What Did Distributors Think of Constellation’s Big Show?

Dear Client:

We brought you some top-line highlights from the Gold Network Summit last week in Dallas, Constellation’s big yearly show for distributors.

We can regurgitate show details — about innovations, about Modelo’s skyward trajectory, about Bill Hackett’s tear-jerking sendoff — all day. But there’s one more vital component to know:

What did the distributors think?

We pinged more than a few distributors on their impressions, and got feedback from a handful. Those respondents represent a mix of A-B and MillerCoors wholesalers.

The bottom line? All seemed happy with, and bullish on, Constellation Beer going forward, if eager to see crucial innovation as a focal point (which STZ is addressing).

BEST-IN-CLASS CULTURE (MOSTLY). Notably, most distributors of all affiliations mentioned the beer team’s longevity, and culture of wholesaler appreciation, when describing show highlights. Impressions from a few:

“35 Consecutive Quarters of Growth. They have been together as a team for the last 10 years. Continuity of people including the agencies.”

“Most of their leadership has been working together for a very long time, especially when compared to that of A-B and MillerCoors, which gives them an advantage from a culture standpoint. As usual, all of their key leadership were available to talk with in the brand room after the meeting.”

“They were super thankful and gracious to distributors and made the room feel like we matter. That doesn’t happen much anymore. Makes distributors want to fight and win for them and with them.”

Despite said “graciousness,” one wholesaler referenced the uneasy legacy of the brewer having moved some of their business in Southern California last year: “Paul H tried to be transparent about canceling distributors in California … No comments or reactions from crowd due to fact that anyone near a Reyes operation wondering where the shoe will fall next.”

SHELF SOLUTIONS. Several also praised CCO Bruce Jacobson’s presentation on SKU maximization and shelf flow. We’ve reported this before in covering Constellation’s Shopper First Initiative, but the idea is that cutting 20% of SKUs would improve category dollar sales, generating 5% lift.

Some wholesalers mentioned they are executing this shelf flow plan at some stores currently and “should be able to prove this out.” The idea is “Continuation of the same core SKUs, with a local customized approach to secondary SKUs.”

AND INNOVATION. Another major theme of this year’s show was the need for innovation. Both Constellation and their distributors seem acutely aware of segments they’ve yet to tackle:

As one distrib put it, “strategically, if they do not innovate and compete in FMBs/ABAs, Craft, and Premium Plus … they are going to run out of opportunity to grow.”

But this distrib and a few others seemed excited about forthcoming brands like Alera, Western Standard, Refresca and more. “New innovations are really good and derived from clear consumer insights,” said one.

THIS YEAR WILL BE A RECORD ONE FOR CONSTELLATION MARKETING SPEND

Another big theme that resonated with wholesalers: continued marketing muscle.

Constellation Beer has tripled their marketing investment over the last decade, and promised 2019 will be a new record.

A smattering of brand specific highlights:

PACIFICO: They’re investing ahead of growth for this still small but growing brand. In fact, it’s the number fourth growth brand in the on-premise. And it’s not so small in some markets: In California, Pacifico is the no. 6 brand. And Texas has doubled the business in the last three years; in fact, Pacifico was up 22% there last year.

These results are likely amplified by campaigning: Pacifico is in its second year of national advertising. More sponsorships and national media are imminent. Some feature action sport partnerships, like with X Games and the US Ski and Snowboard team.

They are doing local marketing in 15 markets where they believe the brand is primed to grow as well.

MODELO: We reported last week on some innovations, like Limon y Sal Chelada, and general upward trajectory of this brand, which is up double digits in most markets.

Constellation still believes they have huge room for further growth through distribution, so look for continued innovation. They have a deep connection with the Hispanic consumer (roughly 70% of the consumption is Hispanic). But general market consumption is up about 60% since 2016, when “The Fighting Spirit” campaign started.

The brewer promised 2019 will see Modelo be a top 5 category spender. Expect some six new spots, with UFC fighter Brian Ortega (after all, it’s the official beer of UFC).

