Goldman Sachs: Labor Day Weekend Total Beer Sales +7%; Hard Seltzer Sales +137%

Despite out of stock issues from key suppliers, Labor Day weekend beer sales increased over the holiday weekend last year and indicate the beer category’s off-premise sales will finish the year strong, according to a report from Goldman Sachs Equity Research.

“The summer ended on a strong note according to the vast majority of distributors in our Labor Day ‘Beverage Bytes’ beer distributor survey,” Goldman Sachs wrote. “Beer industry volumes were solid (up strong triple digits) over Labor Day — which was particularly impressive given persistent out-of-stock pressures.”

Overall Beer Category Performance & Outlook

Beer sales increased 7% during Labor Day weekend 2020 over the holiday weekend in 2019, which fell nearly a week earlier than it did this year. Most breweries saw single-digit growth for the holiday weekend:

  • Constellation Brands — +6%
  • Anheuser-Busch InBev — +6%
  • Heineken — +2%

Molson Coors Beverage Company’s sales were flat. The craft beer segment in total was up 3%. Boston Beer Company’s sales were up 18% due to strong sales of Truly Hard Seltzer, despite inventory issues.

Looking ahead, distributors are feeling positive about the total industry’s outlook for both Q3 2020 (+5%) and the remainder of the year (+4%). Their outlook is stronger for some suppliers (Boston Beer +21% for Q3 and +25% for the year; Constellation +4% for Q3 and +7% for the year) than others (A-B +3% for Q3 and +2% for the year; Henieken +2% for Q3 and flat for the year; Molson Coors -1% for Q3 and flatfor the year).

For the craft segment, distributors are expecting +1% growth in Q3 and -1% for the year

“Distributors noted that craft beer continues to lag due to on-premise closures,” Goldman Sachs wrote.

Out-of-Stock Issues

Brewers with holiday weekend inventory issues namechecked the most by surveyed distributors include Molson Coors (all Coors Light can packages, Vizzy Hard Seltzer variety 12-packs, Miller Lite 12-pack bottles), Boston Beer Company (Truly Hard Seltzer 12-packs), Heineken (Dos Equis 18-pack bottles). Other brands with longer lasting out-of-stock issues include Mark Anthony Brands (White Claw family) and Constellation Brands (Corona and Modelo families).

In a year in which the beer industry has been turned upside down due to the COVID-19 pandemic, out-of-stocks are adding confusion.

“A few distributors noted that out-of-stocks have made it difficult to truly gauge the overall health of the demand environment,” Goldman Sachs wrote.

Some distributors said they only received 70-75% of the inventory they ordered from major brewers.

Constellation Brands — which has been plagued by out-of-stock issues since the Mexican government shut down beer production in the spring— had inventory issues for Labor Day, but Goldman Sachs believes Constellation “has sufficiently de-risked expectations” ahead of its Q2 earnings release on October 1.

Labor Day Hard Seltzer Sales

Hard seltzer sales increased 137% during the holiday weekend compared to last year, and distributors are feeling very positive about the segment, with an outlook of +130% for Q3 and +140% for the year.

“A few distributors noted that this growth would have likely been even stronger absent out-of-stocks,” Goldman Sachs wrote. “Several lamented the fact that supply chain pressures remain a significant headwind for the category.”

Truly led the segment in growth over Labor Day 2019, with an increase of 131%, and segment leader White Claw was up 94% over Labor Day 2019.

“While Truly faced some out-of-stock pressure, they paled in comparison to White Claw’s own out-of-stock pressures,” Goldman Sachs wrote. “In fact, several distributors think that Truly’s strong performance was due in part to out-of-stocks for White Claw.”

Both Boston Beer and Mark Anthony have plans in place to increase capacity. Boston Beer expects to double its capacity in 2021 through additional canning lines at the company’s Cincinnati brewery and enhanced contract production agreements. Mark Anthony has invested in two new facilities, one in Glendale, Arizona, and one in Hillside, New Jersey.

Diageo’s Smirnoff Spiked Selzter’s sales increased 61% compared to last year’s Labor Day weekend, and distributors’ outlook for the brand is positive (+76% for Q3 and +74% for the year). Despite out-of-stock issues, Gallo Winery’s High Noon Hard Seltzer’s Labor Day weekend sales increased 36% over the same time last year. Although distributors told Goldman Sachs they were “generally disappointed,” they remain positive about the brand’s outlook (+33% for Q3 and +47% for the year).

A-B’s Bon & Viv’s Labor Day weekend sales increased just 3% over last year and distributors are cautiously optimistic about its outlook (+4% for Q3 and +5% for the year).

New entrant Coors Hard Seltzer is selling well according to 42% of distributors, but is suffering from out-of-stock problems.

“While the brand appears to be getting trial, it’s less clear at this point as to whether it’s getting repeat purchases, which will be critical for it to succeed,” Goldman Sachs wrote.

A plurality of distributors, 46%, said it’s too soon to tell how Coors Hard Seltzer is performing. Meanwhile, 12% said the brand is not performing well.

The majority of distributors (68%) are concerned about difficult comps for hard seltzer. Some drew comparisons between the hard seltzer segment and the state of craft beer in 2014, “when retail chains were willing to take on every single launch in order to avoid missing out on the next major craft brand,” Goldman Sachs wrote.