Brewbound Podcast: What’s Up – and What’s Down – in Beverage Alcohol to Start 2023?

[00:00:00] Jessen Fonte: Next on the Brewbound podcast, we look at what's up and what's down in Bev Alk. Hello and welcome to the Brewbound podcast. My name is Justin Kendall and I'm the editor of Brewbound and I'm joined by Jessen Fonte, the managing editor of Brewbound and Brewbound reporter extraordinaire, Zoe Licata. Good to see you both.

[00:00:30] Zoe Licata: Hello. Hi, great to be here.

[00:00:33] Jessen Fonte: On this week's podcast, Jess, you're chatting with Stephanie Roatis from Three Tier Beverages on the early year Bev Out trends. What's the big thing coming out of that?

[00:00:44] Zoe Licata: So not terribly surprising, the number one item on Stephanie's list of things that were up was non-alcoholic beer coming off a very strong Dry January. So we talked about that quite a bit, how that segment shaping up. how it's developing out of big players, craft players, really interesting stuff right now. Another segment that's growing is Imperial Cider, which really stems from the TTP's decision, what, like two years ago to change standards of fill, which allowed cider makers to put higher ABV products into smaller containers. Those are doing really well for some craft and regional cider producers.

[00:01:24] Jessen Fonte: That's something that we chatted about or Zoe chatted about during Brewbound Live too. So that's out there. We've got all kinds of Dry January content that's sort of up on the website now. We've got an interview with two bottle shop owners, Boisson and Sarah Money, a video that insiders can watch. We've got your interview with the folks in Oklahoma on their Dry January Brewery Taproom event. So all the Dry January content that anybody could ever want.

[00:01:55] Zoe Licata: Yeah, and I think this is probably going to be the end of our Dry January coverage, but certainly not the end of our non-alcohol beer coverage because that definitely is here to stay for a while.

[00:02:05] Jessen Fonte: Yeah. Quick plugs for this week. Please like, rate, and review this podcast if you like it. Subscribe so you can follow along to all the episodes. We've got a whole backlog of episodes that you can listen to. A whole archive of episodes is probably the way to put it. We're going to be hitting the road in a few weeks. The whole team is going to the California Crab Brewers Association's Summit in Sacramento next month, March 20 to the 22nd. We'll be recording podcasts. I'll be moderating a tap talk with the folks at Wild Fields. We're doing live podcasting on the floor of the Expo in the, I think it's called the Brewbound Studio. So you can check us out there. We've got things lined up with Russian River and Society. We'll be hitting a lot of the talks, the parties, all of that in Sacramento. So look for us there. And then BrewTalks is returning at the Craft Brewers Conference, first one of the year. That's set for May 7th. I believe it's at Nashville Underground. Bleep this out if I am wrong, but we'll be doing an afternoon event there. confirmed so far for that Dogfish Head co-founder Sam Calagione and Athletic Brewing co-founder Bill Shufelt. So more low and no alcohol talk on the way, but also we're going to dive into the higher ABV items as well because Those are the two growth areas that we've seen in the category so far this year and throughout last year. So more to come on that, but, uh, let's get to some of the headlines from the last week or so. And the big deal that came out was Drake's merging with Bear Republic. Although this looks like Drake's is buying the assets of Bear Republic, everything but the brewery.

[00:03:56] Zoe Licata: Yeah, I saw this one pop up on Twitter late one evening here on the West Coast while I was trying to watch TV. And that's what I get for looking at two screens at the same time. But yeah, this is certainly not going to be the last. It's the first Craft on Craft deal of 2023 from what I can tell, but it's definitely not going to be the last. And we saw quite a few deals like this last year. But two, I wouldn't quite call them OG California craft breweries, but certainly, you know, elder siblings of the bunch. Drake's goes back to the late 80s. I want to say they started in 89 as Lin's Brewing Company. Bear Republic goes back to the mid 90s. So these two brands have been instrumental in helping create the California craft beer industry to be what it is today. Unfortunately, it's not all that surprising. You know, we've seen Bear Republic go through what would look to be some pretty difficult times. They've had to close their oldest taproom in Healdsburg, which is, you know, in wine country up in Northern California due to rising rents. And I remember talking to CEO and co-founder Rich Norgrove back then. He basically explained to me that the community had changed and instead of being a town where young families could live and thrive, it really was turning into something quite different where people are buying up vacation homes. And I'm sorry to say I once have been somebody who rented an Airbnb in Napa, Perhaps I am a small part of this problem. But yeah, that happened before COVID. And just a few months ago, they announced that their last remaining taproom at their Cloverfield Brewery was going to be closing for the winter, which to me made sense. You know, if you're in a tourist town, it's hard to stay open and make that business in the tourist off season. So that's what they were doing. But then this news broke last week. So Drake's, their volume is actually smaller than Bear Republic's. What's interesting to me about Bear Republic is that Racer 5, their flagship IPA, is 92% of their volume. That is huge. And, you know, Racer 5, I feel like when I first moved to Boston in 2010, you know, it was everywhere. It was my, you know, then boyfriend, now husband's, one of his favorite beers, drank a lot of it. And I am not sure if they've pulled out of mass, but you just don't see it. I've never seen it ever. Yeah. Yeah.

