Brewbound Podcast: Why You Shouldn’t Freak Out When You See the Latest Off-Premise Scans

[00:00:00] Justin Kendall: Heading to CBC? Kick things off the day before at Brewbound's meetup at Love City Brewing in Philly, Sunday, April 19th from 5 to 7 p.m. Connect with beer industry leaders, grab a drink, and catch up with Check Brewbound team. It's free to attend and walking distance from the convention center. Head to Brewbound.com slash lovecity.rsvp. And don't forget to catch Check Brewbound team at booth 956 during CBC. We finally lapped the stock up period from last March. How should we be reading off-premise scans going forward? Nielsen IQ's Danelle Kosmal is here to discuss. Hey everyone, welcome to Check Brewbound Podcast. I am Justin Kendall, the editor of Brewbound, and I am joined by the meme queen of beer Twitter, Brewbound reporter, Jessica Infante. How's it going, Jess?

[00:01:03] Jessica Infante: Good. What an honor.

[00:01:04] Justin Kendall: So many honors.

[00:01:06] Jessica Infante: I know. This is really like great for my self-esteem. I'm glad we do this at least twice a month.

[00:01:11] Justin Kendall: I try to bring you up, you know, we got to get up for this podcast. So yeah, it's April and we have hit the March mountain that our friends at Three Tier Beverage warned us about.

[00:01:26] Jessica Infante: Yeah, we have. And since it actually is April Fool's Day, I would like to in advance, thank everybody out there for not submitting April Fool's press releases. I think that was a tradition started last year when the world was crazy. And I really think it should just continue going forward. And technically, it's March 30, as we're recording, but I'm just gonna forge ahead is that we didn't get any joke press releases. And everybody is just kind of forgotten that April Fool's Day exists.

[00:01:52] Justin Kendall: That's a perfect world where we don't get joke press releases. We get enough press releases, folks, and it's hard enough for us to keep up with the volume as is. So adding joke PR to that is no bueno.

[00:02:07] Jessica Infante: And not to be a downer, but most of the time they're not that funny. And sometimes they're hard to tell if they're jokes or not jokes. So let's just let this one go.

[00:02:19] Justin Kendall: Thanks to everybody who didn't submit joke PR.

[00:02:22] Jessica Infante: You guys are stars. Thank you.

[00:02:24] Justin Kendall: It's also opening day. I'm sure Jess is very excited for the return of baseball.

[00:02:30] Jessica Infante: I actually like baseball. I can get down with baseball.

[00:02:33] Justin Kendall: All right.

[00:02:34] Jessica Infante: Yeah. When I first moved to Boston 11 years ago, I actually used to watch the Red Sox pretty regularly, which my husband reminded me of the other night. But that was, you know, before streaming services put any number of trash TV easily accessible to watch at any time. So I'm not really sure if what has caused my decrease in baseball consumption. But I come from a Sox family, which is odd because I am from Yankee territory, but my little brothers were always big Red Sox fans, like from the jump.

[00:03:04] Justin Kendall: They must've liked paying.

[00:03:05] Jessica Infante: I think they did. I think what happened was that my, uh, my dad's sister has always lived in Massachusetts and would buy them baby Red Sox gear, you know, at birth. And my dad wasn't really a Yankee fan. He, he liked the Giants and that was really it for his sports team. So it's kind of what happened.

[00:03:21] Justin Kendall: Well, we all get indoctrinated into something at a young age. That's how I'm an Iowa State Cyclone still to this day. That's how it happens, right?

[00:03:30] Jessica Infante: Yeah, that is how it happens.

[00:03:32] Justin Kendall: So we've got a lot of things happening too at Brewbound.com. You can go back and watch our Frontlines conversation with Buffalo Wild Wings' Jason Murphy. That's up now for subscribers. A lot of good things coming out of that from Jason, plus his email address. So if you want to sell beer to, or hard seltzer, or hard kombucha, or hard coffee, or hard tea, or any number of products to Buffalo Wild Wings, Jason is standing by.

[00:04:00] Jessica Infante: Yeah, and he's particularly keen on hard kombucha. So if you got one of those, definitely hit him up. And cold IPAs.

[00:04:06] Justin Kendall: So excited about the cold IPA or the IPL for that matter.

[00:04:10] Jessica Infante: Not actually an April Fool's Day joke press release, a real thing.

[00:04:15] Justin Kendall: This is true. We also have a Brew Talks coming up on Thursday, May 13th. So stay tuned for that. We've got the lineup just sort of formulating. Sam Calagione from Dogfish Head will be there. Winking Lizards, John Lane will be there. We may have Julie Verati, formerly of more always sort of denizens and now from the Small Business Administration. And we've got others we're working on. But Katie Beale-Brown from Lone River Beverage, one of my favorite up-and-coming companies, maker of Ranch Water. I've got a 12-pack sitting right by my desk, you know, just in case I need it. She'll also be on one of the panels, so stay tuned for more information on that, and that'll be free to everyone. So if you're listening to the podcast, you're not a Brew Balance subscriber, you can come check it out anyway.

[00:05:06] Jessica Infante: Yeah, that'll be fun. We'll have two different panels that will happen live, so you'll be able to submit questions and we can hopefully get them asked and answered in real time for you.

