Who Gets Stuck With the Hot Potato? Some Discord Over Returns
TTB issued the ruling earlier this month that returns are allowed in this era of widespread shutdowns and event cancellations. But they are not compelled. If a brewer or distributor doesn’t want to take beer back anywhere in the supply chain, even though they CAN, they don’t have to.
Since then, some states have issued their own guidelines related to returns, mostly related to beer purchased for events that have since been cancelled by COVID-19.
For example, in our own great state of Texas, last week the Governor issued a Proclamation that waived the prohibition on consignment sales that are contained in the Texas Alcoholic Beverage Code.
“The Texas Alcoholic Beverage Commission has instructed us that the waiver pertains to beer that was sold on February 16 or thereafter to retailers that had a special event canceled due to the COVID-19 pandemic,” Beer Alliance of Texas president Rick Donley told BBD. “They used as examples the Houston Livestock Show and Rodeo, Fiesta, sporting events, and concert venues.”
He says they are picking up products from retailers “that have product left in unbroken packages (no single containers due to health and safety concerns).”
Further, the waiver does not extend to every on-premise retailer and “is at the sole discretion of the wholesaler or distributor.”
SOME RETAILERS THINK RULES NEED TO BE CLEARER. But what about “softer” events, like St. Patrick’s Day, for which many retailers –like Ohio sports bar chain, Winking Lizard Tavern — ordered tons of extra beer, before they had optics on COVID restrictions?
“We loaded in for St. Pats — you have any idea how many kegs and extra cases I brought in?” said operator John Lane.
He’s concerned that his beer distributor partners “will not make up their mind on what they want to do as far as returns.”
It’s not totally clear what’s lawful in Ohio right now. One distributor told BBD that he doesn’t believe returns are lawful. But John points out that the state superintendent for liquor control “okayed it” for liquor, so “why wouldn’t be ok for beer?”
And even for some beer distributors, he says, “in the last 30 days, they’ve taken it back, and they EFT the money.”
“At first it was going to be a credit memo, and I raised holy hell: who wants a credit memo right now? … We need the cash.”
He says a majority of his distributors have said, “We’re sitting on our hands, we don’t know what we’re going to do yet.” He finds that unacceptable not only for him, but even moreso for the smaller restaurant that could be completely debilitated by such a loss.
He calls on the NBWA to offer some sort of guidance as to what they’d like their distributors to do.
“The point is, no-one’s going to do something for our industry that looks bad right now. And this looks bad on them. And I want to say kudos to those who have picked up, and given us cash refunds. I believe they’ve done the right thing.”
“I’ve heard the big breweries are going to take kegs back. If they’re taking kegs back, why isn’t the wholesaler taking kegs back from us?”
BUT… ARE BIG BREWERS ACCEPTING RETURNS? We asked a few brewers: under what circumstances are you accepting returns?
Molson Coors’ communications chief Adam Collins told us they’re still working through the details.
“Kegs are a huge issue for everyone right now – from bars and restaurants to wholesalers to brewers – and we’re working hard on the right approach, including possible legislative solutions, to a situation no one could have predicted,” he said. “These are uncharted waters for us all, and though we don’t have every answer at this moment we have been communicating regularly with our distributors to let them know what steps we are taking, to understand what steps they are taking and to drive solutions where they have questions.”
He praised the industry’s determination to keep the public in beer during these times.
“From distributors to drivers to brewers and everywhere in between, there is a massive sense of pride throughout our network in overcoming incredible obstacles to get beer on the shelves,” he said.
When we asked A-B about the conditions under which they’re accepting returns, VP of communications Jennifer Morris told us they’re “following local (city/state) guidelines.”
BEER TRADE ORGS ASK CONGRESS FOR SHORT-TERM TAX CREDIT TO HELP OPERATIONS WITH EXPIRED BEER
The Beer Institute, Brewers Association, National Beer Wholesalers Association and American Beverage Licensees wrote to Congress on Thursday to ask for some relief addressing all that expired beer.
“To help ease the economic loss associated with this public health crisis, we are writing to ask Congress to work with the undersigned industry leaders to institute a short-term business tax credit to address the economic disruption attributed to the COVID-19 crisis,” they wrote.
“Specifically, a tax credit would be realized by the entity that is in possession of the beer product on the date that it expires. Doing so will provide employers with greater financial certainty, assist with retaining employees, help many small brewers from imminent and permanent closures, and bring financial relief to the thousands of retailers, distributors, brewers and importers that are facing an uncertain future.”
