MillerCoors on “Interesting” Start to 2019, and Why CornGate is a “Gift” from A

Dear Client:

Molson Coors held an earnings call for its 2018 fourth quarter results yesterday, but much of what we’ll report on from that call below will center on what has happened in 2019.

You see with beer seemingly posting a pleasantly surprising report card for January (more on that in the next story), some analysts were eager to hear the company’s thoughts on Q1 of 2019, rather than dwell on the previous quarter.

MillerCoors chief Gavin Hattersley concurred that the first six weeks of 2019 have been “interesting.”

“Obviously, we’ll have to see how it transpires over the course of the full quarter, but we’re very encouraged by the results for both the industry and for MillerCoors,” Gavin said of the first six weeks in 2019.

He pointed to Nielsen scan data, highlighting that their YTD trend has improved to down low single digits versus the mid single-digit decline seen in Q4. Much of that can be attributed to stronger performances from Coors Light and Miller Lite, with Coors Light stemming its declines to low-single digits YTD, and Miller Lite planting itself “firmly in positive territory” YTD.

So, it’s “only six weeks,” Gavin said, but here’s why they’re feeling positive about the start to 2019.

They’re “confident” in their new Coors Light marketing campaign.

They believe they’ve got “the right message with Miller Lite.”

Plus, they’ve got a suite of “really exciting” above premium initiatives, including but not limited to Cape Line, Saint Archer Gold, Sol Chelada, and Crispin cider line extensions, which they’re “going to execute in the first part of this year.”

So MillerCoors isn’t worried about a potential impact from Bud Light’s Super Bowl spot(s)? Nope, it’s “disappointing” that Anheuser-Busch InBev opted to go that route, Gavin said, but ultimately it’s a “gift.”

THOUGHTS ON CORNGATE. “It’s disappointing that ABI has chosen to single-handedly damage the overall health of the beer category health initiative by discouraging American farmers and natural ingredients that most brewers including themselves, I might add, use quite extensively,” Gavin said.

IT’S A GIFT FROM ABI. “On the positive side, Anheuser-Busch could not have handed us a better gift if they tried harder,” he added. “Our distributors are proud, they’re fiercely competitive and they like nothing more than a good fight. And honestly nothing we could have done, could have fired them up so much. Our employees are just as fired up and the next few months are going to be interesting for sure.”

When asked whether they were seeing any impact from the spots, Gavin circled back to his comments surrounding the first six weeks of 2019, which “obviously include pre-Super Bowl and post-Super Bowl,” he said. “So that’s as close to telling you what’s going on from an individual brand point of view as I’m going to do.”

NEW CMO A “RISING STAR”. Gavin also took this time to call out their new chief marketing officer, Michelle St. Jacques, who officially joined the MillerCoors squad the day after the Super Bowl. “She’s been a rising star at Kraft-Heinz,” Gavin said, “she understands what makes brands unique, and she’s ready to take our brands to the next level.” He emphasized that Michelle is going to bring “new ideas and speed” to the company, and you can already see some of that in the way they’ve reacted to Bud Light’s attack, Gavin said.

LATEST ON CANNABIS JV IN CANADA. Other highlights from the call, included some talk on Cannabis, of course. The company didn’t reveal a whole lot of detail on their joint venture with Truss, but said they’re expecting cannabis-infused beverages to become legal in Canada in the fall this year, around October, and they’ll be “ready to capture a meaningful share of the Cannabis infused beverages market [in Canada] from day one of legalization.”

WHAT ABOUT CBD BEVERAGES IN THE U.S.? Molson Coors chief Mark Hunter said it’s “too early” to comment on CBD beverages in the U.S. “Obviously we’re watching where there is Federal approval and clearly that’s something important to us as we’re federally regulated,” he said, “So we’re watching the CBD space, we’ve got a team looking at it and it’s too early to comment beyond that at this point in time.”

Another soundbite that caught our attention came up in a question about Keystone Light. One analyst asked about the interaction between Coors Light and Keystone Light and Gavin quickly shot down any inference of cannibalization saying they’ve “done study after study” and determined that there’s “very little interaction” between the two.

A-B COPIED US ON 15-PACK. But as soon as he cleared the air on that, Gavin began to ostensibly talk on their share losses in economy (down 0.3 points in Nielsen scans to February 2). If you follow scan data you know Keystone Light has cooled off considerably from the tear it was on a year ago, a la the 15-pack.

“What’s driving it is Anheuser-Busch has reacted with their economy brands on a 15-pack basis, so they’re driving a fair amount of price and value to customers and Keystone’s going up against that strategy,” Gavin said. “So Anheuser-Busch copied us and that’s impacting our economy share.”