[00:05:14] Justin Kendall: And we've got a lot more shows coming up. We've got a couple of data clubs, one in April with IRI and one in May with Brewers Association Chief Economist Bart Watson. So stay tuned for more on both of those. More podcast episodes, maybe more front lines. We'll see. We're working on some things, you know. Everything's gestating at this point, but let's get to today's show. We're now cycling the one year ago stock up period from the start of the shutdowns and lockdowns driven by the pandemic. The comps are going to be tough moving forward. So joining us to discuss. how we should be reading scan data one year after the stock-up period began. Caused by that pandemic is Danelle Kosmal, VP of the Beverage Alcohol Practice at market research firm Nielsen IQ. Thanks for joining us, Danelle.

[00:06:07] Danelle Kosmal: Thanks, Justin. Jess, thanks so much for having me.

[00:06:10] Justin Kendall: But we're excited to have you here to sort of give us the data 101, because I think we're going to need it after last year. So it's been a year since the stock up period began, leading to a string of $19 billion sales weeks in the off premise from May through September. Comps are going to be extremely tough to cycle. I believe this week, total alcohol was down in dollar sales 20% in comparison to last year. Beer was down 15% cycling all of those tough comps. So as we move forward, how should we be reading scan data?

[00:06:52] Danelle Kosmal: Very carefully, I think. So we really need to be looking at numbers this year in a similar way and with caution that we did last year, knowing that now we're comparing back to a year that no one has ever seen before. And we're still in times that no one has ever experienced before. So while bars and restaurants are beginning to open up in several states, it's 100% open. There are still many areas where it is not 100% open. And even if it is we still have a large set of consumers that may not feel entirely comfortable to go back to bars and restaurants. So we're still in that space where you know off premise is experiencing higher than average sales because that shift is still coming from on premise. combined with year ago comparisons that were unprecedented, that were at rates that we have never seen before, and that we wouldn't come even close to meeting or surpassing. So I think the first thing to answer your question is, when we're looking at these numbers, we're going to start to see a lot of negative numbers over the coming weeks and months. And I think we need to, you know, step back and just put all of that in perspective and put a lot of context around it.

[00:08:17] Jessica Infante: So what do you think is the biggest mistake that people are going to make in trying to decipher the data going from here forward? And how do you think that we as journalists should approach reading this data to avoid, you know, writing stories that are basically saying that the sky is falling?

[00:08:31] Danelle Kosmal: That number one, that the sky isn't falling and for all of us to first not freak out. To always have that perspective that when we're talking about trends like alcohol sales and off-premise down 20%, that that first is just off-premise sales. That's not including what's happening in on-premise. And also addressing the fact that on-premise is really difficult to understand because Some locations haven't opened at all, some locations are fully open, some locations are partially open. So we're never gonna have that apples to apples comparison to really understand fully what's happening across different outlets and on premise. So that first dynamic of on to off premise, and second, really always capturing what those year ago comparisons were. So when we say that alcohol was down for the latest week 20% in off premise channels, understanding down from what, and it was down from alcohol being up 53% in that same week last year in off-premise channels. So again, we're just comparing back to a really unique time and a week of sales that just really skyrocketed.

[00:09:41] Jessica Infante: Does it make more sense to compare numbers today to 2019? Yes, definitely.

[00:09:47] Danelle Kosmal: And that's where we'll continue to include those comparisons and all of the information that we're sharing out. So when you look at alcohol sales for that latest week versus two years ago, alcohol sales in the off-premise are up nearly 40%. So it just goes back to, we're still far outpacing those growth rates of what we typically would be seeing within off-premise channels.

[00:10:13] Justin Kendall: You mentioned the on-premise return and how that's going to be a difficult comparison and not necessarily an apples to apples comparison. Do we have a feel if it's returned to a level enough to see a shift back?

[00:10:28] Danelle Kosmal: So our on-premise partner, CGA, have done a really great job over the past year in talking to consumers regularly and weekly in capturing velocity rates with those restaurants that are open. We are getting a really good idea based on those velocity rates on how often people are going back, drinkers are going back to bars and restaurants, what that pace of sale is at those restaurants that are open and have been open. But like I mentioned, it just goes back to we're still missing that piece of the pie of those bars and restaurants that haven't opened at all. What's the total loss to the industry from those outlets? Numbers are showing some promise and velocity rates for the most part, have been up over the past couple of weeks in on-premise. And I think it just goes back to show, you have one set of consumers that are gonna be really excited to get out and another set of consumers that will probably be a little bit more cautious and venturing out often.

[00:11:27] Jessica Infante: So I know measuring the on-premise right now is a little dicey because some states are open, some states are not open. Almost everybody has some sort of restriction going on, but the on-premise is hard to measure in general, even without any of this. So I know this isn't really your bag necessarily, but what are the best ways to even know what's happening in the on-premise, pandemic or no pandemic?

