Brew Talks Virtual: Seltzers, Spirits & More: The Blurred Lines of the Beer Category

Speaker 1 [00:19] Thanks for sticking around for the second half of Brew Talks presented by Dogfish Head. A thank you to our other sponsors, the Reyes Beer Division, Orchestra Software, and John I. Haas. So let's get into it. Let's dissect the so-called 4th category of offerings, as Boston Beer founder Jim Cook likes to say, that's hard seltzers, ready to drink canned cocktails, hard tea, hard kombucha, hard coffee, pretty much all the hard stuff. So, the world of Beyond Beer. Here to discuss all of those products today are Dave Berwick, the CEO of Boston Beer Company, which makes the truly hard seltzer and twisted tea brands, as well as Samuel Adams, Dogfish Head, and Angry Orchard. Dave, how are you doing?

Speaker 2 [01:08] I'm doing great. Uh, thanks for having me, Justin.

Speaker 1 [01:10] It's great to have you here today. We're also excited to have Katie Beale Brown, the founder of ranch water maker Lone River Lone River Beverage Company, which was acquired by Diageo Beer Company in March. Katie, we're excited to have you back here.

Speaker 3 [01:28] Thanks for having me back, guys.

Speaker 1 [01:31] And finally, we have Ed McBrian, the chief operating officer of Manhattan Beer Distributors, whose portfolio of brands includes Boston Beers offerings, as well as Diageo and other major players such as White Claw, and those from Molson Coors, Constellation Brands, and other top craft producers. Thanks for being here, Ed.

Speaker 4 [01:51] Yeah, Justin, thanks for having me.

Speaker 1 [01:54] So, if it wasn't for Hard Seltzer, we might not be having this conversation today. So, let's start there. Year to date, the Hard Seltzer segment has generated more than $1.9 billion in off-premise sales, according to Nielsen IQ. Over the last 52 week period, it's up to $4.5 billion. And Dave, I don't have to tell you that Truly is the number two brand now. However, hard seltzer growth rates have decelerated to the point some analysts are questioning whether the segment will be able to double this year. Is that off the table for this year, Dave?

Speaker 2 [02:29] Well, I think, um, you know, based, based on our most recent, in our most recent earnings call, we talked, our range is 60 to 90. People have all sorts of different ranges. Um, doubling would mean 100. I think, I think doubling might be tough. It has done that for the last, since it started. Actually, it's triple digits, but um this year, it's up about 50% or so in IRI year to date. The last few weeks have been a little, have been a little bit soft as, as you referenced, Justin. So. But it's, it's unclear really if it's a blip or what's going on. I mean, with the, you know, with everybody getting, getting vaccinated, getting out and, and, and living a sort of different pattern of life right now, it's kind of hard to tell. But we think we're still sticking to the 60 to 90 range, you know, it could be lower, it could be higher. Either way, it's a really good range to be in. And I think time will tell. Really a lot of new products out there now, and the summer's not here yet, so I think we'll know, we'll definitely know by Labor Day where it's going to end up, but we, we're still feeling like it's that 60 to 90 range is doable.

Speaker 1 [03:31] And let, let's look a little bit further out into the future because uh there's a lot of news coming out of the beverage forum and guesses or estimates and projections of how big the hard seltzer segment could be. Uh, your main competitor, Anthony von Mandel of White Claw, has said, 25 to 30% of the category by 2025. I think Jim's a little more conservative in the 20% range. Where do you think it's gonna be, Dave? Is that where you're, you're going?

Speaker 2 [04:01] So you have to ask me if I can side with either Anthony or Jim. I gotta think about that for a second. Um, I think, I mean, here's the thing, nobody knows. I think, you know, I, I understand Anthony's got a point of view and, you know, it's, it's a pretty, uh, bullish one. It might be right. Jim might be on the, uh, so maybe you say somewhere in between. How's that? Between 20 and 25% of total beer. But, but I think honestly, like we're focused on what's going to happen in the next, you know, 3 months, 12 months, 18 months versus the next 5 years. Um, and there's a lot of growth ahead. And, and right now it's, it's an interesting time because the question is, who's going to end up with, with all, with, with more share when, when it's over? What's the category gonna look like? But it could be either one. And by the way, both, whether it's 2025. That's pretty high. It's pretty extraordinary given this thing just started back in like the middle, you know, like actually 95, 90, I'm sorry, 05 06. So it's, you know, this is like year six or seven. It's pretty amazing, amazing run right now.

Speaker 5 [04:56] So, Katie, you launched Ranch Water right around this time last year. So at last check, the brand now has a 0.3% share of the segment nationally, which is huge, and a 3.8% share in Texas. So, ad week is called Ranch Water the drink of the Summer, which you'll be taking to more consumers outside of Texas, expanding to uh 21 new states in the next few months. How do you make a drink with such local provenance resonate with mainstream consumers in far-flung destinations?

Speaker 3 [05:23] Yeah, I mean, I think it's been amazing, and I'm very humbled to be here today, uh, to think about what we've done in the past year with, with such a limited distribution footprint, um, and the kind of traction that we've gotten in that distribution footprint. For the most part of our past year in business, we've only been sold in 2 states in Texas and Tennessee, and only recently started to broaden that scope in partnership with Diageo. And I think for me, as I, I look at, you know, reaching new consumers well beyond our home state, I think it's really about getting beyond the product attributes and looking at connecting with consumers on a brand level. And I think that's something that over time will also breed loyalty and will be really important as we start to carve out our place in the category.

