Dear Client:
OK, that headline is an exaggeration. But folks, it’s time to brace for some serious out of stocks on beer’s biggest holiday.
We hate to be the repeated bearer of bad news. But the package shortages we’ve been covering — affecting many top suppliers — seem largely unabated as we head toward July 4.
And distributors are starting to get panicked.
Constellation CFO Garth Hankinson told the RBC Consumer Conference a couple of weeks ago that the market will indeed see “select outages” over the summer. Shoppers should be able find Corona and Modelo — perhaps just in “a different pack size than what they were initially looking for.”
That’s already coming true.
Says one distributor, covering a couple of large markets: “Never have I seen my Constellation inventory so low!” They’re seeing “8- 9 days inventory for the last 2 weeks. Constantly out of stock on 4-5 items per day. Corona family 12 packs and Corona Seltzer seem to stay in stock-thank God. Really sad — all brands [are] hot and losing so many cases every day. We need those Constellation increases in order to make up for lost on-prem during COVID.”
Another wholesaler in the Northeast believes that, with beer outages —
“specifically in cans” — that key packages will indeed be out for the next big beer holiday.
“Right now we are currently out of stock on Coors Light 12 pack cans with not much coming down the line,” per distributor. “We predict that brands such as Coors Light, Corona Extra, Modelo Especial will have out of stocks for the 4th of July. Coors Light will most likely have other bottle packages available to sell but both Corona Extra and Modelo Especial inventory will be cutting it so close to out of stock it scares me. We have begun to alert our main off premise retailers to this expected shortage so they can build their inventory now. … Fortunately, we preloaded our Truly inventory so they most likely will go to seltzers (I hope).”
After the first few unsolicited emails hit our inbox, we started to ask around about package shortages.
Everyone who replied conveyed significant out of stocks, particularly for Constellation (due to COVID-paused production in Mexico), White Claw (due to insatiable demand), and Molson Coors (who previously communicated a 12. oz. can shortage, but now seems to be short on bottles as well, per one distrib).
Says one large wholesaler in the middle of the country: “Our inventory for our top 10 suppliers is generally under 10 days. We normally would have at least 20 days on domestics and 45 days on imports.”
This distributor described “daily out-of-stocks” on Molson Coors, Constellation and White Claw.
In fact, “on many of our White Claw packages, we are literally day-to-day,” they said, noting still that “Mike’s has been working hard to get us extra loads.”
They don’t have issues with Truly but we’re hearing some future loads are being cancelled. Still, the no. 2 seltzer brand seems to be in a slightly better inventory position.
Another Midwestern distributor noted issues with top suppliers, and added FIFCO to the list.
This wholesaler praised A-B for generally keeping things in stock.
“ABI has been the # 1 star among our portfolio in regard to very few out of stocks,” they said. “We have maintained adequate supply with the majority of ABI major packages. Our ABI sales trends are + 6-7 % improved versus 2019.”
COLUMBIA ACQUIRES ECHANIS DISTRIBUTING IN EASTERN OREGON
Columbia Distributing continues to expand its already sizable footprint in the Pacific Northwest, as the big Blue/Silver/Gold wholesaler announced a deal yesterday to “purchase the majority of the assets” of Echanis Distributing Co. in Oregon.
Echanis — which sits right near the border of Oregon and Idaho in Ontario, OR – has been in the beer distribution business since 1972, and does about 370,000 cases annually. Its beer portfolio is made up mainly of the Miller and Coors brands, Constellation Brands, Mikes/White Claw, Boston and other craft, similar to Columbia’s lineup.
And it also carries a little bit of wine too, a space that Columbia dabbles in as well. Here, they’ll add to their existing Constellation and Treasury wine brands.
But efficiency, of course, is the clear motivation for Columbia in this transaction.
Indeed, Columbia chief Chris Steffanci stated in the announcement that “We’re expanding to align our great brands in contiguous geographies. This creates operational and marketing efficiencies for our suppliers and better access to an incredible selection that we know consumers are looking for.”
The deal is slated to close at the end of this month, and once it is final Echanis’ warehouses and employees will begin functioning as Columbia Distributing.
CBA STRIKING DEAL TO SPIN OFF KONA HAWAII OPS TO PV BREWING
(For those who missed this breaking news last night, we’re reprinting our article in full.)
To speed the regulatory review of A-B’s deal to buy out the remaining shares of Craft Brew Alliance it doesn’t already own, the brewers are announcing a sale of Kona Brewing’s Hawaii operations to PV Brewing, “a team of investors with decades of combined beer industry and business growth expertise” that includes ex A-B chief, Dave Peacock.