[00:11:51] Danelle Kosmal: Under normal circumstances, I would say the partnership that we have with CDA and CGA, I'll speak on their behalf and say they have one of the best reads because it is nationally represented. It's based off of Nielsen IQ's view through TDLinks of the entire universe of on-premise, so all outlets, excluding brewpubs, which we would love to include but aren't included. So that's a really good capture typically of what's happening at a national level and really understanding trends. Again, because we don't have those regular reads of all of the closures of bars and restaurants, I think that's gonna be, I think at this point, there isn't necessarily one outlet or one organization that can really capture that.

[00:12:41] Justin Kendall: So we discussed a little bit about the numbers for this week in comparison to last year, and then needing to maybe take a look at 2019 to get some perspective on that. When you look at this week's data, what's standing out to you? What are the points that you are sort of pulling out and saying, here, these are the things that folks need to look at?

[00:13:04] Danelle Kosmal: I mentioned this in one of my recaps last week and I'll continue to reinforce what was growing last year at a faster pace, we'll probably see stronger declines this year. And equally, those segments or channels or markets where we saw slower growth at this time at the beginning of the pandemic, that's where we right now, we won't see as many declines. So when we talk about beer specifically, I think convenience channel is a really great example in understanding across all channels and off-premise. Nearly all channels are declining for beer right now, except for convenience store. And, you know, I think the instinct is to say C-Store's on fire, which is C-Store will always be the most important channel to be your F&B insider. At the same time, when we go back and look at those a year ago comparisons, Sales within the convenience channel for all categories were much slower than other channels, simply because of how people were shopping at the beginning phases of the pandemic. People were going to larger outlets. They were going to club stores, to grocery stores to get as much as they could. They weren't doing those quick one-off trips to small stores like convenience stores. In June, like the end of May and beginning of June last year is when we started to see sales and convenience stores pick up. And so that's something that we should all be prepared for when we start to see those year ago comparisons, because that's when we're gonna start to see slower growth trends and stronger declines within C-store because it just goes back to then we'll start to see some of those comps. So convenience store within channel and actually across all of alcohol is one area that I would just ask everyone to just use caution and understanding interpreting those growth rates.

[00:14:52] Jessica Infante: What are you watching moving forward? You know, what kind of tea leaves are you reading right now?

[00:14:57] Danelle Kosmal: A lot with share to understanding share change, because I think it goes back to, you know, if we use beer as an example, nearly every segment is going to be in decline. And even, you know, if we use 2019 as that benchmark, which is going to be a really great help in understanding which segments or brands are overperforming versus others. 2019 is a great example and a great benchmark for some of those more like total category level and those more established segments. But when we're talking about newer segments and emerging segments, when we're talking about, you know, even hard seltzers and hard teas and kombucha, it's really difficult to use those 2019 comparisons as the benchmark because a lot of those segments or brands were still somewhat new. And so I think understanding the share change and almost week by week change is gonna help us to better understand with like today, what is outperforming versus others in the category. And then the other thing I would say is, I'm sitting here and Nielsen IQ is reporting out week by week information. And now I'm gonna tell you don't pay attention to the week by week information. And one of the reasons that we share that out is because we'd like to provide that context of those trends because people are going to be reading the weekly trends no matter what. So we want to provide some of that context. At the same time, there's so much fluctuation in those year-ago comparisons that things can change pretty drastically from week to week. And so another thing that we'll be looking really closely at is maybe those four-week comparisons and year-to-date comparisons to see overall at 2020 year-to-date, how does that compare to what we were seeing in the beginning of 2020? Again, just as an idea to track especially some of the emerging segments where we think have a lot of potential as we're coming out of the pandemic. And what are some of those emerging segments? Hard seltzer is still going to be on the list, but it's the sub segments of the seltzers now. So it's the lemonade seltzers, it's the iced tea seltzers, maybe some of the more flavor forward seltzers. Hard tea in general has been doing well. So I think we're going to see some continued strong performance with hard tea. Kombucha, while still small, continues to do really well. A lot of new entrants and kombucha players that are kind of mixing up and playing in a few different spaces. And then outside of the beer, F&B, cider category, I think similarly, it's that total ready to drink cocktail and ready to drink product profile. So looking at whether it's spirit-based cocktails or wine-based cocktails, whether it's wine and spirit-based seltzers, a lot of the tequila-based products, the ranch water products, I think we're going to continue to see a lot of growth within those segments. I think they all had some great benefits during the pandemic, just in the way that consumers and drinkers were seeking variety and a way to have an interesting cocktail at home. And I think many of us have just grown accustomed to having that convenience and variety at home.

[00:18:10] Justin Kendall: Any beer products?

[00:18:13] Danelle Kosmal: So products like the, the active lifestyle products prior to the pandemic, we're doing really well within the craft beer space. And so, I mean, McUltra in the super premium space has been doing well, but a lot of me too products that have been following McUltra. And then a lot of products that can easily play in that space in imports and craft that are going to, you know, the 100, 110 calorie range and really tapping into that in great part, the type of lifestyle that a craft drinker often has of having an awareness of health and wellness, being active and wanting to find some balance. And I think some of those active lifestyle brands will continue to provide some good options to drinkers. And then similarly, I would say along the same lines is low elk and no elk. I mean, when we look, I was looking at some of the fastest growing brands and brewers within the craft beer space for the latest week. And the leading craft beer, non-alcoholic product is one of the fastest growers in craft. And so I think we're going to see a lot more of those players and some success in the next year or two.