Speaker 5 [06:06] Mhm. Kind of sense. Ed, you have the pulse of what retailers want. So what are you hearing from them, and how are they feeling about the current pace of innovation?

Speaker 4 [06:14] Well, Jessica, first, thanks for having me. Justin, also, um, generous of you to have me on board. So when, thanks for being here. When, uh, when it comes to, to innovation, you know, retailers are a lot like distributors, and I don't know that, that any of this is a revelation, right? So they want high velocity brands with good margin. Um, they want items that are on trend with consumers, right, tapping into the vibe. Um, they want really solid marketing that drives trial, that drives repeat. Um, I would tell you in many ways, I think the bar at retail is higher than the bar with distributors. Distributors are certainly, um, getting better at managing their portfolio, but if you think about being a retailer, right, they've got a very limited amount of shelf space, so the bar is really high at retail. And I'd also say with the amount of innovation that's been coming, that um You have to get it right and you have to get it right fast because you don't often get more than one season, right, with the consumer, right? If you go out and you don't break through in a meaningful way, get some repeat, you know, it's, it's tough to win that argument with retailers why they should keep you on the shelf.

Speaker 5 [07:26] So how are you, how are they strategizing shelf and floor space right now?

Speaker 4 [07:31] Yeah, well, I, I think, um, we were talking about seltzers. I think seltzers are, are certainly winning the floor game, right, as we head into the summer. Um, there's a lot of pent-up demand, and so, um, they're taking that space. We're also getting a lot of space in the coal box, whether that's in the coal box itself or dedicated coolers at end aisles. You see a lot of that. And in terms of um the winners and losers, we're not a very big economy brand market, so there's not much to take there. I think, um, you know, I think the folks who are most at risk, I think the long tailor Kraft, um, is, is a little at risk, right? If you think about it, it's 68, 10% of the category, it's 20, 25% of the shelf in a lot of places. Um. Those guys have been hit hard by the pandemic, right? They lost a lot of on-premise business. So, unfortunately, it's a 12 punch for the, the long tailor craft. Um, but I think they're a bit at risk, and then, You know, if you, if you simply look at product attributes, so if you are a light, refreshing, crisp, better for you product, beer product, right, and you know what that looks like, you're competing with seltzers or seltzers are competing with you. So, um, if there are You know, 50 American Light lager skews on a shelf, right? There might be 45 at the end of the season, right? Because that space has got to come from somewhere, right? And seltzers, I think, compete for often with that same consumer and for many of those same occasions. So, um, retailers are still very, very, um, eager to support American Light Lagers. It's a giant segment of the business, really important, but it plays in a lot of the same space that seltzer's do, right? That's the hard reality of it.

Speaker 5 [09:19] Mhm. You basically answered what would have been my next question, but other than long tail craft and then premium lights, is anybody else losing space to seltzers? Any other segments?

Speaker 4 [09:29] You know, in our, in our market, not in a material way. I would think if, if you're in a market where you've got a really big economy brand business, right, um, those brands, especially the tail brands of economy, could be at risk.

Speaker 1 [09:43] We don't usually play a lot of word association, but I want to do a little bit of that right now on three terms that we hear a lot of lately, RTD, innovation, and better for you. So, Dave, what do those three words or terms or phrases mean to you at this point?

Speaker 2 [10:04] And the future. How's that for word? Is that do you want more than a two-word answer? I'd give you that too. I think.

Speaker 1 [10:10] I mean, that's a pretty good two-word answer, but uh if you want to elaborate, I'm here for it.

Speaker 2 [10:15] Association. No, so I think, yeah, I think that's right. Look, I think. The consumer decides everything, right? I think it starts there. I think consumers are, if they start you with hard seltzer certainly over the 2015, 2016, not 2005 and 2006. I don't even know what year it is, quite honestly, so I'm confused. But, but, um, you know, consumers are driving and we talked about the, you know, it's health and wellness, absolutely part of it. People want flavor variety. They want, you know, they want different types of form, formats like, like cocktails and cans, etc. You know, they, they like, they like convenience, premiumization. All of that is playing into RTD, the world of RTD, and I think about the world of RTD is anything from hard seltzer on one end to traditional FMBs on the other, and all the other stuff going in from ranch water to, you know, cocktails and cans to malt-based, uh, you know, full cocktails and cans, etc. etc. etc. So I think that's the consumer is kind of, they're looking for that type of experience, and I think the kind of the obviously the the companies that can successfully innovate. In that space, and I would argue build, build brands because I think one of the, one of the challenges, it's in a way it's kind of easy to create a product and and a package design to again get, well, not that easy, but get you get on the shelf. It's nothing to actually build a brand that matters. And I think that's what Katie was talking about before. It's like the brand building piece. I think a lot of people kind of stop before you get to the brand building part, and they assume that the job is over when they get into the marketplace, and that's not the case. So I think it's going to be, I think. Um, you know, brands that matter are gonna be critical in this new world of RTD innovation, health and wellness. And I think understanding what the consumer wants and trying to translate that into a brand, a product first, and then a brand that's relevant to them is the big challenge, and there's gonna be a lot of failures, a lot more failures than there are successes like Ed, Ed and, and his customers are gonna be feeling the brunt of that too, to a certain extent because a lot of things aren't gonna make it. So I think, again, the challenge is As the brewer, as the, as the brand owner, if you will, how do you pick those white spaces there? How do you innovate really smartly to create a brand that really resonates with consumers, and how do you do it without making too many mistakes along the way?