“The arrangement with PV Brewing is contingent on the closing of the proposed expanded partnership between CBA and A-B, at which point PV Brewing will purchase CBA’s Kona Brewing operations in Hawaii, including the new brewery and two brewpubs. The arrangement does not include CBA’s Kona business outside of Hawaii,” per announcement.
So basically CBA and A-B are trying to lessen their influence in Hawaii, where they collectively have more than 50% market share, to prevent market concentration concerns from killing the larger deal. While there have certainly been many deals where different owners had the same brand in different geographic regions, we’ve never seen a situation where one owner was relegated to a single state. Read on.
DEAL EXPOSITION. It seems like a lifetime ago. But actually, it was November 11 that A-B announced its intent to seal the deal and buy all of CBA, beyond its existing 31.2% stake.
Recall, the deal was to “purchase the remaining CBA shares it does not already own in a merger transaction for $16.50 per share, in cash.” That was lower than the $24.50/per remaining share A-B had been beholden to via a 2016 commercial agreement, but it was higher than CBA’s $7.33-ish stock price at the time.
At the time, CBA chief Andy Thomas had told BBD they anticipated a 6-9 month close period. That sounded long to some, but it was prescient. Just look at how long it’s taken the Gallo/Constellation deal to close. It was early April 2019 when Constellation announced a deal to divest 30 lower tier wine brands and facilities to Gallo for $1.7 billion. It didn’t pass FTC muster, has been revised down twice, and still hasn’t gone through (now at closer to $1 bill).
And, sure enough, we reported in February that CBA filed an 8-K report revealing that the DOJ had asked for more information pursuant to their pending deal to become wholly owned by A-B.
All signs pointed to Hawaii as the snag. As MKM has written of the deal, Hawaii has been “the only market where [the firm] saw potential concentration concerns, as Kona has roughly 12% share and ABI has another 40% share.”
Back to today’s announcement:
One does have to wonder how much value the Kona brand has to A-B with its whole origin/story, Hawaii, removed.
But the head of A-B’s craft division, Marcelo “Mika” Michaelis of the Brewers Collective, still seems juiced.
“While our shared vision for the expanded partnership between CBA and A-B did include CBA’s Hawaii operations, we are still optimistic about the ability of CBA and A-B to offer more consumers, in more communities, even more choices as a result of this expanded partnership,” he said in the announcement.
“We are confident that PV Brewing will continue investing and driving economic growth in Kona’s communities in Hawaii,” Mika said.
(Indeed, Kona was already getting a new 30,000-square-foot brewery and canning operation this year.)
One of Kona Brewing’s original founders, Cameron Healy, has his own take on the deal.
“I feel this change of ownership bodes well for the 26-year legacy of leadership that Kona Brewing Company represents in Hawaii. I expect PV Brewing to continue to invest in the business and in projects that support local communities while maintaining a dynamic focus on producing world class craft beers. With respect to Kona’s growth outside of Hawaii, Kona Brewing Company has enjoyed a positive partnership with Anheuser-Busch for the past 17+ years through our affiliation with Craft Brew Alliance, and I expect the brand will continue prospering under the companies’ pending expanded partnership.”
ANDY ADDS DETAIL. We had a second to chat with CBA chief Andy Thomas on the deal at hand.
Our main questions: Who exactly is PV, and what sort of guardrails will surround the Kona brand inside and outside of Hawaii?
WHO IS PV? It’s a private equity group formed by former A-B chief, Dave Peacock, and VantEdge Partners, a Kansas City investment firm with stakes in everything from sports franchises (Kansas City Royals) to 260 quick-serve restaurants, including Dunkin’, Taco Bell and Jamba Juice.
Needless to say, “they’re pretty adept and experienced,” says Andy, not only in the brewing industry [with] Dave’s background, but also “with consumer facing goods and propositions.” So they should be a proper steward for the Kona brand.
WHAT EACH OWNER WILL BE ABLE TO DO WITH THE BRAND. The PV/Kona deal is contingent on A-B’s deal to buy CBA getting regulatory approval.
Provided that, A-B would own the Kona brand everywhere except Hawaii, where PV would also of course own production facilities (at about 100,000 barrels capacity).
Andy points out there’s a well established precedent with this sorta thing — Constellation owning Corona and Modelo for the U.S. vs. A-B’s global provenance, for example.
Asked what sort of latitude they’ll have with the brand outside Hawaii, in terms of marketing and beyond, Andy says: “We’ll have a certain amount of autonomy,” whereas PV/Hawaii can also “innovate locally, and do things locally.” Both have the brand’s best interest and will “try to be consistent.”