[00:19:24] Justin Kendall: When do you expect the numbers to sort of normalize? Is this going to be a situation where we have to wait until 2022 to have a fair comparison to 2021 instead of that 21 numbers back to 2019 for a sort of normal, logical look?

[00:19:44] Danelle Kosmal: I think we're going to have to wait probably until 2023, because I think that people's activities in terms of traveling and going out to bars and restaurants won't start to normalize really until the beginning of 2022 depending, assuming that we're, you know, all on track with vaccines. I think that won't even start to normalize until the beginning of 2022. And then at that point, I think we're going to start to understand what that new normal in a sense will be because I think a lot of consumers and drinkers will continue with the drinking at home and kind of all of these new habits and drinking occasions that we've adopted in our homes. So I think It's going to take us a good year or two to figure out what that balance is going to be. How much of the old life of bars and restaurants are we going to go back to? And how much of the new habits that we've learned to embrace in the past year, you know, will continue. And then the number year ago comparisons are going to, I feel like it's going to take like five years to get to figure it out. Oh my God. It's going to take a couple of years, I think.

[00:20:50] Jessica Infante: Yeah. Yeah, you're right. I don't know what I was expecting you to say to this, but that's a long time that we're going to still be talking about this. So, Janelle, if you think back to like a year ago right now, or like last April, I know we had been in pretty close contact back in those days, but back then, what were you personally expecting the pandemic's effect on the alcohol industry to be?

[00:21:15] Danelle Kosmal: I think I didn't know and I think that's it, that so many of us didn't know and we had no idea because none of us had experienced anything like this before. I think we all saw the industry turn upside down and so many suppliers and distributors and retailers move so quickly to try to adapt to it and the work and the strength and the effort that that took, I think is incredible and I think Many of us just never expected the impact to happen in such a really drastic way. Sorry, I just had my wine delivered. And so the FedEx driver was singing as he was dropping it off. So I was very distracted while that was happening.

[00:22:05] Jessica Infante: I mean, that I think is the most post 2020 thing to happen on this podcast.

[00:22:10] Danelle Kosmal: Yeah. And actually, if you guys don't mind, and I feel like this is the only industry that I could do this, I need to go and sign for it. So go for it.

[00:22:21] Jessica Infante: Legally necessary. All right, so Danelle, you just got your e-commerce wine delivery. Yes, I did. Perfect. And we were talking about your expectations. Now, at what point did those things start to change? When did you start to have an idea last year of what the year was going to turn into? What month was that for you?

[00:22:42] Danelle Kosmal: I would say about May. And I think that When I, and it actually was through some of the data that I was looking at, it all started to click both personally and with what I was looking at with data. Because when we started to see trends come in in May, that's when we started to see a shift in French champagne growing, in C store growing, in sparkling wine, outpacing growth of table wine, which we weren't necessarily seeing at the beginning of the pandemic. And I think it was this moment in or days or weeks or whatever in May when I think, you know, consumers and Americans just started to realize that we're going to be in this a lot longer than what we first anticipated. And so because of that, we need to find ways to have celebratory moments through Zoom and whatever else, you know, we need to find this next normal and way that we're going to figure all of this out over the next, you know, months that followed. And I think for me, that's when I saw the shift. And I also think that's when the industry itself really started to understand that bars and restaurants wouldn't be opening. I think initially, we thought they would be closed for just a little bit. And so what does that look like in the coming months? That's when we started to see so much more of the virtual tastings. We started to see a lot more of with craft breweries, not only curbside pickups, but so much more of collaborations with local restaurants and things like that. And so, yeah, I would say in May of last year, that was the time where I started to see the shift of this is going to be a little bit different and a little bit longer than what we all anticipated.

[00:24:24] Jessica Infante: So how long are we going to be talking about COVID-19 in the beer industry? Forever?

[00:24:29] Danelle Kosmal: Maybe that's a question for Dr. Fauci. I don't know. Yeah, I think probably. I mean, Within the alcohol industry, we still talk about the recession and how alcohol reacted to the recession in 2008, 2009. And so I think that we're going to be talking about this for a long, long time, because again, it just goes back to it's nothing that anyone has ever seen before. And I think we're going to start to see shifts that will be a little bit longer impacting in the way that consumers and shoppers are purchasing alcohol and e-commerce is probably one of the most obvious ways. And I think there will be a consumer demand that the industry will have to meet.

[00:25:16] Justin Kendall: Do you think that's going to be as sticky as firms like Drizzly think it's going to be?

[00:25:21] Danelle Kosmal: I would guess that Drizzly is probably going to be extremely optimistic in their view of it, as they should be. I do think it's probably an optimistic view at the same time. If people can figure out how to order huge bags of dog food and have that delivered, and that can be one of the leading e-comm categories prior to the pandemic, we should be able to figure out how people can easily pick up a 12-pack of beer at their grocery click and collect.

