Beer Outpaces Wine and Spirits Trends Off Premise, Led by High End

FILED AUGUST 28, 2014

Dear Client:

The big banner good news from today's Brewers Association Power Hour presentation via IRI beverage alcohol insights chief Dan Wandel: For the first time in four years, beer dollar sales trends are outpacing both wine and spirits' in US multi-outlet channels.

Also: YTD to July 13, the period for most of Dan's commentary, beer is back in black in c-stores and positive in volume YTD overall. Overall, beer dollar and volume sales trends have increased across the key IRI off-premise channels. And it's another great year for new beer innovations.

Of course, the high end is still driving category growth. In fact, high end segments (FMBS, import, super premium, craft, cider, etc.) now account for more than half of total beer dollar sales in supermarkets, at 50.6. That's up 2 share points from 2013.

Of course, craft has continued its tear. Craft's dollar sales in grocery is up 20.5% YTD. Its share of total beer dollar sales is up by more than 2 share points in seven of IRI's top 10 food states by craft dollar sales.

And craft has the highest share gain of total beer dollars in IRI's multi-outlet channels, having gained +1.1 share in multi-outlet and convenience and +1.4 share in multi-outlet. (More craft details in CBD.)

THE LESS-GOOD NEWS: ON PREMISE. Unfortunately, beer's triumph over wine and spirits doesn't extend into the on-premise, where spirits in particular continue to outperform beer. IRI has teamed with on-premise data gurus GuestMetrics to give a more holistic view of the category. (For what it's worth, GuestMetrics' craft definition includes Yuengling to reflect Brewers Association changes, while that brand is currently not categorized under IRI's craft.)

In summary, spirits are increasing their share of total beverage alcohol sales on-premise, primarily at the expense of America's Favorite Beverage. Beer is challenged most in bars, clubs and casual dining channels. It's down 4.5% in casual dining and almost 4% in bars.

THE BETTER NEWS. Of course, craft is the outlier, "aggressively increasing its share" on-premise, having snagged nearly twice spirits' gains YTD. (Craft beer makes up nearly 10% of total beverage alcohol dollar sales and about 29% of total beer dollar sales on premise. Non-craft beer accounts for 23% of beverage alcohol dollar sales on premise YTD through July 13. Spirits is at a whopping 43%.)

Yes, craft gains on-premise are also siphoning from premium lights. But at least beer has a sturdy avenue for growth: craft comprises 26.9% of beer volume on premise, while premium light is at 26.5%.

The top on-premise beer brand gainers this year are primarily craft, cider, and imports. Based on our reportage, you might not be surprised to learn that Angry Orchard's share gains equaled the gains of the next two best-performing brands combined.

CONSUMER CONFIDENCE BOLSTERING "PREMIUM" BUYING. Now to the off-premise. IRI MarketPulse Survey results (culled from 1,300 respondents) reveal that consumer confidence appears to be rebounding, with Millennials in particular "beginning to feel more comfortable after suffering longer than most."

IRI said this should lead to "both increased shopping trips and spending on premium brands" in particular. In fact, 15% of consumers surveyed said they plan to increase their usage of "premium" (in the larger consumer product goods definition of the word) products in the next 12 months. "Although wealthier households purchase more premium products today, increased premium purchase behavior is more prevalent across lesser-earning households," per IRI.

Could this help explain sub-premium sluggishness? Indeed Dan said that price is becoming "less of a defining factor" for premium products: "Millennials are more drawn to convenience and attractive packaging, while Boomers are more likely to seek out quality ingredients and brand names."

REPORT CARDS: SIX TOP VENDORS UP MORE THAN $10 MILL IN SUPERS. In supers, six top vendors -- ABI, MillerCoors, Constellation Beer, Boston Beer, New Belgium and Lagunitas -- have achieved actual dollar sales increases of more than $10 million YTD. Boston Beer is already up more than $40 million dollars; Constellation beer is up $33 million.

Dan also called out New Belgium's momentum "on the strength of new products and double-digit distribution increases as they expand, up over 41%" in the channel, while "Lagunitas is also driven by double-digit distribution gains, up 63%."

On the other hand, five of the top 25 beer vendors in supers experienced sales declines, including Pabst (down 1% in dollars vs. YA), Diageo, North American Breweries, Vermont Hard Cider and World Brews (primarily private label).

Dan also shared that those "Assorted Make Your Own Packages" are up 10% in dollars, having generated just under $17 million YTD. They would be ranked as vendor number 18 overall in supers based on dollar sales.

As for moves among the top 15 beer brands in the channel: Modelo Especial is now the number 10 beer brand ranked by dollars in supers, having passed Miller High Life. Corona Light also moved up one spot, to number 12. Mich Ultra is doing "very well"; Stella is up almost 10%.

Light beer is a mixed bag in supers. Number nine beer brand Busch Light is up almost 6%. Meanwhile, Bud Light and Miller Lite are achieving positive dollar and case sales, while Coors Light is slightly down.

LIGHT BEER DIPS BELOW 49 DOLLAR SHARE. But those light trends seem anomalies, as the larger segment continues to struggle.
Light beers in total U.S. multi-outlet plus c-stores have seen dollar share dip below 49. "We're at 48.9 light share for dollars, and under 54 share for volume," per Dan.

