Heineken USA (HUSA) will halt shipments of all draft products to five states for the next year, a company spokesperson told Brewbound.
Those states include Vermont, Wyoming, Montana, North Dakota and South Dakota. The Lagunitas brand, which Heineken wholly acquired in May 2017, is excluded from the draft cuts.
“We have recently made a supply chain decision to streamline our on-premise product offerings for a small subset of partners across a few markets,” the spokesperson said. “For the next 12 months we will no longer offer draft product for these partners in these markets. Core brands in packaged formats at these locations will not be impacted.”
Both Beer Marketer’s Insights and Beer Business Daily reported last week that the company planned to cut non-core SKUs due to supply chain issues, but those SKUs and affected markets were not yet known. HUSA confirmed to Brewbound that those cuts are limited to the elimination of draft products in the aforementioned states.
The move comes as HUSA rolls out Heineken Silver, its big innovation bet for 2023. The company is supporting the new low-calorie, low-carb beer, which is available on draft in certain global markets, with a $100 million marketing investment, executives told Brewbound last fall. However, Heineken Silver is not currently available on draft in the U.S., a spokesperson said.
In Vermont, Baker Distributing sells the HUSA portfolio statewide, which includes the Heineken, Dos Equis, Tecate and Amstel brand families. According to Baker’s product locator, nearly 270 on-premise accounts carry HUSA products, including 79 bars/taverns, 17 hotels, 47 recreation/entertainment centers and 125 restaurants. It is not clear which of those accounts sell HUSA products on draft.
HUSA’s distribution networks in the other affected states is more complicated, with nine wholesale partners in Montana, six in North Dakota, five in Wyoming, and four in South Dakota, according to the National Beer Wholesalers Association’s (NBWA) 2022 membership directory.
Last year, out-of-stock issues and trouble securing ocean freight plagued HUSA, CEO Maggie Timoney said. Those continued “worldwide supply chain challenges” “have created inventory issues throughout the U.S. and ultimately impacted our ability to fulfill product orders on a regular basis,” leading to the decision to slash draft shipments to the affected markets, according to a memo chief sales officer Jim Sloan sent to distributors, which was obtained by Beer Marketer’s Insights.
Year-to-date (YTD) through March 26, off-premise dollar sales of the HUSA portfolio have declined -2.1% and case sales have declined -8.1%, compared to the same period last year, according to market research firm Circana (formerly IRI). Those declines mark an improvement over HUSA’s 52-week performance, in which dollar sales declined -8.1% and case sales declined -12.8%.
The company is the sixth largest beer category vendor in Circana-tracked multi-outlet grocery and convenience stores, which largely exclude draft offerings, behind Anheuser-Busch InBev, Molson Coors, Constellation Brands, Mark Anthony Brands and Boston Beer. HUSA products account for 3.35% of beer category off-premise dollar sales YTD through March 26, according to Circana.
Editor’s note: This story was updated at 6:20 p.m. ET on April 10 to note that Heineken Silver is not currently available on draft in the U.S.