Speaker 1 [12:24] Katie, what are your thoughts on those terms?

Speaker 3 [12:28] Yeah, I mean, it's really interesting just listening to Dave talk, because I think when I look at the RTD category and what a lot of the brands are doing is they're having to um kind of educate consumers and convince them to trade up into that premium proposition. So, while they're spending most of their communication in really building the category, I think Seltzer has started to mature to the point where um you're starting to see more established brands, and, um, you know, brands communicating. As brands versus communicating about the category itself. Um, and so, I think that is an interesting thing that I've just seen from a marketing and brand building perspective. But I think if I just had to say one word, it's really premiumization of, um, kind of the fourth category as a whole, and, you know, how that starts to look on the RTV side, but I, I'm sure it will also happen a little bit on the hard seltzer side as well, as you start to see these more premium brands entering the space.

Speaker 1 [13:27] Ed, uh, from the middle tier perspective, what do you think of those terms at this point?

Speaker 4 [13:32] Refresh my memory. What were those terms again?

Speaker 1 [13:35] RTD innovation, and one that we're gonna hit you back on, uh, better for you.

Speaker 4 [13:41] Yeah, so, um. You know, the one word I think is opportunity, right? It introduces a great deal of complexity, right? So I'd rather, you know, less is more, a lot of times for us, um. Uh, but with that complexity comes opportunity, an opportunity to bring new drinkers right into, um, into our business. It, it gives us an opportunity, um, as beer distributors to start thinking about white space that we've historically not been in, um, and it gives you an opportunity to solve challenges, right? Because with that complexity comes a lot of challenge. So you gotta figure out how to sell it, how to distribute it, how to make money along the way, and how to keep your suppliers really. Pleased with your performance, right? And that's all, you know, those are a lot of plates to spin, so, but I, I think it's opportunity. It's all I got.

Speaker 5 [14:38] Perfect. You're absolutely spot on with the opportunity there for sure. So, and, you know, sometimes this gets brought up in all of our live streams that for many years before Brew Brown, I worked at Boston Beer, and Dave, I remember when, you know, the company launched Truly, one of the first giveaway items was a a branded yoga mat, you know, we were leaning in so heavily to health and wellness, you know, to launch that brand. How much of that health and wellness aspect of, you know, these products still is resonating with consumers? Is that still really super important to the truly story? Yeah,

Speaker 2 [15:08] I mean, it is, but I think, um, you know, it's, it's not the only thing. So health and wellness definitely is important, but also, I mean, drinkability. It is important. It's actually become a batch too. So I think, you know, what kind of people like to be seen drinking it. So the, the brand aspects are starting to be dialed up a little bit more. I think health and wellness is sort of the way in, but that's not the only thing. And, again, back to the yoga mat days, I think that's health and wellness was the probably 80% of it. Now it might be, you know, 20% of it. There are other things like the refreshment aspect, like the brand building aspect and, and, and the badge value aspect. Um, and the fact that, that it's something that's popular and a lot of people like to be seen drinking what other people are drinking. So it's, it's, it's been adopted by, you know, a lot of people, obviously, and I think it's, so it's becoming more nuanced and, and a little more complex as to why people are drinking hard seltzers.

Speaker 5 [16:04] Mhm. Katie, ranch water comes in a little bit under the, like the kind of standard of, of 100 calories. You guys are only 80 calories, I believe. So, how much of the health and wellness angle factors into your story?

Speaker 3 [16:16] Yeah, I mean, I kind of view this as the better for you attributes have just become table stakes for the category, and obviously, we designed Loan River to be very competitive from that perspective, um, with our market leading nutritionals coming in a little bit under the category. But I think, you know, when I look at the category, the real advantage for brands today seems to be more around the differentiation and flavor profile. Um, obviously, you know, Boston beer has led the market with the differentiated lemonade flavor profile. Um, we have leaned into that differentiation with this more agave inspired flavor profile. Um, and on top of that, you know, using higher quality ingredients like natural juice versus just flavorings. So, I think the consumers more and more are looking for, um, complexity of flavors and something that feels, uh, new from that perspective.

Speaker 1 [17:09] Ed, as we see more of the higher ABV hard seltzers come to market, does that aspect of health and wellness still sort of find it, does that sort of get tweaked a little bit with those coming to market?

Speaker 4 [17:25] Uh, yeah, to a degree. So health and wellness obviously very, very much on trend. I would say, so better for you on trend. I'd say bad for you has never been on trend, right? Um, um, but there is a role for indulgence, right? And there is a role for higher flavor, higher ABV products, right? Um, I'm not sure that's the, the biggest volume-driving segment of the business, right? But there's a place for it. Um, you know, what I'd add to the conversation is health and wellness obviously important. I agree it's table stakes today in many ways. But brand stories matter, right? People, people wanna connect with brands. They wanna know the history of the brand, what's behind it, who are the people, you know, why did they make it the way they make it, you know, does it have a, a personality and a soul? Isn't it, is it something that I can be proud of being associated with, right? That's That's what differentiates brands, right? And that's, I think it's what Dave was speaking to, Katie was speaking to. That's hard work, right? How do you differentiate these brands in a way that makes them special, where people want to be seen with them, make them part of their identity. So, to me, the, the whole brand building aspect is something that, you know, you can't lose sight of, right? Because that's the hard work that sustains these liquids over time. Everybody's gonna be able to come out with new liquid profiles, right? Um. But what, what differentiates them in terms of why I wanna be seen with the product? Really important.

