Brew Talks Virtual: Hop Vax Summer: Analyzing the Beer Category’s Summer to Fall Trends

Justin Kendall [00:00] Hey everybody. Welcome to Brew Talks, our virtual meetup series presented by Dogfish Head and sponsored by the Reyes Beer Division, and Brew One by John I. Haas. My name is Justin Kendall, and I am the editor of Brewbound, and I am also lucky to have my co-host with me today, superstar reporter Jess Infante. What's up, Jess?

Speaker 2 [00:24] Nothing, Justin. How are you? Hi from our very fancy studio.

Justin Kendall [00:28] I know you're live from Newton. You're from Newton.

Speaker 2 [00:31] I am live in Newton, and this is the first time I've been in the office since March of 2020. So fortunately, everybody, you know, was happy to see me. But really nice.

Justin Kendall [00:41] Well, I'm happy to see you too, and we've got 1 hour and 45 minutes or so to bring everybody to big conversations on the latest of what's going on in the beer biz. One on how the summer selling season is going so far with an eye on the fall. And a second on the future of the American craft beer bar, which you want to stay tuned for, but if you happen to miss it, all this will be available on demand at brewbound.com. So, uh, another thing I want to get out of the way before we start here is a big shout out to Zoey Lacata, Brewbound's editorial assistant. She's doing a great job covering the industry. She's new, and she's rocking it, and, you know, she's gonna be going on the road with us when we do this live and in person at CBC in September. So, stay tuned for that. We're gonna have more information in the coming weeks, but we gotta get going here because As, uh, Jerry Reed said, we got a long way to go and a short time to get there. So we are in the midst of the oh so important summer selling season. We've got tough comps, scans haven't looked great, but that's only part of the story. So let's get the real scoop from our all-star panel during this All-Star week. Here to discuss today is Sam Calionei, the co-founder of Dogfish Head. Thanks for being here, Sam.

Speaker 3 [02:12] Excited to be with you guys, Justin and Jess. Uh, we're super proud to be the longtime brewery sponsor of Brewal. I really enjoyed the process leading up to these, uh, biannual events that we do, and we ideate on what we think our industry wants to hear about, what they, we want to talk about together, and we really did put together two dream team panels today, so I'm excited to be along for the ride with everyone today.

Justin Kendall [02:36] Also, we've got along for the ride is Danell Cosmol, the VP of beverage alcohol practice at Nielsen IQ. Thanks for being here, Danelle.

Speaker 4 [02:45] Hi, thanks guys. Thanks for having me. Thanks for having me to be a part of this awesome all-star panel too.

Justin Kendall [02:52] We love having you here, so you're welcome back anytime. We also have Jason Milburn, director of alcohol beverage for Kroger. Thanks for being here, Jason.

Speaker 5 [03:02] Yes, good afternoon. Thanks for having me. Very excited to be on the panel here.

Justin Kendall [03:06] And one hell of a wine collection.

Speaker 5 [03:10] Yeah it's a work in progress.

Justin Kendall [03:12] Last but not least, we have one of the biggest brains in the beer industry. We have Bart Watson, the chief economist for the Brewers Association. Thanks for being here, Bart.

Speaker 6 [03:22] Thanks for having me back, Justin. Always great to be on Brew Talk. So happy to be here.

Justin Kendall [03:27] So, let's get started here. Danelle, uh, let's set the stage a little bit. We gave a little bit of a preview, but, you know, what, what we're seeing so far this year, the off-premise comps are admittedly tough, up against last year in which nearly all of the purchasing shifted away from the on-premise and into the off-premise channel. Now bars and restaurants are back. The scans are showing a lot of red against that backdrop. What story is the scan data telling you so far, and what's the story we should be telling everyone?

