Let’s Talk About Kegs

Dear Client: 

One of the things that is unique to the beer industry is we have kegs.  The draught business is complex, and often involves long plastic lines of beer cooled by spirals of glycol, that ends up in a tap. The beer in the keg itself has a shorter code date compared to bottled or canned beer because it’s usually unpasteurized. If it is indeed unpasteurized, it absolutely should be kept chilled at all times.  

How many bars and certain restaurants, who are out of business right now, are chilling their kegs and cleaning their lines?   

It’s not a trick question.  The answer is: Damned few. 

When brewers extend draft code dates at this point, they are hoping for a COVID-19 cure in the next two weeks or so. Probably not going to happen. 

Look:  from my viewpoint, it is looking like almost all kegs are going to have to be picked up from the trade, and distributors might as well start picking up the oldest of them now while they have on-premise labor and capacity (as many already are). And if you’re a really good guy, maybe even clean the lines. (If you do, shoot me a pic and I’ll include it in BBD hs@beernet.com.) 

Yes, certain bars are pouring kegs into growlers and selling them out of the parking lot.  Let ’em do it while they can. But in reality that is a small fraction of the beer that will eventually need to be taken back to the distributor/brewer and be properly drain-poured. We’re talking about millions of kegs out there.

One small distributor I spoke with said, “Well, hell, can’t I just pour it all out back?”  No.  No you can’t.  Please. There are strict effluent restrictions and you absolutely cannot just pour it out into your backyard. It could be a felony. Please don’t do that, (or at least don’t let anybody see you’re doing it 😉 

There are solutions in the works.  

The largest owner and manager of kegs in the nation is MicroStar (their kegs are marked with the iconic blue M Star).  I had the opportunity to speak with their top management over the weekend, and believe me they are working overtime to make sure everybody’s keg needs are met during this crisis. But — and this is important — they and others in the keg management business need everybody in all three tiers of the industry to work together, and that means giving each other some time to work through the problem.

SIDEBAR:  This situation reminds me of 9/11.  Like many of you, I was in Las Vegas at the NBWA annual convention. I was walking out with my roller bag that morning and the bellcap says, “Hey fella, don’t bother going to the airport, all flights are grounded.”  Then I looked at the TV over the bar and the second tower fell. I was crushed. After I gathered my wits, I went back to the reservation counter and said, “I’d like to check back into my room”. She said, “I’m sorry, we’re booked.”  I started to walk away, but then returned and replied, “No ma’am, you’re not booked, because everybody who was flying in today — they ain’t coming.” She thought about it for a second and said, “Oh. Yeah, of course”, and got me a room. I was sheltered in place.

Here’s the thing:  ZERO KEGS ARE MOVING right now. Like me and others on 9/11, they are sheltered in place. You can’t really send a keg back because it depends upon one coming in, just like my hotel attendant understood that in a critical time, movement stops. Like Einstein said, two objects cannot occupy the same space at the same time.

Brewers don’t need empty kegs, and distributors and retailers don’t need full kegs. Nobody needs any kegs. Kegs right now are like the COVID-19 virus itself:  “Flatten the curve, stay at home, and shelter in place.”   That is what kegs at this point need to do. Stay put. Because if everybody sent their kegs to their keg logistics firm at once, they’d literally need a football stadium to store them. MicroStar alone has 5 million kegs out in the market at any given time. And eventually the keg business will return, and the industry will need keg logistics firms like MicroStar and others to get them moving and maintained again.

As a distributor, I know you’ve probably collected a lot of empty and full kegs. It sucks, no doubt about it. You’re babysitting a lot of stainless steel cooperage with no deposit back. But after speaking with several industry stakeholders, I and others believe the right move right now is to hold onto them, at least until they are decanted. You’re not receiving any incoming full kegs from breweries, so conceivably there is space. These are extraordinary times, and nobody, nobody, wishes for one part of the industry to destroy the other part, particularly when that part saves everybody a lot of money in normal times. We are all in this together, my brothers and sisters. 

For its part, MicroStar (and others) are working overtime to build capacity to help distributors decant their full kegs that go out-of-code.  At issue is keg recalls do not happen that often. “So the industry’s actual available capacity and capability to handle recalled kegs and properly decant the liquid isn’t that large,” explains MicroStar vp Dan Vorlage.  “Harry, all the effluent that comes out of those kegs … you need certain city permits and you need to know how to legally dispose of the beer. So it’s relatively low capacity, but we’re working with our partners to figure it out how to quickly expand capacity to give distributors and brewers more options to decant their full out-of-date kegs.” But like we said, the industry needs time to “flatten the curve” because it’s physically impossible to decant millions of kegs at once. 

We’ll be following this story as it unfolds and the on-premise gets the nod to open up again by city and state officials. 