PV in Hawaii will “have the autonomy to do what they need to do and operate the business independently, and we’ll have the ability to maybe take some of that globally… do things they’re doing in other markets,” Andy said.
In all, Andy thinks the deal will ultimately “facilitate” regulatory clearance on the larger A-B transaction, with respect to any potential concerns related to Hawaii.
But how long could that take? They “think it will be before the end of year,” but no promises. Of course, things have slowed down due to COVID.
Would current CBA management stay on with A-B after an ultimate deal?
“We’ll stay on for a certain amount of time; we’re obligated to do that,” said Andy. Particularly to help A-B’s Brewers Collective with integration planning. After that? Stay tuned.
MEET goPUFF, THE ECOMMERCE PLATFORM THAT OWNS THE TOP SELLING STORE FOR WHITE CLAW IN THE COUNTRY
If you haven’t heard of goPuff, then it’s time you get acquainted.
The e-commerce retailer based in Philadelphia isn’t new, it’s been around since 2013, but it’s grown leaps and bounds over the past couple years.
To wit: goPuff had 55 warehouses at the end of 2018, and now has around 200, director of alcohol at goPuff, Randy Ornstein shared on a Beer Institute webinar yesterday afternoon.
The retailer is now in 40 states and delivering to most every major market with the exception of California and New York City, according to Randy (who you may recall used to head up A-B’s Beyond Beer division not long ago). goPuff makes their hay in college towns, he said, and their busiest shifts are typically between the hours of 10pm and 4am. You know, normal college hours.
But unlike Drizly, Minibar, Thirstie or some of the other bev alc e-commerce platforms, goPuff delivers much more than alcohol, they’ll basically deliver anything you can find at a c-store, drug, or grocery chain.
Still, despite their expansive selection of products for purchase, alcohol is still tops in the company. Beer is a top two category for the company overall, and in places where they’re licensed to deliver alcohol, beer is number one.
Ed. Note: In case you are wondering, they are indeed three-tier compliant. Beer, wine and spirits distributors deliver the products to them, and they own their own inventory and liquor licenses. goPuff has pickers that grab the items selected in their customers’ purchases, put it all together, and send it out for delivery.
Randy says a little over half of their warehouses hold a beer license, a little under half have a wine license, and about 10% have spirits.
Because they’re a private company Randy wouldn’t divulge too many numbers on their bev alc business, but he did share a couple good nuggets on the beer, er… hard seltzer side, like: their top two beer SKUs are hard seltzers, “with the number one being a sizable difference over number two.”
And ready to have your mind blown? goPuff’s “number one” location/warehouse in Philly, dubbed 12th Street, “sells more White Claw than any retailer in the country. So it’s the number one White Claw store in the entire country in 2020,” Randy said.
A-B’S ZX VENTURES EXPANDS PARTNERSHIP WITH THE WINE GROUP, ANNOUNCES NEW DISTRIBUTION AGREEMENT WITH SUPER COFFEE
A-B has announced two new partnerships through its venture arm, ZX Ventures, exemplifying the brewer’s interest in building out its portfolio of spirits, wine, and non-alcohol beverages.
The company said it is expanding its partnership with The Wine Group (TWG), America’s second largest wine supplier, “to grow key brands in the canned wine and FMB RTD segments.” BBD first reported A-B distributors doing some test runs in c-stores with TWG in late 2018. A-B has other wine ventures, of course, having bought out the kitschy, social media-driven wine brand, Babe, last year, after having invested in a stake.
But back to The Wine Group arrangement.
“Through this agreement, wholesalers will have the opportunity to distribute TWG’s popular Cupcake canned wine portfolio in select retail channels. This partnership also builds upon the successful pilot distribution program in Florida and California last year and includes the ability to partner on other exciting consumer propositions in the future.”
A-B also announced “a new strategic distribution agreement with Super Coffee, the third best-selling bottled coffee brand in the US. Super Coffee’s product line portfolio includes both cold and hot coffee options in addition to creamers, espresso and pods. Super Coffee has already seen success in the A-B network, with a number of wholesalers currently distributing the product.”
Until tomorrow,
Harry, Jenn and Jordan
“Luck is what you have left over after you give 100 percent.”
– Langston Coleman
———- Sell Day Calendar ———-
Today’s Sell Day: 9
Sell days this month: 22
Sell days this month last year: 20
This month ends on a: Tues.
This month last year ended on a: Fri.
YTD sell days Over/Under: +1