[00:06:13] Jessen Fonte: I remember us getting shipments at the office in Watertown at the time. Of Racer 5? Yeah. Yeah.

[00:06:19] Zoe Licata: I mean, a lot's gone on in New England IPAs since those days, but this is a great example of, you know, things are changing in this industry around us all the time. There's a tough balance between chasing all of the trends, keeping up with everything that happens, and sticking with something that's tried and true and works, and you got to figure out where you are on that spectrum. So the combination would make them a pretty big brewery, I want to say in the top 40 largest. They're combined volumes about 70,000 barrels based on the BA's info from 2021. And we haven't seen 2022 numbers yet, so we're not really sure. I'd have to assume those numbers are smaller, but we'll find out soon enough when BART releases all that data.

[00:07:05] Jessen Fonte: Yeah, I'd say at least the top 50 brewery combined is probably what we're looking at here. And good for them because I don't want to say it's a way out because Rich is going to be working with Drake's and they're bringing along their brewmaster. But I mean, things are definitely going to be different because they're still doing all production at Drake's eventually.

[00:07:29] Zoe Licata: Right, and not sure what happens to the rest of the Bear Republic staff either. So if you're in Northern California and you're looking to hire, might be some people on the market.

[00:07:39] Jessen Fonte: Absolutely. And like you said at the top, this is not the end. This is just the first deal of this kind that we're going to see this year, next year, every year, going forward pretty much.

[00:07:52] Zoe Licata: We saw so much of this last year, you know, Harpoon, Old Mass Bay slash Harpoon and Long Trail Otter Creek. What else guys? Fulberg and Made by the Water.

[00:08:02] Jessen Fonte: The Harpoon and Long Trail and Otter Creek is probably the closest approximation to this deal that I can think of. Almost. I mean, Harpoon being much larger.

[00:08:14] Zoe Licata: Right, right. Yeah, well, I mean, you know, like Scofflaw and Bearded Iris are planning on building out their Indie Brew platform. We'll see what becomes of that. But yeah, I mean, safety in numbers.

[00:08:29] Jessen Fonte: Yeah. Also a lot of numbers last week with Boston Beer Company. Uh, we had a bonanza of news from them and I guess it starts with Truly, which is getting a makeover. So basically what they said before they even issued earnings last week was we did this reformulation last year and the brand awareness on it was not so great, which I blame on fruit flies.

[00:09:00] Tier Beverages: I think that's fair. Yeah, that's a little, a little accurate, at least.

[00:09:04] Jessen Fonte: When fruit flies are the star of your branding campaign.

[00:09:08] Zoe Licata: I get it. I mean, look, like guys, we're journalists. What's one of the first things we get told? Show, don't tell. And how better to show that your product now has fruit juice by showing how attractive it is to fruit flies. But the other thing here is the first rule of marketing is like, please make your product look attractive.

[00:09:26] Jessen Fonte: You go from Dua Lipa to fruit flies.

[00:09:30] Zoe Licata: They're both levitating.

[00:09:32] Jessen Fonte: Yeah. We should just end the show right there because I think we've hit the high point of this episode.

[00:09:37] Zoe Licata: Can't top that. No, but like it was gross. Gross, gross, gross. Yeah. Yeah. I mean, other stuff happening for Truly Vodka Soda is the new name of the former not very long lived Truly Vodka Seltzer. which is not to say that product's going away. It's not going away at all. It's just getting a little tweak in its name, new packaging and two new variety packs. And I think early returns on that show that it's doing all right. So that's good. I even tried it. Yeah. Zoe, have you tried it?

[00:10:10] Tier Beverages: I have tried one of the flavors.

[00:10:12] Jessen Fonte: We tried it at NBWA, right?

[00:10:14] Tier Beverages: Yes. Yes. The blackberry lemon one, which is now going to be in a different variety pack. with their new mix around of things. It was alright. Can't hold too much against it. It's very carbonated.

[00:10:30] Jessen Fonte: I'm glad you're not holding any grudges.

[00:10:34] Tier Beverages: Those kind of products are either you like it or you don't like it. And so it's like something as simple as like, do you like super carbonated or not is going to turn you off from it because there's so many other options, which is something they talked about on the call was how crowded the RTD market is right now. And Dave Berwick had a lot of interesting comments on RTDs.

[00:10:56] Jessen Fonte: That quote was sort of a jaw dropper for me.