Industry leaders noted how they’ve been blindsided by the barrage of key event cancellations and closures, “including St. Patrick’s Day parades and celebrations from coast to coast, March Madness and other tournaments” as well as other events, which require significant pre-loading of beer.
MORE STATES FOLLOW CALIFORNIA’S LEAD AND ISSUE STATEWIDE STAY AT HOME ORDERS
In our last issue of BBD, we reported that California had issued a statewide “stay at home” order, calling for the closure of all non-essential business in the state.
Since then, several states have taken similar measures. Ten more by our count.
New York, Illinois, Connecticut, and Oregon all announced stay at home orders on Friday, and New Jersey took similar action on Saturday. Pennsylvania, meanwhile, has not announced a “stay at home” order per se, but has called for the closing of non-essential businesses. Philadelphia announced stricter measures on Sunday, prohibiting all but essential businesses and activities, and disallowing gatherings of any number “until further notice.”
Sunday, Louisiana joined the list, as Gov. John Bel Edwards “told lawmakers Sunday afternoon he will issue a statewide stay at home order, requiring Louisiana residents to shelter at home unless going out for essential tasks,” including grocery shopping or picking up food to go, for 4.6 million residents, The Advocate reported. It will take effect later today.
The state of Ohio also announced on Sunday an order for all residents to stay at home, and the closure of non-essential businesses. The order will go into effect tonight at midnight, per Cincinnati Business Courier.
And Kentucky Governor Andy Beshear took a similar action to the one announced in Pennsylvania, calling for the closure of non-essential businesses starting tonight.
HOW LONG? Note, some states haven’t put any sort of end date on such orders; Illinois and Ohio have issued some of the earliest case “end” scenarios that we’ve seen, on April 7 and 6, respectively.
But Delaware Governor John Carney issued one of the seemingly longest-lasting “stay-at-home” orders on Sunday, closing all non-essential businesses in the state. It goes into effect on a Tuesday morning and “will remain in effect until May 15 or until the public health threat is eliminated,” per Gov’s office.
While these types of orders may sound intimidating for beer, they have not affected beer flowing into the off-premise in these areas, for now.
INDEED, DISTRIBS LOCATED IN SHELTER IN PLACE TERRITORIES “CONTINUING TO OPERATE AS AN ESSENTIAL FUNCTION,” SAYS NBWA
“As more cities and states are implementing shelter-in-place directives, we need to be preparing for the impact on distributor operations,” the NBWA communicated to its members yesterday via email.
The U.S. Department of Homeland Security issued guidance on essential functions late last week, and “while the guidance was silent on alcohol, it does deem several distributor functions as essential,” per NBWA.
Therefore, “distributors located in areas where the government has issued a shelter-in-place order are continuing to operate as an essential function.”
BEST PRACTICES FOR WORKING IN THESE CONDITIONS. Let’s say your operation falls in one of the states that handed down these stay at home orders, what sort of measures should you take? NBWA Treasurer Peter Heimark of L.A.’s Triangle Distributing, a shop that’s been under these orders for three days now, shared some of the best practices they’ve learned:
- Sales employees should start and finish from the field to minimize the number of employees entering and exiting the building.
- Our on-premise team will be reassigned to off-premise starting immediately to reduce the number of account calls for each off-premise rep.
- We will be reassigning all of our small format team accounts (convenience, package liquor, etc.) to every-other-week deliveries to minimize our calls and deliveries to these accounts.
- We are asking all large format accounts to take their whole week’s load in one delivery and we are seeking flexible delivery windows to be out of the stores completely by the time shoppers enter. We are also seeking more flexible hours so that we can merchandise when no shoppers are in the store.
- We have ordered PPE and hand sanitizer for all employees. While we await its arrival, please practice good hygiene, maintain six feet distance at all times, wash your hands, and avoid contact with others. Do not congregate within six feet of each other at our facility or at retail – for example, do not gather together in break rooms or at the time clock.
- We are asking all drivers to “sign” for customers by printing the customer’s name rather than having the customer sign.
- Please stay home if you are sick. We will be understanding and flexible of UPTO requests. Some employees whose duties allow them to do so have been asked to work from home.
ON-PREMISE WAS DOWN 24% IN WEEKS BEFORE MANDATORY CLOSURES
By now, the on-premise is pretty much closed for business here in the U.S. But new data from Nielsen CGA shows the trends in the channel were looking pretty grim even weeks before the mandatory closures started trickling in on March 15.
This data from Nielsen CGA, which covers the two weeks from February 22 to March 7, show total checks across the U.S. were down 24% versus a year ago, and total dollar sales were down $28,000.
They also highlighted the trends for the two-week period in four large markets. It ain’t pretty.
