Show Off Keurig Machine Hits Show- Me and Sunshine States

Dear Client:

After a “very successful” pilot launch late last year, Anheuser-Busch and Dr. Pepper Keurig’s Drinkworks Home Bar is embarking on an expansion. The appliance, touted as the “ultimate bar back,” will launch statewide in Missouri and Florida this month.  

BUILDING OFF BUZZ FROM PILOT LAUNCH. The rollouts in the Show-Me and Sunshine State follow a pilot launch in St. Louis this past November that exceeded expectations, Drinkworks CEO Nathaniel Davis shared with BBD. As he tells it, Drinkworks ended up selling through, what they pegged as their “most aggressive expectations” for a 6-month pilot, within 6 weeks heading into Christmas.

“The pilot was very, very successful, but it was also very small,” Nathaniel said. “The buzz and interest so vastly outstripped our footprint, so that’s one of the main reasons we’re expanding.” Other reasons for expansion? To “keep momentum going” and to also “show that this thing can scale beyond a pilot at the pace that we can build and install capacity and grow and scale with it.”

Indeed, Nathaniel says they’re confident in supply heading into the two new markets. “We’re pacing both the timing and size of scale to our capacity, so for sure we’re confident [on supply].”

The decision to hit these two particular states off the bat stems from a multitude of reasons. But ones we heard repeatedly are: 1) they’re ecommerce friendly, which is a “big part” of Drinkworks platform and “a big part of what we’re learning about.” And 2) they both hold a large concentration of their target consumer.

WHO IS DRINKWORKS’ TARGET CONSUMER? The person aligns more with a certain personality than any sort of demographic skew. It’s somebody who loves to host, a “generous hoster” as Nathaniel calls them, that “really appreciates making their lives easier,” and drinks across all bev-alc categories.

They’ll go after these target consumers in some retail outlets that bev alc suppliers aren’t accustomed to too, at least in Florida as it’s “a bit of a limited license market.” There, you’ll see the machine pop up in traditional bev-alc retailers like Total Wine & More or ABC Fine Wine & Spirits, as well as Best Buy.

COMING TO A BEST BUY(!) NEAR YOU? Yep, you heard that right, Best Buy. Why? It’s a “great outlet for Keurig,” and a place where people buy home appliances, which is part of their business model, Nathaniel said. Plus, “it probably represents a bit of a new category for them and it’s a live learning for us to get into that side of the retailer world.”

Now don’t get it twisted, Best Buy won’t be selling any alcohol and Drinkworks won’t open them up and license them as new places for the distributor to stop in or service, according to Nathaniel. Nope, Best Buy will simply be “a place where people learn about the system, learn about Drinkworks, and purchase the machine,” Nathaniel said. Once they’ve purchased the machine, “they’ll go back to the more traditional stores or online in order to purchase and repurchase the alcohol.”

According to Nathaniel it doesn’t really matter if Best Buy has any experience with alcohol or not, because Drinkworks is there to leverage the power of the Keurig name (a company that up until now has never really been affiliated with alcohol).

THE POWER OF THE KEURIG NAME. “What we’ve seen is the power from the backing of Keurig and the name on the machine and the understanding of Keurig as a business model or a delivery system in coffee is so powerful that it’s really well understood when we’re showing up with ‘one pod, one button, one drink,'” Nathaniel said. “We don’t have a lot to explain because the Keurig name does so much wonderful heavy lifting.”

THE LATEST ON THE PODS. In addition to the expansion news, Drinkworks also announced the launch of a “simply refreshing” lineup of cocktails, which includes a couple wine cocktails like Rose Spritzer and Lemon Bubbly (both of which clock in under 100 calories) as well as a Vodka Lemonade and Whiskey Cola. The introduction of the “simply refreshing” lineup comes as Drinkworks discovered through learnings in the pilot launch that people want the complex cocktails like a Moscow Mule or Old Fashioned (their lead pods) as well as the convenient and simple drinks.

PRICE? Drinkworks proprietary pods are still $15.99 for a four pack, and the machine will put you back $399.

WHAT ABOUT NON-ALC PODS? “We’ve done a lot of work in that space,” Nathaniel said, “but not launching yet.”

AND ANY MORE BEER? Again, “not yet.

“We’re having some great learning and digging into the needs of performance in the machine and ease in pouring. so it’s definitely an active area, but a little too early to announce the exact details on the next wave of beer.”

BRITO ON WHY IMPROVED U.S. SHARE TRENDS ARE SUSTAINABLE: BUD, BUD LIGHT “MAYBE WILL BE SMALLER GOING FORWARD; OTHER BRANDS WILL BE BIGGER”

Yesterday’s A-B Q1 call saw improved trends for its U.S. business: Depletions were down “only” 1.9%, with Mich Ultra, the nouveau domestic light, continuing to lead a full-portfolio press forward from the brewer. Innovations and Mich Ultra basically drove better share trends for the brewer, down only 0.1% for the quarter. That was a drum Brito beat loudly.

Accordingly, many questions on the call poked at the premise of the company’s new go-to-market strategy, and why anyone should believe in A-B’s sustained share trends.

BRITO ON TEST-AND-LEARN DRIVING INNOVATION RESULTS. Elaborating about their improved trends in the U.S., Brito stressed:

“Taking a regional approach is a key component of our US strategy,” as the beer market in the U.S. is “large and diverse” and consumers differ regionally. So “the closer we get to the consumer, the more we can leverage the effectiveness of our wholesaler network” to meet consumer needs.

