The Year of Cider: MillerCoors and A-B Make Their Moves

FILED FEBRUARY 7, 2012

Dear Client:

BBD reported several weeks ago that Tenth and Blake had its eye on Crispin Cider, and that A-B was looking at making a light cider. It looks like both brewers are making their moves.

MILLERCOORS AND CRISPIN. As of yesterday, Crispin Cider is a "100% acquisition -- not a partial equity sale" to MillerCoors' Tenth and Blake division, Crispin chief Joe Heron told BBD. "We couldn't be happier," he added.

Yesterday's official announcement from MillerCoors on the Crispin buyout referenced "a shared great personal chemistry" among the new official cohorts. That seems to be the case; Tenth and Blake's Tom Cardella jokes you can tell Joe by his Brooklyn accent. Joe is from South Africa.

He only started Crispin three years ago, in October of 2008. Now his company -- which includes a line of artisanal, large format ciders and the Fox Barrel pear cider -- is in 40 states, and the number three cider producer in the category.

Joe had recently started looking at a number of avenues to raise capital for further growth. There were quite a few private equity and venture capitalists interested, but Joe wasn't. He'd struck up a friendship with Tenth strategy director Jeff White last year.

That proved fateful. Not only did Tenth and Blake bring money to the table, but also capabilities: Their ability to help scale up the cidery and go deeper and wider with chain sales on and off-premise were two big attractions. "Those are things funding doesn't give you but that you can get from a great beer company," says Joe.

FIRST-LINE GOALS. Joe was already prepared for a year of growth, so his Colfax, California cidery has the capacity to help him reach a 100,000-barrel goal this year. Jeff says they'll help Joe maximize the space - find "growth around the edges, maximize what the site can bear," and anticipate future growth.

"We bring the ability to assist Joe quickly in infrastructure to increase his capacity, and create significant synergies in all areas of the integrated supply chain, from transportation to packaging," says Tenth and Blake chief Tom Cardella to BBD. "That's an immediate priority because we think there will be significant growth in the cider category this year, and we know there will be with Crispin."

Joe's already secured regional authorizations in Kroger and True Value banners, as well as in Publix. "Over the last 6 months Joe's relatively modest-sized sales organization has done an amazing job of getting Crispin listed in a lot of accounts around the country," says Tom. MillerCoors has the relationships to take such placements to the next level. The team has big hopes for the on-premise as well; Joe says they've had good conversations with Buffalo Wild Wings and Fado Irish Pub chains. "There are a lot more of opportunities to growth the business organically, fast," he says. Tom is bullish because he thinks it will offer on-premise independent and major chains alike the opportunity to expand their business in a differentiated way.

DEMOGRAPHICS AND OCCASIONS. And then there's the advantage of cider's cross-categorical appeal, as Joe puts it, which should be advantageous in all occasions. "We get more drinkers across more categories than any other alcoholic product," says Joe, who says that cider sources majorly from craft drinkers as well as wine. Tom thinks it can stem the "grab" from wine and spirits. And cider's seasonality is complementary to that of beer: The former takes off at St. Patrick's Day, and is also popular for summer and fall.

We've reported before that cider is about o.1 or 0.2 share of the U.S. beer market. It goes as high as 17 share in places like the UK and 5 or 6 share in other international markets, according to Joe. He thinks we'll see cider in America reach more international norms one day. Exportation is also an eventual goal for Crispin.

ON NEW PRODUCTS AND GIVING THE CATEGORY ITS CREDENTIALS. The team paints Crispin as a market leader with differentiation. Tenth's resources will help give leverage and scale to that position, they say. "We're the only one with our scale making cider from 100% unpasteurized, fresh-pressed juice; it's a novel art that we do better than anyone else," says Joe. "We're the one cider company that uses yeast as a creative tool. And we're going to keep doing that stuff - our barrel aging programs and limited releases are world famous from Russia to Australia. That's what makes the brand as powerful as it is. It gives credentials to the brand and category as a whole."

Part of what attracted the companies to each other, each maintains, is the ability for Crispin to stay relatively operationally autonomous. Joe is staying on and "keeping all the big ideas in-house; launching ciders named after Marvin Gaye and Oasis songs. We'll keep doing that stuff."

Crispin ranks third in a U.S. cider market led by the Vermont Hard Cider Company and second-placed Irish drinks group C&C which bought Hornsby's last November.

A-B TO LAUNCH LIGHT CIDER UNDER MICH ULTRA NAME

Meanwhile, not to be outdone, A-B told distributors last week that it was launching Michelob Ultra Light Cider to combat FMBs (not Evolve as we reported). The new brand will have 118 calories and 4% abv, and will be priced with leading FMBs. It's rolling out nationally next month, except in 3.2 states, and we hear it's going to get big media support.

RESTAURANT REPORT UNVEILS CONSUMER EXPECTATIONS

We mentioned last week restaurant sales are expected to reach a record high of $632 billion in 2012. This week we thought we'd take a look into a recent National Restaurant Association report to get a better feel for what consumers are thinking. A full 92% of adults believe the economy is either "fair" or "poor" meaning they feel much the same way they did at the end of 2010. The report goes further to divide customers into three categories. Some 21% are optimistic, confident in their financial situation and no cut back on spending; 42% are cautious, or cutting back on spending somewhat and waiting for the economy to improve; and 37% are hunkered-down, cutting back significantly. The report says nine out of ten restaurant customers are more knowledgeable about food and beverages than ever before and the top attributes they look for in a full-service restaurant are food quality, service and value.

Until tomorrow, Harry

"Using words to describe magic is like using a screwdriver to cut roast beef."
-Tom Robbins

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