Brewbound Podcast: World of Beer Bankruptcy, Bud Light 1 Year After the Boycott

[00:00:11] Justin Kendall: Hello and welcome to the Brewbound Podcast. I'm Justin Kendall. I'm Jess Infante. And we've got a lot of news to talk about this week. But first, how are you doing, Jess?

[00:00:22] Jess Infante: I think I'm good. I'm just back from a week of vacation that ended with a seven hour car ride and a puking baby. So I think I'm still out of sorts. But how are you?

[00:00:33] Justin Kendall: I'm rattled. We're about 72 hours, maybe 48 hours. I can't even remember at this point into a new dog. Oh, that's right. We have a new puppy named Coffee Bean, and she's five months old and she's like an Australian cattle dog. And she is very energetic. very puppy-ish, and we're trying to keep her on a schedule, and I've been waking up at like 5.15 a.m., which isn't far off from what I normally do, but we're 5.15 up and out the door to potty and then, you know, feed her quick and then get her on an hour walk to try and wear her out.

[00:01:13] Jess Infante: That is smart. You don't sound like married to the name Coffee Bean.

[00:01:18] Justin Kendall: That's what they gave her, but I'm all for it. I am all for it because I've become a big coffee drinker in the last few years.

[00:01:28] Jess Infante: Well, she is also waking you up at the appropriate time.

[00:01:31] Justin Kendall: Exactly. Maybe that's why they named her that, was a 5 a.m. wake-up call. Require a lot of coffee beans.

[00:01:38] Jess Infante: True, true, true. Well, very exciting times.

[00:01:41] Justin Kendall: Yeah, she's a rescue and she was set for euthanasia, but now she has a home.

[00:01:47] Jess Infante: Now she's living the life.

[00:01:48] Justin Kendall: Yeah. It's taken me, you know, eight months to not get over Dusty, but, you know, be able to maybe allow a new dog in. So here we are.

[00:02:00] Jess Infante: Yay. So exciting.

[00:02:02] Justin Kendall: Yeah. What else is exciting is this podcast, I guess. So please like and subscribe to it. That helps us out. We appreciate it whenever somebody does that. And we've also got an exciting lineup coming to Brewbound Live in December. December 11th and 12th in Marina del Rey, California. We're going to have conversations on the future of draft beer. We're going to talk about Generation Z. We're going to get into the state of the business with NIQ and three-tier beverages. We're going to talk about creating experiences with Russian River. Natalie Churiluso is going to join us for a keynote speech. And we've got a whole lot more that's coming.

[00:02:44] Jess Infante: Yeah, this lineup is already super strong and we're still so many months out. So there's so much time left to go. I know we'll add more, but I'm really excited for everybody that we've got joining us already. So it should be very cool.

[00:02:56] Justin Kendall: I don't want to panic you, but it has occurred to me that we're nearly on like four months away, which is a lot of time, but not a lot of time.

[00:03:08] Jess Infante: Yeah, well, I mean, the four months between us and that are always like the busiest in the beer industry. So yeah, you're right, it'll go fast. I don't love this because our conference ends one week to the day before my next very big, very scary birthday. So I am trying to put this out of my own brain, but we'll be all right.

[00:03:30] Justin Kendall: Totally understandable. It's gonna be fun.

[00:03:32] Jess Infante: Yeah. 39 plus one is great, I hear. So we'll see.

[00:03:36] Justin Kendall: Yeah. And two plus one is, I guess, great, which will be my daughter's birthday is like two days before the conference. So we'll see how that goes. Yeah. Let's get into some of the news and let's start with World of Beer. They filed for Chapter 11 bankruptcy protection. You dug through the documents. Give us the quick take on, you know, what's happening here.