NEW BRAND BOONS. It's been a great year for new products: Total new beer product dollar sales reached $126.1 million.

Nine beer vendors have had new product sales over $1 million in U.S. supers. A-B took the cake, at $47.4 million. Then comes MillerCoors ($26.1 million), Boston Beer ($11 million), Mark Anthony Brands ($6.4 million), Heineken ($5 million), Sierra Nevada ($4.2 million), New Belgium ($3.5 million), Deschutes ($1.5 million), and American Vintage Beverage ($1.1 million).

And the brands? Bud Light Lime Mang O Rita topped the newcomer dollars, at $16.4 million YTD in supers. That was followed closely by Raz Ber Rita. Miller Fortune came in third, having brought in $12.1 million. Rebel IPA is the number four new beer brand, at $10.2 million in sales. Coors Light Summer Brew is at number five, with $6.1.

In all, six A-B brands and four MillerCoors brands comprised 10 of the top 15 new beer brands. Who says Big Beer can't innovate? PABs have four of the top 15 new brands, while craft and cider each have three.

HOT TOPICS: SKU-MAGEDDON PART TWENTY. If you think we talk too much about too many SKUs, it's probably because, per our conversation with Bump earlier this week, there seems to be no end in sight for the phenomenon.

Case in point: As of mid-year, craft and cider segments have already surpassed their SKU numbers for 2013. Last year craft beer SKUs totaled 5,048; YTD they're already at 5,065. Craft definitely has the lion's share of SKUs in beer. Total 2013 SKUs were at 9,006, and we're set to blow that away, already at 8,848, which suggests an exponential increase by year's end.

HOLIDAY RECAP. If you weren't sure of the off-premise summer score, Dan shared that we had a "really strong Memorial Day overall," with craft showing the highest dollar sales change vs. year ago. The category was up almost 6% in dollars, 2.5% in volume. July 4 was a bit more "ho-hum," up about 2.4% in dollars, with flat volume.

More tomorrow.

GUESTMETRICS: ON-PREMISE BEER HOLDING IMPROVEMENTS

Good news for the embattled on-premise beer outlook, at least for the latest periods: Though GuestMetrics had attributed their previous four-week read (to July 13) to a bump from the World Cup, beer has held onto its sequential improvements in the latest period. During the four-week period ending August 10, trends remained steady at down 2.2% (the prior four-week period had been down 2.4%). The whole first half of 2014 saw on-premise beer volumes down 3.8%.

PREMIUM STARTS TO STEM LOSSES, CRAFT GAINS SLOW. They also noted a craft gains slide in the latest report, which continued this latest period. Premium light share was down 1.7% the latest four weeks versus down 2% YTD, while craft share had the inverse trend: it was up 1.8% the latest period, less robust than its 2% YTD and 2.3% in Q1 gains. So while premium light continues to lose share, "largely at the hands of craft," per report, it also appears to be taking back some momentum from craft during the last eight weeks.

So what's the deal? "On craft [slowing] somewhat, the segment is up to a 31% share of volume in the on-premise, significantly higher share than in the off premise," GuestMetrics chief Bill Pecoriello told BBD. "So it could just be the law of large numbers ... it bears watching as the number of brands being sold on-premise is still climbing 25% [vs.] year ago and share is still growing, but the pace of share gains seems to be slowing in the on premise."

Import share was down 0.4% the latest period. The longer trend for import is that import share is down 0.2% YTD. "It had been only down 0.1% in June and up 0.1% in July, so weakened somewhat in last four weeks to down 0.4%, but running down slightly on the year," per Bill.

GuestMetrics offered some more bull spot checks: For latest four weeks, IPA share was up 1.5%, cider was up 0.5% and FMB/flavors were up 0.1% the latest period. Meanwhile, pale lager share was down 2.4%.

TRAFFIC TRENDS IMPROVING, IN SPOTS: "We reported that overall on-premise traffic growth was a positive 0.3% in the latest four weeks, significantly better than the down 1.2% YTD as consumer confidence hits post-crisis highs," per note. The company also shared that, with the gap widening between high and low income consumers, "we aren't out of the woods yet, but the improved traffic trends, if sustained, are encouraging."

Beer volume in bars was down 2.4% the latest four weeks ("giving up some of the World Cup-spurred lift of down only 0.9% last month"). Casual dining was down 2.9% ("an improvement driven by improved traffic trends to the channel that we pointed out last [time]"). Fine Dining was up 2.9%.

CONSUMER OUTLOOK "BROADLY ROBUST." Just today, sister group Consumer Edge Research sent out their "State of the U.S. Consumer" update. The company called the consumer outlook "broadly robust" as of August, noting that growth in discretionary spending was likely "at its healthiest level since mid-2013." The month of August also showed a "slight" acceleration in retail strength compared to 2Q14. And, unlike in periods past, where consumer strength gains were sequestered to the high income group, the low income group also showed a "nice pick-up" in the August, likely due to moderating gas prices. Consumer confidence remained high for the sixth month running.