Speaker 4 [03:59] Um, well, Justin, you started with that of scans are scans are in the red right now. I mean, trends are in the red, and it's the most important part of that is that's what we expected, and that's what we want to keep reminding everyone of that last year when so much shut down in the on-premise, that volume shifted to the off-premise. That's why we saw such spikes in sales on the off-premise. Given those massive skyrocketing numbers in the off-premise because that volume shifted, um, we have really tough comps like you mentioned, um, to work with, so we expected trends that would be declining around this time, um, in off-premise. So that's why we've continued to compare back to 2 years ago and using 2019 a little bit as a benchmark. So in that we have everything up and in some cases, everything's up across alcohol, um, spirits is up double digits, um, nearly 30% still. Beer is lagging a little bit, so beer, FMB, seltzer, cider category is lagging a little bit. It's, um, it's up by about 8%, but that said, we're still above what we would typically see in off-premise sales.

Speaker 2 [05:12] So, Bart, you've written, uh, for the, the BA's website that negative scans might not always be a terrible thing for craft brewers. Uh, craft shares remained pretty much stable and draft is coming back, but, you know, we know it's, it's not often that craft breweries pop up and scan data. So, how would you describe the year so far in craft beer?

Speaker 6 [05:32] Yeah, I mean, I think we can separate the year, uh, to the, the 1st 3 months, you know, which, which largely, again, were pre those big comps that, that Danelle just talked about. Then the next couple of months, and then, you know, I think we can almost set June and, and July aside is, you know, a very different logic. Um, you know, I think that post was, was somewhat prescient that, you know, we started to see in more. Numbers that, that the on-premise really has regained some strength, and that's been good for craft brewers. Um, if you caught, you know, Lester's presentation of, of FinTech data earlier this week, which, um, if, if you were here, you'd want me to remind everyone that's a, that's a sample. So, you know, we saw a 9% depletion rise in that, but not necessarily that's gonna translate everywhere, uh, you know, in, in the beer market. Um, but, you know, that, that showed very strong on-premise and showed growing share for the tail, um, as that on-premise can, comes back, which is, you know, good for craft brewers and Um, you know, in the early read of our, our mid-year survey, we're seeing the same thing that on-premise is coming back, particularly in June, and, and that, that has been enough to offset those losses against those big comps that we've seen in off-premise. So, I think, you know, largely we're seeing what we wanted to see, that, that really tough year for craft brewers where the on-premise was challenged last year is, is that tide's coming back and, and brewers are starting to return to, to growth driven by, you know, still fairly elevated relative to 2019 off-premise sales and, and on-premise sales which maybe aren't fully back but they're getting pretty close.

Speaker 2 [06:56] So what's your read on at the brewery sales so far?

Speaker 6 [06:59] Yeah, it's a great question to break that out cause, you know, if you looked at the data last year, those never dropped quite as far. Uh, you know, we saw brewers able to pivot to, to do those package sales and, you know, at least from some indicators, things like, you know, Google search data as well as our, um, our mid-year survey again, where we're taking a snapshot from June, um, I think we're seeing that those sales are not only back, but maybe now, you know. Higher than they were in 2019. So, you know, brewers have found new strategies, you know, with that to go, that some of which I think is gonna be sticky, uh, going forward. And, and so I think those at the brewery sales are now back where they were now, whether they're they're in dollar sales, you know, with those package sales being a little bit less, I think it's, it's harder to know. But, but in volume terms, I think they're back, if not stronger than they were even in 2019.

Speaker 2 [07:44] Now, is your mid-year survey still open? Do you want to tell people where they can take it?

Speaker 6 [07:48] That, that is a wonderful plug. Yes, brewers, please fill out our mid-year survey. It's at www.brewersassociation.org/BIPS for beer industry production survey. Um, and it'll be open for another week or two. So, so please fill it out.

Justin Kendall [08:02] That's why Jess is the best in the business. Sam, how is the summer going so far for Dogfish Head? What's working and what could be better?

