THE GIST
Boston Beer Co. is making significant changes to its distribution agreements in New York State, indicating the massive importance of flavored malt beverages (FMBs) like Truly Hard Seltzer and Twisted Tea Hard Iced Tea in its portfolio. The developments come amid declining share for the company’s former flagship brand family, Samuel Adams.
A spokesperson for Boston Beer confirmed that the company is consolidating its distribution in New York; Beer Marketer’s Insights (BMI) suggested in a newsletter to subscribers April 5 that the company had done so. The spokesperson says Boston Beer informed its distributors of its consolidation plans two weeks ago. BMI wrote that Boston Beer will likely consolidate statewide distribution with Manhattan Beer, which already distributes Boston Beer products in NYC. Boston Beer did not confirm this detail, saying only that the company has informed its distributor partners of consolidation.
“Since the Dogfish Head merger, we’ve consolidated over 80% of our wholesaler network [nationally]. This is the next step in that journey,” a Boston Beer spokesperson told GBH via email. “In New York, we have a very complicated footprint with as many as three distributors calling on the same account on behalf of our brands. We believe a more streamlined network will serve our customers better.”
Because of the specifics of New York State alcohol laws, Boston Beer is able to consolidate distribution without having to pay any compensation to the wholesalers whose portfolios it is leaving. This frees the company to potentially cast all its chips with Manhattan, a distributor that is already a powerhouse in the hard seltzer category. Manhattan currently carries leading seltzers from Truly, White Claw, and Corona, as well as new hard seltzers from New Belgium Brewing and Molson Coors-backed Arnie’s Spiked. Manhattan appears to be all in on seltzer, offering Boston Beer the chance to further partner with a wholesaler that excels in the category.
With Sam Adams and Angry Orchard declining in portfolio share, Boston Beer could use more of Manhattan Beer’s muscle behind Truly and Twisted Tea.
WHY IT MATTERS
Since 2019, FMBs have continued to overtake Sam Adams as crown jewels of Boston Beer’s lineup:
From 2019 to 2020, dollar share of Sam Adams dropped from 21% of the company’s portfolio to 13.8%.
Year to date through March 21, Sam Adams accounts for just over 10% of total Boston Beer sales.
Truly, meanwhile, has gone from 28% of Boston Beer’s sales in 2019 to 46.8% in 2020 to more than 50% so far this year.
After a rocky integration into Boston Beer’s distributor network, Dogfish Head’s sales in grocery, convenience, liquor, and other chain stores tracked by market research company IRI ended 2020 flat compared to 2019 at $75.3 million.
Further partnership with Manhattan Beer would signal Boston Beer’s necessary focus on Truly and Twisted Tea, especially in the competitive and not especially beer-centric New York City market.
“New York City already under indexes as far as craft beer market share to begin with. It’s not a great market to sell craft beer in as far as share of dollars spent,” says Chase Brooks, co-founder of Best Kept Chill Beverage Development Studio. “[Boston Beer] might be like, ‘Fuck it, we’re an FMB brand as far as NYC is concerned.”
[Disclosure: GBH cofounder Michael Kiser is also a cofounder of Best Kept Chill.]
Manhattan Beer has proven it can move volume on FMBs. In addition to selling Truly and other aforementioned seltzer brands in NYC, Manhattan also carries Mike’s Hard Lemonade, Cape Line Sparkling Cocktails, Pabst Blue Ribbon Hard Coffee, and more.
While it may seem counterintuitive for Boston Beer to go all-in, statewide, with a distributor that also carries its seltzer competitors, Brooks says that Manhattan’s sheer size and influence in the state outweigh that potential disadvantage.
“In this case, Manhattan is so dominant that I’m not surprised that Boston Beer wants to go with them,” he says, noting that after years of watching the New York City market he sees FMBs over indexing there. “Having Corona, Modelo, and White Claw in the portfolio has compounded Manhattan’s control over the market in a crazy way.”
This seltzer focus is in line with Boston Beer’s future. Beer has been a declining portion of its portfolio for years, and in Manhattan, it potentially sees a former beer-based company that’s excelling in the newer, hotter world of FMBs.
Chris Missick, a licensed attorney and winemaker/owner of Bellangelo Winery in Dundee, New York, agrees that simply being in a certain distributor’s portfolio in a major market can move significant volume in that state.
“The other thing I’ve personally witnessed in New York State is … so much of it is dependent upon the relationship each individual distributor has built,” Missick says.
In essence, consolidating distribution behind the largest beer and FMB distributor in the state’s largest market is a streamlining move for Boston Beer. As a Boston Beer spokesperson noted, the company’s distribution territory was previously “complicated,” with overlapping sales representatives handling various parts of the company’s portfolio in the same retail accounts across the state. This move reduces that redundancy and ensures that its most viable brand families will get the attention they need to continue pushing the company’s success—and stock price.
And it won’t cost Boston Beer any money to do so. In New York, consolidating distribution is generally deemed “good cause” for an alcohol producer to exit a wholesaler relationship. Missick says this “good cause” allows an alcohol producer like Boston Beer to leave existing wholesalers without having to compensate them for the loss of its products in those distributors’ sales numbers.
Distributor consolidation is a national reality, not just for Boston Beer, but for other companies nationwide. California has proven ground zero for the trend, with Reyes Beverage Group acquiring 10 wholesalers up and down the state between 2019 and 2020. Last year, Reyes added 12.65 million case equivalents in the state—nearly as much Coors Banquet as was sold in the entire U.S. in 2019. Much of Reyes’ momentum comes from its alliance with Constellation Brands and Mark Anthony, which puts popular products like Modelo, Corona, and White Claw in its portfolio. Boston Beer has also, within the last two years, aligned with Reyes in California, joining other alcohol producers including New Belgium, Sierra Nevada, and Lagunitas in doing so.
In New York, Manhattan Beer now has a similar all-star roster of White Claw, Truly, and other FMBs. Boston Beer is banking on accelerating hard seltzers and hard tea within that already powerful network.
“It says Boston Beer sees their own numbers,” Brooks says. “They know their business is becoming an FMB business.”
Words by Kate Bernot