Dear Client: 

Heineken USA has become the latest big brewer to implement a distributor credit for untapped kegs of their product.  

The brewer notified wholesalers yesterday morning of their plans to “implement a 50/50 split with distributors for cost of untapped kegs.”

Of course, this credit is only offered to kegs that have expired, they “must be past ‘Best By Date’, or extended ‘BBD’ if applicable,” HUSA said, and “all claims must be filed by June 30th.”

The “full untapped kegs can be scheduled by Kegspediter for pick up from distributor warehouses, mirroring the current process for empties,” according to the memo.

CREDIT GOING TOWARDS FUTURE ORDERS. HUSA said the credit for these kegs will be calculated after Kegspediter decants the keg, and the credit will be applied to future distributor beer order(s).

MOST OF THE BIG SUPPLIERS NOW OFFERING A KEG BUYBACK PROGRAM. By now, most of the top suppliers have announced some type of reimbursement plan…

-Molson Coors – 50/50 split
-Constellation – Offering reimbursement at 70% of distribs delivered cost
-HUSA – 50/50 split
-Boston Beer – Continuing their 50/50 split
-Pabst – 50/50 split 
-Diageo Beer Co. – Covering 60% of keg losses

The big one missing? A-B. Though one red wholesaler shared with us yesterday afternoon that the company is “still assessing what they want to do” and there are rumors that they “may help with package product also,” which would be huge of course.

HUSA WORKING TO “MINIMIZE THE IMPACT” OF MEXICO DECREE; INVENTORY “HEALTHY” AT THE MOMENT

In the same memo announcing the distributor credit, HUSA also shared an update on the supply chain of their Mexican portfolio.

Recall Heineken announced on Friday that it would reduce its production operations in Mexico “to a minimum” in response to the decree put out by the Country last week that declared bev alc non-essential.

HUSA shared that their operations team is working closely with their counterparts at Heineken Mexico “to assess and minimize the impact of the decree on the supply chain of our Mexican portfolio in the U.S.”

They reminded distribs that their team had already “moved a significant amount of inventory” to this side of the border prior to the decree, and “increased inventory of A-SKU’s for the off-premise.”

So, “at this moment we have a healthy inventory of core SKUs of our Mexican brands in the U.S.”

THE PANTRY LOADING PEAK HAS PASSED

Beer continues to grow strong double digits in the latest off-premise scans, but the trends are a far cry from what we saw in the week prior.

After total beer category dollars exploded to +34% in the week ending March 22, they decelerated quite dramatically to +17.2% in the latest week to March 29, per IRI (all channel plus liquor) data shared by Bump Williams Consulting.

With March scan trends now in the books, it would appear we have the pantry loading peak has come and gone.

• Total beer dollars grew 10.8% in the week ending March 8
• Then accelerated the following week (ending March 15) to up 22%
• Peaked in the week ending March 22 at +34%
• And decelerated down to +17.2% in the last week of the month (ending March 29)

While we may be on the other side of this peak, we should note that total beer dollars up 17% in the latest week is still pretty dang solid. Every beer segment continues to grow, and all but two are growing double digits: domestic premium, up 5.7%; and domestic sub-premium, up 7%.

It’s a similar story playing out in wine & spirits too.

Like beer, it’s peak for the month of March hit in the week ending March 22, with total wine dollars up nearly 50%, and spirit dollars up a whopping 70%. In the latest week, however, wine was growing 24.5%, and spirits’ dollar growth decelerated down to +30.3%. Again, those latest numbers are still striking, just a far cry from the week prior.

The question is where do the off-premise trends go from here? Do they hold steady with the on-premise still closed and people continuing to meet that demand through the off-premise? Or have people stocked up so much that they can go weeks, perhaps even a month, before their bev alc supply runs short? Stay tuned.

TRUTH SQUADDERS (MOSTLY) AGREE WITH OUR KEG TAKE 

Our story yesterday on the realities of keg logistics today can be summed up thusly: pick up kegs from the trade, distribs, and then please hold on to them. At least, until they can be properly decanted, which requires permits. And please don’t just do it out your back door. Companies like keg provider/logistics firm MicroStar is working on solutions to help. 

Many of our readers agreed. Said one Midwestern distributor: 

“I really appreciate your thoughts on this whole keg return catastrophe,” they said. 