Speaker 3 [08:12] So just first off, just from a, a Boston beer perspective, we're firing all cylinders, really proud, uh, you know, hitting double-digit growth, led mostly by Truly, which gained 5 points a share, uh, with White Claw in the, in the 2nd quarter, uh, great growth with Twisted Tea. The cousin campaigns really resonating, resonating with Sam Adams. Uh, we did a great job launching our, our, our, our fruited, uh, cider, and it's awesome to see Chris. Really, uh, succeeding as on-prem, especially draft comes back. With Brand Dogfish, we're really excited for this month because this is our biggest, uh, focus month. Uh, we have our Mother Nature, let's do this campaign where we kind of bet heavy that we'd be coming out of COVID cabin fever last fall when we planned for this. And essentially, right now, we're working hard, Boston Beer distributors, retailers, and everyone on Brand Dogfish to get Our displays uh up all around our core offerings, you know, as Danell mentioned with the shift uh to off-prem last year, one trend that's not going away is the excitement around finding core products in bigger packages, i.e. 12 packs, which Dogfish did kind of lag on compared to other top 25, uh, craft. But I'm proud to say, you know, right now, we're looking at about being up 15% on our 12 packs, and this summer, Mother Nature, let's do this program. is all about our core 4, especially 12 packs of 60-minute Hazio, sequence, Slightly Mighty, our variety pack that we now have in-market line price with our core beers, uh, year-round, dynamic, changing up a little prize in the Cracker Jack box every time there's a new iteration of the variety pack and getting displays of our canned cocktails, uh, next to them. And I know we'll talk more about the fourth category later, but that's just finally starting to get out there. Uh. With our, our 3 canned cocktails, and we're really, really excited about that opportunity for Dogfish too, as we head into the summer. And the weather's hot. We're super proud. We not only have our, our, our truly uh ice pops, but we also have our, our Hazio. We just launched with Tipsy Scoop, a Hazio alcohol-infused version of a vegan ice cream featuring the same oat milk that we put into the first nationally distributed oat milk-infused beer, which is HazO. So lots to be excited about right now.

Justin Kendall [10:34] Gonna have to have some of that ice cream, and I might have to hit maybe Kroger to get that, uh, if Jason is carrying it. Jason, how is the summer going so far for the beer category within, uh, Kroger, and what's hot, and are you guys avoiding, uh, out of stock so far?

Speaker 5 [10:53] There, there's a lot to unpack in that question.

Justin Kendall [10:56] So there is, yeah, I'll let you take it. I'll

Speaker 5 [10:59] start with, uh, with the summer and the trends, uh, as Danell said, you know, we were kind of expecting is, uh, on-premise kind of started to come back a little bit of give back this year, uh, but, you know, but really we haven't seen as much give back as what we were anticipating, and, and really the numbers on our beer side have been phenomenal. Not only, uh, kind of meeting expectations or and exceeding them for uh versus 20, but then also, uh, versus 19. So we're looking at the same two-year stack for, for health and, and really looking at market share, and we've been very pleased with what we've seen, uh, from a summer selling uh standpoint to this, you know, so far. Um, you know, brands that are just killing it, um, uh, you know, Modelo's been, uh, a brand that we've had a lot of growth with, but then, you know, anything seltzer, uh, with, with Truly and White Claw, uh, we've had some successful launches in pockets with, uh, Topo Chico, uh, and Alani, uh, Hard Seltzers, which are some crossover items. But all in all, uh, just seeing, uh, really some strong number performance, even with some core items like Michelob Ultra and, and Busch, well, you know, Busch Light, Apple, I think was just released, and there's a lot of, uh, buzz, uh, in the markets in, in, uh, from customer demand on those items, but, uh, uh, really, uh, seen a lot of, uh, success, uh, so far this year. The out of Stock one is probably the biggest hindrance to our, our path forward and, and what we've seen, and that is. In stock position's been difficult and uh really pinning down communication around supply chain, uh, has been very spotty across the country with uh some markets being in good position on the uh key item and then, and then having other of our markets sitting completely empty. And so we've really tried to get weekly reporting uh from our major CPGs and suppliers on. You know, what, what does it look like, and it's really ebbs and flows week to week, and we're watching bottles and cans very closely, and that really started early on through the pantry load uh that we saw last year with COVID. It's, we've been in a little bit of a, we were in a better inventory position last year, uh, during the pandemic than what I've seen us be in this year post pandemic, so, that's, that's the tough part for me.