[00:04:02] Jess Infante: So World of Beer is interesting. They never got to be as big as say a yard house. I don't think like at one point they had 71 locations, which is a lot, but I don't think they got as much of the the glamour and shine as some of the other bigger. craft heavy chains did. However, the loss, and they've said they will be closing some locations, like the loss of any on-premise outlet that's dedicated to craft beer, I think is noteworthy because the on-premise really is where craft meets new drinkers all the time. And having fewer channels to do that, I think is not great for craft brewers. But what's happening here is interesting. World of Beer is a maybe a slightly different format than other companies in that it's about half franchise and half company owned. So, well, Files for Bankruptcy was the parent company and 11 other affiliates, about eight of which were other locations. Half of those locations have already closed. These are all company owned locations, not franchises. The company, in short, they owe $25.6 million to their bank, Synovus Bank. Synovus obviously is going to take first priority in repayment as they're the only secured creditor. Then about $4 million to other unsecured creditors and their stuff, like the assets across the involved outlets, which inventory, cash, leasehold improvements, furniture, fixtures, computers, POS systems, barn, kitchen equipment, all that stuff's at about $20 million. So they've got quite a delta here. But they've said their plan is to focus on the locations that are either cash neutral or doing well, close the locations that are not doing well. They have already closed half the locations that are included in this filing. So they're on their way to hopefully trying to right the ship. What I found really interesting here was that in mid-2020, they took out an $8 million loan to help fund construction at three new locations because they believe the pandemic woes were behind them. And what sweet summer children they were at that time. I'm sure everybody kind of, you know, maybe we all felt that way back then. I just got to remember it, but that was something that jumped out at me and doing all the reporting was that was a bad call. And those three locations closed already. And most of them are in the Southeast. The chain is headquartered in Tampa, Florida. And we'll see. I mean, I know you and Zoe really dug into the mid-year reports last week, but something that I had found when I was covering Lester Jones, MBWA Chief Economist and VP of Analytics, his presentation with FinTech, which is a distributor invoicing platform, he called out the fact that the on-premise is beginning to rebound. And Gavin Hattersley said the same thing this morning on the Molson Coors earnings call. On-premise trends are faring a little better than off-premise trends. So maybe this World of Beer blip is a little bit of an anomaly, But hard to say, the restaurant business is having a tough go at things.

[00:06:54] Justin Kendall: Yeah, I mean, we have been reporting on this since the pandemic challenges and they just keep coming. We've seen it with other chains, such as like Flying Saucer closing locations. It's tougher on premise and it's something we'll get into with Lester Jones and Jennifer Hawk during Brewbound Live is the challenges draft has faced, what the future is looking like and how we get out of this funk.

[00:07:23] Jess Infante: At Funk, it really is. And the restaurant business has always been hard, so that's nothing new. But yeah, I don't know. Have you ever been to a World of Beer?

[00:07:29] Justin Kendall: I haven't been to a World of Beer. I used to live by a Flying Saucer. I know they're two different things, but.

[00:07:34] Jess Infante: Yeah, and Flying Saucer, I feel like doesn't really, didn't come out to my part of the world. But we did have one World of Beer in Cambridge, Mass, right across the river from Boston, which I'd only been to once. It's the launching point for another bar crawl. And I like went to look it up because hadn't really heard anything lately and they stayed open for like almost eight years, which is something. I became more aware of it when one of my buddies from Boston Beer left Boston Beer to go take a job at World of Beer, but he has since left and now does boat marketing, which is very cool.

[00:08:10] Justin Kendall: Boat marketing?

[00:08:11] Jess Infante: Yeah.

[00:08:14] Justin Kendall: Maybe it could be a third space.

[00:08:16] Jess Infante: A third space, drinking on boats. I'm never opposed to that.

[00:08:23] Justin Kendall: Let's get into the other big news and earning season continues. And last week it was Anheuser-Busch and Ball. This week it's Molson Coors. And the common thread among these three. is the lapping of the conservative-led boycott of Bud Light. We are one year removed from that, so these Q2 earnings are definitely seeing the results and how things are shaking out after the boycott, and it all started because Anheuser-Busch ran a promotion with Dylan Mulvaney, who is a social media influencer who is transgender, So where does AB stand a year later in the U S their shipments and depletions declined single digits minus 2.7% and 4.1% respectively in Q2. And their revenue is down 0.6%. And in Q2, 2023, they were down 15% in shipments, 14% in depletions and revenue declined 10 and a half percent. So that was right in the thick of it. I mean, the double digits didn't continue, but you know, that's single digit declines on top of double digit declines. So, so a lot of declines happening in the U.S. for them, all pretty much due to Bud Light. And now they are rebalancing their portfolio. And part of that is with Mic Ultra and Bud Light being sort of I don't know, they're big growth brands.