NIELSEN DATA TO FEB 2 SHOWS WEAKER VOLUMES

Another week, another set of scandata.

Despite the rosy outlook that January’s set of IRI data (4 weeks to Jan 27) painted for beer — notably, it contained NYE, where comps didn’t — Nielsen data that’s shifted slightly forward, the 4 weeks to Feb. 2, shows much more sober trends.

Recall, IRI data we reported on last week showed case volumes and dollars up around mid-singles for beer.

But Nielsen data that came out this week that doesn’t have the comp issue shows case volumes down.

“All outlet category case volume decreased -0.6% vs. YA, reflecting steeper declines than the +1.6% YTD trend,” per report.

Premium volumes were down 5%, down almost 2 case share points. Economy was down about 2.6%, and half a share point.

Above premium volumes, however, were up 6.8%, and their case share up 2.4 points.

Super Premiums (+15.1%, +0.9 pts), and FMBs (+16.7%, +0.8 pts) continue their tear, while imports are up a more modest 4.1%. Craft (-1.2%) decreased in case volume with flat case share, and Cider (+2.1%) barely increased in volumes, with flat case share.

BRIDGEPORT CLOSES AFTER 35 YEARS: PARALLELS TO PETE’S WICKED ALE?

Yesterday, CBD reported that Portland’s BridgePort Brewing, a matriarch/patriarch of the craft beer movement, announced it would close after a 35-year run.

“Today we unfortunately announce that the BridgePort Brewery will cease brewing operations effective immediately, while the BridgePort Brew Pub will close effective March 10th, 2019,” per chief of parent company, Gambrinus’ Carlos Alvarez. “The decision to close was extremely difficult for all involved. Back in April 2017, declining sales caused the brewery to restructure its operations.

“However, sales and distribution continued declining in the extremely competitive craft beer market of Oregon and the Pacific Northwest, which resulted in this final decision.”

REMEMBER PETE’S WICKED? The story reminds us a bit of the rise and fall of Pete’s Wicked Ale.

Interestingly, in both cases, Gambrinus swooped in about 10 years after the founding. Decades later, both brewers would ultimately shutter for ” declining beer volumes.” Pete’s Wicked reached half a million barrels at one point. BridgePort was much smaller, having reached about 700k cases at its high point in 2011. Interestingly, BridgePort’s zenith seemingly coincided with Pete’s demise.

Timing? Craft’s evolution?

Whatever the deal, behold our coverage of Pete’s Wicked’s fall back in 2011:

GAMBRINUS IS DC’ing THE ICONIC PETE’S WICKED ALE brand, according to a note to distributors, effective March 1. The death of a once mighty brand is due to “rapidly declining sales volumes.” In other words, they couldn’t justify the shipping costs. This is a brand, originally hawked by Pete Slosberg starting in 1986, that reached nearly a half a million barrels and was the number two craft brand behind Sam Adams in its heyday in 1995, (in fact, I was ecstatic at the time to have Pete Slosberg sign a baseball for my son, as I was working as a distributor manager in Texas). Gambrinus acquired it in 1998, but the Carlos Alvarez magic machine didn’t work for once on this brand, although it wasn’t for lack of trying. As one distributor put it, “Never has a brand’s physical distribution been propped up by another brand [Corona] as Pete’s was.” Pete’s Wicked Ale was largely responsible for establishing the American Brown Ale as a commercially viable beer style and category for craft beer competitions.

History repeats itself. Younger craft brewers are folding, too. It should be an interesting couple of years for craft.

BEER BRIEFS:

REYES KEEPS ROLLING: HARBOR ACQUIRING CENTRAL COAST. Reyes continues to grow in California. Reyes’ Harbor Distributing has cut a deal to purchase the Larabee Family’s Central Coast Distributing, a Gold/Blue/Silver house out of Santa Maria, CA. The acquisition, which is expected to close April 12, will add approximately 2.6 million cases to Harbor’s house and give them about a thousand accounts across the counties of San Luis Obispo and Northern Santa Barbara, per company announcement. Tom Reyes, president of Reyes Beer Division West, said, “We anticipate a smooth transition and we look forward to welcoming our new employees and building new relationships in the Santa Maria community.”

Until tomorrow,

Harry, Jenn, and Jordan

“I wanna hang a map of the world in my house. Then I’m gonna put pins into all the locations that I’ve traveled to. But first, I’m gonna have to travel to the top two corners of the map so it won’t fall down.” – Mitch Hedberg

———- Sell Day Calendar ———-
Today’s Sell Day: 9
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