BUT: “There is one major issue I haven’t seen anybody write about to this point and that is the safety of the distributor employee and the retailers involved in a mass keg cleanup. To accurately execute a 100% cleanup of our market in the next few weeks, we would need at least 1 interaction by the account salesperson and one interaction by the driver. Assuming the retailer would have only one person on their end to verify the pickup, we are talking about 6,000 interactions between our two distributorships. I don’t think it is safe to mandate that many possible COVID-19 infections when the virus is still this dangerous. 

“The bottom line is I agree with you that this cleanup can wait.”

But producers also agree. Said one in the Southeast: 

“Your article on kegs is spot on. I was about to sign an agreement with Microstar for a four-year lease program but have gotten no less than 10 calls in the last week from breweries looking to sell me their cooperage. Since over 60% of our draft sales go to our local wholesaler that is literally 400 yards from our brewery – purchasing high-quality German kegs at a fraction of their value 4 weeks ago is suddenly our best long-term solution. We are lucky that we can deploy some capital but hopefully it helps the selling brewery stay afloat too.”

Even a mid-large size producer agrees, holding is best for now.

“I’ve felt from the beginning brewers were jumping quick to try and solve a problem we still don’t fully understand. Each day bits and pieces become available to us and rational thinking will prevail.” 

A-B CMO: “WE’RE NOT IN ADVERTISING MODE RIGHT NOW”

The times of “self-serving” marketing campaigns are “officially over and officially gone,” A-B CMO Marcel Marcondes told Forbes in a recent interview.

“We’re not in advertising mode right now,” he said. “That’s the most important thing. We’re acting on a relevance and action kind of mode.”

Indeed, Marcel said he and his team are currently focusing all of their efforts “at addressing the fears that people have in three areas: fear of getting the virus, fear of financial difficulty as a result of the economic downturn, and fear of what to even do with all the downtime,” writes Forbes.

To address that first fear – fear of contracting COVID-19 — A-B, like a lot of other bev alc producers, has begun to make hand sanitizer to help the growing need for the product across the U.S. Then as we shared last month, A-B has funneled $5 million from its sports and entertainment investments to the American Red Cross to help it with COVID-19 efforts, including the conversion of stadiums and arenas into temporary blood drive centers, as well as the donation of media airtime to the Red Cross in support of their PSAs.

As for the second fear – financial fears – A-B used its top brand Bud Light to launch Bud Light Takeout, a new “consumer resource” that helps consumers locate bars and restaurants across the country that are open for takeout, [see BBD 03-27-2020]. “So far, at least 160,000 places have subscribed” to the new program, per Forbes. On top of that, A-B rolled out “a student loan relief program” through its Natural Light brand “to help pay off loans for students in April,” writes Forbes.

And finally, the last fear – what to do with all the downtime, while maintaining social distancing guidelines. A-B has taken a variety of approaches here with a handful of its brands. For instance, through Bud Light they have transitioned the Bud Light Dive Bar Tour into a virtual show, [see BBD 03-24-2020]. Mich Ultra is also “sponsoring live-streamed workouts featuring trainers and studios across the country that are currently out of work,” according to Forbes. And “Stella Artois is debuting a series of cooking lessons called ‘Sessions@Home’ featuring celebrity chefs that show people what to make based on what’s already in their fridge.” Then BonV!V has launched a new Instagram Live content series, dubbed #TogetherWomenRise, starring Priyanka Chopra Jonas that highlights “women helping their local communities during [this] pandemic.” A-B will donate $100,000 on behalf of Bon V!V “to contribute to each cause,” and the UN Women will match the contribution as well.

Marcel would not disclose the dollar amount they’re putting behind these initiatives, but did note that they’re funding them by “diverting spend away from areas like sports and entertainment.”

BEER BRIEFS:

VIDEO PODCAST:  Listen to our brief conversation with Sierra Nevada’s chief sales & marketing officer Joe Whitney on how they are adapting to the COVID-19 era, how they are keeping their brewpub staff on the payroll, and how they have encouraged their wholesalers to take care of their on-premise accounts in these hard times. Watch it here>>

BLUE-SILVER DISTRIBUTOR S.R. PERROTT continues to clean draft lines like a boss. Here cleaning lines at the Brass Tap in Palm Coast, FL. Damn right.

O’CONNOR DISTRIBUTING TOO. The Blue-Silver house out of Arkansas, sent us a picture of one of their employees, Jose Hernandez, doing the same. Awesome.

Until tomorrow,

Harry, Jenn and Jordan

“Nothing is as simple as we hope it will be.”

– Jim Horning

———- Sell Day Calendar ———-

Today’s Sell Day: 5

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: Tues.

YTD sell days Over/Under:  +1