[00:10:08] Jess Infante: That's really interesting because I also feel like we kind of see that everywhere, right? Like the dichotomy of pricing above premium, which you have, well, McAltra is what super premium and then below premium in the Bud Light. It's funny that that's the way that they've chosen to go, but that, that makes sense. We see that in a lot of places, like, especially with ABV, you know, the high end is growing and non elk is growing. Yeah, I mean, the mid-culture stuff you see playing out everywhere. I feel like the logo pops up a lot more places that I'm assuming they paid a pretty penny for. When I was on vacation last week with some extended family members hanging out at my mom's house, people were asking me like, hey, I've seen a lot of like celebrities who don't usually do product placement having Bud Light on social media. I was like, they're paying for that.

[00:10:56] Justin Kendall: Yeah, without a doubt.

[00:10:57] Jess Infante: Without even knowing specifically what was being talked about, I was like, they're definitely paying for that. Like they're putting the money behind Bud Light, but they're putting it other places too.

[00:11:07] Justin Kendall: And they said during the call that the Bud Light investment was really gonna ramp up in the back half of the year. We saw that start to play out this week with the launch of their, I think it's what was easy to enjoy 2.0, their Bud Light NFL campaign that's rolling out. And they have team cans and all that. We mentioned it in the Insider version of our newsletter this week. The preseason of the NFL is kicking off this week. NFL is a big part of the strategy. Folds of Honor, big part of the strategy. The UFC will be a piece of this strategy, although they didn't mention that on the call or they barely mentioned it on the call if they did at all, if I remember right.

[00:11:53] Jess Infante: What were the vibes in the end on those questions?

[00:11:55] Justin Kendall: I think, you know, just trying to understand where things are. And it's funny because there were two earnings calls that day. It was Anheuser-Busch very early in the morning. Rude. And then mid-morning, it was Ball, the aluminum can maker. And there were a lot of beer questions during the ball call after AB. And of course, AB is a huge ball client. And they talked about, without like naming names, but it was pretty obvious. And, you know, after you've sat through the AB call that they were talking about Mic Ultra and Bud Light being the brands that are growing and how, you know, those are helping offset some of the declines of Bud Light. But it was one of those things where I've listened to enough ball calls at this point that the theme keeps coming up that pricing is off on premium light beers. And Dan Fisher, the chairman and CEO of Ball, just keeps saying it over and over again. I mean, I think even. sort of half-joked about having to say it over and over, but he said, you know, premium light beer will have to do something on pricing and different behavioral patterns will have to kick in at some point. Like, there's the frustration there that you can tell. He thinks that price needs to come down on these beers for it to help drive volume.

[00:13:23] Jess Infante: And he's been beating this drum for years, right?

[00:13:27] Justin Kendall: Yeah, it feels like at this point, right?

[00:13:29] Jess Infante: I mean, good luck to you in the red sex on this, Dan, but I don't know who died and made you the king of beer. It's pretty funny to me that he's like the king of beer. Funny, funny. Sorry, I was not.

[00:13:43] Justin Kendall: I see what you did there.

[00:13:44] Jess Infante: Yeah, that was not intentional. I mean, I get it, like, you know, they're clients and that's who buys their product.

[00:13:51] Justin Kendall: I mean, they're the beneficiary of volume gain.

[00:13:54] Jess Infante: Right.

[00:13:55] Justin Kendall: That's the thing that's sagging here. And it's something that we'll get into. I think it's next week with NIQ is what's going on here between, you know, the price and what's happening with dollars versus volume and, you know, have these price increases helped offset the volume declines that we're seeing, you know, I think that what they've sort of put out there so far is that you're beginning to see the dollars come down.