[00:10:59] Tier Beverages: He acknowledged that even though the segment itself is smaller than hard seltzers, it has way more SKUs and brands and is way more crowded. So it's a more competitive space. He did say, though, that he believes the growth of RTDs is probably three quarters driven by retailers jumping on it and only a quarter driven by consumers actually asking for it. And then said, this is a direct quote, he said, this wave could come crashing down a lot faster than hard seltzer, in my opinion. I think it's been propped up by wishful thinking, end quote. So they're excited for their spirits based RTD, which will include tequila soon, but also believe that it could come crashing down very quickly. So a little bit of mixed messaging there.

[00:11:54] Jessen Fonte: When you're bringing three variety packs to a party.

[00:11:58] Tier Beverages: Yes. And their argument for the additional variety packs was you can't stand out in this credit space as a brand with just one offering or one variety pack offering. So they're going to give more options. Whether that is an effective strategy or not, time will tell.

[00:12:15] Zoe Licata: I could see that because that will give you more facings on shelves and in coolers, which makes you easier to see and easier to buy. But I like Dave. I think he's a nice person. I don't think I agree with his statement about a wave crashing down here harder and faster, because that's just not what I see. My friends drink a ton of this stuff, a ton of vodka sodas, and they say it's because they, for whatever reason, think the vodka means it is a more genuine, authentic product.

[00:12:49] Jessen Fonte: And this comes as Boston Beer, their execs are projecting that the hard seltzer segment is going to decline 10 to 15% this year. So hard seltzer in decline. We know that not all of those drinkers are going to RTDs, but some of them are.

[00:13:07] Tier Beverages: And Dave pointed that out too. He said that because they think of spirit-based RTDs as kind of two categories. There's the super high ABV ones like a Cutwater Spirits or even Boston Beer's own Dogfish Headkin Cocktails. And then there are the RTDs that are more about refreshment and a little bit of that better for you messaging. And that has those same occasions and same consumers as a hard seltzer. And those are the ones that are kind of have that overlap and are taking a little bit from the hard seltzer segment.

[00:13:37] Jessen Fonte: Yeah. And their priorities, they said, are fixing truly, basically, or stemming the losses and supporting the double-digit growth of Twisted Tea. And that's another product that we haven't talked about. That's the brand that's driving the growth for them. That's the lion's share of their growth. It's the brand that, you know, really should be getting a lot of this focus. But I guess this is the Q4, you know, full year earnings call. So they have to lay out the plan of how they're going to fix Truly. I get it to a degree.

[00:14:10] Zoe Licata: Yeah. I mean, I feel like if this were a family, Truly is, you know, the former honor student who is somehow struggling and T is the kid you don't have to worry about who does great in school, great in activities and just doesn't really need the extra guidance. I worry that the beer products were, you know, when I used to work there and I used to work on the Sam Adams brand, it always kind of felt like Sam Adams was a troubled teenager that somehow had 15 parents and everybody had different ideas on how to raise them because making decisions could be difficult because everybody cared so much and felt so strongly and had so many ideas. But I almost think if the beer brands were kids, they're, you know, flown the coop out of the house and no one's even thinking about them.

[00:14:56] Tier Beverages: Yeah, they're like the middle child that everyone forgot about. Yeah. There was very, very little conversation on that call about any of the beer brands. There was a small, just talking about how Sam Adams just was down, but they're going to focus on their seasonal brands. They talked about how they're bringing a new non-elk beer in, but that was like one sentence. They talked about the canned cocktails for Dogfish Head, not really about any of the beers. There was very, very little core beer conversation. which is a lot different from I feel like most of the other earnings call conversations we have heard of late from other companies.

[00:15:36] Jessen Fonte: Yep. And for all the hype around Hard Mountain Dew, basically they said it's not going to be a huge volume contributor this year. They're going to add four more states in the coming months. So they'll be up to 15 and they may get to 25 to 30 by the end of 2023. But that's all up to, you know, state regulations and Blue Cloud, the distributor getting licensed in those states and able to move the product. It is funny to me that there are so many so much talk about this hard Mountain Dew product and legislation even in places like Virginia to legislate where it is placed on shelf in stores. And yet it's still not like a huge volume thing. You know, it's kind of like a boogeyman at the moment.

[00:16:26] Zoe Licata: Yeah.

[00:16:27] Jessen Fonte: But this brings us back to non-alcoholic beer. And I guess, you know, we are gonna talk a lot about non-alcoholic beer on this podcast. And in the same week that Athletic had a cover story in Forbes, was featured in videos very prominently, non-alcoholic beer was really an afterthought on this call for Boston Beer, a presumably craft brewing company, as we're always told, beer in the middle name. And like you both laid out, beer was really given cursory mentions on this call. And coming off a gold medal win at the Great American Beer Festival, and don't at me, I know that medals don't mean anything, they don't sell beer, but they just medaled for just the haze. We just came off the strongest January for non-alcoholic beer sales in a while, up double digits in both volume and dollars. And where are you at, Boston Beer?

