CBA-CON: Leaky Bucket, or Renaissance? Either Way, Craft Can Be 1/3 of Beer
October 2, 2014
CBA wrapped another high production value meeting with smartly dressed execs and even surprise firework streamers at the end (your editor about fell out of the chair).
The theme this time: “Right now.” Right now, CEO Andy Thomas said, we’re in an unprecedented age of change, confusion and consolidation. Amid that, “the company that wins tomorrow will have a portfolio. Today’s marketplace is not the time for one size fits all,” he said. You gotta “make sure you have the right tool for the right job.” And “real brands,” with the heritage of Redhook, Widmer, and Kona, not the creation of a marketing director somewhere. There’s also, of course, the advantage of seamless distribution through the A-B network of wholesalers. (“We’re the only beer company in the U.S. that pays for allied access to the A-B distributor system,” said Andy. “We pay 25 cents a case to St. Louis … That’s how much we believe in you.”) And of course, CBA is one of only a couple of plays that allows investors to get into craft.
LEAKY BUCKET OR RENAISSANCE? Then Heineken alum CMO Ken Kunze took the stage for the first time at CBA Con [they'll be at Samcom this year, too]. He took on Jim Koch’s leaky bucket analogy. The leaky bucket theory “implies there’s something wrong with the market that needs to be fixed,” said Ken. “I actually prefer the notion of a Renaissance: a period of intense innovation and creativity. If you’re a plumber and need to fix the leaky bucket, you essentially need to reverse those [craft-feeding] consumer trends … you can sometimes slow it down but once the consumer’s moved it’s really hard to reverse that trend. I’d rather give consumers what they want and be part of the Renaissance.”
He thinks craft can get to at least 1/3 of the category in 25 years, to be bigger than import and bigger than domestic premium. It wouldn’t be the first seismic shift in beer: He pointed out that Miller made it ok for men to drink light beer a few decades ago.
LOCAL “IS NOW A BRAND,” he said. (Ed. note: We’ve been following that trend for years, but it’s at compounded highs. One big retailer that had told us years ago that local was a big focus back then recently shared that they’ve doubled the space for their state’s craft brands in the past 18 months.) But “how far can local travel, both from a capability standpoint and a relevance standpoint?” asked Ken.
About 99% of players are less than 10,000 barrels; a lot of them are a lot smaller, he continued. Their ability to scale is “very difficult: footprints are often smaller than your wholesaler footprint.” He doesn’t think they’ll go away – they have their role – but they can’t quite travel. The point: “If you’re going to spend incremental dollars,” especially to bet on craft’s longer-term share, “do it with the CBA portfolio,” he implored.
BRAND HIGHLIGHTS: KCCO MAKING BIG TEXAS PLAY. Recall that “social brewery” Resignation and its KCCO brands comprise CBA’s collaboration with The Chive. They’re establishing the premier beer market of Texas as Resignation Brewery’s home market, also The Chive headquarters. The brand is already resonating – it’s the number one brand for CBA in both Dallas and Houston.
They’ll launch a new brand, KCCO Gold Lager, which will hit in 6-packs nationally come February. It will replace KCCO Black (and carry the same UPC). They poured the beer at the last few “Chive fests,” where it outsold KCCO Black 5 to 1 and Bud Light by 30%. They’re teasing with some draft in November and December. Next up is KCCO White Wheat, in Texas-only to start.
WIDMER: HEADY FOR HEFE. Widmer Hefeweizen has been challenging for CBA in recent years, but Widmer Brothers Brewing founders Kurt and Rob Widmer’s 100 Days of Hefe event-based campaign is driving its growth in home markets. It’s the number one American-style wheat beer in the US, and the number one craft beer in their home market. Moreover, Hefe is number three in the wheat beer category, behind Blue Moon and Shock Top. Hefe Shandy, a new seasonal, will also provide more halo effect.
Rob and Kurt Widmer took the stage toward the end of the Widmer brand presentation to address the audience. “This is the year that Widmer Hefe is gonna come roaring back, so get ready,” said Rob. Later, general manager for the East, Peter Schauf, said the wheat category is “starting to flatten – including Blue Moon. The story is losing its footing. We think Widmer Hef is relevant again … . The story is rich, relevant; consumer wants to hear it.”
New IPA Upheaval is the second big Widmer brand push: It’s the fifth fastest-growing IPA in the US.
OMISSION: NUMBER ONE GLUTEN FREE BEER. A third of consumers are trying to avoid gluten, and Omission has a leadership position here: It’s now number one in the gluten free beer category, at 44% dollar share. The brand should get to about half a million cases in 2014, with the potential to grow 60%. But it’s at a 25% distribution gap to Redbridge, so the plan for next year is to push distribution and awareness.
CBA-CON PART II: RETAIL OBJECTIVES, “ASTOUNDING” AD CAMPAIGNS AND LESS-SKUS STRATEGIES
Chain focus has been a huge focus of craft brewers this year, from the largest such suppliers to some in the sub-regional range. Epic Brewing, who did 11,000 barrels last year, chooses distribs partly based on their national accounts savvy. And Sierra Nevada continues to hone national accounts, having tripled the size of that sales force over the last three years and added increasing specialization for their largest retail customers. Chains are their primary growth driver.
So it’s no surprise that CBA also stressed the importance of key accounts and retail strategy at Wednesday’s CBA-CON. It’s a continuing focus for the company. After all, as CEO Andy Thomas pointed out, “It wasn’t a large brewer who received the Buffalo Wild Wings Beverage Vendor of Excellence award. It was us.”
Their 2015 retail activation plan includes closing 1,500 points of distribution at three major grocers, to realize $3 million in revenue. In c-stores, they’ll activate cans and target 40% category weighted distribution — at about New Belgium levels — to realize another $3 million. On-premise, they’ll drive draft points of distribution with five major brands across their portfolio: Kona’s Longboard and Big Wave, Widmer Brothers Hefeweizen and Upheaval, and Redhook’s Long Hammer. Finally, expect to see Omission a lot more, as they’ll execute on their casual dining chain mandates, leverage UrbanSpoon.com, and push the brand to 60% CWD in grocery.
KONA CAMPAIGN’S “ASTOUNDING” IMPACT. We saved more brand trends for today: Most big Kona brands are still growing. Notably, Big Wave, launched in 2013, avoided the second-year slump, up 50% vs. YA. (It ran out about 15 minutes into CBA’s reception, in fact.)
But the biggest news for the Kona family is the “astounding impact” of its “Hello Mainland” TV ad campaign. Recent post-test IRI scores showed a 37% lift in sales in measurable channels from the spots.
“IRI has been doing test for 12 years: we have the third highest lift score out of anything they’ve ever tested … which puts us in the 99th percentile in terms of lift based on an ad campaign,” said brand manager Aaron Marion. More importantly, that’s “four times larger than any other beer that’s even beer tested.”
REDHOOK STILL GROWING WITH LESS SKUS. Recall that Redhook promised to cut its portfolio by 38% at last year’s CBA-CON, and went from 51 skus to 30 skus in 2014. That’s “200,000 cases worth of volume that we walked away from in order to focus on Long Hammer and Audible,” per brand manager Karmen Olson. ”That takes a lot of balls, and it worked: Long Hammer is the number four IPA in the U.S. … Audible won Gold at the World Beer Cup last year. And despite SKU reductions, Redhook is still up 6%.”