Last Call: Rhinegeist to Houston; Judge Rejects Stone’s Permanent Injunction Request in Keystone Light Case; OR DTC Policy Challenged

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Rhinegeist to Begin Houston Distribution in Mid-August

Cincinnati’s Rhinegeist Brewery will begin “a two-stage expansion” into Houston, Texas, starting in mid-August via Silver Eagle Distributors. The Ohio craft brewery will begin sending its hard craft beverage line, RGBevs, to stores in the city, including its 12 oz. can lineup of Bubbles (Apple, Peach and Cranberry Splash), Lemmy Nade hard lemonade, Wowie Colada (Pineapple and Passionfruit Colada), and Geist Tea hard tea.

In October, Rhinegeist will follow its initial Houston launch with a draft rollout of its craft beers, including Truth IPA, Cheetah lager, Glow fruited sour ale and Geist Tea.

Rhinegeiest’s products are now available in 10 states.

Last year, Rhinegeist was the country’s 28th largest craft brewery by volume, according to the Brewers Association (BA). Its output increased +6%, to 103,561 barrels of beer. The BA does not include beyond beer offerings in its production volume records, so Rhinegeist’s RGBevs products, hard lemonade, hard tea and cider are not included and its total volume is higher than 103,561 barrels.

Judge Rejects Stone’s Request for Permanent Injunction Against Molson Coors

A federal judge rejected Stone Brewing’s request for a permanent injunction blocking Molson Coors from selling through its offending Keystone Light packaging and preventing the brewer from using the packaging in the future.

In the August 4 order denying Stone’s motion, Judge Roger T. Benitez wrote that “balancing of the factors weighs in favor of” Molson Coors. The judge added that Molson Coors is in the process of “an extensive rebranding and packaging refresh that will remove the infringing products from the marketplace within the next month.” He added that the jury’s $56 million verdict in favor of Stone also “provides adequate compensation at law for past harm suffered.”

“The court is skeptical of Stone’s argument (made at the argument on this motion) that denying injunctive relief would result in constant and continuing litigation,” Benitez wrote. “Stone’s argument is premised on the prospect that [Molson Coors] may decide to change back its packaging to that of an infringing nature. There is not so much as a scintilla of evidence that [Molson Coors] will re-infringe the Stone mark in the future.”

Also of note, Benitez wrote that there was a lack of evidence that Stone was “irreparably harmed” and “expert testimony for Stone by Dr. Palmatier was based on seriously flawed survey methodology, including the way the Keystone Light can was presented to survey subjects.”

“There is little evidence of actual confusion and little evidence that Keystone gained sales on Stone’s goodwill,” Benitez wrote. “To the extent that Stone’s ‘linkages’ survey shows a loss in reputation and need for corrective advertising, the jury’s damages award already covers these damages. Stone’s argument that its brand was irreparably harmed is also belied by Stone’s 9% year-to-year sales increase reports in May 2022. Finally, the Stone brand was not so tarnished, if at all, as to cancel its recent purchase by a major international brewing company.”

Washington Breweries Challenge Oregon DTC Policy

Three Washington craft breweries have filed a lawsuit against the state of Oregon to challenge its policy banning direct-to-consumer beer sales from brewers outside the state.

Burlington-based Garden Path Fermentation, Vancouver-based Fortside Brewing and Seattle-based Mirage Beer and consumer Joseph Odden of Parkdale, Oregon, allege that Oregon’s ban on shipments from out-of-state breweries violates the Commerce Clause of the U.S. Constitution.

“The plaintiffs seek an injunction barring the defendants from enforcing theses laws, rules, and practices and requiring them to allow: (a) out-of-state beer producers to sell, ship, and deliver beer to Oregon consumers upon the same terms as in-state beer producers; and (b) out-of-state beer producers to self-distribute beer to Oregon full on-premises, limited on-premises, and off-premises sales licenses and other OLCC-licensed retail establishments,” the lawsuit said.

The defendants include Gov. Kate Brown, attorney general Ellen Roseunblum and Oregon Liquor and Cannabis Commission chairman Paul Rosenbaum. The lawsuit was filed in U.S. District Court in the District of Oregon’s Portland Division.

Oregon permits shipments from breweries in states that will allow Oregon breweries to ship to consumers, according to Sovos ShipCompliant. Washington is one of 38 states that does not allow interstate shipments of beer.

“Oregon does allow for direct shipping to consumers only in those few states where reciprocity is allowed, and Washington is not one of them,” the lawsuit said. “Brewery plaintiffs anticipate that defendants would enforce current Oregon laws, rules, and practices to prevent any attempts to directly ship their products to Oregon consumers.”

Imports -1.9% in June 2022; +4.5% Through First 6 Months

Imported beer volumes declined -1.9% in June 2022, compared to June 2021, the Beer Institute (BI) shared, citing U.S. Department of Commerce and Census Bureau data.

