Dear Client:
Molson Coors will start to make full-strength Peroni in the U.S. starting this August, ensuring the brand’s reliable supply stateside. Currently the company imports all Peroni (both full-strength and 0.0) from Italy.
As we understand, MC will first make a big push with the brand on-premise after the new production arrangement, with package product coming in a later phase.
Molson Coors tells BBD that kegs from domestically produced Peroni should be available in the on-premise starting this September, with other SKUs to follow in early 2025. Peroni 0.0 will continue to be brewed and imported from Italy.
The bottom line here is that producing the full-strength product domestically “means we can overcome one of the biggest issues to scaling the brand, which is reliable supply,” per a spokesperson. Source says there are “many accounts, particularly on-premise,” who say they’d put Peroni on draft if not for the headache that comes with importing in relatively small quantities.
Hopefully that will counteract the somewhat inevitable portion of consumers who complain about domestically-produced imports; it seems to have worked out for A-B’s Stella, however, and more recently, Japanese brewers Sapporo, and (soon) Asahi. Should be good for MC’s Peroni margins, too.
In a letter sent to the company’s wholesaler network last night, Molson Coors supply chain chief Brian Erhardt and North America CMO Sofia Colucci said that their U.S. brewers have been painstakingly working to get the recipe exactly right over the last few months to “honor its original recipe from 1963 – brewed under the authority of Peroni master brewers in Italy.”
They also promised “increased marketing support” from the “expanded production.”
“Thanks to your support, Peroni has been growing since 2020, and, as you heard at convention, we have big plans for this great brand moving forward. That’s why now is the perfect time to expand our production and scale this beloved brand to new heights, Brian and Sofia wrote.
INTOXICATING HEMP BAN AMENDMENT CLEARS HOUSE AG COMMITTEE MARKUP
We have the latest on the Farm Bill. Much to the chagrin of the delta-9 beverage industry, the proposed amendment seeking to “exclude” products with detectable amounts of THC as well as cannabinoids “synthesized or manufactured outside the plant” was adopted late last week as members continue to markup the bill.
Recall, U.S. Rep. Mary Miller, an Illinois Republican, filed the amendment, expressing concern for closing the “loophole that legalized intoxicating hemp products” based on her contention they are “being marketed to teenagers and children” and “are often sold in colorful packaging next to candy and snacks.”
During the markup hearing, several Republican members made comments opposing the amendment, Marijuana Moment reported, with Rep. Jim Baird of Indiana noting that farmers around the country “have invested their time and resources over the last six years to develop a domestic supply chain of hemp and hemp products.” Growing hemp has also served as “a great opportunity for family farm[s] to diversify their farm income,” he said.
Wisconsin Rep. Derrick Van Orden said Congress “inadvertently created this problem in the 2018 Farm Bill because they could not reasonably predict, or they didn’t reasonably predict, that these types of cannabinoids could be synthesized.” And since then, “there are now tens of thousands of Americans who have created different businesses, including several in my district now, that are using this process to feed their own kids,” he said.
Then too, Iowa Rep. Zach Nunn said that while, “as a dad of six, I certainly share my colleagues’ passion for protecting children from accessing dangerous drugs,” that “this amendment goes too far” (he said it would eliminate hemp grown for non-consumption purposes) and the proper solution would be “appropriate regulation to drive down the illicit marketplace.”
The draft Farm Bill also proposes creating separate categories for producers who grow the crop for human and animal consumption vs. those producers “who cultivate it for fiber, grain, oil and seed not intended for consumption [see CBD 05-20-2024].
Farm Bill amendments and revisions will continue to roll in, as the Democratic-controlled Senate has yet to release its own draft version of the bill.
DEA OFFICIAL: THCA CANNABINOID “DOES NOT MEET DEFINITION OF LEGAL HEMP.” Complicating the federal discussion around hemp further, Marijuana Moment got its hands on a letter from a top Drug Enforcement Administration (DEA) official this week indicating that the agency does not believe THCA – a cannabinoid related to delta-9 THC, which is converted in delta-9 when heated – falls under the legal definition of hemp.
Recall, cannabis products must contain less than 0.3% of delta-9 THC to be legal under the Farm Bill. And the DEA has clarified its position that the threshold includes delta-9 THC and THCA, meaning THCA must be accounted for when determining the total allowable THC level.
Jonathan Miller, general counsel for the U.S. Hemp Roundtable, told Marijuana Moment “this interpretation would destroy the hemp industry” as “most hemp growers, even fiber and grain growers, would be out of compliance” (i.e. over the allowable THC threshold).
“I would imagine nearly every hemp farmer and company would find this interpretation objectionable,” he said.
We’ll be monitoring. Stay tuned.
RBC NOT RINGING ANY ALARMS ON CONSTELLATION’S “SLOWING” TRENDS
While still “the best growth story in staples,” Constellation is not “immune to today’s macro pressures,” writes RBC Capital Markets managing director, Nik Modi, in addressing the latest talk of “deceleration” for Constellation Beer.
As you may have noticed, Constellation Beer has seen some “slowing” volume trends as of late, with Nik and co. tracking 5.5%-6% depletions growth in Q2 to date, which is a notch below the consensus depletions estimates of +7% for the quarter.
Still, Nik and co. aren’t ringing any alarms.
They believe Constellation’s current guidance of achieving net sales growth of +7-9% is the “correct range” for the full year, and do not expect Constellation chief Bill Newlands to reduce guidance while speaking at a “competitor conference” (Bernstein) today.
NOT IMMUNE TO MACRO PRESSURES. “While Constellation Brands continues to gain share and outperform the overall beer category (volumes still +5%), the company is not immune to the increasingly pressured consumer,” writes Nik.
Citing Numerator Insights data, he and his team note that low-income consumers — which over-index to large beer brands — showed “evidence of trade down” during April with their beer buy rate declining 14% year over year. They also called out the rising rate of unemployment with Hispanics/Latinos during April, up 4.8% during the month, which was ahead of the national average over April (+3.9%).
Yet “despite some of these macro dynamics, STZ is still growing its volume in the MSD range and shelf resets have not been fully completed yet,” per note.
CONSTELLATION HAS A HISTORY OF BOUNCING BACK. Then too, they’ve seen this movie before. “For investors familiar with the STZ story, STZ has had quite a bit of history with controversies that typically cause overreactions to the downside,” Nik’s note states. “Over the last 5 years, investors have had several concerns over tracked channel performance, share losses, weather, capacity issues, etc. that have caused underperformance, but shares have a history of bouncing back.”
“DE-LINK” THE CONSTELLATION GROWTH STORY FROM BEER. And Nik also calls out, as he has recently, that Constellation’s growth story should be looked at separately from the beer category, explaining that “The bear case on STZ for about 10 years has been the concern that the company would not be able to sustain its 7-9% top line growth rate in beer against a backdrop of weak category dynamics. If someone subscribed to this bear thesis over that past decade, they would have missed a significant surge in STZ shares (from $70 in 2014 to ~$250 today—a return of 259%).”
Until tomorrow,
Harry, Jenn, Jordan, and Bianca
“Some people like my advice so much that they frame it upon the wall instead of using it.” – Gordon R. Dickson
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