New NAB Owner: Double Business in 3 - 5 Years


Dear Client:

North American Breweries kicked off its distributor meeting in Orlando yesterday, the first under the new owners Florida Ice & Farm Co. of Costa Rica. Your editor lurked in the back in disguise. Ramon Mendiola, chief of FIFCC, sets an ambitious goal: double the business in three to five years.

But NAB has had a rough go of 2012. Even CEO Rich Lozyniak admitted it. They made the decision to sell back in April; the sale was then a "distracting process" that demanded attention that could have gone to the marketplace. Indeed, last year's SIG data looked a bit soft, though total NAB distribution was up 8.3% vs. YA while total NAB depletions were up 70,000 barrels.

But we "could not have ended up in better hands than our friends with FIFCO," said Rich. [After his presentation to FIFCO, Rich told KPS' Raquel Palmer the meeting was "fantastic" but "strange": "At the end of the meeting, we all hugged each other."]

The sea of distributors seemed to agree: There were a scant 2 questions by Q&A time, one of them from a Buffalo-based distributor who jokingly asked Florida Ice & Farm Co. chief Ramon Mendiola Sanchez: "It's 5 degrees, we have a foot of snow: Why don't you come back with us and see what the market is like?"

RAMON MENDIOLA TAKES THE STAGE. Wholesalers got to meet him here. He laid out FIFCO's heritage, structure and dominance in practically every segment it plays in in South America, along with the company's progressive triple bottom line corporate culture.

He answered the obvious ask: Why NAB? They provide great geographic diversification, and innovation. They have "talented management"; "beer assets" in their infrastructure and distribution; and "high growth beer segment participation."

Indeed, FIFCO strategic alliances are "carefully chosen": Heineken has "given a lot of know-how in tech and manufacturing." Their tie to PepsiCo in 2007 has provided "lots of things that have contributed to our growth. ... They're very good at innovation."

FIFCO is a public company with 2,400 shareholders. NAB falls under food and beverage arm Cervecería Costa Rica, which is a quarter owned by Heineken. There are several subsidiaries, but the point is that this company has the capability to manufacture their own glass and cans, and even has a real estate division, and a growing 7-Eleven retail chain knockoff. They're big.

"WE LIKE NO. 1 AND NO. 2 POSITIONS." "We like No. 1 and 2 positions in every segment we choose to participate ... scale does matter to us. A lot," said Ramon. Indeed: In their home market, they have close to 96% market share for beer. ("Rich, I like this share of market," he joked of their expectations.) But that's not all: They have 99.5% market share of the RTD market. More than 60% of wine market share, which is 6 times bigger than their closest competitor. Upward of 52% of the water share, where they "compete head on with Coca Cola day and night." And even 41% of refried beans share, but we digress.

The point is the new management has big expectations. "We're here for the long run ... we're here for the next 100 years," Ramon said. The short-term goals? "We want to double the size of this biz within next 3-5 years, max." Where to start? Sales VP James Pendegraft said that nearly 25% of beer is sold in segments where "segment specialist" NAB has an ownable position, where they can be No.1.

TRIPLE BOTTOM LINE. Ramon also outlined the phases of their company history that led to their position as a global leader of the triple bottom line operation model. In the early 2000s, a period of efficiency and productivity was followed by doubled sales and profits, and M&A activity.

By 2008 they'd achieved strategic objectives, but "started receiving strong signals from society," said Ramon. "Critics said, 'all you're trying to do here is get everyone drunk.'" Now they actively work to spread out consumers' consumption over the week. They've achieved a zero solid waste company status. They're one of the first companies in world to be water neutral, and they expect to be carbon neutral by 2017. Forty percent of their executive compensation is driven by "social and environmental indicators." They choose suppliers based on footprint. It's all part of the conscientious triple-bottom line approach for which they've been recognized by Boston Consulting Group and the world Economic Forum as a top-16 world leader.

But the biggest reason wholesalers seemed to like Ramon? He invited them to Costa Rica next year.