[00:14:25] Jess Infante: Yeah, and this is funny because it really helps you see the entire industry as an ecosystem where everything is connected. Because like our boy Dan here is saying, beer prices are too high. People are not buying it in volume because it is expensive, but consumers are buying the more expensive beers, which the beer companies like, which got talked about a lot in the Molson Coors call this morning, which we'll get into in a minute. this is bad news for Ball. But another thing that keeps coming up that Lester Jones says on pretty much every time I've heard him speak lately, is that beer keeps pace with inflation. And when you think about who Lester's general constituency is, like this is good news. Lester is, you know, works at the organization that represents the nation's wholesalers who are selling to retailers. And that crew loves to hear that beer keeps price with inflation. more so than Wine or Spirits does, because it means more money for retailers, which means more money for wholesalers. So it's really interesting the way that all of these different peers of the industry have different priorities, and sometimes they're in conflict with one another.

[00:15:32] Justin Kendall: Yeah, absolutely.

[00:15:35] Jess Infante: That's the most intelligent thing I will probably say for a month. So I hope you enjoyed it.

[00:15:39] Justin Kendall: I rather enjoyed it. So let's get going and talk about the Molson Coors call. And I think really, you know, the big point coming out of this is how sticky their gains were. And basically, Gavin Hattersley, the CEO of Molson Coors, said that they're what, 80 percent have stock.

[00:16:00] Jess Infante: Yeah, so he says 80% of the gains that they have made in recent years have stuck around. So when he talks about their core brands, what he includes in that is Miller Lite, Coors Lite, and Coors Banquet. So those three have really been the biggest beneficiaries of the Bud Light boycott, and their share in the last quarter, Q2, which is what they reported this morning, they've lost half a point of share, but they're still more than two points above where they were this time in 2022. So I think that's an interesting tack to take here is to look at where they were before all of this craziness started. So he says 80% of what they've gained has stuck around. So to me, that feels pretty sticky. I kind of went deep on the Cercana numbers for both of those brand families. Cercana lumps Coors together, Light and Banquet, but Miller Light is on its own. And you can kind of see it. If you look at their last 52-week numbers, so the past full calendar year, this is ending July 14th, you see big gains. Miller Lite is up 7% in dollar sales, 4.9% in volume. The Coors Fam in the last 52 weeks is up nearly double digits, 12% in dollars and 9.9% in volume. But when you look at every other time period, the picture changes. You know, year to date. So Jan one through July 14th, those numbers for cores get smaller, more muted, uh, up 4% dollar sales, almost 3% volume. But in the last 12 weeks in the last four weeks is where things really take a turn. And all of those numbers are negative for both cores and the Miller brand family. So it's like they're, they're cycling past, you know, the giant gains they had of last year. And it doesn't look that great, but I will say the losses were decelerating from 12 weeks to four weeks. So it seems like they, along with the entire rest of the industry, were affected by a pretty weak April, and I assume into May. Once you hit the real peak summer, June, July, things start to look a little bit better.

[00:18:06] Justin Kendall: Yeah, I think that's one of the things that I definitely heard on last week's calls was April bad, May-June better, July hopefully doing better than that.

[00:18:17] Jess Infante: Which like, what was happening in April? I don't remember. Was the weather bad?

[00:18:21] Justin Kendall: Do we have to talk about the weather? Because I don't want to talk about the weather, but the weather was bad. The weather was bad.

[00:18:28] Jess Infante: Noted.

[00:18:29] Justin Kendall: We got chief economists. We need like a chief meteorologist here.

[00:18:33] Jess Infante: I have a good friend who's a meteorologist. We could talk to her.

[00:18:36] Justin Kendall: Yeah, let's work on it.

[00:18:38] Jess Infante: Yeah. Another thing that got covered in Molson Coors is that the above premium part of their portfolio was super important for them. And in the US, these brands and favorable pricing mix contributed 4.1% to help somewhat offset their sales declines, which were still in decline. So yeah, I mean, we know this a few years ago, they even announced they were cutting below premium brands so that they can shift more volume into the higher end, which for them is going to be their craft stuff. They're really focused on Blue Moon right now. Justin, you went to their distributor meeting last fall and covered all their big plans for Blue Moon, which include new packaging. a complete refresh on Blue Moon Light Sky Citrus Wheat, which is now just Blue Moon Light. Props to them for just making it simple. And they've also got a Blue Moon non-alk. So they've got big hopes for that brand. As well, they showed it's the best-selling craft-esque brand in Suricana. And it's important for them.

