Of Crafts and PABs

February 18, 2011

Of Crafts and PABs

Dear Client:

Dan Wandel of Symphony IRI barely drew a breath as he went over the pertinent beer numbers for 2010 for over an hour yesterday for the Brewers Association’s bi-annual Power Hour conference call. Major themes included the fact that, of course, craft is still growing gangbusters, wine is really cutting into beer growth, the big brewers are having somewhat of a innovation drought, volumes are down but dollar sales are positive, drug stores are growing (thanks Walgreens) while c-stores suffer, PABs are still hot, craft cans are hot, as are IPAs, and much more.

So let’s go over some of the highlights from Dan’s call:

-Trip shift. While consumers’ trips to retailers have remained nearly unchanged, they are making trips to different types of retailers more often. Interestingly, supercenters and Walmarts saw significantly fewer trips in 2010 (-3.2% and -4.5% respectively), while grocery trips increased slightly and drug and dollar stores increased by 1.2% and 2.5%. C-store trips were down by 1.1%

-Wine is growing big time. Wine volumes are up 2.6% with pricing up 1.1% in 2010 (beer volumes were down 1.7%). That’s the second year in a row that wine sales trends have accelerated from the previous year, and the second year they outpaced beer, says Dan. In the top 15 beverage alcohol growth segments in dollar sales in supermarkets, six are wine categories. The good news: Craft beer is the number one bev-alc growth category, up 14.1%.

-The beer category was “unwell” in 2010, and things are “frightening.” Beer failed to increase case sales in the food channel for the first time in years, while c-stores beer sales continued to decline. Wine and spirits outpaced beer in supermarkets. The seven beer mega-brands combined to be down 1.9% in dollar sales in supermarkets. Merchandising support was down for beer slightly. And innovation was down with regards to sales by new beer brands compared to years past.

-The good news: Craft sales grew over every SIG tracked channel. PABs continue to rock and roll despite caffeine removal, cider sales are breaking through the “small” barrier, and Portland, despite being a mature craft market, achieved 30 share of case sales for craft in supermarkets the week ending December 26.

-Channel trends varied. Craft grew over all SIG channels, but others varied. Thanks to Walgreens selling beer, the drug channel was up 3.8% for the year for the beer category, while c-stores were down 2.4%, liquor stores up 2.5%, Mass Merch up 14.5%, and supermarkets down 1.7%.

-Craft gained over a share point of beer category sales. That’s dollar share points in supermarkets, which they gained at the expense of domestics and imports, while PABs and ciders gained a little share. In fact, craft’s dollar share of the beer category has gone from 5.4 in 2005 to 9.4 in 2010.

-Beer pricing up in all segments except imports. The average base price of beer per case in 2010 was $19.89. The average base price of craft beers was $31.16 (up 42 cents). Imported beer pricing was down 14 cents per case.

-Heavy beer buyers drink a lot of beer. I don’t mean fat beer buyers, I mean folks who buy over 23 cases of beer a year. They make up only 6% of the category buyers, yet they purchase 52% of total beer. Light beer buyers, who only buy less than two cases of beer a year, make up 58% of total buyers, but only buy 8% of the beer.

-Heavy beer buyers drink domestic premium and sub-premium beer. In fact, 85% of the beer they buy is domestic premium or sub-premium beer. But….in 2010 they bought more PABs, more imports, and more crafts than the year before.

-A-B and MillerCoors posted 13 brands which experienced over 100k cases of volume growth in 2010. Of those 13 brands, six were their craft style beers. Of those six craft beers, three were Blue Moon varieties, two were Leine’s, and one was Shock Top.

-Momentum winners. SIG’s top five Momentum Brands for 2010 in supermarkets were: Blue Moon, Pabst Blue Ribbon, Yuengling Traditional Lager, Sam Adams Seasonal, and Modelo Especial.

-New brand introductions haven’t fared so well. When you look at the top 15 new brand introductions in beer in 2007, six have since been discontinued, and only two grew last year: Landshark Lager and Bud Light Chelada.