[00:17:30] Zoe Licata: Well, they are releasing a new non-alcoholic product called Gold Rush. It is a golden Ale, I believe. I can't see if it's an ale or a lager. But they touted this new product's arrival in the market with a photo that like, I don't know, was taken on an iPhone 6.

[00:17:53] Jessen Fonte: It looked like I took it, which means it was poorly done. Dude.

[00:17:57] Zoe Licata: It's like three six packs in a blank tray. not even a branded tray, and somebody wearing a hoodie and jeans and sneakers is holding it, looks like this is outside somebody's apartment in Boston. And it's just like, you have all the resources at your disposal. You have designers and photographers, and somebody's got to have a better iPhone than at least I do. Why is this the way that you're announcing this new product? And it's like out on Facebook. I haven't checked their other socials, but that's where I saw it. Cause somebody sent it to me and was like, look at this. Like I can't imagine launching a new product this way. And here's the thing, like that beer is really good. Yeah. You know, Zoe and I got to try it at the annual business plan meeting in the fall and it's delicious. Yeah.

[00:18:43] Tier Beverages: I liked it a lot.

[00:18:44] Zoe Licata: There's a way to not look overproduced. That's not quote unquote craft, but there's also like not half-assing it.

[00:18:53] Jessen Fonte: Well, what is craft even? That's a whole other conversation. That's a whole other conversation. Yeah, but you know, my point is with the non-alcoholic beer, you're looking for good news, basically. You're a company that's looking for good news, and you do have good news in twisted tea, and you presumably could have good news in non-alcoholic beer. And I get it. You only have so many priorities, but if you've got one month where you could make non-alcoholic beer a priority, We just had that month and it just kind of feels like here's gold rush.

[00:19:29] Zoe Licata: This is basically like they were on a surfboard and there's a giant wave that's going to bring them to shore and they just jumped off. Like they've got the gold medal win. They've got a really successful Dry January at their back and they've got this delicious new product and they're like, nah, nevermind.

[00:19:46] Tier Beverages: Yeah, it feels almost like they have, because non-alcoholic beer has had all this growth, that they feel like, oh, you don't have to put as much into marketing a non-alcoholic beer as you used to, where you have to kind of convince the consumer that this is a product worth trying. And I don't think we're quite at that point yet where you can just release it like any other new beer. You still have to put a little extra effort behind it because people are still figuring out how any beer is going to fit into their consumption.

[00:20:21] Jessen Fonte: I don't get it. You can create more occasions. You can create more money, I guess, but you got probably the biggest sales force in craft, wouldn't you say?

[00:20:31] Zoe Licata: Oh, easily.

[00:20:32] Jessen Fonte: Yeah. Yeah.

[00:20:33] Zoe Licata: And yeah, I mean, there are a bunch of other priorities and, you know, one to two Sam Adams SKUs I'm sure are very far down the list beyond. Truly in tea and dogfish cocktails, but this was the time.

[00:20:45] Jessen Fonte: their seasonal is the flagship at this point, whatever the seasonal is at the point, you know?

[00:20:50] Zoe Licata: And that's been that way forever.

[00:20:52] Jessen Fonte: And yeah, you've got to push remastered Boston Logger. I get it. But I don't know. Felt like a missed opportunity. That's just me. Also in the news last week, Coca-Cola is they're in Tier Beverages alcohol game. They see white space and we're going to be talking a whole lot more about them in the future. That's just coming off their earnings. There's not a whole lot more to say there, but they're interested. They're in this thing and they have the money to do it and make it work.

[00:21:25] Zoe Licata: The New York Times had a piece today, I want to say, or yesterday about, you know, big soda companies moving into beverage alcohol. And I did not read it because I am not a subscriber, but I did see some chatter about it on Twitter. And the way that they had framed it on Twitter, I could see they said like, Coca-Cola is making, and like, that's... And not to be a stickler, but we've been asked to not quite phrase it that way, because that's not what's happening. So it's always interesting to me when, you know, stuff from our world spills over into regular media. Here we go. I mean, it's basically a point about big sodas, alcohol, drinks, worry health experts is the headline.

[00:22:09] Jessen Fonte: And I feel like this is a warning flare that Nadine Starwat from Bernstein Autonomous threw out there recently, too, is basically with these cross branded products, you're running a real risk of having a Joe Camel moment. And I totally get that. Yeah. Same guy that said, you know, we, we talk a lot about hard Mountain Dew, even though it's like a low, low amount of volume.

[00:22:33] Zoe Licata: It's like 1% of the hard seltzer in the country, but it's only in like what, 11 states. But yeah, I mean like, like the casual consumer is not going to understand TTB licenses and license agreements and the three-tier system. I mean, I wouldn't expect them to. Shit, I wish I didn't know half of that stuff, but here we all are.

