The National Beer Wholesalers Association’s (NBWA) 83rd Annual Convention kicked off today with a celebration of beer wholesalers’ work during the COVID-19 pandemic, as well as an outline of perceived threats to the three-tier distribution system.
NBWA president and CEO Craig Purser highlighted the association’s work with fellow trade organizations to establish beer wholesalers as essential businesses at the outset of the pandemic and the work to maintain that designation.
“The collaborative effort to get beer deemed essential might have been this industry’s finest hour,” he said.
“There’s no question now that independent beer distribution is essential,” he added.
Purser also outlined several potential challenges that have arisen to the three-tier system during the pandemic. With the acceleration of e-commerce sales due to an increasing number of consumers ordering products to be delivered to their doorsteps, Purser said “a significant focus” of the NBWA will be “keeping distributors in the driver’s seat when it comes to e-commerce.”
“Maintaining a regulatory framework as home delivery evolves will be a priority,” he said. “Retailers and delivery service providers must comply with state laws that work to level the playing field and protect the public. Maintaining the chain of custody between licensed businesses for age-restricted products and accountability remains critical to this process. And ensuring that independent distributors continue to supply these retailers is vitally important.”
Additionally, Purser said he expects regulatory and legal challenges “to be significant” on the heels of last year’s U.S. Supreme Court decision striking down a two-year residency requirement for obtaining a retail liquor license in Tennessee that had prevented out of state retailers from setting up shop in the state.
“Last year we saw a couple of appeals court decisions that followed the Tennessee retailers Supreme Court opinion,” he said. “These decisions were positive, as they limited the application of the Tennessee decision. Today, we wait as the world’s largest brick and mortar retailer has petitioned the Supreme Court to take up one of those cases. And numerous other cases are in stages of consideration as plaintiffs continue to attack through litigation, what they could not change through the legislation
“NBWA will remain vigilant on this front as any loss of legal structure threatens to devalue your business,” he added.
With the logos of Coca-Cola, Topo Chico and Monster Beverage appearing on a screen behind him, Purser said “laws and regulations have never been more important” as new players enter the beverage alcohol market.
Purser also warned wholesalers that “suppliers and retailers will continue to take advantage where they can,” addressing so-called “shadow terminations” in which beer companies terminate their wholesalers without cause.
“Some suppliers did not let a global pandemic get in the way of their interest in terminating their relationships with long-standing, brand building distributors,” Purser said as headlines about New Belgium, Constellation Brands and Diageo terminating their wholesaler contracts flashed on the screen behind him. “These threatened terminations serve as a reminder as to why there are state laws that allow distributors to take risk and invest in new brands. These so-called shadow terminations remind us of what we’ve said about trust. It takes years to build, seconds to break, and a lifetime to gain back.”
Purser also attempted to debunk false narratives in the media that overall beer sales are up and consumption is on the rise. He took on government agencies’ proposals aimed at changing moderate consumption for men from two drinks a day to one. He said NBWA will “continue to be vigilant in defending beer and moderate consumption.”
Finally, Purser urged NBWA members to remain active in their state and federal associations in order to protect their businesses.
US Beer Shipments Decline 2% Through August
Eight month into 2020, beer shipments have declined 2%, NBWA chief economist Lester Jones and Beer Marketer’s Insights publisher Benj Steinman reported during an overview of the industry.
Steinman added that beer industry shipments in the U.S. have declined around 4% since 2008, with ebbs and flow.
Jones stressed that the off-premise gains haven’t been enough to offset the on-premise losses due to the shut downs and reduced capacities. He ticked off a litany of headwinds in 2020, including the shutdown, spoiled and out-of-code beer, brewery closures in Mexico, shortages of cans and bottles, and out of stocks.
Jones and Steinman hit on several highs and lows from the year so far. Sharing FinTech OneSource data, Jones showed the highs during the COVID-19 stock up periods followed by a “Labor Day flop.”
“The idea that we just didn’t have that strong Labor Day was a bit of a disappointment,” Jones said, wondering if consumers stayed home or out-of-stocks led to lost sales, or a combination of the two and other factors.
Jones also showed the shift in package mix during the pandemic to canned beer, as well as the slow return of the on-premise. In the first 11 weeks of the year, cans accounted for 60% of the mix, followed by bottles (32%) and draft (8%). That changed between weeks 12 to 20, at the outset of the pandemic, with cans increasing share to 67%, bottles growing to 33% and draft zeroing out. In weeks 21 through 38, cans are still up from the beginning of the year, at 65%, while bottles settled back in at 32% and draft is up to just 3%.
“It’s a long way to go to get back to 8%, and even 10%, as the on-premise reopens in the fourth quarter of the year,” Jones said.
Steinman also gave a look at how much market share Anheuser-Busch and Molson Coors have lost over the last 11 years, with A-B losing about 9% share and Molson losing 6.8% share. Combined, the two largest U.S. beer manufacturers have fallen from 78% share of the U.S. beer market to 62.4%. Those losses total more than 43 million barrels. Still, both companies’ are making billions of dollars in profits, Steinman said.
Capturing that share in recent years has been craft beer, which has grown more than 8% share, and Constellation, which has increased more than 5% share.
Hard seltzers were a 3% share of volume in 2019 and are nearing 8% share in 2020. Steinman also cited an estimate from Mark Anthony Brands that hard seltzers will exceed 150 million cases in 2020.
The growth of craft, imports and hard seltzer points to a shift in consumer purchasing to “above premium” brands, which now account for 56.9% of the beer category’s dollar share year-to-date through September 12, according to Nielsen all outlet data.
Hard seltzers are up more than 200% and accounted for 10% share of dollars earlier this summer, but have slipped to 9.8% share over the last few weeks as brands face out of stocks.
Those out-of-stock issues have proven costly. Mark Anthony Brands estimates that it missed 1.5 million barrels in sales this summer, Steinman said.
Beer Growth Initiative to Go Nationwide in Q4
The NBWA also provided an update on the Beer Growth Initiative, the alliance among the NBWA, the Brewers Association and the Beer Institute to promote beer through an agnostic, pro-beer campaign.
Last year, the effort kicked off with the #BeersToThat digital activation in Austin, Texas. In the fourth quarter of this year, the program will go nationwide. It will be a digital campaign that targets “a more female-skewed, occasional beer drinker between the ages of 21 and 29.”
Why is this so important? NBWA senior VP and CFO Kimberly McKinnish said “beer’s share of the alcohol beverage market is at an all-time low and continuing to decline.”
“That decline has accelerated during COVID-19, even while case sales have increased,” she said. “Despite the strong trends in off-premise, the beer industry has not hit the projected threshold to offset losses in the on-premise.”
Additionally, the NBWA is launching Beer First Movement, which Purser described as “a sales execution campaign solely funded by NBWA to focus on the positive attributes of the category and fact-based selling.”
Editor’s Note: In a video message Monday, Florida Gov. Ron DeSantis mistakenly said the NBWA’s Annual Convention would return to Orlando in 2021. He misspoke; the 2021 Annual Convention will take place in Las Vegas.