Dear Client:
Molson Coors Beverage Company is making good on its new name.
The company today unveiled a wide range of new non-alc products that it plans to roll out this fall in select markets, giving us our first peek at some of the work they’ve been doing with L.A. Libations, which you’ll recall Molson Coors took a “long-term minority stake” in last fall.
None of them seem especially targeted at the alcohol occasion — not even as replacements (like with non-alc beer). But Molson Coors does intend to leverage its distribution network for these products — though that may not be a viable route to market in some areas.
“We’re following through on our promise to seek out new opportunities beyond beer, and we’ll continue to innovate and move into new spaces as it’s an important part of our long-term strategy,” Pete Marino, president of emerging growth for Molson Coors, shared in today’s announcement. “This is just the start of our entrance to the marketplace with breakthrough brands, and we couldn’t have a better partner to embark on this journey with than LA Libations.”
Pete also sent a memo to their distributor network today (procured by BBD via the regular, dimly lit, nefarious backchannels) emphasizing the company’s belief that “our beer distribution network is a competitive advantage” as they look to expand beyond the beer aisle. “We also know that we need to bring these new products to you when they’re ready for you, and when you’re ready for them.” So MC and the LA Libations team “will do the heavy lifting on these initial launches … then transitioning to our network when we’re ready to scale.” There will also be “opportunities to partner with [them] on pilots” for some new non-alc brands.
Anyway, on to the products.
THE NEW SLATE OF PRODUCTS. HUZZAH, a shelf-stable, “full-flavored seltzer” that comes with added probiotics to “help support a healthy gut” is the first new non-alc product from the emerging growth division. HUZZAH is slated to launch online this month and at select retailers in Southern California. It will arrive in three flavors: Strawberry & Hibiscus, Juicy Pear and Raspberry & Lemon. Each flavor will contain 3g or less of sugar per 12oz can and 15 calories or less.
Another innovation bubbling up from the pipeline is MadVine, “a 100% plant-based, diet soda with zero calories, zero sugar and zero artificial ingredients.” This earthy soda is “infused with monk fruit and recognizable ingredients, including bourbon vanilla, yuzu lemon and black cherry,” and will come in three flavors: “Clean Cola, Yuzu Lemon-Up, and Dr. Stepper [that last one named for LA Libations chief Danny Stepper].”
Then there’s Golden Wing, “a cutting-edge, grain-based milk alternative packed with proteins and nutrients, made with top-quality barley and no additives, stabilizers or frothing agents.”
And finally, Molson Coors teased a yet-to-be announced, “nootropic performance beverage that provides enhanced focus, nutrition, and improved performance without the jitters associated with high-caffeinated drinks, geared towards gamers and developers.”
For more on the business division strategy, check out our interview with LA Libation’s Danny Stepper from last December [see BBD 12-04-2019].
REACTION. While some distributors seem excited about the prospect of reaching across the aisle, questions abound. Some wonder what the contract will look like (i.e. protections in event of a sale), some note that the NA universe is quite structurally different than for beer (with slimmer margins), and some wish Molson Coors would just focus on beer supply. More to come.
CONSTELLATION STUCK IN CATCH UP MODE, FOR NOW
Constellation is “playing catch up right now,” CFO Garth Hankinson said while presenting at today’s Barclays Conference.
Their beer is constantly on the move right now, he said, explaining that as soon as it’s produced in Mexico, they’re taking it here to the states, supplying their distribs, and distribs are immediately taking it to retail, where consumers are waiting to snatch it right off the shelf.
Despite this fast and furious cycle, the out-of-stocks continue. However, the duration of these out-of-stocks is quite short, said Garth. “Any out-of-stocks that we’re experiencing, we’re replenishing pretty quickly and the out-of-stocks really only last for a couple of days,” he said.
He believes that the hectic hand-to-mouth supply cycle they currently find themselves in, “will go on for a few more weeks, but really the worst of this is behind us.” Come November they’ll “be back at more normal levels of inventory across our system.”
Garth later commented, too, that they’re “not seeing any loss of shelf space at this point” due to their out-of-stocks, and don’t expect any loss on that front going forward.
GARTH’S EARLY READ ON Q2 DEPLETIONS AND SHIPMENTS. So, what does all this mean for their upcoming second quarter earnings at the start of next month? Garth said they expect to see second quarter depletions “up in the range of low to mid-single digits,” while shipments are projected to be “down low-single-digits.”
Garth added that we will “certainly see a reversal in that shipment to depletion gap” in the third quarter, meaning Constellation will ship more beer than they’ve depleted in the third quarter.
BUT WHAT ABOUT CAPACITY? Will they have enough with their Mexicali plant still in limbo?
There is no clear resolution on what will happen with Mexicali yet, Garth said, but Constellation continues to have “productive” conversations with the Mexican government as it relates to their Mexicali plant. Adding, that they still have “a full array of options” available to them in their next move in Mexico, including what they can salvage in Mexicali, what they can do at their existing breweries as well as the possibility of a third production site in the country.
Despite the uncertainty surrounding Mexicali, Garth believes they’ll have enough capacity to hold them over in the near-term.
OBREGON WILL MEET THEIR NEAR-TERM CAPACITY NEEDS – ESP FOR SELTZER. By year’s end, they’ll have completed the expansion of Obregon — “Obregon 9.0,” as they call it, will give them “ample capacity” for “near-term demand needs.”
Notably, that gives them incremental capacity to “meet our seltzer demand,” said Garth.
Where current constraints allowed them to sell only in that “8-10 million range,” next year, with Obregon, “we’ll at least have 2X that capacity for seltzer, at a minimum.”
EXCLUDING SELTZER, THEY’RE GAINING SHARE IN TOP 5 MARKETS. Nielsen data trends have “abated a bit,” and Constellation has been impacted by out of stocks.
But Garth insists “we really haven’t experienced a share loss” — if you take out seltzer’s impact. “Excluding seltzer, we’re actually gaining share in our top five markets of California, Texas, New York, Illinois and Florida. “
BIG SELTZER INNOVATION IMMINENT. And he thinks they can address the share loss related to seltzer through “what we do with Corona hard seltzer,” from which he promised “some really neat innovation … that we’ll be able to launch next year, as well as the venture we have with PRESS.”
Until tomorrow,
Harry, Jenn and Jordan
“Whatever is reasonable is true, and whatever is true is reasonable.”
– Georg W. Hegel
———- Sell Day Calendar ———-
Today’s Sell Day: 7
Sell days this month: 22
Sell days this month last year: 21
This month ends on a: Wed.
This month last year ended on a: Mon.
YTD sell days Over/Under: +1