[00:22:55] Jessen Fonte: A couple of things from the Brewers Association also from the last week, revenue for the BA top $23 million. That was the first time that they've topped the $20 million mark in a couple of years, but they're not back to pre-pandemic levels in like I want to say like 25 to $29 million range that they were getting previously. Membership revenue from dues continues to decline. It's at its lowest point since 2016. So definitely a reason that they're raising dues and they've done it already this year. And events more than doubled. So they're back on track there, but they're going to have one less event this year. And that, you know, that's also a major expense, though. Putting on Sabre is probably not cheap.

[00:23:47] Zoe Licata: I'm sure putting on savers is not cheap. Putting on savers seems like a logistical nightmare. Very cool to attend, but I cannot imagine what it's like making that many teeny tiny little bikes for that many people. But yeah, even, you know, GABF now has a saver-esque component to it, but GABF last year was smaller due to construction at the Colorado Convention Center. So, you know, so we'd never been, but I think, you know, Justin, to you and me, it certainly felt smaller than the past. hopefully they get that space back.

[00:24:19] Jessen Fonte: Yeah. The booth space was way smaller. I mean, you used to see these massive booths and end caps, but it was very dialed back.

[00:24:28] Zoe Licata: Yeah. And not a lot of big sponsored areas too. You know, like there used to be like, like Buffalo Wild Wings would have like a pavilion or like Red Robin and they would have... Or Jameson. Clearly I'm just naming the food places, but yeah.

[00:24:40] Jessen Fonte: which is the whole other issue of allowing Jameson in. But yeah. Hey, everybody. It's a spirits company.

[00:24:47] Zoe Licata: They're just here to be our friends. Don't worry about it. Want to partner with them? Can make a barrel aged beer in their barrels. Nothing else to see here.

[00:24:55] Jessen Fonte: Yeah, this is fine. I'll just drink my coffee in my burning house. Zoe, you have a story too on the U.S. hop supply and our friend Bart Watson, the chief economist from the Brewers Association, called it unsustainable.

[00:25:13] Tier Beverages: Yeah, I don't think the conversation was surprising because this is what we've been hearing for a little while now, but hop production globally and in the US has just been outpacing what people are actually using. And that's a mix of, you know, beer being down and also people being more economic in their production and things. But Bart said, we can't keep going on like this. There's going to be a point where growers and suppliers, they're already overwhelmed with the hop stock that they have. They can't just keep things in their warehouses and it's going to result in a reduction in hop acreage. So Bart kind of gave a warning to specifically craft producers, don't get too comfortable in the spot you're in with thinking you can always get whatever hops you want whenever you want. You know, he said, like, the brewery down the street isn't going to have some extra for you if you run out or something anymore. Things are going to get a little tighter. And he didn't give a specific timeline of when that will happen, but he said it's basically inevitable.

[00:26:18] Jessen Fonte: Not much to add there, but just watch out.

[00:26:22] Tier Beverages: I'm sure we'll be, once it happens, well, there'll be a lot more to talk about and see how everyone kind of has to, to figure things out, but everyone just be aware that that is a incoming problem.

[00:26:37] Jessen Fonte: Yep. And Jess, you have a new product roundup there. And one of those products you spoke into existence, which is Noda's collaboration with Cheerwine for Cheerwine Ale.

[00:26:47] Zoe Licata: Yeah, I mean, I can't take full credit. I'm sure this was in the works much longer than I tweeted about it. But yeah, Cheerweon is a soda that's based in the Carolinas. It's like a cherry soda, not like a cherry cola. It's like cherry. I did a research project on it in graduate school. So that's why I know about it. But it just seemed like an obvious path when other North Carolina non-alcoholic beverages were crossing over. So that's one of them. We've got a few others. Rheingeis has Beer for Humans and Easy Hot Bale. That's going to be the center of their philanthropic work. Deschutes introducing new Tropical Fresh IPA that they were kind enough to send us packages of. I'm very excited about the sunglasses that came with it. Revolution's got Infinity Hero, which is a new year round, kind of sitting square in the middle between West Coast and East Coast styles. Founders has a new variety pack that's all day themed. Three Floyds is making Zombie Ice, which is joining its other zombie sibling, Zombie Dust. And then El Segundo, who brews the beer with Mr. Stone Cold Steve Austin, is making a beer with 311, making them now the official craft brewer of all of my aging male millennial friends' favorite things on earth. So, good stuff. I do want to call out one thing that we did see in tasting notes for several of these packages. Some of these beers are being called really drinkable and they're like 8% alcohol. No, stop this. That is aggressive. 8% alcohol is not crushable.

[00:28:22] Tier Beverages: We even saw that when Fruit Force came out too. They said this was like a drinkable beer.