Speaker 5 [18:58] Mhm, so important. And um really to, to your point and to Katie's point about all the innovation that Truly has been doing, uh, Dave, I'm gonna recap everything for everybody watching along at home in the case they have forgotten, but in the past about 21 months, Boston Beer has launched Truly Lemonade, recently Truly Iced Tea, right before the spring resets, and then came back with Truly Punch, uh, really recently. So we've also seen the launch of Truly Extra. Um, that's so much innovation, and what frontiers and flavor trends do you think are left? And how do you keep a handle on the innovation fire hose, which is certainly the way that you guys have been doing it lately, um, without overwhelming the network, the wholesalers, and the retailers.

Speaker 2 [19:37] Yeah, I think, um, there's been, and that's just Boston beer, but there's been, there's been a lot of innovation out there for sure, and I think, I don't think this pace of innovation will sustain, quite honestly, because I think every success of innovation becomes more dilutive than what came before. I think what we, what we've tried to do is be very clear about finding an incremental proposition to the original. So we think, uh, so if we look back at, you know, lemonade last year, it was, it was highly incremental to the, to the base business. Um, we're seeing the same thing with tea, um, as well, and there's, you know, there's, there's a lot more that the non-LT business is much bigger than the LT business. And so we think we're bringing new consumers in. So the key is how do you create a position where you can, you can have deliver more incrementality with each successive innovation. So, having said that, we'll keep innovating. I think, um. But also I think getting back to what Katie and Ed were saying. Going forward though, it's not, it can't be just because what's happening in this category, it's starting to look like the Japanese convenience store, like soft drink business, where it's just like, just incredible levels of innovation. Things, they come in, they, they go up, they go up really high and they come straight down and then they're gone. And I think that's just not, that is not sustainable. Um, it's kind of fun to watch it from a distance, but you don't want to be in the middle of it. And so again, I think innovation plays a role, but there's a lot of other pieces like, you know, building brands, you know, building brands that resonate with consumers, creating a distinctiveness with your brand, the products as well, you know, the the base product, the distinctiveness with the flavor profile, but also how the brand is, is positioned against the consumer in the marketplace. So I think it will probably even out. It's going to have to because You know, your wholesaler partners, they can't carry all these SKUs and retailers. I'm saying, I think by, it's not going to be next spring. I think by, and I think Jim actually Jim may have said this at the beverage forum this week. I think actually this fall we're going to see, you know, fall resets are gonna, are gonna be, you know, they're going to address a lot of slow movers in the category. So I think it's going to settle down to more um who could build the best brands will, will, will gain the most share.

Speaker 1 [21:50] Ed, is that your expectation that this fall, that we're gonna see sort of a A culling of the herd.

Speaker 4 [21:58] Oh, sure. I, well, I, yes, so I'd, I'd say a couple of things to that. Um, I'd say, um, distributors have gotten really good at managing their portfolios, right? The pandemic kind of forced a lot of people into that, by the way, right? But I don't know a good distributor out there who, on a quarterly basis. and really on a monthly basis, doesn't look at their entire portfolio and figure out what's paying the rent and what's not, right? Um, retailers will do the same thing, right? Um, as I said, they're less patient today than they used to be because of the pace of innovation. And today's point, um, You know, the value of innovation can trail off over time because you tend to come up with your best idea first, your 2nd best idea next, your 3rd best, right? And at some point, right, you get down to these kind of marginal improvements. For me, when it comes to stuff like seltzer, it's about inviting more people under the tent. More demographic groups, right? And I haven't seen that quite yet, right? I, when I look at my market, right, I sell seltzers, I look at the zip code data, I sell it in suburbia, and I sell a lot of it, and it's spectacular. Um, I haven't figured out yet. Um, how to sell it in markets where there's a lot of people of color, particularly Latinos. So, for me, the next horizon for stuff like seltzer is how do I invite more people of color, specifically Latinos, into that tent. Lightbeer figured it out, right? Right? Um, I'm not sure, at least in my market, we haven't seen that yet here. So that's, to me, that's the big next horizon.

Speaker 1 [23:35] Katie, your innovation playbook might look a little bit different than someone like Truly, I, I don't feel like you can just bring a, a mango or black cherry flavor to market and it have that sort of fit within the ranch water brand. So, how does your playbook different and if we were to connect the dots, is the next logical move for you maybe to bring something that Has a spirit in it, given that you are now partnered up with a spirit's business.

Speaker 3 [24:09] Yeah, I think, you know, for us, I really get excited about innovation at the brand level and building Loan River as a lifestyle brand. So even getting beyond products, um, I know that's not exactly what we're talking about here today, but I think there's a ton of opportunity for us when you just look at the Western lifestyle and how many things it's connected to. Um, At the product level, you know, we were developed as a challenger brand, so I think anything we introduce will always have that kind of mentality and will feel new to market. Um, obviously, you know, just looking at the RTD versus hard seltzer proposition, we actually, along our own journey, we formulated it both ways. We formulated our product as an RTD and a spirits, as a spirits-based RTD and a hard seltzer. However, you know, there were obvious benefits in the route to market with the hard seltzer that led us in that direction into what you see in the market today. Um, and I think just given how much run room there is in expanding our distribution footprint, um, that certainly is the focus for us, um, in the near term. But, you know, that's not to say that we aren't considering, um, you know, a spiritba play down the road, and obviously with credentials of a partner like Diagio, um, especially in the tequila space, I think that there's a lot of flexibility for us to explore that in a really competitive way.