Listen to me attempt to tell the execs at MicroStar how their business model works.   https://www.youtube.com/watch?v=wSFQCZkJhwI

ACE METRIX RELEASES AD INSIGHTS FOR VIRUS MESSAGING

Ace Metrix released some advertising insights in the age of COVID-19 last week on their blog.

Their major takeaways from surveys and feedback concerned authenticity and tact and found that consumers are “highly receptive” to “virus related messaging,” despite (what feels like) the overwhelming presence of COVID talk. 

This doesn’t come without caveats, though. Ace Metrix found that in order to be successfully received, brands should “walk the walk, whether that’s giving back or adapting to customer needs” through naming specific steps the company is taking, rather than making empty statements like “we’re in this together” or “we’re here to help.”

Brands focusing on sales should be careful, making sure to weigh out whether or not the sale is benefitting the customer, who could be struggling to make ends meet. 

In addition to being considerate of customer circumstances like financial strain, brands who also included specific mentions of support for workers and communities in tough situations scored higher with consumers. This includes support for those currently furloughed and unemployed in the restaurant industry, healthcare workers on the frontlines, and philanthropic contributions to those in need.

As for naming the virus and disease itself, data from Ace Metrix shows that, while it isn’t necessary (some top scoring ads have successfully avoided specifics), vague messaging scores significantly lower, noting that phrases like “uncertain times” and “challenging times” are “getting old quick.”

FURLOUGHS COME TO THE MIDDLE TIER

We started to hear chatter from distributors that demand in the off-premise was slowing down in the last week of March (22-27) [see BBD 03-27-2020]. 

One wrote in to remind us of the implications of a slowdown in that channel. “We can only redeploy our On Premise people for so long. If Off Premise slows down we’ll have to consider layoffs,” he said. 

Unfortunately, it appears that time has come. We understand that Hensley in Arizona has furloughed its draft and marketing departments.

SLIGHTLY MORE SAY THEY’RE DRINKING LESS THAN THOSE WHO SAY THEY’RE DRINKING MORE NOW, PER NIELSEN CGA 

On Friday, Nielsen CGA presented their take on the impact COVID-19 has had in the on-premise, during a BA Power Hour. 

Among the most surprising headlines: According to a survey Nielsen did of 1,200 consumers over the weekend of March 28-29, more people say they’re drinking less in the wake of COVID than are drinking more: 

Specifically: “While half of US consumers stated they are drinking the same amount of alcohol as usual,” only 22% identified as drinking more; 28% said they were drinking less. 

However, the 35-54 year old contingency definitely seems to be drinking more, with 30% saying as such. 

CBD covered some other interesting trends from Nielsen CGA’s Power Hour insights on Friday, which utilized the aforementioned survey as well as sales trends from their RestauranTrak dataset, for the weeks ending March 21 and March 28. (RestaurantTrak covers 10,000 transaction-level POS feeds from mostly small, indy type accounts.)

Some highlights:

  • Two thirds of Nielsen CGA surveyed consumers have ordered takeout in the last two weeks. Of those, “15% are ordering take out/delivery with alcoholic drinks,” and “this behavior is more popular with younger consumers; one in four 21-34 year olds have ordered alcoholic drinks with take out.” 
  • The third most popular bev alc choice ordered with takeout is craft beer, after red wine, and then import beer. More specifically, “over half of those that have ordered alcohol with takeout/delivery have purchased craft beer,” per Nielsen CGA. Domestic beer is ninth. 
  • Soberingly, Nielsen CGA Client Solutions reps Matthew Crompton and Matt Drummond made the sobering prediction that “if all outlets across the U.S. on premise are closed for March and April 2020” – which is probably a somewhat optimistic scenario, as we have no idea how long this thing could last – “there would be approximately 17.8m 288oz EQ of BA Craft beer sales lost.” That converts to about 1.3 million barrels. A top five craft brewer wiped out, basically.

NORTH CAROLINA DISTRIBS HELPING OUT LOCAL GROCERS

Last month we reported that a local distributor here in San Antonio, Silver Eagle Beverages, secured a temporary exemption from the TABC to be able to loan trucks and volunteer drivers to help Texas grocer H-E-B replenish shelves at night of crucial staples [see BBD 03-17-2020].

Now, we’re hearing of more distributors doing the same. 

The North Carolina Beer & Wine Wholesalers Association informed BBD that they have also obtained an emergency exemption from the North Carolina ABC Commission, to team up with the NC Retail Merchants Association and have distribs provide trucks and commercial drivers as needed to help grocers keep up with consumer demand.

We understand a half-dozen NC distributors are already volunteering in the project. Check out the brewpic below.

BREWPIC:

A tractor from RH Barringer Distributing Company pulling a Food Lion trailer in Salisbury, NC.

Until tomorrow,

Harry, Jenn and Jordan

“Always and never are two words you should always remember never to use.” – Wendell Johnson

———- Sell Day Calendar ———-

Today’s Sell Day: 4

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