[00:28:30] Jessen Fonte: I think we need a moratorium on the word drinkable, period. What's your cutoff for drinkable, ABV wise?

[00:28:41] Zoe Licata: I personally am old and a pansy, so I would call it like 5%.

[00:28:45] Tier Beverages: Yeah, I think it's probably skewed a little higher now that there are so many super high ABV beers, but I certainly don't think like anything six or above, I wouldn't put as drinkable. Which is also a weird term because like, okay, I don't think we even know what that means anymore. But if two is kind of maxing you out, I don't think it can be considered drinkable.

[00:29:13] Jessen Fonte: One is maxing me out, like they're throwing these things in 19, two ounce or... Well, yeah, that's the other thing too, is that these are also being put in like larger formats.

[00:29:23] Tier Beverages: And so it's, I don't know.

[00:29:26] Zoe Licata: That just seems like the table stakes of making a beverage. Like, ah, it's drinkable.

[00:29:32] Tier Beverages: Right. Are you saying your other beers are undrinkable?

[00:29:35] Zoe Licata: Right. Like, well, it won't kill you. Like, OK, great.

[00:29:39] Jessen Fonte: Yeah.

[00:29:40] Zoe Licata: Let's do the English language a little bit better, everybody.

[00:29:42] Jessen Fonte: Let's maybe put drinkable on the list of words that we use sparingly, maybe, or more judiciously.

[00:29:53] Zoe Licata: You know, as a service to our community, I will put together a list of words I find more enticing. We will share that next week. Beautiful.

[00:30:02] Jessen Fonte: I look forward to it. Also looking forward to your interview with Stephanie Roatis from Three Tier Beverages. So let's get to that.

[00:30:11] Zoe Licata: As you've probably noticed, one of our favorite things to do at Brewbound is have our much more numbers-inclined friends join us to break down industry data. So once a quarter, Stephanie Roatis from Three Tier Beverages is gonna stop by the podcast to share Three Tier's Three Up, Three Down report, which is exclusively available to Brewbound Insiders every quarter. So Stephanie, what's up? How are you? Hi, Jess. Good, how are you? I'm good, thanks. I'm so glad we're doing this because you put so much work into these reports. And I mean, everybody, Brew and Insiders can read them at Brewbound.com, but I thought it would be helpful for you and me to talk through the numbers a little bit to just flush things out a little bit more so everybody has a better sense of what's going on out there. And what I also really love about what you do with Three Up Three Down is this is more of a holistic approach to all of Bev Alk. And I know we're super beer focused here. That's really what we do. But you always do a great job at making sure we've got a lot of beer stuff, but there's also like, you know, stuff from wine and spirits. So, and this report's no different. So why don't you walk us through the three up for this current report and tell us what time period this report's covering.

[00:31:19] Stephanie Roatis: Yeah, definitely. So most of the data in the report is with latest 13 weeks through the 28th of January. We normally do quarterly data, which is 13 weeks, but I wanted to include Dry January in that measurement because that is the main three up that I'm going to talk about. So the first of the three up is that Dry January had its most popular year yet in 2023. Non-alcoholic beer grew almost 40%, 38.1% in the last January compared to Dry January 2022, while total beer was only up roughly 8%. And so, you know, your non-alcoholic craft and non-alcoholic import beer are roughly the same size right now. Wow. Yeah, and Non-ALK Craft, actually like the leader of its athletic, right? And they are at the helm, leading the charge in a lot of those innovations. We saw Keurig Dr. Pepper give them a huge investment earlier this year to lead product innovation in the Non-ALK space. So no surprise that Non-ALK Craft is up in January, and then Non-ALK Import is also up and brought in 9.2 million.

[00:32:27] Zoe Licata: Yeah, and who were some of the biggest brands in that Non-ALK Import segment?

[00:32:31] Stephanie Roatis: Within non-alc import, we had Heineken and we had Paul Anner as well. Heineken was one of the big non-alc imports. And then beyond just import also, Anheuser-Busch was one of the big domestic premium and domestic super premium leaders of non-alc. I know that earlier this year, last, they pledged to make 20% of their beer portfolio non-alcoholic, and they're still working towards that number.

[00:32:54] Zoe Licata: Wow, you know, I just had a Heineken Zero Zero last night, actually. Super close to the real thing. What else are you seeing out there as it pertains to the non-alcoholic part of the world?

[00:33:04] Stephanie Roatis: I'm seeing other Dry January instances, especially in on-premise at the restaurants. I myself have noticed that at bars and restaurants, there's more non-alcohol on tap, not just previously an athletic or a Heineken can like I saw before. And then, you know, for example, online alcoholic searches that contained non-alcoholic or alcohol-free rose 19% last year. And so, you know, we are seeing that in instances like dry bar events. nothing's left brewing. I know that was mentioned last week before on brew bound. They're now hosting a weekly dry bar event called not a drop of alcohol. And so similar to what we've seen at the larger scale with occasion driven consumption, we're seeing that happen in the non elk space as well. People are finding different ways to consume their non alcoholic beverages than previously just strictly Dry January.

