The Lost Month: January

FILED FEBRUARY 4, 2010

Dear Client:

You editor spent the entire day on the phones yesterday with distributors and brewers. The bottom line: This is the worst January we've had, possibly ever. It seems that people spent heavily over the holidays despite a poor economy and then woke up on January 1 and said, "Holy cow, we have no money!"

I got comments ranging from, "The month started off bad and got worse", "Beer sales hit a wall in January", and "We always lose money in January, but this year we lost a boatload." Many distributors and brewers reporting sales down into the double digits.

Let's take a deep breath and break out some excuses, even if it only serves to make us all feel better. First, we all know we lost a sell day, and the Super Bowl is a week later this year. But perhaps the greatest excuse of all, the ole' standby, is that we simply had some of the worst January weather in huge swaths of the country that sell a lot of beer, from the Midwest to California to New England to Florida to Texas -- all cold and rainy/snowy. Not very conducive to a drinking a cold light lager. Perhaps that's why the craft brewers are still posting gains, and indeed we've learned that Yuengling's shipments were still up around 15% (although retail sales were likely lower than that). But pricing is also an issue. Beer's relative price to wine and spirits has narrowed, and that certainly had an oversize impact over the holidays, their highest volume period, and January is the hangover.

Also we are to consider that we went into the month with shipments likely exceeding STRs to the tune of about 150k barrels or more, we estimate, so supply chain inventories were likely high and there was no early Super Bowl buy-in to help alleviate the bulge. (Plus A-B had a big shipment month last January to cycle). Like I told a distributor meeting recently, the brewer believes that the beer is sold when it's sold to the distributor, and the distributor thinks the beer is sold when it's sold to the retailer, and the retailer thinks the beer is sold when it's sold to the consumer. But in reality, not even at the latter stage is the beer actually "sold." The beer is only sold when it passes through the bladder of the consumer, not when it sits in his fridge. With sub-premium 30 packs all the rage, we likely have a lot of unsold beer sitting in consumers' pantries, undrunk as blizzards of snow drive against their window panes.

We've also had some lackluster marketing from the Big Boys, both in quality and quantity. Part of that malaise, consultant Joe Thompson opined to me, is that nobody knows how to market to the masses anymore with the fragmentation of media. The last time we had over 100 million Americans watching anything on TV at the same time was the finale episode of "M*A*S*H" in 1983. There's a lot riding on this Super Bowl, which has an expected viewership of over 100 million. Hopefully clever national ads by A-B and local spot ads by other brewers will fill America's urninals full to overflowing with spent beer, driving replenishment sales.

Relatedly, we must also consider that the average lag time between the purchase of beer and its consumption is getting longer simply by the nature of the channel shifting that's going on. In the on-premise, the time between purchase and consumption is about 10 minutes. Same for c-store single serves. As these two crucial channels suffer at the expense of larger format off-premise retailers, who also, by the way, sell larger package sizes, it goes to reason that beer is sitting longer at home before it is being consumed.

The good news is that, if you're going to have a crappy month, January is the month to do it. Being down 10% in January is a heck of a lot better than being down 10% in July. So let's put it behind us and hope for a better Spring and Summer. And if everybody reading this article buys a few cases for themselves and a few cases for friends, well, that's a big help too. I'll do my part.

This Just In: January Shipments Exceeding Retail Sales

The numbers are just in, and they're terrible and ...... meh, not so bad too. The St. Louis Post-Dispatch Lager Heads blog is reporting this morning that A-B's shipments were down a whopping 12.2% in January. Wow. That's quite a drop. (Remember one less selling day and Super Bowl timing).

However, IRI all-scan retail numbers show that beer case sales were only down 1.8% in January. But those numbers are for the four weeks ending January 24. So they don't reflect that last week in January last year when there was a huge Super Bowl buy-in ahead of Super Bowl. A-B's IRI retail scans for the same period "only" show the brewer down 4.1%. So that Super Bowl timing issue is likely the cause of much of the discrepancy between shipments and retail sales. Also, on-premise in January is likely dead. MillerCoors fared better, down 2.2%.

Bud Light was down 5.2% in four weeks to January 24, Budweiser down 9.2%, Miller Lite down 5.5%, and Coors Light up 1.2%. Heineken was down 8.4%, and Corona was down 5.9%. Crafts were up a big 12.1%. So a few bright spots there. More tomorrow.......

Heineken USA Picks Coyote Logistics for Dutch Brands


Heineken USA today announced the selection of Coyote Logistics as its national freight forwarder. Under this new agreement, Coyote will manage the outbound transportation of the company's Dutch brand portfolio from Heineken USA's Demand Point centers. "Our supply chain has been a competitive advantage for us," said Dan Sullivan, cfo and coo, Heineken USA. "We believe this decision further demonstrates our commitment to continued improvement. By leveraging our scale and consolidating efforts, we will gain efficiencies while maintaining our superior service levels for our distributor partners." Today's announcement applies only to freight forwarding activities for the company's Dutch brand portfolio. Heineken USA will continue to work with Satellite Logistics Group, ASA Apple and Maersk to coordinate the portfolio's drayage and warehousing operations at its Demand Point locations.

STILL A FEW seats left at the Beer Summit. We've got Carlos Laboy at Credit Suisse giving a breakfast presentation, we've got a retailer panel with reps from Walgreens, Rite Aid, Pappas Restaurants, and more, we've got Kelly McDonald covering the Hispanic market, a craft beer panel, and all the blue chips execs, and much more. Click here for scheduling and to register: http://www.beernet.com/beer_summit.php

Until tomorrow, Harry


"A nation that is afraid to let its people judge the truth and falsehood in an open market is a nation that is afraid of its people."
-John F. Kennedy

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--------- Sell Day Calendar ----------
Today's Sell Day: 4
Sell days this month: 20
Sell days this month last year: 20
This month ends on a: Fri.
This month last year ended on a: Fri.
YTD sell days Over/Under: -1



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