Speaker 5 [25:39] So, Ed, what do you want to see and hear from suppliers when they're bringing in new innovation to the table? Do you want more hard seltzers? Would you rather see different stuff like hard kombucha, hard tea, hard coffee, and a beer maybe? What, what is kind of on your wish list?

Speaker 4 [25:53] Well, so I'm, I'm kind of idea agnostic. I'm not a, I, I sell and deliver beer, right? I am not a marketer, right? Um, I'm, I'm a reformed marketer. Um, I, uh, I really rely on our suppliers to do the consumer homework, um, to figure out where is the white space, right? And come up with a credible idea that's on trend, um, and or one that's meeting some kind of, of unmet, heretofore unmet consumer need, right? Bring me an insight, bring me an idea. Tell me something I didn't know about my consumer or about my market. Um. And then when you do it, bring muscle with it, right? Right? Bring a good marketing plan, have people in the marketplace, um, you know, those kind of things. So I'm, it's, it's not my business to tell suppliers, right, what to bring me, uh, you know, that's their job and they're way better at it than I am, um. So I That's, that's all I got.

Speaker 1 [26:55] So Dave, with so much innovation going on for Boston beer. How do you know when you have a winner? And, and can you get a good gauge with so many new products hitting at the same time?

Speaker 2 [27:10] Yeah, that's a good, that's a good question. Let me answer it this way first. When you have a loser, you know it right away. And actually, and actually like Ed will, Ed will tell you, uh, you know, our, our customers will tell us before even the consumer gets to us, we'll, we'll, we'll know. And fortunately, I, I haven't really had, I haven't had that at Boston Beer. I've had that in prior lives many times. So, the loser part, you know. The winner part takes a while. And I think one of the things that strikes me about kind of this world we live in is that there's a lot of people like to claim victory really early in this business. And, you know, trial is almost, it's really, I mean, it's important to get a trial, right? So, um, of course, and it shows that there's interest in the brand and that, and that there's something there, but that's just the beginning. So, to really know if a brand is going to be successful long term, I think you need probably like 6 months is my guess because you need to look at repeat data. You need to see it over time. You need to see how it, how it, how it weathers all the other launches in the case of Hard Seltzer, all the other launches that are happening simultaneously, and only then do you really know what you got. So I think it it does take a while, um. If you're gonna do it the right way.

Speaker 1 [28:16] Katie, it's still so very early for Lone River, uh, in the life cycle of your brand. I mean, we are just cycling a year for you. So, how, what, what's your barometer for winning brands?

Speaker 3 [28:31] Yeah, I mean, I think there's kind of the intangible aspect. So for me, I have such a direct link to the to our consumer. I mean, I still manage all of our social media pages myself, so, I get to see how they're talking about our brand, you know, having a one on one conversation with them, and even things like, a couple weeks ago, there was a group of guys from New Jersey who packed up um the bed of a pickup truck with a pallet of ranch water from Texas, drove it back up to New Jersey to share it with all their friends there. Um, and so I think things like that to me, have certainly been an indicator, um, of the type of, um, you know, kind of traction we're getting with consumers, but I think to Dave's point, you know, it's also really been about showing Strong velocity that's sustained over time. Um, and I think that sustainable proposition, especially in the past few months, is something, um, that you're certainly starting to see the difference of in a lot of brands, and Um, you know, even the fact that we have maintained and even grown our share in our home market despite some really big blockbuster launches, I think that just shows the strength of a brand and something that can be grown and sustained over time.

Speaker 1 [29:50] Ed, do you feel like there is enough due diligence being done by suppliers and wholesalers as all of these new products are being introduced?

Speaker 4 [29:59] Yeah, um, yeah, two things I'd say yes, right? I, I very much believe that especially the big suppliers do their homework, right? Um, nobody is, nobody's fudging the numbers. No, you know, people might spin it a little bit, but they're, they're investing millions and millions. Millions of dollars to launch these things and they, you know, they're doing it because they believe they can be successful. So, I think people are doing their homework. Um, there is a lot of stuff coming out. I wanna kind of touch on something Jessica said about being agnostic about the idea. The reality is, so we, we've historically been a beer distributor. I wanna be the distributor for all of my major suppliers regardless of whether it's beer or spirits or wine, or NA's, any of those things, right? Why in the world would I want one of my big suppliers to come to this market and have to choose someone else? So, I'm agnostic about the innovation they bring. It's our job to figure out how to make those brands regardless of what segment they fit into. It's our job to make those brands successful.

Speaker 1 [31:08] So, as far as threading the needle between developing drinker loyalty and recruiting as many new drinkers as possible, how do you do that, Dave?

Speaker 2 [31:19] Um, well, I think for me, honestly, I, I worry a lot more about recruiting new drinkers than I do about loyalty because, because that's really, that's where your future growth is gonna be. It's always gonna be new, new consumers who come in because everybody, every brand has a leaky bucket and the, the, the question is how quickly can you fill that, that bucket because people are promiscuous in their purchasing. And I think You know, it might typically, certainly in the, in the world of CPG, it's all about bringing in new consumers. So for us it's about awareness, awareness trial, execution in the marketplace, availability in the marketplace, own visual landscape, getting into people's shopping carts, get into their hands, and it, and really independent of whether they purchased us before or not.