[00:33:56] Zoe Licata: Cool, awesome. Well, I know we've covered Dry January extensively here at Brewdown, so let's move on to your number two in the up category, because this one's really interesting. It's basically the exact opposite side of the coin.

[00:34:11] Stephanie Roatis: It's interesting because in craft in the last year, we've seen that Imperials, which are 8% or higher and non elk are the two largest growing segments, followed by hop water, which is essentially with an ABV less than 2%. And now we're seeing that insider as well. So the insider scoop, but, um, is that within Cider, Imperial is the growth segment that's flooding right now. So Cider had a super transformative 2022. We saw a lot of the dollar shift into regional players and move away from companies like Ace and Redd. And Cider experienced a volume decline of about 8 percent last year but regional cider saw their off-premise dollars grow 22 points since 2018. So now they're making up the regional players largely in the Pacific Northwest making up about 54 percent of the category. What does that mean? Well, with all this large extra revenue that's coming in, they're having more space to product and item innovate. And so we've seen them move from bottles into cans, and we've also seen them experiment more with flavors. And one consequence of that is this high ABV imperial ciders. So They're coming from top cider houses, and now four of the top 20 ciders he used are Imperials. So they're boasting a high ABV, very strong in flavor, and their dollar sales grew 140% compared to the total category of 5% in the last quarter.

[00:35:43] Zoe Licata: Wow, yeah, I know a couple of years ago now, the TTB changed their standards of fill for cider, and I assume wine as well, but I covered it from the cider angle and allows them to put these Tier Beverages into smaller packages now. So it's crazy to see how regulatory things like that can play out in the data. So glad you brought this one up. Zoe's covered cider quite a bit lately. She went to CiderCon earlier this month. So she's got all sorts of stories coming out of the cider segment lately. Your third thing in the up category is tequila. So real quick, what's new in tequila?

[00:36:21] Stephanie Roatis: Yeah, so Tequila and Reposado, sorry, Tequila's Blanco and Reposado segments are growing within Tequila. So we saw Tequila grow over 9% in the last quarter versus a year ago, while total spirits were just up about 3%. Wow. And so that's excluding Tequila-based RTDs, which just judging on a survey of my close friend groups, like that's all that they drink, right? So excluding Tequila-based RTDs, which are now about 20% of total RTDs, Tequila as a standalone spirit grew the 9%. And so, you know, according to Discus and IWSR, tequila and mezcal contributed to a third of spirits 3.8 billion in off-premise revenue growth. And so, you know, looking specifically at Blanco and Reposado, which were the largest growing segments, the largest dollar gainers were existing huge tequila giants. So we saw Jose Cuervo, Casamigos, Cornitos, and Espolon take a lot more dollar share this year than they already had. Interestingly enough, however, one brand entered the top 50 dollar ranking in tequilas across both Reposado and Blanco, and that was Kevin Hart's tequila. And so that's Grand Corps Amino's Reposado. So that grew 2.3 mil in the last 13 weeks alone, and it was a completely new product last year. And so looking back to, I think, the Drizzly 2022 consumer report, You know, they said that a lot of consumers are looking to celebrity owned liquor brands. And this is just another instance where even if you don't previously have the distribution for it, if you have the name behind it, you're going to see a huge growth. I'm thinking. I know it's not tequila, but Finnish long drink is endorsed by like Miles Teller and Braxton Berrios and all these professional athletes. And that's a drink that's based on the Olympic Games. So having a name behind your brand will instantly give you a ton of growth.

[00:38:24] Zoe Licata: Yeah, it's funny that that never really caught on in beer. You know, there's a few celebrities that get involved in beer brands, but nowhere near what we see in spirits. Okay, that was a great breakdown of the things that are up, but if things are up, things are also gonna be down. So not surprisingly, the number one segment listed in the down column is gonna be hard seltzer. So tell us what's going on there.