[00:25:51] Justin Kendall: Well, I mean, you just proved the point too with your wine delivery. Or we'll just say it was beer. We'll pretend it was beer. So let's switch gears a little bit to another topic that we will potentially be discussing for the rest of our lives. There's an endless string of new hard seltzer brands, whether it's a line extension from Truly or White Claw or Bud Light for that matter. Molson Coors with Vizzy and then there's a whole bunch of new hard seltzers out there from New Belgium and Spindrift and I guess I could just keep going and going and going. Are these products bringing new consumers to the segment or is this the same drinker pool that we're pulling from? And I guess the reason I ask is You see this glut of new products and they're all going to be fighting for the same shelf space. And I wonder if they're going to be fighting for the same consumer or if there is a new consumer out there to be had for these products.

[00:26:50] Danelle Kosmal: So when we looked up through the end of 2020, we did a lot of consumer work to understand just that. And I think I've, I've shared with you guys, and I talked to you guys last year, the work that we did to understand specifically in COVID, if, you know, the months of March and April, we found that half of nearly half of hard seltzer drinkers were new. So from what we found was even in their early months of the pandemic, seltzers were still bringing in a lot of new buyers. When we look through the rest of 2020, seltzer buyers doubled and in the same way that they doubled in 2019. So it continues to work off of a strong base and then building on that strong base and bringing in new buyers not new to alcohol but new to seltzer. I do think however You know, we haven't reached that saturation point, but I think we will soon. And I think the past couple of weeks, when we look across some of the more traditional Seltzer brands and how they've been performing, we have started to see declines compared to last year. And again, putting that into perspective, you know, we're working off of comps from last year where sales for Seltzer were just ridiculous. They were really strong. So working with really difficult comps, At the same time, it's crucial for those large existing seltzer brands that have been around for a couple of years. It's absolutely crucial for them to continue to find ways to excite drinkers and continue to bring them back to their portfolio. And I think what Truly is doing right now is a good example of that because with their lemonade and iced tea, mixes, they've been some of the fastest growing brands within seltzer. But also in the past couple of weeks, the other fastest growing brands are those brands that are new. And again, you know, they're fastest growing because they don't have any volume to compare back to last year. But I think it does speak to its new products that are getting consumers excited about the seltzer category. And so, you know, we will be reaching a point soon where those large existing brands are going to be in a different place than they have been in the past couple of years and really need to find that consumer loyalty in a way that they hadn't needed to in the past.

[00:29:14] Jessica Infante: Do you think there's a risk of burning out the consumer?

[00:29:16] Danelle Kosmal: I don't. I think there is a point that the consumer can look at a shelf and feel very overwhelmed with the options there. However, The products that are being launched right now still are interesting new flavors or interesting new formats or liquid in a way that seltzers haven't seen before. And the consumers will always be wanting that variety and something new. There just needs to be that balance of variety and something new along with that core base or flagship product that will bring the consumer back to either to the seltzer segment or to that particular brand.

[00:30:01] Justin Kendall: That sounds a little bit like craft.

[00:30:03] Danelle Kosmal: It does. And I think two years ago, I used to get questions of, will Celters be the next craft? And my answer was immediately no. And my answer would still be no, that it's nowhere at that point in terms of the number of SKUs that enter the shelf, in terms of the local brands that are playing. However, there are a lot more local brands within Celters. I will continue to say that I think that's one of the areas where there is opportunity because When you look regionally, and these are some things that I shared with you guys at Brewbond Live in December too, when you look regionally and you remove those top national seltzer brands, it's a very different picture of what the country looks like in each of the regions of those next regional players. We can get to a point where it's a small scale version of craft, right? Of that need for the core flagship brand along with the something new.

[00:31:02] Justin Kendall: There's also been a lot of comparisons of hard seltzer being compared to light beer or energy drinks. I don't know if that's apt or anything that you see within where, I think it was what, two lead brands with a very, very long tail of smaller producers.

[00:31:20] Danelle Kosmal: Yeah, and I think the first couple of years of hard seltzers, energy drinks could be some type of comparison. In the past year, I think we've had enough new entrants within the hard seltzer space to create some pretty different dynamics that yes, there are still some of the two-ish big players within seltzers, but at the same time, you have so many other large brands that have entered from big suppliers in the past year. along with so many other brands that have launched and entered from smaller players, that it's finding a bit of that balance. And I don't think you have that dynamic anymore of just a couple of brands that are completely dominating the space.

[00:32:02] Jessica Infante: Janelle, do you think there's like possibly enough shelf space at retail to accommodate all these new entrants? And what segments are they going to be stealing that space from?

[00:32:10] Danelle Kosmal: Yeah, I mean, we're talking about seltzers right now, but part of that conversation also needs to include ready-to-drink spirit cocktails, ready-to-drink wine cocktails, because in a lot of ways, those products are being launched so that they can be sold in the same stores where malt-based seltzers or, you know, seltzers made by beer suppliers can also be sold. competitive landscape in terms of shelf space is the biggest concern. When we looked at some data last year to understand SKUs that were being sold across beer, wine and spirits, where we saw most of the decline in the number of SKUs was within the beer category and specifically within craft beer. And so the assumption there is that in great part, the ready to drink products and the seltzers will be, you know, taking space from craft beer. And I think that will continue to happen. And I think it also just places increasing pressure on craft brewers to find the right story for their product on shelf.