Speaker 5 [32:04] That's really interesting, Dave. So, one thing I keep wondering is how much of the growth of seltzer is driven by, you know, how excited people are for new products and variety versus people finding something they actually like and settling in with it. And I'll give you an example, and I don't expect you to comment on your closest competitor, but White Claw had variety pack 1, and as soon as variety pack 2 came out, sales of variety pack 1 went down. Is that because people really like the flavors and variety pack 2, or people just excited? So, You know, for, you know, something new and different. I'm not sure if there's any preference here really over, you know, mango versus black cherry or whatnot. So how much of your innovation and where you're driving the brand is going to satisfying people's preferences for flavors versus people's just excitement over new things?

Speaker 2 [32:52] Yeah,

Speaker 5 [32:53] that's a lot,

Speaker 2 [32:53] sorry. I think, no, no, I got it. I think, and I think it's a good one, I think. Look, one of the, we talked about one of the drivers in this category in hard seltzer is, is the desire for variety and flavor variety. You know, people definitely, you know, they seek that not just in this, in this, um, segment, but across beverages, across food. And I think what, what, what all the All the brewers, brand owners have been doing over the last, you know, couple of years has been feeding that desire, and I think we've kind of created a monster, quite honestly, because I think people are looking for what's new, what's new and different. I think that, and we've, we've seen it, you know, we've seen it in, um, over the particularly the last couple of months when things really started to get into the marketplace this year. There's so much out there and people are going from one to the next to the next, which is fine. And I think, and then ultimately they'll decide what's, what's their preferred. You know, brand, what's their preferred flavor profile, which, you know, which of, you know, of, uh, which flavor of twisted tea do they like, what, you know, which flavor of Lone River do they like, and they're, they're gonna go by and they're gonna buy it. So I think right now we're just It's a, I've never seen anything like it other than going back to my Pepsi days and like I said, looking at the culture of the convenience store and beverages in Japan, it's just this massive trial frenzy. In the end of the day, it will all settle out. At the end of the day, the best brands and the best products will win. And so it's, and I think everybody in the street, everybody's crazy about it. Like every week people, people dissect. I've never seen it either. Every week people dissect the IRI or the Nielsen data. It's like it's crazy. It's, it's, it's because the world doesn't, doesn't operate that way. It's, it's people have to be patient and see what happens over time. You know, who's, you know, who's building things up to last and who, who isn't, and, and ultimately the consumer will decide and we'll know. And I'll tell you, by the fall, we'll have a good sense of what, of what it looks like. And by the way, I also, last thing I want to say like when I mentioned to Justin, like 6 months so you know if you have a winner. I'm thinking, by the way, of like line extension and new innovation, not building a brand. It's like, well, Katie's doing this, it's gonna take her more than 6 months to know if what she's got. It could take, you know, it takes several years, but you want to see progress along the way. But right now we're just, it's a, it's a feeding frenzy. Of trial and it's kind of in a way it's kind of, it's kind of fun to watch because we're learning a lot about consumers and how they behave and, and we're learning, you know, and we're learning how to make our, our own brands better by by carefully observing what's happening right now.

Speaker 5 [35:14] I know truly really leans heavily into variety packs. I think there's 6 at last count with the new line extensions. How important are single flavor packs anymore? Is that something that's a priority?

Speaker 2 [35:26] Yeah, single serve is really important. I mean, it's, it's where it's, it's, it's a lot of cases how people adopt adopt brands. So I think, you know, we're looking, I use a different, I'll use a different brand, twisted tea. I mean, twisted Tea 24 ounce is the number 3 single serve brand in all of beer after I think Bud Light and Budweiser 25 ounce. So that's what built that brand. And I think most brands you go if you go to other beverage categories, soft drinks, most brands are built single serve in convenience stores. This is a little bit different. This is starting in large format in variety packs of all things, which, by the way, nobody knows how to produce really well, and going to, you're now going to single serve. And there, there are other players I actually like, I'll tell you, I give, give Mark Anthony credit. They got into C stors early and they did a single serve. Uh, had a single serve proposition that worked. I think that that's seats are where where brands are built and certainly single serve is critically important, uh, for, for all these brands.

Speaker 5 [36:20] Katie, how important are Cors for Lone River, and I know you guys have a new variety pack coming out, right?

Speaker 3 [36:27] Yes, uh, we just launched it actually a month ago, and I think just to build on the single flavor, um, thing too, cause I, I do think we have an interesting insight there. We actually launched with a single flavor six pack, which was very, you know, counterintuitive to what was driving the category with the variety pack, but in a way, that's helped us build our brand in that marquee flavor as our original versus, um, you know, Training the consumer to expect a lot of variety of us. So, I think, you know, well, part of that was a business decision, um, and, you know, just as Dave said, it's very difficult to produce a variety pack, and as a startup, manage cash flow against that. Um, but on the flip side of it, it was also very intentional for us in leaning into, um, that single flavor to really start to build the Brand, um, versus depend on variety. And interestingly enough, as we got into our first kind of retail set meetings, we actually had a retailer, um, request not a variety pack, but a single 12 pack, um, which, because they said they had been inundated with new variety packs coming to market, but they felt like there was a, a space for that single 12 pack for the brands that could carry it. Um, so I think that's just kind of an interesting build, um, on that side. And then CStore, yes, um, critically important. Um, I think, you know, for us as we look, you know, we just introduced a single serve product as well, um, and the intention behind that is to drive the CStore channel, uh, more than we have to date. So, that is an aspect of the business that we are looking to build more significantly as we get into our expansion plan.

