A-B Redirects $5 Mill from Sports and Entertainment Investments to American Red Cross

Dear Client:

Today, A-B is announcing that it will funnel $5 million from its sports and entertainment investments to the American Red Cross to help it with COVID-19 efforts and blood drives. Beyond that, the brewer and its sports partners will also “identify available arenas and stadiums to be used for temporary blood drive Centers,” as A-B offers up its tour centers in St. Louis and Merrimack, NH, for the same. 

“As part of the donation, Anheuser-Busch will also donate media air

time to the Red Cross in support of their public service announcements,” the company announced. 

A-B’s U.S. Chief External Affairs, Cesar Vargas, explained to BBD that the Red Cross partnership “provides us with an opportunity to redirect” funds from A-B’s sports and entertainment partnerships, which have basically been thwarted since COVID-19 measures have caused mass entertainment and sports event cancellations.  

This is important. As we understand, people aren’t giving blood at the normal rate for obvious reasons — one, it’s hard for people to sit in a small lobby waiting together to give blood under current COVID restrictions. 

American Red Cross CEO Gail McGovern shared that about “7,000 Red Cross blood drives have been canceled across the country due to COVID-19 concerns, resulting in some 220,000 fewer blood donations.” So the ability to offer these massive venues that allow for social spacing requirements is incredibly valuable. 

The brewer has also started producing hand sanitizer to help “growing need” across the U.S.; the company said it will be “utilized at Red Cross blood donation centers and to support emergency shelters for future relief efforts.”

BUDWEISER RUNNING “ONE TEAM” SPOT TO INSPIRE. The Budweiser brand has a place in A-B’s efforts to assist in the American COVID-19 battle, too, as an iconic American brand known for its iconic ads celebrating the American way of life. 

“To bring hope and inspiration to the people of America who may be feeling isolated and scared during this difficult time,” it said, they’re releasing a new 60-second video.

Called “One Team,” it celebrates American resilience, “honoring the everyday people of America who are rising above the call of duty to help in the wake of the COVID-19 health crisis,” from healthcare workers to grocery store clerks. See it here. (And here is a related microsite for more.)

CESAR SHARES MORE ON A-B’S EVERYDAY EFFORTS TO ADAPT TO COVID-19 NEW NORM. While Cesar shared the laudable new Red Cross efforts with BBD, he also shared some of the ways they’ve been adapting and operating in the age of COVID-19 social distancing efforts, and its market effects. 

ON RESPONDING TO DAILY CHANGES IN THE COVID-19 ERA. Cesar said they’re talking with business partners daily about the marketplace’s quick-changing realities.

“We’re actively and regularly communicating with our wholesalers just about every day,” on happenings in the overall environment, as well as business developments.

“We’re working with them, supporting efforts to implement measures so they keep their own [workforce] safe and healthy, and able to maintain continuity and operations.” They’ve got an active dialogue with retailers also, “making sure the full chain is protected.”

Cesar described the landscape as a “fluid environment,” with “adjustments continuing.” Hence, as you may have seen, their recent communication to go to 180 days on date coding.

As for what specific changes A-B has made in the age of COVID-19 precautions: “A lot of people are working from home across the U.S.; we did that before government guidance,” he said.

Where employees need to be on site, “we’ve put in place a number of precautionary measures and sanitization protocols above and beyond what the CDC is recommending.” That goes for their breweries, their wholly owned distributors, and front line salesforce, “interacting with our customers as part of essential operations.”

ON TWEAKED BRAND PLANS. Asked whether they’d look to postpone any launches that were due out the next few weeks (we reported yesterday that Budweiser Zero’s marketing campaign has been delayed until May), Cesar said, “everything’s on the table; there are things we can’t do now that we’d planned to do,” but brands are making adjustments during this period. For example, Bud Light is bringing its Dive Bar tour online. And Mich Ultra is looking at doing something about encouraging people to stay active inside.

It’s “little adjustments like that, being sensitive at the moment and period we’re in, but still being there for people. That’s the balance we’re trying to strike,” Cesar said.

LATEST NIELSEN NUMBERS CAPTURE CONSUMERS’ BEER BUYING FRENZY

The latest scan data from Nielsen makes it clear that lots and lots of people had the same idea in the week from March 7-14… Go out and get beer, any beer, and grab as much as you can. 

ALL BEER SEGMENTS UP. Indeed, total beer dollar sales for the week were up 14% versus a year ago, Nielsen’s VP of Bev Alc Practice Danelle Kosmal shared in an update with BBD. “All segments in the category are up,” Danelle said, “and many are up double digits.” Hell, even non-alc beer was up 48.6%.

And get this: even if you were to take beer’s current growth engine, FMBs and seltzers, out of the equation, total beer sales would still be on the verge of double-digit growth, up 8.1% for the week in Nielsen off-premise channels, according to Danelle.