[00:33:14] Jessica Infante: Does Nielsen IQ differentiate between hard seltzers made with malt from those that are spirits-based? Is that something that we can see teased out?

[00:33:22] Danelle Kosmal: We differentiate on seltzers that are made from beer suppliers, mostly because our beer suppliers' clients want to see that within the beer category. And then spirits-based, any products that are specifically called out as a spirits-based seltzer or a vodka-based seltzer. So we do differentiate between those. We also look across them as a whole, because in great part, we think that consumers are not differentiating them.

[00:33:51] Jessica Infante: That's literally the next question on our list. Thank you. What kind of runway do you think there is to ready-to-drink spirits this year? Will we be thinking of ready-to-drink canned cocktails the way that we were thinking of hard seltzers last year? Definitely.

[00:34:05] Danelle Kosmal: First, there's so much that spirit suppliers can do with ready-to-drink cocktails, you have that natural variety option just from the base alcohol that you have. And in the work that we've done in the past, we've seen a large percentage of the spirit ready-to-drink cocktails are vodka-based. I think there's a ton of opportunity for tequila-based cocktails, which we've already seen more launches this year, and I think we'll see a lot more in the rest of 2021 and 2022. And then I think there's a lot of interesting opportunities for American whiskey brands, for bourbon, for rum-based cocktails, I mean, for gin-based cocktails. In terms of meeting that consumer need for variety and experience, there are a lot of opportunities there.

[00:34:51] Justin Kendall: What are the biggest opportunities for craft that you're seeing? Is it still all in the IPA hazy section?

[00:34:58] Danelle Kosmal: Yeah, I looked recently at styles and the craft beer styles that are driving most of the growth and hazy IPA is the number one. I mean, I think year to date, hazy IPAs grew in share by like almost 1.6 share points. Sour styles, we're still doing really well. Triple double IPAs and then American Weeds and that is really driven by one brand and one launch last year in particular. With that said, I think there are probably going to be others that are going to launch and follow that type of innovation.

[00:35:34] Justin Kendall: All right, we got a final final before we let you go. If you were to leave our audience with one piece of advice on reading the numbers from here on out, what would that be?

[00:35:45] Danelle Kosmal: Read with caution. Understand what was happening last year at this time. find that balance of what was happening last year and include that context in understanding what's happening right now.

[00:36:02] Justin Kendall: And maybe don't panic.

[00:36:04] Danelle Kosmal: Don't panic. And I get it. It's hard when we see numbers of like declines of 20% and we're gonna continue to see declines for a while, but it just goes back to we're comparing to a year that no one has ever seen before.

[00:36:19] Justin Kendall: How many fires are you gonna have to put out? A lot.

[00:36:24] Danelle Kosmal: A lot. And I think that's going to be our job for, you know, the next couple of weeks, especially of just helping everybody in the industry to interpret those numbers. But I will say that's nothing compared to the fires that suppliers and distributors and retailers have had to put out in the past year. And it just goes back to, I continue to say how impressed I've been with the industry and what so many people in the industry have been able to do and accomplish and shift and change and become flexible with. because immense challenges that people had to meet and a lot of people surviving and still getting people excited about beer, which is a good thing.

[00:37:05] Justin Kendall: Thanks for doing this, Danelle. We really needed the 101 and hopefully our audience took a lot away from it.

[00:37:12] Danelle Kosmal: Thank you guys for the opportunity. I think that, you know, I can write as much as possible for people to make sure they're, you know, including that in the way that they're interpreting, but you're the experts in writing about it. That just the opportunity to have the one-on-one conversation and kind of talk through it, I think really helps a lot. So thank you.

[00:37:35] Justin Kendall: All right, thanks to Danelle for joining us today. And we're gonna hit some headlines before we get out of here. Jess, what do we got going on at Brewbound.com for subscribers?

[00:37:46] Jessica Infante: So at brewmound.com for subscribers, we have a story about alcohol e-commerce. The penetration rate of people ordering alcohol on the internet more than tripled in 2020. This story came out of a webinar hosted by Drizzly that featured their COO, Kathy Lewenberg, and Constellation Brands e-commerce national accounts manager, Kristen Terhorst. These guys were joined by a co-owner of a retailer here in Massachusetts, and the three of them talked about the status of alcohol e-commerce for retailers one year after the pandemic. So alcohol e-commerce more than tripled, growing from 1%, so what that means is 1% of households that participate in the economy had been exposed and used e-commerce to purchase alcohol. That number grew to almost 4% during the pandemic, which is pretty massive.

[00:38:35] Justin Kendall: One of the takeaways that you had was the amount of window shopping that consumers use Drizzly for.

[00:38:42] Jessica Infante: about 40% of people go on Drizzly in advance of a trip to a brick and mortar retail store. So people are using it for reconnaissance, I guess, to see, you know, I think it's a good way to know if like, let's say like you have a very specific brand of ranch water in mind and you don't want to spend your whole day driving around Greater Boston finding said ranch water. You can go on Drizzly and see what stores have it listed in their inventory.

[00:39:09] Justin Kendall: That's kind of a fascinating use case for Drizly. Not only do you get the benefit of maybe getting some of that delivery, you also might get somebody in your actual store and then you can maybe expand that basket ring.