[00:19:36] Justin Kendall: In decline. And what was it that Gavin said? I think it was, we've got work to do in the U.S. Mm-hmm.

[00:19:44] Jess Infante: He did say that. And I think everybody would agree. They're also brewing Peroni in the US. We'll see how that goes. I see his points. If you brew it here, it's easier. You don't need to get it across an ocean. But if you brew an Italian beer in America, is it still an Italian beer?

[00:20:04] Justin Kendall: I'm a big Peroni fan, but it's nothing new. Like we saw it with Anheuser-Busch and Stella. I can't remember when, but maybe it was like two years ago, three years ago. Who knows?

[00:20:15] Jess Infante: That was like 2020.

[00:20:16] Justin Kendall: Yeah. They cited the same issues. And at some point it just becomes easier. And I guess you got to do the calculus on whether your core consumer cares that it's had to travel across an ocean to get here.

[00:20:33] Jess Infante: The weird thing to me is that anecdotally, I feel like people do care where the beer is made. But I don't know. We'll find out.

[00:20:43] Justin Kendall: And the last thing is Athletic Brewing, speaking of non-ALC, has formed a partnership with Arsenal FC, the men's and women's soccer clubs in the UK for the 2024-25 season, and Run Wild IPA will be sold in the stadium at the club level. You'll be able to get it on draft. And When you look at it, it's kind of a big deal because the UK is a pretty big non-alcoholic beer market. It's more developed than it was here. And moving into that market and doing so with a major club like that, that's a big boy play.

[00:21:26] Jess Infante: Yeah. Can I ask you a dumb question? Literally, where are they? Are they in London?

[00:21:33] Justin Kendall: They're in North London, England.

[00:21:35] Jess Infante: They're in London. I mean, it makes sense. Like you said, they have been drinking non-alcoholic beer across the pond much longer than we have here.

[00:21:46] Justin Kendall: Yeah, it's an interesting move to make it into that market and do it with a club at that level. You know, as someone who doesn't watch soccer, it's a name that I've actually heard of.

[00:21:58] Jess Infante: So I don't know what bar, but yeah, happy match day to the athletic crew who I assume will be heading over to. help out with the launch.

[00:22:11] Justin Kendall: Can you blame them? And they'll be doing in stadium sampling. But, you know, if I'm Bill Shufelt, I might just be sitting center, center court, center, center field. I don't know. Anything else that we should cover before we get out of here for this week?

[00:22:31] Jess Infante: I don't think so. I saw a lot of, a lot of booze banner planes last week. It was interesting. A lot of hard tea. What you would expect, a ton of Surfside. Surfside's big message for all their advertising in the sky is a hundred calories and zero bubbles. But I also saw some ads for Suncruiser and High Noon Tea. Saw some Lion and Kugel planes. Yeah. And that concludes our reporting on Jersey Shore banner plates for the summer because I am back in Massachusetts and will stay here for the duration based on aforementioned hellacious seven hour drive with puking baby.

[00:23:11] Justin Kendall: You're the Don Henley or the boys of summer, but you can catch up on all the news and our insider newsletter or at brewband.com. There's the Callie craft acquisition of heretic brewery and distillery. That news just hit. We have our latest around with feature Q and a with Ray Ricky Rivera from Norwalk brew house. We've got the latest BPI numbers from the MBWA. We've got all those earnings reports. We've got so much more. Tamron's distributor survey, which includes a lot of tips for improving relationships with your wholesalers and breaking through the clutter. hard seltzer report, check it out at Brewbound.com. And with that, we'll just say that's our show for this week. Thanks to Jess for all she does. Thanks to our audio team. And thanks to all of you for listening. We'll be back next week.