LARGER PACKS SURGE DURING THE WEEK. The popular pack sizes during this frame further illustrate consumers’ desire to snag as much as they can too in these crazy times.  

“While nearly all packs sizes grew for the week ending March 14, the larger pack sizes far outpaced the growth of smaller pack sizes,” Danelle shared.

Check it out:

  • Dollar sales for 24-packs were up 28%
  • 30-packs were up +21%
  • And 36-packs were up 40% 

“These are extremely significant increases if you compare to growth rates for 13 weeks ending 1/25/20, when dollar growth rates were  +8%, -1.4%, and -2% respectively,” Danelle pointed out.

Meanwhile, 6-packs were up 5% during the week, and 12-packs were up 26%, “driven in large part by Seltzers.” Speaking of, seltzers made up nearly half of Nielsen’s 15 top growth brands during the week, with seven making the list, and White Claw’s Variety Pack taking the top spot. Mich Ultra and Miller Lite followed at number two and number three, respectively.

WHERE WAS THE GROWTH COMING FROM? Of course, much of this surge in beer sales occurred in the food channel, up 19% over the week. Meanwhile, beer grew 6% in drug during the week, and 4.4% in convenience. Danelle added that liquor stores “played an important role” in beer’s growth too, with sales up 30% vs year ago.

And while beer grew in “nearly all markets,” a few states “experienced much stronger growth,” said Danelle, pointing to: Ohio up 38%, Michigan up 36%, and Pennsylvania up 33%.

BEER HIGH ON CONSUMERS’ LIST, BUT NOT A TOP PRIORITY. While this type of surge in beer is astonishing, the growth across total consumer goods over the week was unbelievable, up 40% in Nielsen all outlet channels. For Danelle, “this is an indication that beverage alcohol is important to consumers, but other consumer good categories are being prioritized, at least for now.”

HOW LONG DOES THIS SURGE LAST? It’s important to note that this week of scan data from Nielsen is prior to any state calling for mandatory closures of the on-premise (recall those began on March 15). So we could foresee these numbers growing even higher in the data to come as they start to reflect the virtual shutdown of the on-premise. 

Indeed, “as more and more on premise locations close, I think we will continue to see off premise sales for Beer, Wine, and Spirits grow even more, and closing the gap with other consumer goods,” Danelle concluded.

FTC SHOOTS DOWN PROPOSED FRANCHISE LAW IN CALIFORNIA

There’s a bill floating around in California that aims to bring a “good cause”  statute to The Golden State, making it harder for brewers to terminate distributors. 

If you look up the legislation, you can see the nuts and bolts of the franchise bill, entitled Assembly Bill 1541, are there, like…

A beer manufacturer shall not cancel, terminate, reduce, not renew, or cause any of the same, an agreement with a beer wholesaler for the distribution of beer and malt beverage products, unless the beer manufacturer has complied with specified provisions.

And the bill would place the burden of proof on the beer manufacturer to demonstrate that it has acted in good faith, that it has or had good cause to cancel, terminate, reduce, or not renew an agreement, or to cause any of the same, and that it complied with notice requirements. 

Yet pertinent details – like, the size of the brewers this law will apply to, or how many days’ notice is required to inform the wholesaler of cancellation/termination – are blank.

Regardless of whatever numbers may fill those blanks, however, it appears the Federal Trade Commission and the Antitrust Division of the Department of Justice have already seen enough and are wary of this bill making its way through the legislature.

THE FTC AND DOJ ASK CA LEG TO REJECT THE BILL. The staff of the two agencies submitted a letter to California State Assembly Member Jim Wood yesterday, “raising concerns” that the bill “would harm competition along the chain of beer distribution in California, to the detriment of California’s consumers.”

They claim the bill is “likely to diminish competition among California beer wholesalers and increase manufacturers’ costs of obtaining distribution services from wholesalers,” and in turn “likely to increase the cost of beer distribution.” 

LIKELY TO CREATE “HIGHER PRICES” AND “LESS VARIETY.” Add it all up, they say, and California consumers “would likely pay higher prices for beer and may enjoy less variety.” Therefore, “the agencies urged the California legislature to reject A.B. 1541, just as it has rejected similar proposals in the past.”  

STATE TRADE ORGS RESPOND. As one could imagine, the warning from the FTC and DOJ has caused some cheers and some tears from the state’s trade organizations for craft brewers and wholesalers.

A BIG WIN FOR CRAFT BREWERS, SAYS CCBA. The California Craft Brewers Association views the letter as “a clear and major victory for craft brewers across the country,” Executive Director Tom McCormick shared in a statement to BBD.

“The FTC and the DOJ have clearly stated in their letter that franchise laws are detrimental to both small brewers and the consumer, stating that proposed franchise legislation in California would  ‘lead to higher beer prices for California consumers,’ and ‘reduce the variety of beers available to California consumers and impede innovation,’” he said, adding that the bill “clearly only benefits wholesalers at the obvious detriment to brewers and consumers.”

