Dear Client:

Yesterday’s Boston Beer earnings call spent a lot of time trying to discern what the current crisis means for the brewer’s immediate future. 

For example, as we covered in this morning’s BBD — could Boston ramp up capacity by buying one of the many distressed craft brewers about to hit the market? 

It’s not likely, said founder Jim Koch, but they’ll at least look at such opportunities. Besides the inherent distribution dissynergies Jim has talked about for years in the context of acquisitions, there’s also the fact that what Boston needs is canning capacity — and that’s tougher to find at craft breweries. 

Still, with more capacity for Truly sleek cans coming online next month in Memphis, they’ll double their Truly production capabilities. 

ON TRULY TRENDS IN THE COVID ERA. Indeed, the pressure to produce enough Truly is on. 

In the “COVID” shopping era of the first week in March to the first week in April, Truly penetration doubled, and repeat buys grew by 25%, Boston chief Dave Burwick said. And 41% of consumers who tried Tuly in that time span were new to the brand. Household penetration around the last four weeks has been about 7.7, slightly up from the 52 week trend. 

“We think hard seltzer could be on its way to 8%, 9%, 10% percent of beer,” maybe even this year, Dave said, echoing comments made by Mike’s Hard chief Phil Rosse earlier this week in BBD [see BBD 04-22-2020]. 

BUT IS THERE ENOUGH IMMEDIATE TRULY SUPPLY TO STAVE OFF OUT OF STOCKS? One analyst asked, with the rampant demand for seltzer: How much inventory do they have, and with the recent pantry loading depleting inventory earlier in the year than expected, is there risk of out of stocks going into summer?

CFO Frank Smalla answered that they were indeed “trying to build more inventory” with wholesalers “to be prepared for the summer, but the COVID crisis increased the depletions beyond our planning and that’s why we didn’t achieve the goal of the inventory build.”

They’re now at about six weeks of supply. Will it be enough?

“That’s above the level where we were at last year, maybe a little – maybe a few days more, but less than half a week. It is below the level that we had targeted, a little bit,” he said.  

So while “in absolute terms” the inventory is “significantly higher” than last year, they’re also looking at doubling the business. We’ll see if they have enough. It all depends on demand.

WHAT ABOUT SAM ADAMS? BBD reported a few weeks ago during an interview with CMO Lesya Lysyj [see BBD 04-08-2020] that Sam Adams brands were up double digits in the off premise, the latest 4 weeks ending 3/29 (in IRI MULC). 

Indeed, COVID pantry loading actions have prioritized large packs and known brands, some of which were struggling before (like Boston Lager). 

But going forward, will that new trend seriously reverse more than half a decade’s worth of share losses for such legacy brands? 

Jim doesn’t necessarily think so. 

“I wouldn’t want to predict an overnight change in the seven-year trend,” he said. “I do think [current shopping trends] might bend the arc a bit, but you know, we’re very focused on trying to get Sam Adams back to growth and we’re not going to assume that some twist of fate is going to change that, we feel like we need to do it ourselves.” 

Chief Dave Burwick added that the last month has seen that roughly 42% of Boston Lager buyers are new to the brand . 

“So … there’s an opportunity to drive trial and retrial among brands,” he said. “But to Jim’s point, that’s not enough to bend the arc necessarily.” 

FOUNDERS TO FURLOUGH 163 EMPLOYEES

Founders Brewing Co. has made the difficult decision to furlough 163 of its retail staff employees at the start of next month, reports the Detroit Free Press. 

The Michigan brewer has provided its retail teams with paychecks since the closing of their taprooms on March 13, but with no clarity on when some sort of normalcy will return the brewer announced yesterday that it has made the call to furlough those employees for an “indefinite” period starting May 3.

“The COVID-19 pandemic has hit our business and industry hard,” Founders chief Mike Stevens said in a statement. “Founders has been very fortunate to have continued paying our retail teams since we closed our tap rooms on March 13. However, this week we announced the difficult decision to furlough those team members starting May 3 until we have better clarity on where we as a business, and society, go from here. We did not take this decision lightly and hope to bring back our furloughed staff as soon as possible.” 

The decision will affect employees at Founders’ Detroit Taproom, its Grand Rapids Taproom, and its Company Store. While the furlough is considered indefinite, Founders has reportedly said that it will not extend beyond six months, per a local affiliate. 

Until tomorrow,

Jenn, Jordan, and Harry 

“Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less.” – Marie Curie 

———- Sell Day Calendar ———-

Today’s Sell Day: 17

Sell days this month: 22

Sell days this month last year: 22

This month ends on a: Thurs.

This month last year ended on a: Tues.

YTD sell days Over/Under:  +1