sort of feels more personal than, you know, as a reporter, and also feels sort of old, but that the industry and more of the industry, at least at the supplier level, continues to invest in non-alcohol beer. It continues to give me warm and fuzzies. And whether this was my answer last year or the year before, I don't know or whatever, but I love it. I love that one of my local breweries has gone super hard here and been super successful. I love that major brands like Sierra Nevada, like Deschutes, and a number of others are going here. I think there is staying power. as I think about my consumption and I see lots of other people thinking about their consumption, that's a way to continue to drink beer. Even though I love hot waters too, I'm a big hot water fan, but the fact that it's much easier for me to find those things as well is also super lovely to me. So in terms of warm fuzzies for me, maybe not brain fuzzies, but actual heartwarming sort of things.
[00:50:50] Zoe Licata: Great one. I'm going to piggyback on yours because I spent the first half of 2023 not being able to drink alcohol.
[00:50:55] Christopher Shepard: Yeah, you did.
[00:50:56] Zoe Licata: I had usually absolutely no problem finding something that I could drink both at bars, restaurants and breweries. So it was a really nice way to make me feel still included. Zoe.
[00:51:09] Speaker 1: Mine's very specific, but I really liked seeing how Funkytown continued to get recognized this year by people outside of our little circle. It was really awesome. They won Brewing American Dream. They were put on another top 30 list this year for influential brands. They are kicking ass. They're good people. I'm excited to see. It's people who are doing craft beer. but they're finding new consumers and doing it in a really fun and authentic way. And so to see them be rewarded for it has been really cool.
[00:51:46] Christopher Shepard: They're not alone too. There are other versions of that story that are legitimately warm and fuzzy sort of feelings.
[00:51:52] Zoe Licata: Lastly, wrong answers only. What is Tilray's next acquisition target? Anchor brewing. And I think we should leave it there. That's it. That's the one. That's perfect. Well, this has been delightful. Not a sinking ship. A buoyant, if realistic, crew here. Really appreciate all the time you both have given us. We value your friendship and camaraderie. That's the word. That's the word. It's always nice to talk about this stuff with people who do the same stuff that we do. So thank you both for taking the time. And Justin and Joey, thank you so much for trusting me to take us on this weird adventure. I appreciate that. And that's it for this week. Thank you so much to Joe, our one man audio team who is capable of all the wizardry that makes this podcast somewhat listenable and palatable to the ear. Thank you to everybody for listening. If you enjoyed this, we will be back next week with another episode.