As for headwinds: Real estate price outlooks "took a step back" in August, while 6-month job outlooks softened.

CRESTED BUTTE, COLORADO "UP FOR WHATEVER"?

Anheuser-Busch has revealed that Crested Butte, Colorado, will be the location for Bud Light's city-transforming "Whatever, USA" promotion. But some residents of the "wacky" mountain town are having mixed feelings about its Bud Light-themed makeover, per report by Denver Post. A public hearing Monday night dragged on for more than three hours and brought forth more than 50 speakers. Some lauded the Bud Light takeover as a "great, money-making event," while others believed the invasion to be an "image-damaging sellout."

According to the report the town allegedly agreed to the Bud Light takeover in exchange for a payment of $250,000. With apparent control of the area, the brewer has implemented some "augmentations" to have in order for Crested Butte to be ready when it rolls into town September 5-7. Presumably, all the downtown bars will carry only Bud Light products and the brewer plans to fence off the lampposts on Elk Avenue and paint them Bud Light blue. Buskers are to perform within pop-up bars along the avenue and a giant soundstage will be constructed where undisclosed acts will perform. The town's Mine Ice Arena and the Center for the Performing Arts are expected to be converted into "Whatever" venues as well.

One of residents' chief complaints over the promo addressed the "secrecy" leading up to the announcement. That the "Whatever" destination would indeed be Crested Butte was reportedly only leaked to the public in recent weeks -- even though the town Council had worked "behind the scenes on planning for the event since spring."

Of course, secrecy is integral to the promotion. The "Up For Whatever" campaign, debuted in a Super Bowl ad with Arnold Schwarzenegger playing ping pong and other fantastical bits, promised to makeover an unknown town into a Bud Light fantasy land. Fans could apply to enjoy this "Whatever" town for a weekend. More than 100,000 reportedly have.

"I do not understand how this got this far down the road in absolute secrecy," said former Sen. Tim Wirth, who lives in Crested Butte. Tim went on to say he isn't fond of the town "being turned into a beer parlor."

Dan Marshall, who was hired by the town to help plan for the event and calm disgruntled residents, explained the secrecy as a security purpose. "The secrecy behind the event is because we don't want 35,000 people here. It's a matter of safety and security for us," he said.

But local and Izzy's bagel shop owner Craig Maestro falls under the disgruntled resident category. He was so distraught about the matter he didn't bother attending the meeting. "It's an absolute disrespect to the community to keep it secret from us," said Craig, "who has vowed to rip down any blue fencing in front of his shop."

Other protestors were downright bizarre, like resident Kevin McGruther, who spoke in Mickey Mouse ears and a T-shirt that said "Dumbest Town Ever." He rallied against the town being turned into "Disneyland."

Despite the hoopla at the hearing, David Ochs, director of the Crested Butte Chamber of Commerce, said a chamber survey found 90% of residents in favor of the event. "People come. They spend their money. They leave. That is the epitome of Crested Butte," David said.

But Crested Butte Mayor Aaron Huckstep claims the takeover isn't a done deal just yet. "It's not like this event is in the bag," Aaron said. The Town Council plans to take more time studying the issue and will issue a final decision in due time. Town staff has already compiled a 100+ page "Whatever USA Town Operations Packet."

BEER BRIEFS:

LABOR DAY WEEKEND GAS PRICES CHEAPEST IN YEARS. Time online said that gas prices began falling in early summer and kept on heading down, "resulting in the cheapest holiday weekend for gas since 2010." As of yesterday, a gallon of regular gasoline was averaging $3.43 around the country, per outlet, about 13 cents cheaper than last year.

Until tomorrow, Harry

"To achieve the impossible dream, try going to sleep."
- Joan Klempner


THE 2015 BEER SUMMIT - The Beer Industry Summit will be at The Breakers resort in Palm Beach, FL. January 11 - 12, 2015. Register and more info here: http://beernet.com/beer_summit.php


---------- Sell Day Calendar ----------
Today's Sell Day: 19
Sell days this month: 21
Sell days this month last year: 22
This month ends on a: Fri.
This month last year ended on a: Fri
YTD sell days Over/Under: 0

----

(c) 2014 BeerNet Communications, Inc. - All rights reserved. Please, no forwarding or copying. Individual subscriptions $580/year. Corporate rates available.
Editor & Publisher: Harry Schuhmacher - hs@beernet.com
Twitter: @beerbizdaily

Senior Beer Editor: Jenn Litz - jenn@beernet.com
Customer Service: Kim Nelson - Kim@beernet.com


Check beernet.com for back issues or to subscribe or renew. Phone: 210-805-8006. Email: admin@beernet.com

BeerNet Radio: http://www.beernet.libsyn.com

We have a new mailing address:

909 NE Loop 410, Suite 7
San Antonio, TX 78209


BeerNet Communications, 909 NE Loop 410, Suite 720, San Antonio, TX 78209 USA

Unsubscribe | Change Subscriber Options

Go back to listing Go to next article Go to previous article

Top Secret News Hotline:

Got beer news for BBD?

Submit Anonymously
twitter facebook