How Deschutes Will Tackle the Rest of the Year
Dear Client:
Tuesday we shared news that Deschutes was having to make layoffs due to almost 50% of its revenue stream (on-premise/own premise) debilitated by on-premise shutterings amid COVID-19 containment efforts.
They’re hoping to hire some of those people back when business returns to more normal operations. Of course, nobody knows what that will actually look like, or when that will be.
Meantime, sales and marketing chief Neal Stewart is managing the rest of the year in chunks.
“The way I’m looking at the business… [I’ve] broken the rest of the year into three parts: Part one, now through the end of May. Part two, June through August. Three, September through the end of the year.
“And I look at where I think our business is going to index vs. our original forecast. Right now, part 1 – on premise is 0%. We can’t rely on any of that. Hopefully in the summer, we can index at 10%-20%, and then toward [the] end of the year, that’s 20%-30%. That might be on the aggressive side.”
But on the off-premise and package side, Neal has challenged his team to “execute at 100% of what we forecasted.”
“That could be higher… maybe we overindex in that way,” he said. But they’re still taking “a bit of a conservative approach to that,” considering all the unanswered macro considerations.
FRESH FAM HELPS ALLAY HURT. They have a few bright spots in the off premise, where they’ll go to battle with their Fresh Family and Black Butte Porter, which have substantial distribution.
As we reported earlier this month, their “fresh” family, comprised of Fresh Squeezed, Fresh Haze and new Lil’ Squeezy, sold about 130,000 barrels last year, which is almost half of Deschutes’ 2019 289,000-barrel production.
Right now, for Fresh Squeezed and Fresh Haze, they’re still “getting really good feedback” on velocity.
LEGACY BEERS RESURGE A BIT–BRANDS THAT PEOPLE TRUST. While the Fresh family is relatively young for the 31-year old company, one of Deschutes legacy brands, Black Butte Porter, is also doing well at trade. It’s not totally surprising, considering people’s desire for tried-and-true brands right now, which represent stability.
It’s actually the no. 1 selling craft porter in the U.S., says Neal, a fact that they’ve been focusing on the last 1.5 years. That’s “a really good point of differentiation there from other brands in market,” he says.
Even Mirror Pond, which had “been in decline for awhile,” is starting to see resurgence.
“We’re getting calls from chain retailers here in the Northwest: ‘We want to bring in a palette of Mirror Pond,'” he said. He believes that speaks to the power of “brands that people trust — and 12 packs. And all those [legacy] brands are available in 12 packs.”
PRODUCTION CHANGES? But we were curious if they were shifting production significantly in these uncertain times.
“I don’t think enough time has gone by where we have to pivot what we’re producing,” said Neal. “We are watching the numbers and we have a fantastic team that works on forecasting,” he said. They’re “mostly fulfilling orders” at this point.
“But we are working with distributors to manage inventories in a proper way,” he said. Using a piece of software that projects shipments and volume, but also extrapolates over longer periods of time, they’re looking at the last 30 days’ rate of sale to determine what distributors should be purchasing from them.
MODIFIED THEORY? You may recall that Deschutes was just about launching its big new FMB brand, Modified Theory, when COVID-19 really started to take hold in the U.S.
They’re still shipping it. But as “a lot of chain retailers have delayed spring resets… I think right now, understandably, distributors have focused on maintaining their business, so driving distribution for new brands is on the back burner.”
Still, they’re focused on finding opportunities at retail where they can. “We’re going to ship 19.2 oz cans — that’s a possibility to drive incremental volume in the c-store channel. But in terms of the big launch, we’ve gotta be empathetic to what is happening at retail and react according.”
They’re also launching a 19.2 oz. can of their new low-cal hazy IPA, Wowza!. Initially a play for venues, Neal says, “we believe [there’s] a lot of volume to be had in grocery and c-stores as it replaces Da Shootz!” pilsner.
BREWERS ASSOCIATION OFFERS COVID RESOURCES FOR CRAFT BREWERS, FROM SANITATION TO DRAFT QUALITY AND MORE
Over the past week, the Brewers Association has been keeping a close watch on COVID-19’s impact on the craft brewing community.
Following its survey of craft brewers, the Brewers Association has released resources for the craft community to refer to about sanitization techniques, guidelines on shutdown safety and scaling back production, maintaining draught equipment during stagnant periods, and financial tips from Maria Pearman, CPA.
Links to each subject posted below:
An aggregated list of these and other resources, including links to disaster assistance loans programs and legal information can be found at the Brewers Association’s Coronavirus Resource Center, link below.
BA ALSO SHARES ECONOMIC STIMULUS PACKAGE PASSED IN SENATE THIS A.M. The Brewers Association also sent note this morning that the Senate unanimously passed the Coronavirus Aid, Relief, and Economic Security Act. It is supposed to be taken up by the House tomorrow.
There’s a lot in it for small brewers, including:
- Emergency grants of up to $10,000 to offer immediate relief for small businesses who have/are applying for Economic Injury Disaster Loans
- Authorization for businesses with fewer than 500 employees to obtain SBA 7(a) loans with the ability to use a portion of the loan for payroll, salary, mortgage or rent, and utility payments, forgiven
- A temporary exception from excise tax for alcohol used to produce hand sanitizer
- A retention tax credit to encourage employers to keep workers on payroll during the crisis
- And other breaks for small businesses and self-employed workers. See more here.
Until tomorrow,
Jenn, Jordan, and Harry
“Nothing is too small to know, and nothing is too big to attempt.”
– William Van Horne
———- Sell Day Calendar ———-
Today’s Sell Day: 19
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