-Craft consistently growing. Craft beer has been a “model of consistency in outperforming the beer category for the past seven years — including double digit dollar sales growth for the past five years,” says Dan.

-Craft brings rings. Average supermarket basket rings, when craft beer is in the basket, averages $65.07 versus $42.91 when craft beer is absent from the basket. Three regions beat the national average for craft in-basket rings: South Central – $77.04; Southeast – $75.67; Northeast – $68.25.

-Craft rocked 2010. Nine of the top 15 top craft case sales weeks occurred in 2010 or 2011. They were the weeks ending December 26, November 28, July 4, September 5, May 30, December 19, November 21, and July 11. And January 2, 2011 was the eight largest craft week.

-Even within craft, small is in. Big and medium sized craft brewers gave share to small craft brewers. The top four craft brewers are 50.8 dollar share of the craft segment, but lost 0.5 share points of craft market share. Medium sized craft brewers (ranked 5 to 11) represent 21% of the craft business but lost 1 share point. Small craft brewers (ranked 12 to 346) represent 28.2 dollar share and gained 1.5 dollar share points.

-Same with imports, small is in. The top 6 importers, which represent 94.4% dollar share of total imports, lost 0.3 dollar share points, while all the rest gained 0.3 points.

-New Belgium Ranger IPA was the top new craft brand in supermarkets in 2010, followed by Sam Adams Latitude, Widmer Deadlift Imperial IPA, Flying Dog Raging Bitch, Sierra Nevada 30 Series, Redhook Big Ballard Imperial IPA, Capital Supper Club Lager, Bridgeport Hop Czar Imperial IPA, Sierra Nevada Crystal Wheat Ale, and Ninkasi Variety Pack. Notice all those IPAs.

-New craft brands roaring. Torpedo IPA from Sierra Nevada, Latitude IPA from Boston Beer and Ranger IPA from NBB, have generated over 632K in combined case sales in supermarkets from Jan 2009 – Dec 2010.

-Of the top ten new craft SKUs in 2010, Shiner Bock rated the only can (12 packs), and four were IPAs.

-Craft cans are in. Craft can sales dollar sales in supermarkets went from $832k in 2007 to $5.8 million in 2010. In 2007 17 craft vendors sold 28 SKUs in cans. In 2010, 30 craft vendors sold 65 SKUs in cans. The can can, and the can will.

-Imperial Pale Ales gained the most share within craft last year, up 2 dollar share points. Seasonals gained 1.8 points, and variety packs gained 0.7 points.

-January sales results: Four the four weeks ending January 30 in SIG supermarkets, the beer industry is down 1.6% in volumes. But craft is up 16.7%.


CRAFT BREWERS Nick Matt of FX Matt, Dan Kopman of Shafly, and Leslie Henderson of Lazy Magnolia appeared on Fox News talking about their excise tax relief bill. Don Kopman of Shafly says that craft brewers employ one person for every 1,000 barrels brewed, while big brewers employ one person per every 50,000 barrels. Also, while craft brewers account for only 5% of the business, they account for 50% of the jobs. See the video here.

COSTCO STILL GOING FOR WA PRIVATIZATION. WA state Senate Republican Leader Mike Hewitt told reporters Costco is now working the issue behind the scenes in this year’s legislature to privatize the state. He said, “I do believe the privatization of liquor will get some steam. Costco has been down here and they’ve been meeting with people. They’re working with people who come out of industry who I know personally who have forty-years experience.” However, those in the know say that a bill to privatize the industry won’t get a hearing in this session.

BREWPIC OF THE DAY. The image is too big to post here, but here’s an interesting map of the US from Symphony IRI showing the growth of crafts by region. Click here to see the image: http://www.beernet.com/beersummit/2011/craftmap.gif

Until tomorrow, Harry

“When two men in business always agree, one of them is unnecessary.”
-William Wrigley

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