Speaker 2 [13:24] Yeah, and, so we just made it through the July 4th holiday and. We don't have a full picture of scans yet, Danelle, as you were saying, uh, before we started, but Danelle, what's your feeling coming out of the holiday and how big of an effect did the nasty weather in the Northeast have on sales?

Speaker 4 [13:39] Yeah. So, I mean, when I looked at Memorial Day performance for 2021, I mean, we definitely looked at versus last year and then two years ago to have a really good sense of how performance was for Memorial Day. So we'd like to do the same for July 4th, um, which we'll have that complete set of data by next week. Um, looking at what we have so far, um, we're declining compared to last year. We expect that, um, We probably won't be declining as much, um, once again, we have that full set of data. Um, but when you look across regions, there were some, a couple of regions that really stood out, and it was the Mid-Atlantic and the New England regions in particular where we saw some of the deepest declines so far. Um, the regions where we saw some of the bigger declines also were also the regions where we didn't see as strong of growth rates in seltzer. So it goes back to that Hart-Seltzer is really driving, it continues to drive and kind of pull the category along in a lot of areas. Um, there are some markets. Where seltzer is a little bit more developed and um might not have had growth rates or in, in some cases might have even had declines that were a little deeper in, in those regions and that also is where we saw um some of the bigger declines so far for Fourth of July um for the total category.

Speaker 2 [15:02] Bart, I know the BA has declared July 3rd National Independent Beer Run Day, and it's really started to get some traction on social. What's your read on, uh, how the beer holiday itself went and how the Independent Beer Day run was received?

Speaker 6 [15:17] Yeah, you know, I, I think it was received well by members, which, you know, I mean, that's already always our primary goal, you know, we saw, you know, growing engagements and lots of downloads of, of the toolkit and, and social media mentions. Um, I think it's a little too early to really know, pull apart the data, uh, and obviously, we're gonna have weird comps this year, uh, versus last year and looking at that. But, you know, you know, we're hearing good things from the members who, who lean into it and activated it as another way to get, you know, people to To, to look for their brands or, you know, to come by their brewery and, um, you know, July 4th is such a huge holiday for the, for the whole beer industry, you know, trying to tell the independent beer story as a part of it, you know, we, we'd be missing if we didn't try. So, uh, you know, we're excited about that and we're glad that we, that brewers have, have adopted it and engaged with it.

Speaker 2 [16:02] But, we've gotten a few press releases independent of, you know, from other media sources pitching us on stories for independent beer one day. So I think it's, it's really catching on.

Speaker 6 [16:12] Great to hear. Yeah, it's a great time to go, you know, visit your local brewery. Not that any other time is, but, uh, we're glad to see the excitement, built.

Justin Kendall [16:20] Jason, uh, would like to get a read on, uh, how the July 4th holiday went in your stores. How'd it go? Uh, because I, I, I haven't been in a Kroger, but I have been in some grocery stores, and I'm kind of that weird person who's always taking photos of the stacks to see what's moving and what's not. So, uh, what can you tell us about how things went?

Speaker 5 [16:41] Yeah, I think, uh, you know, we're still looking and evaluating with some IRI and market share information as we're waiting for some of that to come out at the end of this week, uh, to really measure some of the success for us, but we were really, uh, excited to see the numbers. I think the biggest, you know, challenges, as we've mentioned, and it'll be a, a repetitive thing, you know, theme from me today is, is really just supply chain. We were a little bit constrained going into the 4th of July on some, some key items, and so we're really having to. Uh, make sure that we communicate well with our, our store teams and, and our, uh, And the suppliers to just make sure that we're trying to take as much inventory on hand to get through the holiday week and not wait for for delivery to delivery and that's been the struggle is uh really timing when the inventory hits and making sure that our stores are full for the customer and uh I think we still probably left some sales on the table, uh, because it's just hard to get through a holiday weekend like that with, uh, where a lot of people were off that Thursday, Friday going into the Monday and, and, and making sure that we have enough product. Uh, to keep the cold box full, and so, uh, very happy with the holiday, but, uh, we, we probably did leave, uh, some, some, some money on the table and disappointed some customers by just not having the items there cause we just have some, some in stock position issues right now.