[00:39:25] Jessica Infante: Great bonus for the retailers using Drizly. I don't know what it does for Drizly.

[00:39:31] Justin Kendall: I think it gets more people on the site. It never hurts to sort of build that out. So I imagine more retailers, that can be attractive.

[00:39:41] Jessica Infante: Definitely. I mean, Uber still thought Drizly was worth $1.1 billion. So clearly not a deterrent to them.

[00:39:47] Justin Kendall: Exactly. The point I was going to make is you got your $1.1 billion from Uber, so you're good.

[00:39:55] Jessica Infante: Drizzly grew 350% last year over the year before. And that growth came from a few different areas. The biggest one was the fact that they just got new users, because people had to stay home and couldn't go out, but still wanted to consume the alcohol. But they also doubled the number of retailers using the platform, more than doubled. They started 2020 with about 1,900 retailers on the platform, and they ended the year with almost 4,500.

[00:40:22] Justin Kendall: Another story that we tracked in the last week was the U.S. Department of Justice has sort of shrugged off concerns over Craft Brew Alliance's sale of Kona in Hawaii to private equity firm PD Brewing. There were questions raised by the Hawaii Attorney General as well as Maui Brewing Company, which one of the really fascinating notes to come out of that story was Maui saying that they had made several offers above what PV Brewing had paid for Kona's operations in Hawaii to take it all and try and build some super craft brewery in Hawaii. But I guess they were rebuffed

[00:41:06] Jessica Infante: Well, they were, but there's also some connections between PV Brewing, CBA, and Anheuser-Busch. You want to go with the buyer you know very well, because one of the principles of PV Brewing is who?

[00:41:20] Justin Kendall: Dave Peacock, who is a former executive at Anheuser-Busch, and I believe he's now running the Schnucks, I don't know how you say that exactly, market in St. Louis. I believe he's still doing that. But he also hooked up with Vantage Partners in Kansas, one of my own old stomping grounds. Another story that you probably heard us all flustered and running out the door on the last podcast to start reporting. And the pile on just continued that day.

[00:41:51] Jessica Infante: That was a wild day, a wild day of beer industry news.

[00:41:56] Justin Kendall: It really was. And one of the stories that we didn't tell you about on the podcast was an investor group reached a deal to take a 100% ownership stake of Contract Brewer, Copacker City Brewing. And the consortium also acquired the Irwindale Brewery from Pabst. Well, that consortium is majority owned by, I believe it's Blue Ribbon Partners. And I don't think you need to be a detective to figure out who Blue Ribbon Partners is. That's Eugene Kasper, owner of Pabst. So one of the things that came out of that was TSG Consumer Partners has divested its stake in Pabst. The investor group includes Charles Bank Capital Partners and Oak Tree Capital Management. According to Moody's, both of those will be minority owners in this new business and majority owner will be Blue Ribbon Partners.

[00:43:03] Jessica Infante: And that Irwindale Brewery has been a bit of a hot potato in the past year or so. It had been owned by Molson Coors. They sold it to Pabst, and Pabst, I don't think, had it a year before announcing that it would sell it to Citi.

[00:43:18] Justin Kendall: Yeah, and there's always been the city Pabst connection because Pabst was going to move production from Molson Coors. That was very contentious, and they were going to shift all of that, I believe, by 2024 to Citi. So there's the relationship between Citi and Pabst, and then Pabst agreed to acquire the Irwindale Brewery, and now all the pieces are sort of finally coming together on these respective deals, and there will be the Irwindale Brew Yard in California, producing a number of products, likely a whole lot of hard seltzer.

[00:43:58] Jessica Infante: Definitely. And Citi doesn't only just produce Pabst. They have a bunch of other clients, including Boston Beer, who really relies on them to produce a lot of Truly.

[00:44:06] Justin Kendall: Yes. And there's a lot of different Truly coming out, as we know. We found out about Truly Punch and they were beat to the punch. Oh, I hate myself so much. By Veve, but of course, and that's Braxton Brewing Company in Kentucky. They make Veve hard seltzer, but they were the. I think the first one that we saw out with a punch product, I'm probably wrong. Somebody's going to email us and tell us no, we were making punch hard seltzer first, which is fine. Everybody can make whatever they want. But Boston Beer is going hard this summer with Truly Punch. I got to talk to Don Lane and they see that as a an opportunity equal to lemonade, which was their huge innovation last year, and iced tea, which they already launched in January of this year. So we've got three, four, five horses now running at the same time. I don't know.

[00:45:04] Jessica Infante: It's crazy. Basically anything you drank and liked as a small child is now available as a hard seltzer.

[00:45:11] Justin Kendall: There's some nostalgia at play here. And that's really what we should be looking for is what were we drinking as children? We're going to have a Mountain Dew flavored truthfully sooner or later or what? I don't know.

[00:45:26] Jessica Infante: I'm actually surprised we haven't seen that. That might be like the next wave.

[00:45:31] Justin Kendall: I don't know.

[00:45:33] Jessica Infante: Stewart's, which is a soda brand in definitely the Northeast, but I think kind of centralized in the New York metropolitan area where I'm from, they're launching their own hard seltzer, similar to the way that Sonic has paired up with Coop Aleworks to make a hard, hard seltzer. So if anybody wants to resurrect Fruitopia strawberry passion and wants, makes that a hard seltzer, I'm on board.