Speaker 5 [38:13] Ed, where have you, how have you seen this channel growing through the CStore, or this category growing through the C-Store channel in the past few years? How important has that been for new brands in your market?

Speaker 4 [38:24] It's, um, so it's, it's very important. So, um, CStore drugstore in New York, small format stores are really important in this, this place, right? So we're really well developed there. Um, the markets in which the seltzers sell the best are the places where we've got the best, where we've got the most penetration of CS stores. So yeah, winning in C stores with seltz. is, is job one and to the point made, right? It's a, I think our mix is right now probably 70% of our volume is variety packed, right? But, you know, single-serve, right, in bodegas and in C stores, um, are really important. They're great trial vehicles, um, and they're, you know, um, they're kind of a daily consumption item for a lot of people, so very important.

Speaker 1 [39:05] We've seen everything start to open up. The on-premise is a territory that is largely uncharted, uh, for Hard seltzer. How does that change this year in a meaningful way? Uh, I'll start with you, Dave.

Speaker 2 [39:20] I think it's a big, it's a new frontier and it's gonna, it's gonna be a big channel for, for hard seltzer. You think about it, really, 20 2020 never happens in the summer, um, 2019. So if you go from 2019, I'm getting my years right this time, by the way, from 2019 to 2021, I would say that the number of people who are consuming hard seltzer is probably tripled. So the, so the base of consumers who are looking for hard seltzer, asking for it is, it's certainly the critical mass now. And um so I think it's going to be a big, a big, a big, uh, a big channel for, for Hard seltzer, but it's not gonna be easy because there's probably one or two brands that are gonna get in any given, you know, customers not gonna be like an assortment of brands, but it is gonna be very, it's gonna be a great way for people actually to to try out the product, these products as well.

Speaker 1 [40:08] Does that happen on draft, or does that happen with some cans and you get sort of the prestige of holding it with the label out?

Speaker 2 [40:18] It's gonna be both. It's funny because, you know, we, we came out with kegs, um, and, um, at the beginning, and we got, we got modest, we have modest success, I would say back in 2019. But now we're, as we're selling in for 2021, we're getting a lot more requests now for, for kegs and, and for draft versions of, of hard seltzer. So it's gonna be a mix. I mean, cans will be predominant, but it's gonna be both. It'll be cans and, and kegs.

Speaker 1 [40:44] Katie, how big does the on-premise factor into your plans?

Speaker 3 [40:48] Yeah, I mean, I think for seltzer in general, as it was more broadly adopted at home, I think that will just translate to on-premise and consumers going in there and really looking for the products they've been drinking at home for the past year. Um, for us, it absolutely is something that we're focused on. I think an interesting insight that we started to see as an organic consumer behavior were, um, these dressed can recipes, which I think, you know, for on-premise, it makes the can feel a bit more special, um, and it also allows you to kind of maintain the presence of the can, um, as that badge brand, which I think people are still really looking for, um, you know, with the strong seltzer brands.

Speaker 1 [41:31] Ed, how are you seeing uh Hard Seltzer sort of uh get into that channel?

Speaker 4 [41:38] But we're, we're excited for this summer. So as Dave said, um, the summer of 2020 never happened. So 2020 was gonna be the summer of Selzer on-premise, right? Because 2019 was a breakthrough year. Retailers were ready for it in 2020, you know, it went away. So as we go into 2021, um, we're gonna push it really, really hard. I think, I think Dave's right. Um, it's gonna be, it's gonna be a really tough battlefield, um. On-premise retailers in the New York area are being very careful about their selection. Um, so if you went into a bar that used to have 12 tap handles, they've got 3 or 4 now, right? They're just cautious, right? Um, as they reopen. And so I think we're gonna get seltzer on. Um, some will be drafts, some will be cans, both. Um, we'll get a bunch of it out there. Um, we're blessed to have a great portfolio of seltzer brands. Um. But I think the ones with the best name recognition right now are the ones who are gonna have the best shot at winning that coveted place behind the bar. But there will be a lot more seltzer sold on-premise this summer than ever before, no question.

Speaker 5 [42:45] Definitely. Um, Dave, Twisted Tea doesn't always get the credit that it really deserves for, uh, all the success that it, it delivers to Boston Beer. It's truly a monster. Um, how can you guys elevate that product in the next year, and what are your plans to take it to the next level? I know it, you guys do some really great marketing with it.

Speaker 2 [43:04] Yeah, I mean, twisted tea, it is something that is pretty extraordinary, and I think nobody really fully understands why. We don't want to know the answer because it might ruin everything if we did. But, but I think like for twisted tea, it's sort of, it's got very low household penetration but very high loyalty and frequency. And so for us again, it's like the, it's the basic, you know, blocking and tackling, driving, creating awareness, driving just driving trial through better distribution. I think what's really helped drive the brand the last year. We upped our media spend, which is good, which helps on the awareness side. We've, we've really made a concerted effort to get 12 packs out there because again, this was like a 2024 ounce is still more than, more than half of the, of the, the total business. So, you know, there's lots of upside just doing the basic things, um, you know, well, which is really, um, awareness, distribution. Getting the right packages out there, you know, continuing, continuing to build a brand, investing behind the brand, and finding the right platforms that can resonate with our consumers and going from sort of the traditional, more, you know, rural areas to, to more, to more urban markets with the brand. And so far it's been, it's managed to weather the storm of all the, you know, hard seltzer, like, you know, casts a very long shade over everything. And I think twisted tea for whatever reason hasn't, you know, it's still in the sun, right? It hasn't felt that shade. And it benefited from COVID. Uh, the household penetration went up significantly last year, and now we're just, we're kind of letting the throttle out a little bit on this, on this brand and pretty excited about it.