JAMES PENDEGRAFT: NAB IS "SEGMENT SPECIALIST." VP sales James Pendegraft took the stage to laud their competitive advantages as "credible craft supplier and world class PAB producer." He also compared their importing operations to that of Crown, Heineken, Diageo. "We have the No. 1 Canadian brand in world. We have the No. 1 Cerveceria de Costa Rica." And Canada is actually the third largest source of imports in U.S.

He'd later speak about wholesaler consolidation: Last 3-4 years has seen more than 300 consolidations. "Consolidation is important; it helps us reduce overlap. Increases ability to implement our portfolio strategy, and helps us leverage local media buys" besides improving logistics and helping to focus the fragmented market.

BRAND HIGHLIGHTS. Executive team talks segwayed into brand family numbers. Overall, NAB was +7% in Food, +1% in Drug, +11% in Liquor, and +2% in Convenience in 2012.

Looking forward, you can boil the squeakier brand wheels down to a few epithets: "red-hot" Seagram's, "total upside" Imperial and "Millennial bug bitten" Labatt:

SEAGRAM'S. They've doubled the size of this business in the last 3 years. Seagram's Escapes grew 57% vs. LY in Total U.S. food, where it's the No. 3 PAB. And and every year they ask distributors to carry more (last year only 14% of Seagram's distributors had the full line; now it's up to 40%). "Depletions were up nearly 35%. Were growing in nearly every package in nearly every part of the country," and in all classes of trade, said brand manager Jennifer McCauley. Eight out of 10 consumers that see it buy it, compelled by the vivid colors in well-branded dump bins and a popular 10 for $10 dollar program. This year they'll add a couple new flavors and update their growing variety pack (where competitors Smirnoff and Mike's are in decline).

Nielsen's Danny Brager offered some interesting PAB segment via video commentary: "Of the 120 categories Nielsen measures, PAB is the fast-growing category, worth over $1.6 billion dollars in retail, and growing at 17%. ... Seagram's is up 30% in dollars last year, with incremental dollar vs. last year gains better than Mike's ... Percentage growth better than any brands that've been in the market the last 2 years." Growth is coming from bottles and pouch, and a multitude of channels.

Speaking of pouches: "In all my years covering bev alc I've never seen anything like it; from almost nothing 2 years ago, it's worth about 200 mill dollars at retail, growing at 80% over last year," said Danny. Much of this business is coming from incremental purchases.

James Pendegraft mentioned their leading capabilities in the space: Nano filtration technology allows them to get a very clear base, a competitive advantage.

IMPERIAL. Depletions have grown 330% in 3 years. The import has done well in focus markets California, Texas and Florida, but there's "still a ton of opportunity" per brand manager Jennifer. They'll drive that via its "Costa Rica in a bottle" position. Indeed the country is a top-5 travel destination to which a million Americans visit yearly. They'll reinforce the connection between country and beer [with has 70 share at home] by linking it to surfing, zip lining, rafting, and beaches.

LABATT: SWINGING FOR MILLENIALS. Director of consumer insights/market research Mary Jo Hardy led into the main event brand with some Millennial insights. We know this 79-million strong demo is coveted. She went a bit deeper: This generation is unified only by their relationship with technology, Mary asserted. They are strongly swayed by mobile pictures and recommendations. They drink cross-category. And about half of those surveyed in internal data say bar specials and availability on-tap are "most important" to their beer drinking habits. All of this informs their campaign to re-energize Labatt and make it relevant to the demo.

The resulting "RElevance" plan is multi-prong: It first seeks to "REtell Labatt's 'quality story'" as a long-standing, successful Canadian beer. This will center around a new campaign that kicks off with three Super Bowl spots, inviting drinkers to "raise it up." The original Labatt bear will come out of hibernation for the occasion; Mary Jo said characters like Progressive's Flo and Planter's Mr. Peanut are well-liked on Facebook; they give "permission to connect with Millenials" - in fact, the bear is played by one. [Surprisingly little was said about Labatt Blue Light especially in comparison to last year, prompting the only other audience question at the end; Rich said the new spots seek to elevate that entire brand family.]