Tom continued: “In a time of national crisis, it would be appalling for wholesalers to further attempt to divide our industry. We hope that wholesalers do what is right for our industry and drop this selfish legislation so that the CCBA and other stakeholders can move on to help, not divide our industry in these challenging times.”

CBBD SAYS FTC WAS QUICK ON THE DRAW. The California Beer & Beverage Distributors appeared to be caught off guard by the news. 

“It is regrettable that federal competition agencies would render an opinion on recently introduced legislation without an understanding of the proposal they opine on, even before a single hearing has been held, and without any evidentiary record whatsoever,” said California Beer & Beverage Distributors president Victoria Horton in a statement to BBD.

If those agencies would have reached out, she said, the CBBD “would have explained that the proposed legislation will exempt 99% of the members” of the CCBA.

Then there are the blanks. “Any plain reading of the bill’s section J, which says, ‘This section shall not apply to ___ (blank)’ is clear intent of exemptions to be added to the bill’s language,” Victoria said. “Yet apparently the FTC wasn’t curious about what exemptions would be placed in the bill?”

She also adds that, had any discussions taken place, the CBBD would’ve stressed that “good cause” statutes “exist in 47 states, so this proposal would bring California in line with virtually every other state, which the letter ignores.” 

They would have also pointed out too, she said, that “unlike most states, California allows brewer self-distribution, regardless of size of the brewer, which is mentioned only in passing in the letter.” And highlighted that “the proposed legislation will not impact existing contracts, and only applies to future contracts.”

All in, the CBBD finds the letter from the FTC “odd in its timing and lack of comprehension of existing law in 47 other states and the California legislative process.”

ABI WITHDRAWS 2020 GUIDANCE IN THE WAKE OF COVID-19 

Anheuser-Busch InBev withdrew its 2020 guidance on Monday evening as the spread of COVID-19 continues. 

The outlook issued at the end of February (back when the virus was still mostly in China) forecasted between a 2% and 5% increase in EBITDA. But the scale of the spread since then has caused A-B to scrap that guidance, reports Reuters.

“Since 27 February 2020, the scale and magnitude of COVID-19 has increased significantly, resulting in restrictions imposed on many customers, as well as other limitations and social distancing measures in many countries in mid-March,” the brewer said in a statement.

“Given the uncertainty, volatility and fast-moving developments of the pandemic in the markets in which AB InBev operates, the company is withdrawing that 2020 outlook in its entirety because of the impact of COVID-19,” said A-B.

The brewer also added that its deal to sell its Australian beer business to Asahi for $11 billion is moving forward, but is now expected to close at a later date. Instead of closing in the first quarter of 2020 as planned, they’re now eyeing the second quarter to wrap up the transaction.

DIAGEO NORTH AMERICA CHIEF DEIRDRE MAHLAN TO RETIRE

In case you missed it in Wine & Spirits Daily yesterday, Diageo announced that North America president Deirdre Mahlan will be retiring, effective June 30. Taking her place is Debra Crew, who will step down from the Diageo board to take the helm of the region.

Deirdre joined Diageo in 2001, and rose in the ranks over the years to CFO in 2010 and North America president in 2015. 

“Diageo North America is a strong business that has been very ably led by Deirdre since 2015,” said Diageo chief Ivan Menezes. “While we are sad to be losing Deirdre, I know that she leaves a great legacy in the North America business and across Diageo. I am very grateful for her exceptional contribution over many years at Diageo and wish her the very best for her retirement.”

Incoming North America president, Debra Crew, has served as non-executive director on the Diageo board since April 2019. She is also the former president and CEO of Reynolds America. Before that, she held various leadership positions at PepsiCo.

“Debra’s extensive experience in consumer businesses will serve Diageo and North America well as we continue to progress on our ambition to become one of the most trusted and respected consumer products companies in the world,” says Ivan. 

CONSTELLATION SPEAKS ON MEXICALI BREWERY FALLING THROUGH

We promised a statement from Constellation on the news that Mexicali residents have voted against having a Constellation brewery in their backyard, and we’ve got it for you.

The comment from Constellation chief Bill Newlands is cool and calm, considering 76% of the voters from Mexicali elected to shut down a $1 billion project that was more than halfway done.

He said they’ll “continue working with local authorities, government officials and members of the community on next steps related to our brewery construction project in Mexicali and options elsewhere in Mexico.” 

And reassured that this curveball won’t leave them scrambling for capacity. “We have ample capacity, based on current growth forecasts and production capabilities at our Nava brewery and soon to be completed expansion in Obregon, to continue fueling the growth of our beer business in the medium-term.”

Until tomorrow,

Harry, Jenn and Jordan

“We only know of one duty, and that is to love.”

– Albert Camus

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