“Termination of Major Business Contract” Results in Layoffs at Burke Distributing

Dear Client:

Tough news coming out of Burke Distributing Corporation.

The Massachusetts wholesaler is expected to cut 72 positions (nearly a quarter of its workforce) at the start of next month as a result of the “termination of a major business contract.”

“Due to unforeseen circumstances arising out of the termination of a major business contract, Burke Distributing Corporation will be conducting a mass layoff,” chief Bill Burke said in a state filing obtained by the Boston Business Journal.

Who terminated them? Burke didn’t name a company in the notice to state labor officials and has declined to comment to BBD.

But we can all but confirm that company is Red Bull. Apparently, the energy drink company is going to try its hand at self-distribution in the state. A move they’ve executed in other markets before. Red Bull’s job board for the state of Massachusetts backs this move to self-distribution up too, with a slew of sales, warehouse, merchandising and driver positions added to the board over the past month.

Unfortunately, it would appear Burke is not the only beer distributor in the state that could be affected by Red Bull’s decision to self-distribute. Other beer wholesalers that we can confirm carrying the non-alc energy brand in Massachusetts, include Atlas Distributing and Williams Distributing.

Stay tuned.

BUFFALO WILD WINGS PART II: GROWING DOMESTICS THROUGH SPORTS PROMOS, AND MANDATING CORONA PREMIER

Yesterday we described Buffalo Wild Wing’s new beer strategy, and their intent to provide more variety.

But domestics are far from dead at the chain. “We ran a fairly aggressive promotion during our fall football season, through Super Bowl, carried into March Madness, featuring $5 pitchers of domestic [light] products, and $5 talls from some nationally mandated brands. We saw some really good results from that campaign,” said Jason Murphy, their beverage innovation manager.

Jason said domestics had been decreasing in sales “for quite some time” before they launched that promo, after which they “started to see a spike in domestic draft,” which carried on into March Madness time.  

Even Lagunitas IPA saw “a really big lift” from that football promo. In fact, Jason said Lagunitas IPA sales improved quite a bit during the winter months.

WHAT’S COMING? HINT: PREMIER NATIONAL MANDATE. They don’t push a lot of packaged beer (although Corona is an exception, and they really got behind Angry Orchard Rose, which did well in the chain last year). They’re looking to change that potentially with some bucket promos in the future.

But they’re betting on Corona Premier in package, which they’ve mandated for all 1,200 stores, as of their new 2019 program launched in March,. They’re not currently mandating Familiar, though stores can bring it in if they choose.

And they’re looking to potentially bring in Corona Refresca if they can get product available, as early as this summer.

MORE ON-PREMISE INSIGHTS: CONSUMER BEV ALC SPENDING IS UNDERPERFORMING THE OVERALL ON-PREMISE INDUSTRY

Here’s an interesting little tidbit from Technomic: the top on-premise chain sales growth tends to increase as level of alcohol sales increases.

Check it out: on-premise chains with alcohol sales at 10-15% of total sales, their total growth was up 0.5%. Chains with alcohol sales at 15-20%, reported growth up 4.3% and those with alcohol sales at more than 20% of total sales were up 3.4%.

BUT… in the last 3-5 years, “consumer spending on beverage alcohol is underperforming the overall [on-premise] industry,” said Dave Henkes, Technomic advisory group senior principal, at the recent VIBE conference.

In 2018, consumers spent about $115.4 billion on-premise in bev alc sales, representing an annual growth rate of 2.5%, according to Technomic. Comparatively, total spending in the on-premise was up “well over 3%,” according to Dave.

Beer is up around 2%. But guess what? Wine and spirits rates are higher. Wine is in-line with overall bev alc growth at about 2.5%. And spirits takes the cake at an annual growth of 2.8%.

In 2019, sales growth is expected to maintain the 2.5% growth rate and reach $118.3 billion in total on-premise alcohol sales. Price increases are driving the majority of that growth, which means case volume growth is either flat or in some cases declining, according to Dave.

What gives?

Dave contends that bev alc sales on-premise are impacted by hyperchoice, both in terms of drinks as well as locations, particularly with the increasing popularity of specialty segments like food trucks, food halls and grocerants.

Consumers are also spending more on non-alc drinks. Beverage alcohol is “uniquely challenged” because there are so many quality non-alc drinks, according to Dave. “Consumers are increasingly voting with their pocketbooks to spend on non-alcoholic beverages.”

However, a good beverage program is still part of the “winning restaurant formula,” he said. But the onus is on the on-premise operator to craft the right beverage menu.

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ED. NOTE:  Since Microsoft 365 updated servers across the world a few weeks ago, we’ve apparently been blacklisted on Exchange email accounts because we have “too many subscribers.”  It’s been a total mess. We’ve taken down our paywall on the website to read issues until it is resolved. beernet.com

Until tomorrow,

Harry, Jenn, and Jordan

“Assumptions are the termites of relationships.”

– Henry Winkler

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