[00:45:55] Justin Kendall: Another big hard seltzer brand that is already in market from a major craft brewer is New Belgium's Fruit Smash. And I am told that this is their huge bet for 2021. It's the biggest investment behind a brand launch in the company's history. All of New Belgium's history, biggest brand investment is going behind a hard seltzer. And they believe that this could be as big as Voodoo Ranger.

[00:46:25] Jessica Infante: You can see that they're definitely taking learnings from Voodoo Ranger and putting them into Fruit Smash in terms of the colors and the packaging and the art and the illustration and creating a really fun, playful brand. So we'll see what happens.

[00:46:37] Justin Kendall: That is exactly what they're doing. They've also hooked up with the Chad Goes Deep comedy team for a series of videos and commercials, infomercials or fake infomercials. If you know the Chad Goes Deep team, they are the ones who crashed the San Clemente City Council meeting and requested a 12 foot statue of Fast and Furious star, the late Paul Walker, be erected on a pier to I don't know, Wardoff Sharks or something of that matter. But this is where that brand is going and talking to them, they wanted to inject some personality, some attitude into the hard seltzer space. And if you look at hard seltzer, a lot of the brands are very similar. White Can, you know, very, Serious.

[00:47:31] Jessica Infante: Aspirational.

[00:47:33] Justin Kendall: Yes.

[00:47:34] Jessica Infante: Everyone else it's more about creating a lifestyle than having a voice.

[00:47:38] Justin Kendall: Right. And on the beer side, one last story that will tell you about here in a little bit of detail is Kentucky has legalized self distribution and has reformed franchise law for small brewers. You were on that story. You talked to the executive director of the Kentucky Guild. What did you find out there?

[00:48:00] Jessica Infante: So brewers making fewer than 50,000 barrels will now be able to distribute up to 2,500 barrels themselves. Virtually all of the breweries in Kentucky are under this 50,000 barrel threshold. So this will help out pretty much all of Kentucky's craft brewers. The only business entity in the state with a brewer's license making more than that each year is Brown Foreman, the spirits giant who produces a line of Jack Daniels flavored FMBs. So they would be excluded technically. interesting callback, they actually contract a lot of that through PEPS. So the bill, in addition to allowing for small amounts of self-distro, allows some franchise law adjustments. Brewers making fewer than 50,000 barrels, again, almost all the breweries in the state, that make up less than 5% of their wholesalers' gross sales are going to be able to terminate relationships after giving 45 days notice and buying back their brand rights. So those are pretty standard things in franchise law agreements that we've seen. You have to be able to buy back the rights to sell your brand from the wholesaler to compensate them in some way for losing the ability to sell your brand. One really interesting tidbit in this situation, though, is that if a brewer and a wholesaler can't agree on what those brand rights are worth, they have to enlist an arbitrator from the American Arbitration Association. That's normal. But in Kentucky, arbitration hearings have to take place in a city that has at least 20,000 people living in it. And in Kentucky, that's fewer than 20 cities, and it needs to be a city closest to the wholesaler. I would love to know what the negotiating that went on between the wholesalers and the brewers to make this actually get codified into law.

[00:49:40] Justin Kendall: you can't just be arbitrating these things in a city of, or a town of, you know, 500 or a thousand people.

[00:49:50] Jessica Infante: Not 10,000 people, no. 20,000 people or GTFO with your arbitration.

[00:49:58] Justin Kendall: I feel bad for Madisonville. I think I looked up Madisonville, Kentucky will not be getting arbitration hearings because they have 19,500 or so people. So Madisonville, you are out.

[00:50:12] Jessica Infante: But if you launch some campaign to convince people to come live there, you could be in.

[00:50:16] Justin Kendall: That's true. And I might be wrong on Madisonville. Maybe they had a population boom recently. I'm just going off some old census data. So apologies, Madisonville, if you actually can have these arbitration hearings and congratulations on that. Other stories at Brewbound.com that are available for subscribers. Stone Brewing has hired the former Lagunitas sales VP Tom McReavy to lead sales and as well as Stone Distributing. He was there during the previous regime and as you all probably know by now Maria Stipp, the former CEO of Lagunitas, is now the CEO of Stone. So a reunion of sorts. Also, Scout Distribution has added statewide operations in Arizona and they've picked up Renn House Brewing and also taken several of their San Diego and Orange County clients with them. Finally, Ballast Point is pushing forward with a San Francisco brew pub that Constellation Brands had planned to open up for the brand, but had scrapped those plans. And they've also permanently closed their Chicago location. They're going to focus all their operations in California. So just some of the headlines, stories that you can read at Brewbound.com if you're a subscriber. If you're not a subscriber, come join us. We have monthly subscription options for you now. So barrier to entry is fairly low at this point. What are you waiting for? Subscribe. Yay! That's our show. Thanks to Danelle for hanging out with us. Thanks to our one-man audio team, Joe. Please like, subscribe, and review wherever you listen to podcasts. That helps us out. And thanks for listening. We will be back next week.