Speaker 5 [44:34] And I mean, do you see any similarities between tea and and tea's formational years and Truly? Are there any parallels?

Speaker 2 [44:42] I would say like 0. I mean 0. It took like 20 years to get the twisted tea. It took, you know, 5 years to get through a real truly, I think actually if you want an analog for a brand, honestly, it's You know, to go out of the category, it's like Mountain Dew, but Mountain Dew is the PepsiCo, Twisted Tea is to us, same small base of consumers, tent started rural, blue collar, male, um, and eventually just kind of spread its wings and brought it to work. I mean maybe Modelo, it's, it's different, but Modelo is another example where a brand that started kind of narrowly focused really caught on with that target group. And then, then credit to Constellation, they, they have a, they wrote a playbook, actually, I guess they did it with, with Corona. How do you take a brand like Model to the masses? We're doing, it's the same kind of thing we're doing with, with uh Twisted Tea. And I think the reason that Modell can do it and the reason Twisted Tea can hopefully continue to do this is because these are brands that really stand for something with the consumer. They're very, very well constructed brands that resonate. And so they, they have permission to go to, to take it to more people.

Speaker 1 [45:45] One of the things that Ed mentioned earlier in the panel was, he's not seeing a lot of multicultural consumers drinking these products. So, what are you guys seeing, Dave and Katie? What, what do you know and how can we do a better job of reaching a more diverse drinker

Speaker 2 [46:03] base? I'll, I'll let Katie go first. She probably has a better answer.

Speaker 3 [46:08] Wow, um. Um, you know, I think for us it's interesting cause we've gotten an early indication that our brand actually overindexes with a more diverse, um, and even Hispanic audience than the hard seltzer category as a whole, um, but I do think that is really part of like the inherent flavor profile that we offer and the fact that it is, um, more kind of agave tequila inspired, and even leaning into flavors like spicy. Um, but we've worked to really, um, you know, lean into it further again by, uh, you know, adding some fuel to some of those organic kind of consumer behaviors with addressed cans with flavors like chamoy and tajin, and so I think, you know, those are things that we've tried to do to just further, um, embed ourselves kind of with those audiences and really, um, communicate with them in the flavors that they're interested in consuming.

Speaker 1 [47:06] Ed, you should definitely call Katie. I, I know you're, uh, you already got Diageo in the book, so, uh, meet

Speaker 4 [47:14] Katie. I made, I made a note. Thank you. Yes,

Speaker 1 [47:18] Dave, uh, let's, uh, we're gonna end with you. Let, let's get your thoughts on how not only Truly, but also, you know, Twisted Tea. And, uh, you know, we could go down the line, but, um, and, and what you're gonna do with the Dogfish Head, uh, scratch cock cocktails as

Speaker 2 [47:37] well. So in terms of this relates to multicultural or just in general,

Speaker 1 [47:42] yeah, in terms of how you're going to reach a more diverse drinker base.

Speaker 2 [47:46] So I think first of all, the consumers, and I agree with Katie was saying that consumers want to, they all they want to know is that you care about them and you're paying attention to them and that you're creating something for them. So I think it does start. The flavor profile is really important. It starts with the flavor profile, but we're seeing it, we're seeing it in. We, we truly, we're seeing it, we've seen it with lemonade. We, we, we, we think we're gonna see it in punch a sort of a greater resonance in, in general to, to Latinos and African-Americans, but I think it's really the product profiles are important. The package design sends a signal is important. The, how you communicate to you, who's in your, who's in your, in your advertising, if you're advertising, you know, um, how do you, you know, how do you message the brand? Is it relevant to those, those, those folks? So I think we're, you know, this is something that obviously the craft beer business hasn't been outstanding in. And I think there's a, there's a big opportunity because there's a lot of folks out there who want to want to feel a part of the group and they want to know, you're doing stuff for them. So we're, by brand, we're doing, we, we look at things much more through that lens than we ever have before. And uh we'll obviously we have to continue to do that to be successful.

Speaker 1 [48:54] Well, we gotta end it there. So that's our first Brew Talks of 2021. Thanks to everybody for watching. If you liked what you saw, we would love it if you became a Brewbound insider. You can find out more at brewbound.com. A big thank you to Dave, Ed, and Katie on this panel, as well as Sam, Julie, John, and Amy on the previous panel, uh, we will return for another virtual Brew Talks on Thursday, July 15th. Stay tuned for more information on that, but I can assure you that Sam Calagione will be back. And Jess and I are planning to hit the road for CBC in September for what we believe will be our first in-person event since the pandemic began, and I know Jess is excited, she is clapping off camera, and A final thank you to our sponsors, our presenting sponsor, Dogfish Head, for obviously presenting this. Reyes Beer Division, Orchestra Software, and John I. Haas. We couldn't do this without you all, and thank you to everyone for tuning in. We'll see you soon.