Dear Client:

Whenever the viral spread begins to slow down, it seems that the economic crisis will pick up, NBWA chief economist Lester Jones shared in a BI/NBWA State of the Industry Briefing earlier this week.

If there’s any comforting news for our industry as we head into this imminent economic crisis, it’s that alcohol consumption has been “consistent and stable” for a long time, Lester reminded.

Around two-thirds of the U.S. population have drunk alcohol since basically World War II, he pointed out. And the amount of consumption from U.S. consumers has been fairly stable, too. 

“We tend to consume consistently and predictably around 2.5 gallons” per capita of ethanol, Lester said, showing how that number has been firm over the past two decades even with the economic recessions in 2000-2001 and 2008-2009. 

“That’s good because moving forward through 2020 and 2021, we know there will be significant shifting amongst the categories but I think we can be confident that people will still — despite all the noise and pantry loading — probably consume around 2.5 gallons of ethanol.”

While the amount of consumption may look the same in the coming economic crisis, the dollars to get there could look a whole lot different, as people begin to trade down, trade over or trade out.

If GDP contracts 10%-20%, Lester said he fully expects the value of alcohol purchases to drop from $100-plus billion down to $80-$90 billion in 2020, but a lot of that depends on how long this lockdown lasts.

Indeed, Lester stressed throughout the call that we cannot compensate for the economic losses in the on-premise with volume gains in the off-premise. Truth be told, we’re not even really gaining all that much volume in the off-premise.

All this talk of mass consumption of alcohol during quarantine makes for a “good news story,” Lester said, “but it’s hardly the reality of the situation.”

He pointed to recent Fintech data to show that while, yes, there was a huge spike for beer sales due to pantry loading in week 12 this year (March 15-22), a “giant relaxation and pause” followed in week 14, “as most people had stocked their pantries.” And now in the latest Fintech sales data available (for week 15) “we’re pretty much on par with where we were last year,” Lester said. 

Bottom line: beer volumes are basically flat right now compared to last year.

Now, back to the virtual shutdown of the on-premise. The beer industry may be holding its own right now, but the longer the shutdown lasts the gloomier things become.

Lester broke it down for listeners.

The on-premise accounts for about 9% of the beer industry’s total $328 billion annual economic impact, he explained, so the channel represents about a $37 billion impact over the course of the year. If you divide that $37 billion by 12, then we’re looking at a $3 billion loss on impact each month the on-premise is shut down. 

That said, Lester figures we may already be eyeing an $8 billion loss on economic impact from the on-premise by the time July rolls around. Here’s his back of the envelope math:

March 50% shut down, loss about $1.5 billion 

April 90% shut down, loss about $2.8 billion 

May, assume 75% shut down for a loss of $2.3 billion 

June, assume Industry back to 50% open, so the June loss is about $1.5 billion

Add it all up and you’ve got an $8 billion loss in impact in just four months.

Sure, some of that volume may be made up in the off-premise, Lester said, “but if there’s not someone there maintaining a restaurant/bar and somebody opening/pouring that beer and handing it to someone then the impact is nowhere near as meaningful.

“They’re just not comparable impacts,” he added. “I think we really need to step up our conversations and talk about how the loss here to the industry is significant and it’s not going to be made up through grocery stores, 30-packs, and people stashing cases in their garages, that impact will not be compensated by those additional off-premise purchases.” 

SOURCE:  PEPSI AND BANG CLOSE TO A DEAL?

All eyes are on PepsiCo and Bang on Tuesday, as that’s when Pepsi will announce its first-quarter earnings.  Will a deal be announced then with Bang?  That’s what a source believes to be so.  

Recall that Bang sent a form letter to some of its distributors — mostly A-B houses — complaining of a lack of focus, which many distributors took to mean Bang was laying a legal foundation for termination for-cause. 

Meanwhile, distributors we speak with are largely still in the dark as to what Bang wants from them.  The problem?  PepsiCo is probably not interested in the supplements and other side beverages VPX owns (Noo Fusion), and yet those would likely remain in what would likely be an aggravated A-B network.  Stay tuned….. 

A-B REGION 1 VP MICHAEL ZACHARIAS MOVIN’ ON, TO BE REPLACED BY ELIO DICENSO 

Michael Zacharias, current VP, Region 1 (Northeast), is moving on to tackle a new challenge after 20 years with Anheuser-Busch, the company shared with BBD.

Elio DiCenso, currently VP, On Premise, will replace Michael as Region 1 at the end of May. 

“Elio has had a robust 17 year career with A-B,” the company said. “After joining A-B in 2003 as a helper on a delivery route at the Boston WOD, he has held a number of positions across our sales organization including Sales Rep, District Manager, Sales & Marketing Director and Nation Sales Director on the National WOD team, among others. Most recently, Elio has served as VP of Sales, On Premise, leading the channel to five straight quarters of share growth.”

Until Monday,

Harry, Jenn and Jordan

“We are made to persist. That’s how we find out who we are.”

– Tobias Wolff

———- Sell Day Calendar ———-

Today’s Sell Day: 18

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