Innovation is another major driver. Thus he flaunted the success so far of their “test and learn”strategy, where they pilot in a “fast and small” way, which, after validating a concept, allows them to scale up quickly and efficiently. This approach allows the to “speed up time to market to less than 100 days.”

It’s paying off: They launched several big brands through this process last year, including Bud Light Orange, the no. 1 innovation in the category for 2018, Budweiser Freedom Reserve and Mich Ultra Pure Gold. These products “contributed to half of the innovation volume for the  entire US beer category in 2018,” Brito said.

BRITO BEATS DRUM OF CONSECUTIVE QUARTER SHARE GAINS. On the call, Brito would stress a few times their two-year U.S. share trajectory as proof that their new commercial strategy works: For ’17, it was minus 70 bps; in the first half of last year it was down 45 bps; the second half of last year landed at minus 35 bps. By this Q1, it was minimized to minus 10.  

BUT WHY ARE BETTER TRENDS SUSTAINABLE? Those trends begged a question: “Given increased confidence in U.S. market share improvement,” asked a caller, “without any [or much] change in Bud and Bud Light,” is this changing the role they play in the portfolio?

Brito answered obliquely to start. He spelled out why these share gain trends are sustainable, as opposed to what we’ve seen in years past.

It’s a portfolio play, Brito says, not just hinging on “one or two” brands, even though “Bud and Bud Light of course remain the two most important brands in our portfolio ….

“But, look at Mich Ultra, it’s already 10% of our portfolio, and growing… look at craft; Stella Artois; the new line extensions, like Pure Gold from Mich Ultra, the Bud Light series [orange and lime]; all these things are getting consumers to trade up.

“It’s true there’s some canabilzation,” with Bud Light “being cannibalized by Michelob Ultra for sure,” but at a much better margin, so “in a way it’s accretive … and in line with consumer trends.”

So he conceded that Bud and Bud Light “maybe … will be smaller in size going forward, and other brands will be bigger.. but because we’re trading up, it’s a move that’s accretive in nature.”

U.S. CAPACITY MANAGED TO SUPPORT PACKAGE ASSORTMENT.

Pressed on capacity, Brito said they have enough capacity in the U.S., but continue to invest in it “because we have craft brewers, beers expanding; more premium beers, premium packaging; we have more assortment. And in the U.S. we continue to … adapt a new line to new package assortment.”

ON CHOOSING VIABLE LINE EXTENSIONS. Finally pressed on how they line extend; Brito said it has to “make the mother brand stronger” or connect with its brand position.  

For example, for Bud Light, it has to do with “easy drinking, refreshment”…

“And of course we have a plan in terms of volume, distribution, consumer takeout. And we also have social listening, that today is very active in our company.” It’s a way to look at what consumers are saying and sharing about the brand.  

ANDREWS TAKING ON SAZERAC ALTERNATIVE BEVERAGE PORTFOLIO

Big, Dallas-area based MillerCoors wholesaler, Andrews Distributing Company, yesterday announced a new partnership with New Orleans-based Sazerac Company to distribute the company’s Alternative Beverage Alcohol (ABA) portfolio.

The full ABA lineup that Andrews will distribute is still TBD, sources tell BBD. But they will include “a variety of brands from Sazerac’s ABA portfolio, such as Stroyski, Flash Point Cinnamon and Vera Cruz.”

An Andrews spokesperson told BBD that the brands are completely new to its footprint (Dallas-Fort Worth and Corpus Christi areas).

“The Andrews and Sazerac teams are still collaborating to build the best assortment of Sazerac’s ABA brands to add to our portfolio,” per spokesperson. “Our team should know the full details of which brands and packages we will have over the next couple weeks.”

Andrews plans to launch the Sazerac portfolio in on- and off-premise on June 17.

In the official announcement, Andrews EVP marketing, David Holt, said Sazerac’s innovative portfolio creates a new opportunity for the Andrews team, “to expand our portfolio offerings, especially within the convenience and grocery channels,” he said.

EDITOR’S NOTE:  UPDATE ON OUR READER APP

Good news. Our SchuPub reader app for iPhone and Android has been fixed and updated to now include imbedded links and images, just like the email and web versions. Download the app for free and start reading BBD and all our publications in one easy place on your phone or tablet.  Search app store for SchuPub.  

Now we have three ways to read our publications:

  1. Email — while the most popular way to read, the delivery to your inbox can be unreliable, particularly as security firewalls have recently tightened to exclude most mass broadcast emails.
  2. Our Websites — This is a great alternative to email. Now all of our articles are posted at the same time as the email broadcast, and it’s a nice clean easy read with no clutter (and we keep the fonts big for the old folks), particularly on a computer or tablet.  However, loading a website onto a mobile device can be cumbersome. So….
  3. SchuPub App — For mobile viewing, the free app is ideal.  Not only are articles now posted to the app at the same time the emails are sent, but the app now supports imbedded links and images, just like the email version.  And once you’re logged in, you can stay logged in.

If you have any questions, contact our expert trouble-shooter  jessica@beernet.com.

Until tomorrow,

Harry, Jenn, and Jordan

“People say nothing is impossible, but I do nothing every day.”

– A. A. Milne

———- Sell Day Calendar ———-

Today’s Sell Day: 6

Sell days this month: 23

Sell days this month last year: 23

This month ends on a: Fri.

This month last year ended on a: Thurs.

YTD sell days Over/Under:  0