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To nobody’s surprise, IRI-tracked beer sales in the first three weeks of March are up almost 17% compared to a year ago due to the closure of on-premise accounts across the country and shoppers flooding to grocery, convenience, and liquor stores to stock up. But it’s also been a time of rapid diversification for sales and delivery channels of beer, liquor, even cocktails.
That’s enabling distributors to focus on high-volume brands for now—something they’ve been eager to do for some time to bring about some "SKU attrition" for brands thought of as “dust collectors," per one report in Beverage Industry. The number of SKUs held by wholesalers has skyrocketed in the past decade as the U.S. beer industry has had historic growth. In turn, these sudden changes have allowed small breweries to experiment with new consumer behaviors and expectations—many of which could remain desirable long after the crisis.
In this edition of Sightlines Premium, a look at how today’s behavior could impact how beer gets to drinkers down the road.
In the most recent week of data ending March 22, beer sales (excluding FMBs and non-alcoholic brands) moved almost $816 million, up $77 million from the week before. When factoring in hard seltzers, RTDs, and other categories, the amount rises to almost $949 million in that week, making it the second-straight week U.S. stores have had summer holiday-level sales. The Fourth of July is usually estimated at about $1 billion for packaged sales.
Take your pick: volume is up big in March for everything thanks to the flood of grocery store shopping. Your top movers in terms of percentage growth compared to 2019:
Premium Plus: 23.8% (ex: Michelob Ultra)
Craft: 21.7%
Value Light: 19.3% (ex: Keystone Light, Busch Light)
Import: 16.7%
Premium Light: 13.9% (ex: Bud Light, Miller Lite, Coors Light)
Last week, we broke down the specific brands pushing sales up, and it's pretty much the same ones that continue to do so.
This jump is also happening within the hard seltzer category, where White Claw, Truly, and Bud Light Seltzer accounted for $64 million of sales, or 6.7% of IRI-tracked dollars spent the week ending March 22. Add in other popular hard seltzer lines and the figure likely is about 7%, more than twice where things stood at the end of 2019 at around 3%.
As mentioned in GBH stories in recent weeks, the forced pivot to an off-premise-only country has been a wild one for producers, including direct-to-consumer and online orders. Pair this with the surge of sales in chain stores that have effectively come from a small collection of tenured and trusted brands, and it's created a problematic equation for many breweries who are getting squeezed out by distributors.
In multiple conversations last week, including in a Sightlines Premium video conference with subscribers, GBH heard from professionals across the three tiers about how there was due to be a culling of SKUs as distributors focused on only the most available and successful brands. And in many cases, COVID-19 has become an excuse for a market correction distributors have long wanted.
In some cases, GBH was told that distributors won't bother right now with individual brands outside the top 30 or 50 in a wholesaler's portfolio, which leaves the largest, national brands and a handful of craft (however you want to define it). Sales reps on the distributor or brewery side simply don't have time to do any pre-sales for stores right now, and as stores are holding off on seasonal resets, there's a need for volume, which only a small percentage of breweries can provide.
For example, the need for high-volume packages that typically come from larger breweries grew at a rare clip in the first three weeks of March. Larger package sizes have been over-indexing compared to typical rates. Across IRI's whole beer category, which includes FMBs and non-alcoholic brands, the losers in the week ending March 22:
4-pack, 16oz cans (-.25% below 2019 levels)
12-pack, 12oz bottles (-.3%)
6-pack, 12oz bottles (-2.5%)
Winners:
12-pack, 12oz cans (+2.1% above 2019 levels)
24-pack, 12oz cans (+2.3%)
30-pack, 12oz cans (2.3%)
The amount of money spent on high-volume packages showed incredible growth when comparing the first three weeks of March 2020 compared to last year, with the biggest gains:
12-pack, 12oz can (+66.7% in dollar sales vs. 2019)
24-pack, 12oz can (+52.1%)
24-pack, 12oz bottle (+47.1%)
30-pack, 12oz can (+44.1%)
6-pack, 12oz can (+38.8%)
When comparing just the third week of March 2020 to 2019, 24- and 30-packs of 12oz cans earned almost twice the dollars. It was stressed last week, but worth saying it again: if you’re a small brewery and have the ability to package higher-volume cases, now is the time to do it.
While this stock-up mentality played out in beer, it's reflective of overall behaviors during the COVID-19 pandemic. IRI recently reported that 74% of shoppers were buying enough groceries to last them one-to-two weeks. Separately, 63% of consumers said they were stocking up the week that ended March 22, coinciding with a historic week of beer sales. That figure was up from 41% the week prior.
Kimberly Clements, managing partner of Pints LLC, a beverage advisory firm, tells GBH that even small bottle shops need to reshift focus from curated craft collections to include larger pack sizes in order to survive.
“Large Breweries and distributors are smart to focus on their core packages right now—which in many events, make up over 90% of their business,” she says, noting those are the SKUs that “keep the lights on.” “Larger packs are what distributors are focusing on for right now—large, easy to palletize in the warehouse, easy to sell and drop at retail, easy to check in at the backdoor, easy to merchandise, high velocity products.”
One industry vet put it like this: given the rapid rise of hard seltzers and other beverage alcohol products, including RTDs, distributors aren't going to make what they consider the same mistake again of stocking warehouses with thousands of different SKUs—and many that change weekly or monthly as breweries sought a definable value from newness.
So what’s a brewery to do? Whether it’s a pandemic forcing the issue, or you’ve been struggling for attention in a distributor’s book for months, it’s all about access to market and consumer mindshare. As for the future, it depends on if relaxed sales regulations stick beyond COVID-19.
For years, delivery services like Drizly have been trying to get consumers to adopt online order of alcohol as a normal behavior, and while they've been wildly successful growing to about 180 markets around the world. But nothing has influenced its growth like COVID-19.
As GBH’s Kate Bernot wrote last week, Drizly saw its most orders ever on March 20, with new customers accounting for 41% of orders that day. New customers typically account for about 15% of orders.
Drizly represents a small collection of breweries, almost all who are large, but that doesn’t mean small companies are out of options, should they make it through this downturn.
"The consumer is going to get used to this new norm of getting whatever they want, whenever they want, and that's going to be the big thing," says Donn Bichsel Jr., who's worked for Miller, Goose Island, Heineken USA, Dogfish Head, Revolution Brewing, and now runs 3 Tier Beverages, sales and marketing consultant. "For any of us in this industry, the consumer is going to demand this flexibility. You're not going to put this back in the box."
Real-time case studies are taking place for breweries around the country, showing how online and direct-to-consumer sales are making a difference for their business, and whenever things return to “normal,” sets up a fight:
As distributors cut down SKUs, multiple industry professionals tell GBH they expect that kind of behavior to continue post COVID-19, potentially leaving local or regional breweries in the lurch. Warehouses were already brimming with stock that was hard enough to move, so now’s the time that distributors will refocus on a handful of best-selling brands per brewery, they say.
Whenever normalcy eventually returns to the economy, that means that distributors could talk about precedent for brands that aren’t performing.
Meanwhile, breweries will point at examples of distributors not selling their beer, and how direct-to-consumer avenues were a lifeline they needed during the crisis and will help save their business moving forward.
If you’re a small brewery working to make ends meet right now, consider what your state guild and lawmakers could be doing months from now to keep temporary laws on the books. Examples of how things succeed in this moment could be lynchpin anecdotes to reshape customer interaction in the future—something that has already been in the works.
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