Danelle Kosmal, BI VP of research, wrote that June’s negative numbers were driven by an -85% decline in imports from Belgium, due to Anheuser-Busch InBev’s shift in production of Stella Artois to the U.S. Removing Belgium from the imported beer numbers, imports would have been flat in June, she added.

Other contributors to June’s declines included imports from Poland (-84.6%) and Canada (-20.9%), with Poland’s declines due to the “the halt in production of Arizona seltzer in Warsaw by Heineken USA.”

Kosmal offered additional context into why June’s import numbers were in the red, noting that imports’ June struggles were up against difficult 2021 comps, when total imports grew +33.8% compared to June 2020, and +14% compared to June 2019.

“June 2021 was a rockstar month for imports, so current trends aren’t bad considering the benchmark from 2021,” she wrote.

Mexican imports slowed growth, which began in May 2022, continued in June (+1.9%, +52,200 barrels) compared to June 2021.

Nevertheless, imports year-to-date have continued to outpace the growth of the total beer category, growing +4.5% through the first half of 2022 compared to the first half of 2021, Kosmal wrote.

Earnings Call Notes: Heineken, Tilray, Diageo

Several global alcohol companies shared financial results over the last couple of weeks. Here are few highlights from the Heineken, Tilray and Diageo calls

Heineken reported +37% revenue growth in its first half 2022 earnings on Monday. The company’s beer volume increased +7.6%, with premium beer volume growing +10.2%. Brand Heineken volume increased +13.8%.

In the U.S., Heineken USA’s net revenue declined slightly “as lower volume impacted by supply chain disruptions and the softer market were mostly offset by pricing.” Those supply chain issues, namely ocean freight, “disproportionately affected” the Heineken brand but “are expected to stabilize in the fourth quarter.”

The Dutch brewer noted that Heineken 0.0 led a non-alcoholic beer portfolio that “grew at high single digits.” Heineken 0.0 is now the top selling NA beer in the U.S., Mexico and Brazil, Heineken CEO and chairman Dolph van den Brink shared during a call.

Meanwhile, Mexican import label Dos Equis increased volume in the low teens, benefited by the on-premise channel recovery and the performance of Dos Equis Lime and Salt.

As for Lagunitas, Heineken said the California craft beer brand grew volume by “a low-single-digit” as “growth in Europe was partially offset by a decline in the USA.” The company added that non-alcoholic line extensions IPNA and Hoppy Refresher “grew volume in the high-teens.” Follow this link to read more about Lagunitas’ brand refresh.

Global cannabis firm Tilray Brands posted +22% revenue growth, to $628.4 million, during its 2022 fiscal year, which wrapped up May 31. The company credited net revenue growth of nearly +18% increase in cannabis ($237.5 million), a +150% increase in beverage-alcohol ($71.5 million) and a +928.8% increase in wellness ($59.6 million).

Tilray’s beverage-alcohol sales — which include craft beer brands SweetWater, Green Flash and Alpine, as well as spirits company Breckenridge Distillery — accounted for 11% of Tilray’s total revenue in FY2022. In Q4, Tilray’s bev-alc business revenue increased +15%, to $22.727 million.

CEO Irwin Simon said Tilray’s path forward for SweetWater, which is now sold in 42 states, includes “a new spirit-based ready-to-drink beverages, continued westward penetration in the U.S., while expanding our presence in Canada and other international markets, improving production utilization and evaluating strategic acquisition.”

Asked about SweetWater sales underperforming the craft segment in scans, Simon said the West Coast expansion of SweetWater has “taken a little longer than we expected,” but he is confident due to the company’s partnership with Reyes.

Diageo CEO Ivan Menezes told analysts last week that he “could not be happier with the health of the Guinness brand,” which he described as “the strongest I’ve seen in my 25 years at Diageo.”

In reporting its FY 2022 results, the company reported that Diageo Beer Company net sales increased +2%, due to increased Guinness sales driven by on-premise channel recovery and the growth of ready-to-drink offerings, which was only partially offset by declines in FMBs, for its fiscal year, which ended June 30.

Overall, beer accounted for 16% of Diageo’s net sales, and increased 25%.The growth was driven by Guinness (+32%), primarily in Europe. Net sales of Smirnoff FMBs declined in North America, due to declines in the company’s Smirnoff hard seltzer portfolio.

Ready-to-drink offerings accounted for 4% of Diageo’s net sales, and increased 18%, with growth in Europe, North America, Latin America, Africa, and the Caribbean. The company credited the growth to Smirnoff Ice and double-digit growth of Crown Royal cocktails.

Firestone Walker’s Matt Brynildson Honored With Order of the Hop in Czech Republic; Brewery Debuts Short Film

The Hop Growers Union of the Czech Republic named Firestone Walker brewmaster Matt Brynildson a knight of the Order of the Hop, an honor bestowed upon global beer industry luminaries.

This week, the Paso Robles, California-headquartered craft brewery debuted a short film about the hop harvest that led to the production of its new offerings, Hypnosis IPA.