Dear Client:

Though yesterday’s earnings results certainly didn’t show it, there is “some certainty” that Anheuser-Busch is “moving in the right direction” in the U.S., per ABI chief Michel Doukeris.

How’s that? 

Well, Michel pointed to a couple pieces of data before the above declaration:

A-B SEEING IMPROVEMENT IN SHARE LOSSES. One is the claim that A-B’s share losses aren’t really stable anymore, they’re ‘improving.’

If you look at the “last week” of Circana data, A-B’s share losses stood at -4.67 points, Michel said, which is a “big-step improvement” from “the beginning of the crisis” when they were losing 5.6 points.

Yes, despite calling out stable market share since April, “the reality is that we are clawing back between 10 to 15 bps every two weeks,” according to Michel.

The other data point instilling some confidence for Michel, came from their ongoing engagement with 260,000 consumers.

LARGE CHUNK OF LAPSED BUYERS “NOW MORE OPEN TO COME BACK.” Michel noted that a “recent survey” conducted to the bunch found that “over 40% of lapsed Bud Light drinkers said that they are now more open to come back to drinking Bud Light.”

With share losses improving, and some lapsed buyers now ready to turn the page, “this gives us some certainty that we are moving in the right direction,” Michel said.

NO NEW NORMAL YET. Later asked in the Q&A if they’ve hit “a new normal,” Michel replied: “I don’t think that we are at a new normal yet, but we have a good grip on what we need to do and how we are proceeding from here.”

Indeed, while there are some lapsed buyers who declare that they are ready to come back to Bud Light, we “want to see now the behavior materializing,” Michel said.

They’ve already seen such behavior with brands like Mich Ultra and Busch Light, which are responsible for most of that clawing back of share referenced above by Michel, and both remain “very healthy under the consumer perspective in all metrics that we see,” he said.

In fact, he said it’s fair to assume that these two brands will recover “their trajectory pre-April… this is what we see with the numbers.”

He later added that the two brands actually “gained space” in the fall resets, and sized up Bud Light’s loss of space over the period.

BUD LIGHT’S SAW “VERY SMALL” IMPACT ON THE SHELF IN FALL RESETS. Michel posited that they had “about 10% of the chain stores doing some change” in the fall reset, and Bud Light’s cubic space in those stores was adjusted by about 5%. “So, the impact so far in Bud Light was very small.”

He wrapped up the topic, saying, “we see good momentum as we move forward on the relationship with the retailers and the hard work that our wholesalers do. So, we want to continue to call back this shared position, make the right choices and investments for next year, so we minimize any resets coming out of the spring reset.” 

However, he noted that “retailers are independent,” and “they make their own choices, and their choices are made based on the losses, rate of sales and the belief that they have in the brands that will drive the category.”

SPRAWLING SUPPLIER PLATFORM TAKES SHAPE WITH BLAKE’S BEVERAGE CO.

There’s a new platform taking shape in the industry, and it’s coming together in a curious space — cider.

Indeed, Michigan-based Blake’s Hard Cider – which has beefed up as of late, building a $9 million facility in upstate New York and acquiring Oregon-based Avid Cider last year – is announcing today that they’re set to become even bigger…

BLAKE’S JOINING FORCES WITH AUSTIN EASTCIDERS. That’s right, the company is partnering with large regional cider co. out of Texas, Austin Eastciders, to create a new company, dubbed Blake’s Beverage Co. 

The combination will form one of the largest independent hard cider companies in the U.S., and a sizable independent supplier overall.

Indeed, the collective trio is set to sell over 2 million cases this year, across 35 states, with product flowing from four facilities in MI, NY, OR and TX. The combined entity will also hold a handful of tasting rooms across the U.S. and employ over 360 people.

BBD caught up with CEO and founder of Blake’s Hard Cider, Andrew Blake, to uncover how the new company came together and where it will go from here.

THE STRATEGY BEHIND THE NEW COMPANY. “As most good things, it was a little strategy and a lot of luck,” Andrew told BBD of the formation of Blake’s Beverage Co.

He notes that the strategy to expand operations beyond their Michigan home has been in place for years now, knowing that if they want to compete with other malt-based beverages and “be consistent from a price point, margin standpoint and strategic standpoint” – they had to diversify their sourcing of apples.

They’ve taken a couple of big steps in solving this supply chain challenge (as noted above), with the stand up of a $9 million facility in upstate New York; and simultaneously acquiring Avid Cider company in the Pacific Northwest.

Understanding that they had invested enough to produce beyond their current portfolio and Avid’s portfolio, they began to look at their footprint, and noticed a gap in the South, and Southwest, Andrew told us.

And that’s where the “luck” comes in, as Blake’s “just so happened” to run into the Austin Eastciders crew and swap visions. “We collectively shared this vision that we thought cider was going to have a moment,” giving way to “this huge opportunity, to get more strategic and more competitive with other categories, while leaning into the volume of supply and understanding that the scale would kind of help everyone.”

As those conversations matured, they found alignment on further fronts, and ultimately concluded that “this just makes too much sense for everyone.” So, they linked up and formed Blake’s Beverage Co. 

COLLECTIVE COMPANY UP 12% THIS YEAR. Now under this new umbrella, Andrew tells BBD that their first order of business is “do no harm,” as “these companies are doing well on their own.” Indeed, he tells us that the collective company is up 12% this year.

So, the plan is for each company to continue expressing their “regional spirit,” while eventually realizing the larger opportunity, like supply, leveraging distribution relationships and retail connection points.

ON SUPPLY OPPORTUNITY. When it comes to supply, Andrew said that in the long term, they see “a huge supply side opportunity… Our platform gives us a unique opportunity to really reduce costs to distributors and ultimately to consumers by looking at our different selling regions and where products are being made.”