Speaker 2 [18:00] I'm sure you guys are not alone in that. So, shifting gears a little bit. Sam, Dogfish has had a huge year for innovation. Uh, the brand's released several new products, Hazy O, Scratch-made canned cocktails, Lemon Quest non-Ak beer. How have each of those met your expectations and what have you learned from playing in those new spaces in a bigger way than in the past?

Speaker 3 [18:21] Yeah, well, I mean, to, to start with, you know, we, we're really excited about the opportunity for Hazy O cause it's kind of very uniquely sits between that number one growth trend in craft beer styles of hazy IPAs, which Bart could give more detail on latest look at that, uh, as good to know, but, uh, and then the other trend of better for you with oat milk being such a sort of better for you phenomena that Starbucks had to ration it or shut it off, uh, for a little while. So we really love that unique position. Positioning as a brand that's been doing, you know, active lifestyle beer since before active lifestyle was even a term in the beverage world, starting with Namaste, our yogatheme beer, uh, uh, from over a decade ago and sequence and slightly Mighty. So we're really excited for the trajectory out of the gates with HazyO. We've had some really fun successes, uh, partnering with different retailers to do like cross promotion, like it's 8 o'clock somewhere, where we're displaying Elmhurst oat milk. on a display next to our, our hazy O, reminding people they can start their day with oat milk and then their, end their day with oat milk. So that's been a lot of fun. Canned cocktails, as, as we know, that uh is uh, uh, a, uh, a, a, a space that's literally on fire. I, I think, 85% up year to date is what I've, I've seen as a number. And we, you know, while that is just to your point, a new launch for us, it's actually the longest R&D gestation. Uh, uh, project in our 26 year history. We, we are one of the original craft distillers in the country. We started distilling 20 years ago, and we started using our gins, our rums, and vodkas, and brandies, and whiskeys in our, uh, in our, in our cocktails in our own properties, uh, for all those 20 years. So, literally, the three, initial, uh, canned cocktails Dogfish brought to market were recipes that have been ideated and improved for all of those 20 years. And the Blue. Blueberry shrub cocktail. Justin's enjoying for liquid courage as we do that, actually, uh, won, uh, the Best of Show at the LA Spirits Awards before it even hit the market. Uh, so we know the quality of liquid is there, but we also know it's a very crowded space, uh, and it's getting crowded, more crowded every day. So one of the things we're really leaning into with July is Dogfish Heads Focus month across all of BBC is getting our eight-case displays of the canned cocktails out. Out there. And the canned cocktail category is just so unique in that it's all over the map in so many ways, not just the spirits base, but the ABVs as well from, you know, a, a High Noon proposition, which is definitely playing more in the seltzer space at 4.5 ABV to something like Cut water that's got tons and tons of different ABVs. With Dogfish, we made the intentional choice to line ABV our canned cocktails. They're all 7% alcohol, they're all 2 foolproof shots in every 12 ounce cans, and they all are as dynamic in aroma, flavor, but also color. If you actually decant them, you see a great diversity of color, cause we're really leaning into the all-natural culinary ingredients that dogfish heads always leaned into from a beer side. And the last of your three categories you talked about, we're super proud of our activities in the non-out space that we know is also a huge growth, uh, uh, potential space in the fourth category. We have our just the, just the Hayes non-Alk from our Sam Adams brand, and our Lemon Quest uh from Dogfish, which is a fruited uh wheat beer. That one, we're really proud we're referencing our partnership with the Nature Conservancy on PAC, and it's sort of the non-alk analog for sequence ale in that it's designed on a molecular level. Level, uh, you know, to be the most refreshing non-alk, uh, that's out there with acai, uh, berries, blueberry, uh, and sea salt. So, too early to tell where it's going data-wise, but we couldn't be more excited for the innovations that we released, released this year in terms of being on trend with where the drinker is going.

