A-B Abruptly Loses Beyond Beer Chief
Dear Client:
In a surprise move, Anheuser-Busch’s Vice President of Beyond Beer, Randy Ornstein, notified wholesaler partners yesterday that his time at A-B has come to an end.
Randy, who began his career at A-B in 2005 as the brewer’s category space manager for Wal-Mart, was named the VP of A-B’s Beyond Beer division less than a year ago.
The email, which was sent from Randy’s personal address, did not specify why he was departing the company, but did say that yesterday (June 4) would be his last day at A-B.
“While my time at A-B is done for now, expect to see great things from me in the future, and who knows maybe I will be back in the beverage world,” he wrote.
The announcement seemed to catch wholesalers off guard.
One distributor said the departure is especially bizarre considering all the current talk around the new umbrella wholesaler agreement for all of A-B’s wine and spirit brands known as the Pestalozzi Agreement, which BBD first reported on in April. This distributor said wholesaler partners had been led to believe that Randy would have presided over most of these new brands.
But now Randy’s out, and no word on a replacement just yet.
Don’t touch that dial.
FIRST CORONA, NOW HEINEKEN DISCOUNTING CANS
As we wrote last week (see BBD 05-28-2019), discounting can packages more than bottles on the same brand/pack is a throwback tactic from the 60s and 70s, when cans were perceived as a “low rent” way to drink beer. Today that’s hardly true as consumers have come to accept and even expect new high-end beers and FMBs to come in cans.
First Corona “decoupled” 12 pack cans from bottles in a discount through the summer, in a bid to drive consumers to higher-margin cans (lower production and shipping costs). Now it appears from sources that Heineken USA, whose shipping costs are much higher than Constellation’s, is asking some distributors to decouple 12 pack cans from bottles and heavily discount them (we’ve heard $9.85 – 10.85 target PTC). Is this a smart tactical move to drive volume and consumer awareness to a more profitable package, or just a terrible brand strategy?
OUR TAKE. This is a terrible brand strategy. I get the math behind it. And I get Corona has some hard comps to cycle this summer while Heineken continues to struggle. But for both of these brands in particular, the bottle IS the brand — Corona with its painted label and lime wedge, and Heineken’s green bottle with the red star. In the old days, former Heineken importer Van Munching & Co. didn’t even want to sell draft because consumers couldn’t see others holding the green bottle. The iconic nature of these bottles is a big part of their DNA, so not sure why they would push consumers to the commodity package everybody else has.
MEANWHILE, WALL STREET A’FLITTER ABOUT HUSA RUMORS
After spending an evening with buy and sell-side analysts in New York, much of the chatter centered around the lingering rumor of a joint venture between Heineken USA and MillerCoors, or even a merger between Heineken NV and Molson Coors. Nobody had any confirming details except that there’s some sort of “meeting” in mid-June that we’ve been hearing about for some time. Both stocks have been in the doldrums and there doesn’t seem to be a run-up on the rumors, so take that with a grain of salt.
A-B WAY AHEAD OF SCHEDULE ON ITS RENEWABLE ENERGY GOAL
In less than two year’s time, every single beer that Anheuser-Busch makes in the U.S. will be brewed with 100% renewable electricity from solar and wind power.
As you’ll recall, A-B had set a goal in 2017 to do the above by 2025. So how are they making good on their commitment in half the time?
Well, this week’s announcement from the brewer touting the “largest solar partnership in the world for the beverage industry” had a good bit to do with it, naturally.
Yesterday, A-B inked a “power purchasing agreement” with Recurrent Energy to snag the renewable electricity credits from a 2,000-acre solar farm currently under construction in Pecos County, Texas.
Once completed in 2021, the solar energy facility “will be the size of 1,500 football fields – with enough solar panels to stretch from New York City to the Southern tip of Florida,” per company release. How much electricity does a monstrosity of a solar farm like that produce? It is expected to “generate 650 GWhrs of energy annually – providing enough electricity to brew 20 billion 12 oz. servings of beer a year,” according to the brewer.