The plan also calls to "Revaluate" their media mix. Social media, of course, is important to the bear; he'll also show up at football games and stores. And there will "always be pictures" of these occasions, because Millennial insights tell NAB: "If there wasn't a pic, it didn't happen."

"Rebuilding" the on-premise will be key too: NAB is hiring 30 marketing specialists to drive on-premise sampling with the target consumer. The goal is to get everyone drinking a Labatt; the bear will then join the party for a "pic."

They'll back it all up with support and spend: End-meeting announcements included AB InBev and most recently Remi Martin alum Glen Tibbits' new gig as Labatt brand manager. Further, they've just added $1 million in marketing ad dollars for the brand toward "more tools and visibility."

An interesting 2012 recap video revealed several NAB milestones:

Total NAB distribution was up 8.3% vs. LY

Total NAB depletions were up +70K BBLs vs. LY

NAB depletions were +14% vs. 2009

NAB was +7% in Food, +1% in Drug, +11% in Liquor, and +2% in Convenience

Labatt Blue is the #1 selling Canadian Beer in the US

Labatt 52 launched and achieved over 9,000 PODs

Seagram's Escapes is the #1 Cooler in the US

Seagram's Escapes is the #3 PAB in Total US Food

Seagram's Escapes grew 57% vs. LY in Total US Food

Genesee Beer depletions were up over 4,000 BBLs

Genesee Cream Ale depletions were up over 2,000 BBLs

Genesee Ice depletions were up over 9,000 BBLs

Genesee Brew House opened in Rochester

Imperial distribution was up +35% vs. LY
Imperial depletions have grown 330% in 3 years

Pyramid grew vs. LY

Pyramid distribution was up 15% vs. LY

Pyramid reached #1 in the TTL Craft/Microbrews segment in Seattle

Pyramid Outburst was the #1 IPA contributing to growth in the Pac NW

Pyramid Variety Pack depletions grew 60% vs. LY

Magic Hat has grown for 18 consecutive years

Distribution of Magic Hat was up 16% vs. LY

Dundee Variety Pack depletions were up 10% vs. LY

MacTarnahan's core distribution was up 6% vs. LY

MacTarnahan's 22oz bottle depletions were +29% vs. LY

Buffalo Bills distribution grew 22% vs. LY

Buffalo Bills depletions have doubled in 2 years

Honey Brown grew 11% vs. LY

Honey Brown 24oz cans increased depletions by 310% vs. LY


Here's yet another model distributors can take to capture the craft/high end market in a dedicated distributorship. In the PacNorwest, blue-silver Marine View Beverage, The Odom Corporation, Sound Beverage, and C. Stein Beverage have created a partnership in a new company to distribute craft and specialty brands called Great Artisan Beverage Co.

Each of the partners has provided personnel in their respective territories and the company will be managed and run independently, reporting to a Board of Directors representing the ownership group. Nick Gagliardi will be president. He says, "We have united as one and can now offer a sales and marketing platform to build and execute craft/specialty brands across one of the most dynamic and critical footprints in the United States." Dave Mickelson, formerly of Craft Brew Alliance and a long time Redhook Ale Brewery executive, will head up operations. "We now have the dedicated ability to pro-actively work with our craft brewery partners to better plan, forecast, and execute our craft/specialty breweries overall objectives."


NEW BELGIUM'S Kim Jordan will be the keynote speaker for the Brewers Association's 2013 Craft Brewers Conference in Washington, D.C. from March 26-29. Recall that Kim was last keynote speaker at the 2003 CBC in New Orleans, where she called on craft to be 10 share. Craft has gained about four share points since then, so they're on their way. For more information, visit

DOMESTIC TAXPAID SHIPMENTS were down 1.2% in December, estimates Lester Jones of the Beer Institute. That puts domestic shipments up 1.2% for the year, the first up year since 2007. With known imports, that puts the US beer shipments up about 1.5% for the year.

I'LL SEE MANY OF YOU in San Antonio on Monday. Looking forward to the Tenth Annual Beer Summit at the Westin Riverwalk. See the agenda here:

Until tomorrow, Harry

"Life isn't fair. It's just fairer than death, that's all."
-William Goldman

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