CAPACITY TO “KEEP UP WITH GROWTH FOR FORESEEABLE FUTURE.” Speaking on the runroom they have moving forward, Andrew told us “we purposely overbuilt capacity within the Blake’s infrastructure to plan for this. Our vision was to make sure we had the production capacity to always be true to the product and keep costs reasonable as we continue to grow.”He adds that they feel they have “three growing brands in beachheads in different parts of the country, and runway to continue to grow to keep up with their growth for the foreseeable future.”

And growth there will be, according to Andrew. Between the investments already made in their sales and marketing teams, the coming innovation and current “rocket ships” in the portfolio, he’s bullish on ‘24, expecting to double their current growth rate of 12% next year.

THE PLAN FOR DISTRIBUTION. As footprints currently stand, each of the three brands hold a nucleus of home markets and “those nucleuses don’t really overlap,” Andrew said.

“We feel that there’s a real opportunity for all three brands to kind of go deeper in their current distribution and then look for opportunities to expand as we understand more broadly how the portfolios will really work together.”

Indeed, “before we really start talking about the synergies in one state, I think we want to make sure that there’s real depth of sales velocity, rate of sale” in current markets, explaining that “there’s not the same cider sales story in every state.

“You have 10 states that make up so much [of total cider] volume,” Andrew said, “and you have these other states where there hasn’t been anyone who’s come in and really tried to put in the work with distributors, retailers, and the consumer ultimately to communicate the category.” And that’s work that they’re eager to take on, he said.

EYEING THE NO. 1 SPOT IN CIDER. Ultimately the goal with Blake’s Beverage Co. is to become the no. 1 cider player in the nation and “hopefully be a lightning rod for the larger cider movement,” Andrew said.

THINKING ABOUT BROADER BEVERAGE TOO, OPEN TO MORE PARTNERS? Still, at the same time, they also want to think thoughtfully about a broader beverage strategy, Andrew said. “We think that [cider] lends itself very well to some fourth category innovations, and we are looking to be strategic about further brands that are aligned in culture values and make great products as we look to broaden the vision and view of Blake’s Beverage Co. into the future.” 

DOGFISH HEAD LEANING ON HIGH ABV COCKTAIL INNOVATIONS IN ‘24

When it comes to its line of canned cocktails, Dogfish Head (already in the top 10 canned cocktails brand families by dollar sales in Total US MULO + C) aims to be among the top three.

And it’s planning to get there in 2024 through a new lineup of innovations that play in the high ABV space.

NEW 12% ABV LINEUP COMING OUT NEXT SPRING. DFH brand director Jennie Hatton-Baver said in a video shared with wholesalers on the brand’s ‘24 plans that “there is a lot of opportunity in the high ABV range” as DFH is currently mostly playing in the 7% ABV space.

When deciding to innovate around a higher ABV, Jennie said DFH “looked at styles that are dominating” which include vodka, tequila and rum. 

As such, DFH’s new 12% canned cocktail lineup next spring includes a Rum Mai Tai with pineapple and orange; a Vodka Mule with passionfruit and lime; and, a Tequila Margarita with strawberry and lime.

The new offerings will also be available in 7% ABV, however, so the line can still be carried in “states where you might have an alcohol cap where you can’t go too high,” Jennie said. 

The new lineup will get two promotions at retail next year through programs planned in the summer and in November and December for the holidays. 

DFH also plans to include the new cocktail lineup in revamped variety packs by updating the Bar Cart Variety Pack to include the new Vodka Mule, while including the Rum Mai Tai and Tequila Margarita in a brand new Tropical Crush Variety Pack that will also include DFH’s Vodka Lemonade and Vodka Crush.

TIME TO FIND NEW PACKAGING ON SHELF CUT IN HALF. Like DFH’s craft beer portfolio, the brand’s canned cocktails are also getting a packaging makeover in ‘24, as Jennie said consumers said the current packaging “doesn’t really scream Dogfish Head” and “the shark is getting lost.”

While the new packaging isn’t finalized yet, the version shown in the wholesaler video features a large image of the reworked DFH logo on the top half of the pack, “drawing your eye straight to that shark” that then “swims down” to the style and flavor which are “anchored right next to those fruit styles” featuring images of the fruit flavors featured in the drinks. 

Consumers apparently gave DFH feedback that their canned cocktail packaging had a lot going on and was “a little cluttered” with no clear “taste expectations.” 

But the new packaging hitting shelves next spring has cut time to find the brand on shelf in half, Jennie said.

DISTRIBUTOR ASK: DOMINATE IN LIQUOR. In terms of where DFH is hoping to win,  its sights are set on their liquor channel, where Jennie said it is the no.4 canned cocktail brand family by dollar sales. 

“That’s where we want you to attack, we want you to attack in the liquor class of trade,” Jennie said, noting that spirits RTDs have 52% of share in liquor in the beyond beer category compared to only 12% share in MULO + C.

DFH is asking wholesalers to “hunt” with 4-packs in liquor, as DFH’s Strawberry Vodka Lemonade is third fastest-growing 4-pack in RTD cocktails in the channel. Plus, “4-packs are the leading size in RTD cocktails by 66%,” Jennie said.

But she also advised distributors to “keep an eye on 8-packs” as they are “a great way for consumers to sample our products,” pointing out DFH already has two “leading” 8-packs in liquor with Bar Cart (no.1) and the Crush pack (no.3). 

Until tomorrow, 

Harry, Jenn, Jordan, and Bianca

“The trouble with being punctual is that nobody’s there to appreciate it.”

– Franklin P. Jones

———- Sell Day Calendar ———-

Today’s Sell Day: 1

Sell days this month: 22

Sell days this month last year: 22

This month ends on a: Thurs.

This month last year ended on a: Wed.

YTD sell days Over/Under: +1