Boston Chiefs on Levers to Sam Adams Growth

Dear Client:

Truly got a lot of press on the Boston Q1 earnings call yesterday.

What about Sam Adams? Certainly, management fielded questions on that, and is making moves to return it to growth. They’ve retooled packaging, are tweaking messaging, and, of course, hired a new CMO earlier this year, industry vet Lesya Lysyj, who has experience in both non- and alcoholic beverages.

So “there’s a number of things we’ve been working on,” said CEO Dave Burwick. “And we’re changing the campaign and kind of going back to where we were in terms of talking about product quality; the heritage; the authenticity of the brand. And when we looked at the numbers in Q4, we actually saw a pretty good bump for that. We saw maybe 4 or 5 points of trajectory change for Sam Adams.” Still, “in Q1 we saw that kind of slip away from us a little bit.”

But everything “has to work together,” Dave said. New packaging has only been in market for a couple of weeks, “but the response has been very, very positive. … Particularly, as we talk about [the] crowded shelf … how do you stand out in this sea of colors?” Well: “We think going back to blue and back to the equities this brand stands for. It will make us much more highly visible.”

As for the reformulated Summer Ale, Dave reminded listeners that Jim developed that brew back in 1996. And “we hadn’t changed the flavor profile,” which they’ve finally now retooled, and are “calling a lighter and brighter profile.” He said they’re seeing “very encouraging signs again only a few weeks out.”

It’s worth the try: Jim added later that Summer Ale’s “base” largely turns over each year: “70% or so of consumers who come to Summer Ale are new consumers,” and he thinks they can attract a lot of new consumers with the new brew.

DAVE ON OTHER INNOVATIONS, AND LESYA. Dave continued on the success of recent Sam Adams innovations, and confidence in their newly announced CMO, Lesya Lysyj.

New England IPA is still “growing this year pretty significantly in the sophomore year.” As for Sam 76, which, with NE IPA, was one of the top  new brands last year, Dave said: “we have some work to do and we’re working on some new communication.”

As for Lesya, Dave said growing brands in tough circumstances is kinda her specialty.

“We’re very excited to have her. She’s a great leader. She’s a super creative marketer. She was at Heineken.” As CMO, “she did the ‘Open Your World’ Campaign at Heineken.” More recently, she pioneered the “Tough as Grapes” campaign at Welch’s.  

“She’s proven that she – in a tough category, she can find a way to grow brands. We also think she is a great cultural fit. So, we’re very excited to have her come in and relieve me of my duty [Dave has been interim CMO] and she’ll finally do a much better job than I’ve done.”

CONSULTANT: FRANCHISE REFORM? BE CAREFUL WHAT YOU WISH FOR

After our coverage of attorney Marc Sorini’s assessment at CBC  that “the ball is starting to roll” on franchise laws and that this is all very, very positive news as craft brewers could terminate without cause, Ippolito & Co.’s Karen Kovturn writes — not so fast. This could backfire for craft brewers.

Why?  Because “without a clear recognition of a brand’s value as part of the reform, it risks turning brands into boxes that are rented by distributors rather than brands that are worthy of being built,” writes Karen.

Franchise reform that promotes “convenience termination” creates uncertainty over value and will dissuade investments behind a brand.

Franchise reform usually stipulates that brands can trade at Fair Market Value, which can be “ambiguous.  FMV starts with the price that a knowledgeable, willing, and unpressured buyer would pay to a knowledgeable, willing, and unpressured seller.  However, from the view of either buyer or seller, FMV will vary based on timing, geography, circumstances and even evaluation principles.”

Ippolito prefers the Discounted Cash Flow method, which is more complicated. “It is the best way to accurately approach determining a brand’s value. “Unfortunately, we have seen examples of judicial determination that held the DCF approach was too complicated to apply in determining FMV. Alternatively, a settlement is sometimes decided by using a rumored price multiple from a recent brand exchange in another market. Such an ‘assessment’ is unlikely to accurately depict the brand’s value.  Price and value are not the same,” she concludes.

BEER BRIEFS:

CIGAR CITY HITTING MISSOURI WITH MAJOR BRANDS. “Following a record quarter for sales and growth in the first four months of 2019, Cigar City Brewing has announced its plan for expansion into the Missouri market,” the company announced today. They’ll partner statewide with St. Louis-based Major Brands to get product to the state by May. This newest market brings the brewer’s distribution footprint to 31 states, plus  Puerto Rico, Sweden, Finland, Norway, France, the United Kingdom and Canada.

Until tomorrow,

Jenn, Jordan, and Harry

“The highway’s jammed with broken heroes on a last chance power drive.” — Bruce Springsteen

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