Beer Starts the Year Off Right

Dear Client:

Dry January be damned. Beer is off to a strong start in the New Year.

For the four weeks to January 27, category dollars and volume are up 6.4% and 3.7%, respectively, in the multi-outlet and convenience channel. (Note, there was a major holiday timing issue tailwind, which we detail below.)

Here are some highlights from the first four weeks of the year:

Every single segment is growing dollars in MULC for the four weeks, yes even domestic premium, albeit slightly, up 0.1%.

Three segments are growing dollars by double-digits during the frame: imports, up 14%; super premiums, up 21%; and FMBs up 24%. We note that cider is right on the cusp of double-digit growth too, up 9.6%.

Then get this: all but one of the top 10 suppliers are growing dollars in the MULC channel for the four weeks. The lone supplier that didn’t grow? Pabst, down 4.6%.

Nearly half of the top 10 suppliers are growing dollars by double digits:

Diageo Beer Company, up 18%
Constellation, up 21.6%
Boston Beer, up 22%
And Mike’s up a whopping 48.4%

Meanwhile, A-B posted 3.6% growth in dollars; MillerCoors grew 0.8%; Heineken USA put up 1% growth; Yuengling, up 1.7%; and Sierra Nevada gained a modest 5.2%.

TOO GOOD TO BE TRUE? BBD hit up IRI to see if there was any sort of timing issue responsible for these pleasantly surprising numbers. Turns out there is… this latest frame from IRI (the four weeks ending January 27, 2019) included New Years Eve day and the year ago comp period does not include New Years Eve day.

However, IRI noted that they’re still seeing strength in beer, wine and spirits trends, even when looking at the latest 5, 6 or 8 weeks. See table below:

Image

Off-premise scan data isn’t the only sign of a strong January, either…

NBWA’S BPI REVEALS IMPRESSIVE START, TOO

The NBWA’s Beer Purchasers’ Index for the month produced a reading of 55, “one of the highest readings the survey has recorded for a January over the past five years,” said NBWA chief economist Lester Jones.

Five of the seven segments tracked in the BPI topped their previous January reading.

FMBs blew past their January 2018 index of 46 with a reading of 66 this January, the highest reading for any segment during the month.

Cider smashed its previous index as well, going from a 28 reading in January 2018 to a 52 reading in January 2019, marking the “segment’s fourth monthly reading above 50.”

Imports topped too, 64 compared to 62.

Even premium lights posted a near 10-point gain over its previous index, jumping from 34 to 43.

Premium regulars saw a slight uptick, moving from 27.5 to 29.5.

Meanwhile, below premiums’ index fell one point from last year to 34. And craft dropped a couple points, falling from 57.3 to 55.4. Still, the craft index “indicates a very slight expansion in the volume in craft beer orders,” Lester pointed out.

He noted that there was a bit of a holiday timing issue as well, but overall a real robust January. The month’s numbers are shifted, he said, but still stronger.

SARATOGA BUYS PLATTSBURGH IN NEW YORK, MAKES 6 MILLION CASE DISTRIBUTOR

Upstate New York A-B house Saratoga Eagle Sales & Service, a subsidiary of Try-It Distributing Co. Inc. in western New York, is acquiring Plattsburgh Distributing, a Bud/Rolling Rock and energy drink supplier, the Albany Business Review reported Wednesday. The deal gives Saratoga Eagle an extra 650,000 or so cases, bringing it to almost 6 million cases.

In essence, per the business journal, “Saratoga Eagle is increasing its eastern New York territory at a time when U.S. beer sales remain stagnant with more consumers opting for cocktails and wine.” The distributor’s footprint now includes 13 counties, up to the Canadian border.

When the deal closes early next month, Saratoga Eagle will have acquired five beverage distributorships since 2005, per outlet.

Indeed, Saratoga Eagle president Jeff Vukelic told the business journal that “one of the only ways to grow these days comes through acquisition.”

JEFF: “MY GUTS TELL ME THIS IS THE YEAR FOR ACQUISITIONS”

BBD got on the horn with Jeff Vukelic to get more details on the deal.

As a family, he told BBD, they’ve “always been in acquisition mode,” and are still seeing a lot of consolidation that could happen in New York or anywhere (most of them involving big, generational businesses like the RA Jeffreys sale in North Carolina, or this week’s news about Donaghy/Delta Sierra in California, for a 14 million case tie-up).

Says Jeff: “For some reason, my guts tell me this is the year, in general, for acquisitions,” he said. “In light of the business climate, and where it’s going, I think there’s a lot of people looking to get out.”

(We’ve heard this sentiment from others, too.)

But for guys like Saratoga, they’ll grow by acquisition. They’d love to do that within their footprint, but if A-B came to them with a territory outside New York, Jeff says, “we’d certainly look at it.”

Overall Saratoga is pretty flat, Jeff says, though revenues are increasing and gross profits are up.

Of course, the high end beer is doing well; Mich Ultra is growing, and they’re starting to see some movement on Mich Ultra Pure Gold. Bud Light is struggling.

They also have a wine and spirits portfolio, as well as a non-alc, which is doing well. Together that comprises about 5% of their portfolio.

BRINGING IN NEW SUPPLIERS IN WINE AND SPIRITS. “We are bringing in new suppliers on the wine and spirit side and partnering with a liquor distributor to help our network cover downstate New York,” Jeff said. “They are also helping us identify new partners.”

Asked about some of A-B’s wine investments, Jeff said Saratoga doesn’t have Babe Rose yet, but are hoping to secure the rights in the near future. (And something called Saturday Night Wine; stay tuned.)

And their Red Bull business is growing, too: In fact, it’s a $50 million dollar business for them, roughly. They’re one of the few independent independent operators out there for the brand; most are wholly owned distributors (by Red Bull).

COLORADO A-B BRANCHES PAY $500,000 FOR ALLEGEDLY LEASING EQUIPMENT TO RETAILERS, SPOTTY BOOKKEEPING

BBD has been privy to documents that name A-B branch wholesalers –including Anheuser-Busch Sales of Southern Colorado, AB visitors Town Center, and American Eagle Distributing CO — under accusation of having provided unlawful financial assistance to Colorado retailers by leasing them equipment.

They also allegedly “failed to maintain adequate books of account and records to show fully the business transactions of the Licensees.”

Licensees deny those accusations. To rectify things, they have opted to pay a fine of $500,000 in lieu of auditing and legal proceedings, per documents signed last December.

(Licensees also assert that licensee lease management systems for leasing equipment in Colorado are now managed from St. Louis, MO, and further that “reasonable efforts” and internal audits were made to address bookkeeping deficiencies.)

AIN’T THE FIRST TIME SOMETHING LIKE THIS HAPPENED, of course. Recall, Anheuser-Busch’s branch in Massachusetts, August A. Busch & Co., stood accused back in May ’17 of providing nearly $1 million worth of draft towers and coolers to hundreds of Boston-area retail outlets to induce purchasing of its brands over the course of 2014-2015, [See BBD 05-10-2017].

But they got off scott free that time: ABCC officials determined that the branch was “not liable under state anti-pay-to-play rules,” as commissioners determined that A-B was the one with the pocketbook, and the branch was just a facilitator.

Until Monday,

Harry, Jenn, and Jordan

“A man cannot be comfortable without his own approval.”
– Mark Twain

———- Sell Day Calendar ———-
Today’s Sell Day: 6
Sell days this month: 20
Sell days this month last year: 20
This month ends on a: Thurs.
This month last year ended on a: Wed.
YTD sell days Over/Under: +1