- In Florida sales were down $39,000 for the frame vs. a year ago
- In California they were down $40,000
- In New York sales were down $41,000
- And in Illinois sales dropped $53,000
Unfortunately those numbers are only going to get worse for the foreseeable future. Knowing that, some companies are stepping up to support the devastated on-premise. Like…
MOLSON COORS DONATES $1 MILLION TO THE US BARTENDERS’ GUILD
Molson Coors Beverage Co. announced on Friday that they will pledge $1 million to the United States Bartender’s Guild National Charity Foundation and its Bartender Emergency Assistance Program.
“The program offers emergency grants to bartenders and wait staff at bars, taverns and restaurants nationwide. The grants aim to help ensure workers and their families are able to purchase food, pay for rent and utilities, and cover medical bills,” per memo to wholesalers from Molson Coors CMO Michelle St. Jacques.
In addition to this generous donation, Molson Coors’ Miller Lite has launched a new social campaign “encouraging others to join in and support the cause with a #VirtualTipJar.” The initial video of the campaign opens up with the line “Taps are off. But tips are needed,” and includes a link where consumers can donate directly to the USBG Foundation as well.
LATEST IN BRIZZY VS. VIZZY TRADEMARK SPAT WILL MAKE YOU DIZZY
Some non-COVID 19 news to close out the newsletter today – we’ve got an update on the Brizzy vs. Vizzy trademark spat for you.
BUT FIRST SOME BACKGROUND. Recall that in early February, the makers of Brizzy hard seltzer, Austin-based Future Proof filed litigation in the city’s federal court, “charging that Molson Coors … is infringing on Brizzy’s federally registered trademark and creating market confusion through the industry giant’s planned launch of a competing [hard seltzer], Vizzy, later this year,” [see BBD 02-10-2020].
Then in early March, Future Proof filed a motion for temporary injunction in an effort to prevent Molson Coors from launching its planned Vizzy hard seltzer. At that time, Future Proof attorneys wrote “we hope and expect the Court will hear these issues in the next 30 days before the announced launch date of Vizzy.”
THE LATEST. Late last week, we received word from Future Proof that their attorneys had submitted a filing in Austin court alleging that “Molson Coors has violated a written agreement to pause the planned launch of its competing Vizzy product, instead rolling out the soundalike product ahead of a previously announced late March date.”
FUTURE PROOF CLAIMS MC VIOLATED “AGREEMENT” WITH EARLY LAUNCH OF VIZZY. “This was set up as a classic bait and switch,” Future Proof CEO Justin Fenchel shared in a statement. “With this agreement in place, we briefly delayed our request for injunctive relief to accommodate what we believed to be good faith discussions with Molson Coors, at Molson Coors’s request. We view the early launch of Vizzy as a blatant violation of our agreement with Molson Coors, and that it also underscores Molson Coors’s gamesmanship, and its intent to derail any attempt by Future Proof to avoid further litigation.”
If this all sounds very confusing to you, you’re not alone.
MOLSON COORS: HUH? VIZZY HASN’T EVEN LAUNCHED YET. “There has been no launch, there’s been no launch announcement and we haven’t turned on any kind of advertising,” Molson Coors chief communications officer Adam Collins told BBD. “Vizzy is preparing to launch, but we haven’t yet and our agreement not to launch expires today.”
Adam continued, “Putting aside their angry press releases, the facts in this case have not changed and Brizzy’s belief that it is entitled to market exclusivity on fizzy-themed beverage names is completely misguided. Plus, Vizzy’s packaging is markedly different and offers unique ingredients. We don’t believe consumers will be confused.”
The court previously set a March 25 hearing date to consider the case, no word on whether that hearing will still take place given the state of affairs across the nation.
THE FOUR HORSEMEN OF THE APOCALYPSE
We started a video podcast 14 years ago, and let it go.
Today that changes. We are adding a free video podcast series on YouTube to give additional perspective during this dire time of COVID-19
For the first one today, we have Kaumil Gajrawala of Credit Suisse, JB Shireman of Arlington Capital, and Bump Williams of Bump Williams Consulting, to talk about the extraordinary week we’ve experienced in the beer industry, and what we can expect in the next two weeks. “We’ve lost so much… there’s a new normal we’re going to have to deal with.” -JB Shireman
Listen and watch here>>
Harry, Jenn and Jordan
“Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.” – Margaret Mead
———- Sell Day Calendar ———-
Today’s Sell Day: 16
Sell days this month: 22
Sell days this month last year: 21
This month ends on a: Tues.
This month last year ended on a: Fri.
YTD sell days Over/Under: +1