[00:38:47] Stephanie Roatis: Yeah, so I'm a huge... Optimists. So even when I write the three downs I'm like thinking about you know yeah hard seltzers down. But these companies are really smart and they've got a lot of analytics backing them up. So they're going to innovate as they need to to change at the time. So hard seltzers 13 week dollars are down 10 percent versus total beer and malts up 6%. A lot of flavored malt beverage, F&Bs and then craft beers are driving the surge in total beer, but hard seltzer is down. And officially now F&Bs sell more per year than hard seltzer. So we've seen it surpass seltzer as a category. And so, you know, as hard seltzer is down, what we're seeing is a lot of these big manufacturers are creeping into RTDs and F&Bs to still maintain their total dollar share of total beer or of total alcohol. And so, for example, you know, I saw that Bud Light Seltzer is releasing a limited edition cocktail hour this April, and it's a variety pack that's still going to be malt-based, but is going to taste like a cocktail. So they're trying to attract that consumer and keep them engaged with the Bud Light brand portfolio. And then Topo Chico is now going to release Topo Chico Spirited sometime this year, which will essentially have the same flavors, but will be made with real tequila instead of malt based. And so last example, like I didn't even know that it existed, but Dos Equis Margarita is now a cocktail RTD, and that's a beer brand that I've been drinking for years as an import, right? So we're seeing hard seltzer companies and beer companies move into RTDs to make up for losses they're seeing elsewhere.

[00:40:29] Zoe Licata: Yeah, it's funny to me how this has been so cyclical. You know, like hard seltzers were invented, what, like, I don't know, Trulium White Claw came out in 2016. And some of the thinking behind those brands was, well, we see that vodka soda is really popular on the on-premise. How can we create something that fills that need for our consumers? So, you know, vodka soda begat these, you know, sugar and malt brew based hard seltzers. which then kind of introduced consumers to the idea of spirits-based cocktails in a can. And now you have both Truly and White Claw launching their own vodka-based versions of the same drink. Time is a flat circle and it makes you, it'll give you a headache if you think about it too much. Right, exactly. But yeah, I'm with you in being a bit of an optimist about hard seltzer. I don't think it's going anywhere, but it's not going to be what it was 2020, 2021 was when it started to decline. So we'll see what happens. Right. Your second item in the down category here is, is craft. So what's going on?

[00:41:34] Stephanie Roatis: Right. So I had mentioned earlier with the cider, right, that cider's imperial growth is following the imperial growth within beer. So within craft beer, imperial and hazy imperial IPAs are both growing a ton, but the rest of the category is flat and beer and malt is up 6% in the latest 13 weeks. So IPAs and then American wheats, grew, but the other 13 style groups dropped anywhere between 1 million to 5.8 million per style. So that's your Sours, some of your other seasonal ales that we've seen. And so eight of the top 10 styles dropped in dollar sales. Essentially, the only two that grew were IPAs and American Wheats. And so Pilsner's, Hopwaters, and IPAs covered most of the losses in craft beer, which is why it looks like it's flat, but we're expecting more cuts within those dropping categories well into 2023 as companies look to shift their production lines to things like hazy IPAs, imperial IPAs, non-alcoholic offerings, or as I've seen, you know, personally, when I go to breweries, a lot of them are starting to offer their own seltzers. Deep Ellum is a good example of that. I'm based out in Dallas. Breweries are trying to innovate quickly on a dime. I'm a little bit skeptical of changing what they're tried and true to just try to keep up with category innovations. But for now, it looks like IPAs, pilsners, and hot water are kind of picking up that slack.

[00:43:08] Zoe Licata: Okay. I mean, not surprising that really tracks with everything that we've been seeing lately. So interesting. And on the last item we've got here is traditional wine. What's up there?

[00:43:22] Stephanie Roatis: We covered this in one of the last podcasts that we did, but table wine, $10 and under is actually down. And it's lost a point of dollar share in table wine as people move to more pricey, pricier options. more expensive alternatives. And the reason for that goes back to the premiumization and the occasion-based drinking. People are willing to pay more for wine on-premise than they are off-premise. But as people limit and experiment more across categories and try to limit staying within one category, we're finding that people do go to more expensive wine options. And then another reason why table wine is down is because wine-based cocktails, similar to your seltzers, your F&Bs, your RTDs, any of your innovation segments, those wine-based cocktails are surging and taking away dollar share. So wine-based cocktails is now the fourth largest wine segment, and it's up 30% in the latest 13 weeks and is now $112 million per quarter. So what I'm interested to see moving forward, not knowing as much about wine production as I do about beer, is are these traditional table wine companies able to pivot and easily offer these wine-based cocktails, or are they going to stick to what they know?

[00:44:39] Zoe Licata: Great questions. Yeah, I know far more about beer than I do about wine, so with you on that. Well, Steph, this has been awesome. Great three up, three down. Can't wait to see what we get in the next quarter, but before we let you go, where can people find Tier Beverages?

[00:44:54] Stephanie Roatis: You can find us at three the number to Tier Beverages.com. But the easiest way to get to us is to go follow us on LinkedIn. That's where we interact with a lot of our clients, repost what a lot of our partners are doing. And just generally, that's the easiest way to get in touch with us.

[00:45:11] Zoe Licata: Terrific. Well, thank you so much. Thank you.

[00:45:15] Jessen Fonte: And that's our show for this week. Thanks to Jess and Zoe for all their hard work. Thanks to our one man audio team, Joe, and thanks to all of you for listening. We'll be back next week.