Hazy Little Thing the "Biggest Opportunity" For Sierra Nevada "Since Torpedo"

FILED AUGUST 16, 2018

Dear Client:

If we had to pick the second biggest bit of news from Sierra Nevada's National Sales Meeting yesterday, behind their $5 million investment into a new media campaign, it would be the stats put up by Hazy Little Thing IPA this year.

GET A LOAD OF THIS. In Nielsen all outlet and convenience scans to July 28, Hazy Little Thing, which launched at the start of the year is now…

The #1 craft SKU YTD
The #35 brand overall YTD
The # 12 selling craft IPA SKU YTD
The #2 selling craft 6-pack can YTD
And #1 in velocity for new brands YTD

EVEN BETTER IN THE LAST 13 WEEKS. When looking at the last 13 weeks, the trends are even more impressive for Hazy Little Thing…

The #1 new craft brand
The #27 brand overall
The #9 selling craft IPA SKU
The #1 selling craft 6-pack can
And not only is it #1 in velocity for new brands, it's #5 in total beer

WHAT ABOUT THE ON-PREMISE? Sierra is thrilled with what the brand is doing there as well. Hazy Little Thing's "velocity and turn at retail in the on-premise is nothing we've ever seen before," said Sierra's VP of Sales sales Nick Lundquist.

HAZY TRENDS LIKE "NOTHING WE'VE EVER SEEN BEFORE" All of their new brand launches over the last four years - Hazy Little Thing, Tropical Torpedo, Sidecar, Otra Vez, Nooner and Hop Hunter - have started "off pretty good, but Hazy started off better," Nick said. "They all do good for a couple months, Hazy did better. They all start tapering off once the newness wears off; Hazy keeps going up and up. The trajectory is nothing we've ever seen before."

BIGGEST OPPORTUNITY SINCE TORPEDO. Suffice it to say, Sierra thinks they "may have something special" in this brand. It's "the biggest opportunity we've had since Torpedo," Nick said, which oh by the way is the 13th largest craft brand by dollars, per IRI.

SHOOTING FOR 40% GROWTH IN 2019 WITH HAZY. Their plans for Hazy Little Thing in 2019 are to launch 12-pack cans and a 16-oz. in March; double their on-premise distribution; and grow 40% over 2018 comps.

CHECKING IN ON PALE ALE. Although Hazy Little Thing may have been the star of yesterday's show, much of the brand talk still centered on flagship Pale Ale.

"Flagship fatigue is for real," Nick said. "There's very few flagships out there that are growing anymore. Those flagships that are showing some positive numbers are doing it either through expansion or pulling price levers.

"None of those are options for us," he said, "we can't expand anymore" and "we will never use price to sell our beer."

So what do they turn to? Activation. Their "big ask" to distributors this year regarding Pale Ale was all about activating at retail and they saw some improvement on that, according to Nick.

TRACKING PROGRESS IN ACTIVATION. They saw "some success" with Pale Ale distribution in the chains, up 4.4% in all outlet, and up 0.9% in convenience, per Nielsen YTD data to July 28. And they're making some "good progress" in independents with Pale Ale, said Nick, as they've been able to grow their placements in the independents every month of the year so far. That, in turn, has moved the -3.5% number for Pale Ale in independents seen last year to -1% YTD in 2018. As the media campaign takes off in this back half of the year, Nick said he expects that number "to get back to flat by the end of the year."

Looking ahead, Pale Ale activation will continue to be a key focus in 2019, as well as support of the new media campaign. The goal for the flagship is to achieve 2% growth next year.

COMPANY GOAL TO GROW 5% IN 2019. As a whole, the company is shooting for 5% growth next year. And besides the continued success of Hazy Little Thing, improvements in Pale Ale activation, and the new media campaign, here are some other things Sierra is banking on to take them to 5% growth next year.

HERE COMES SIERRAVEZA. Sierra CCO Joe Whitney said they've been looking to play in the fast-growing "session" space for a long time, and they think they may have found their entrance with SierraVeza. The brew has been part of their Summer Variety Pack in the past, but now they're taking it out on its own this year and making it their sole year-round release in 2019. SierraVeza will hit next year in a single SKU (six-pack cans), as well as some draft, and will be priced in line with Pale Ale.

NEW TAKE ON VARIETY PACKS. Sierra will also change up the way they do variety packs next year. They'll steer clear of this shift to "seasonal variety packs," and put out a more "dynamic consumer offering," going from four beers to six in the pack, "and not change the darn thing all year long," Joe said. "We hope to carry it all year, but we know that may not be realistic," he said, "so we'll have a second one with 60 days' notice that we can change, but we're absolutely not going to change it before we get into summer."

OTHER 2019 INITIATIVES we wanted to call out, include:

Another year of Sierra's SKU neutral plan - Sierra brought wholesalers a SKU neutral plan last year and plan to do the same in 2019. "I promise you we will take more out of the system than we add," Nick said.

Expanding category management - One big request they've heard from distributors to expand in is category management, Nick said, so they'll hire a new craft category manager in 2019.

Investing into the "3rd Space" - Nick said they're developing a program called DigiCompass to help them navigate online retailers like Amazon, Drizly, etc.

Until tomorrow,

Jenn, Jordan, and Harry


"I distrust camels, and anyone else who can go a week without a drink." - Joe E. Lewis


---------- Sell Day Calendar ----------

Today's Sell Day: 12
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: Thur.
YTD sell days Over/Under: +1

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