So between the forthcoming farm, and the power purchasing agreement cut in 2017 with Enel Green Power for a substantial portion of the energy produced at the Thunder Ranch wind farm in Oklahoma, A-B figures it’s entire portfolio of domestic beer brands will be brewed with 100% renewable energy by 2021, four years ahead of schedule.
FMBs SKYROCKET MORE THAN 20 POINTS HIGHER IN THIS MAY’S BEER PURCHASERS INDEX, WHILE IMPORTS LOSE STEAM
NBWA’s Beer Purchasers Index, a measure of how much distributors are buying, has seen some good trends this year, and May was even better than April’s trends, breaking the 60 high-water mark. Recall that anything above an index of “50” equates to segment expansion.
This May’s BPI was 61.9 overall, representing the fifth month this year of above-50 index. It also jumped several points above last May’s index, which was 58.7. Finally, it’s a sequential improvement from April’s 59.3 read.
“Compared to all May readings over the past five years, the May 2019 Index was higher than in 2016, 2017 and 2018, although it still fell below the 2015 index,” per NBWA report.
But while May’s number was quite healthy, the only segment doing well over previous years’ benchmarks is FMBs, driven, of course, by seltzers.
FMBs had an incredible index of 78.8, more than 20 points higher than its May 2018 index of 55.3.
MAY IMPORTS INDEX DROPS ALMOST 15 POINTS. Imports, beer’s former growth rudder, has definitely slowed. Though it still posted an impressive 58.7, that’s quite a drop from the prior May’s reading of 71.3. May’s reading also slipped a bit from April’s, which was 61.4. Not terribly worrisome but not great to see a deceleration going into the summer selling season.
As we’ve written in previous coverage, import trends are starting to look more like craft, as runaway growth continues to mitigate. Speaking of, craft’s May index was mostly in line with last year’s, at 54.8 (vs. 55.1).
PREMIUM LIGHTS TIPTOE UP, WHILE REGULARS AND VALUE PLUMMET MORE. Finally, per beer’s not-s0-new reality, premiums were all below the 50 “expansion” threshold.
Premium lights did gain a bit this May, at 44, almost two points higher than the comp period.
But premium regulars and below premiums dropped pretty drastically, from already lackluster 2018 readings. Premium regulars recorded a reading of 24.1 (vs. 30.5), and below premiums almost reached 34 (vs. 41.7).
Cider is under the 50 mark, but up to 45.2 vs. last year’s 41.5.
BEER, BARLEY, AND HOP TRADE GROUPS URGE TRUMP: NO MEXICAN TARIFFS
In a rare show of unity by a variety of trade groups — the Beer Institute, the National Beer Wholesalers Association, the National Barley Growers Association, and the Hop Growers of America — sent a joint letter to President Trump to abandon his plans to initiate increasing tariffs on Mexico, and the inevitable retribution by Mexico.
“By the end of the year, more than 360 million cases of Mexican beer will have been imported into the United States, with the majority of that beer having been made from barley and hops grown in the U.S.,” writes the group. “In fact, Mexico is the largest export market for American barley and the sixth largest market for American hops. Once that beer is imported into the U.S., it becomes part of an American supply chain that employs millions of Americans, including those employed by brewers and beer distributors. Additionally, we estimate Mexican beer imports account for over $500 million in American excise taxes annually. Tariffs are taxes. Levying a 5% tariff on the import value of beer and increasing that by 5% each month until it reaches 25% will constitute a $12.5 million cost increase to American brewers and beer importers during the month of June alone. That cost will reach $374 million by the end of 2019. If the tariff remains at 25%, the cost to the beer industry will be nearly $1 billion annually.”
Does president Trump read letters from trade groups? Not likely, but at least we’re on record as opposing it.
Until tomorrow,
Harry, Jenn, and Jordan
“People will buy anything that is one to a customer.”
– Sinclair Lewis
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