CORONA. Make no mistake: Corona will continue to get big time media support, the company promised, with increasing investments on digital and TV. The Gold Network audience was promised something like nine new ads. And they’re doing more with brand ambassadors like popular country music singer Maren Morris (whose fan base is 78% female).

As for the recent innovations, Corona Premier will get a little more than 40 million in marketing support (including a draft beer spot). And Familiar, already a top 10 high end beer brand, will get new ads in English and Spanish.

IPPOLITO CHRISTON SUGGEST IT’S TIME TO DIVERSIFY, OFFER “A DEGREE OF” PROTECTIONS FOR NON BEER ITEMS

It’s a sign of the times. Ippolito Christon & Co, which provides valuation and dealmaking expertise, is using CornGate as occasion to suggest a more diversified portfolio approach to potential clients.

They cite beer’s sliding share of the overall adult beverage mix, now at less than half of bev alc’s share (as has been the case since about 2016).

“If negative advertising becomes more entrenched as a standard for beer marketing, and if beer’s total shipments continue to stagnate, you may find it essential to diversify into traditional n/a’s, spirits, wine, and the multitude of unique beverages now testing the market,” they wrote in a memorandum to distributors earlier this week.

“One day, cannabis too may be an avenue for profitable diversification. Therefore, it may be time to expand your business model to become a beverage distributor that builds on your core beer business,” they suggest.

Further, getting into such incremental products like soda, “New Age beverage” or other non-core beer product cases “can be integrated with a degree of franchise protection. In conjunction with our legal liaison, Ippolito Christon can help distributors take steps toward that protection.”

Considering the fallout for distributors who lost Monster in the wake of the Coke deal, that’s a tall order.

One thing’s for sure: when you have deal facilitators talking about adding cannabis, and traditional beer distributors wishing they were more in the wine and spirits biz (as we’re indeed hearing), these are pivotal times for the industry. Stay tuned.

HAS #CORNGATE BACKFIRED ON BUD LIGHT?

Bud Light hasn’t let off the gas in its attempt to ‘expose’ Coors Light and Miller Lite, if anything, things have intensified. The commercials are still running, billboards are popping up, and its relatives like Natty Light are getting in on the action throwing jabs on Twitter.

So if A-B is ratcheting up the attacks that must mean it’s working, right? Not really. In fact, it seems the attacks are having the “opposite” effect, according to MillerCoors Behind the Beer blog.

[Ed. note: I know what you’re thinking… ‘Why source information from A-B’s competitor’s blog?’ The answer to that is simple, we’ve already reported on#CornGate doing squat for Bud Light trends for a week or more now, and this report has the latest data to prove that #CornGate hasn’t paid off for Bud Light].

“Since the new campaign launched, Bud Light sales volume is off 9.2%, compared to down 6.7% in the 12-weeks leading up to the Super Bowl,” reports Behind the Beer, citing Nielsen all outlet data to March 2. “The brand’s share of total beer also worsened, down 1.2 points of share versus down 1.1 points heading into the holiday.”
Meanwhile, Miller Lite “continues to pick up share in total beer and has gained a full share point in the premium light segment year-to-date,” per report, and “Coors Light has held share in premium lights.”

The early returns lead Anup Shah, Miller VP, to tell the blog that “it’s clear that Bud Light’s desperate attempt to mislead consumers is not helping them.”

Anup adds that “Bud Light’s attack is not going to distract us from our strategy. In fact it only intensifies it. We’re going to continue to focus on making our message break through, connecting with Latino drinkers and being bolder in our competitive spirit.”

BEER BRIEFS:

LONE STAR 24/7 (2.1% ABV) MAKING ITS WAY ACROSS TEXAS. At their distributor meeting in Austin late last year, Pabst Brewing Company hinted at an ultra light Lone Star set to hit the scene. It’s arrived. “Lone Star 24/7”, as it’s called, clocks in at 2.1% ABV and holds only 68 calories, according to the Houston Chronicle. The beer hit Austin, Dallas/Fort Worth, and San Antonio late last month, and is now making its way across the state, per report.

Until tomorrow,

Harry, Jenn, and Jordan

“The great thing about getting older is that you don’t lose all the other ages you’ve been.” – Madeleine L’Engle

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