Justin Kendall [22:19] Dane, uh, we gotta talk about hard seltzer because that's what everybody talks about. You talked about it driving growth. We've noticed it's decelerated some in the off-premise this year. Has the summer of hard seltzer peaked quite yet, or is it just peaking for some?

Speaker 4 [22:36] I would say, well, first we could talk about hard seltzer for like 4 of these sessions, I think, and 4 more hours, but I would say that um I mean seltzer's potentially has peak for some. Um, when we look at year over year sales, I mean, seltzers for summer 2021 are still surpassing sales from 2020, which is incredible, given the, um, the, the skyrocketing sales that I keep talking about and off-premise from 2020, we're still surpassing those sales. So, um, as a whole, the, the pie, the seltzer pie continues to grow at a much slower pace, yeah. Um, and, you know, we are starting to see some differences in some of the brands and how they're advancing and moving forward. So, you know, 2 and 3 years ago, we were always talking about, about White Claw and Truly, and They accounted for somewhere between 80, 85% of the segment. Now that's dropped down to about 70%, but I would say that Truly's been holding share for the past couple of years, and Truly's had a lot of innovation, and it's that innovation that's driving a lot of that growth too, especially in 2021. And then when you look at the top 10, I mean, the, the way the seltzer segment looks today and year to date for 2021 versus two years ago is so drastically different, especially when we think about the top 10 brands and the largest brands ranked by dollars. So seven. Of those top 10 brands didn't exist 2 years ago, so it's a very different picture than where we were 2 years ago in Seltzer. Um, there have been a number of really successful launches this year of new brands, and, um, I think. Seltzer is one of those things where it's kind of like this blank campus, where there are so many directions that you can go in terms of flavor. So right now, there are a lot of kind of softer, more palatable flavors, but you can go in a really bold direction. You can go higher ABV, you can go lower ABV. You can, I mean, Sam talked about the health and wellness. trend that hasn't, I mean, we saw it before the pandemic and it hasn't slowed down. I think it's just gonna continue and increase even more. So you can, you know, there's a lot that you can play on there. Consumers are still really looking for low carb, low sugar, um, low calorie is a smaller piece of that, but it's really the low carb and the low sugar that's, that's a, a big part of that. And then on top of that, like, you know, we haven't even talked about yet of of what on-premise can mean for for seltzers. This is where it's a segment that is so unique, where we saw it grow and develop in the off-premise, and we never see that in alcohol. And so, now that on-premise is starting to open up so much more, what are the possibilities at stadiums, at music festivals, um, And, uh, traditional on-premise, um, and then even when we're talking about off-premise, there's still a lot of room for growth within CSTOR. So, I would say Seltzer hasn't peaked. I would say that, um, we're, we're going on year 4 of talking about how big Seltzer is. So I think it still goes back to, it's something that's a longer term trend, but, um, growth is slowing, and that's expected.

Justin Kendall [25:48] Well, one brand that we won't be talking about for very much longer is Coors-Seltzer, which was discontinued recently. Jason, is the death of Coors-Seltzer, the hard seltzer segment's canary in the coal mine moment for some? Do you see a shakeout coming this fall, even on your shelves?

Speaker 5 [26:08] No, I think, you know, from a standpoint of um of the Coors-Seltzer, it, you know, it's a brand that did OK in, in, in small pockets around the country, but just didn't, you know, didn't gain traction uh for, for us or them nationally, and so we were looking at, you know, the biggest thing I would say for, for us is we definitely have a pressure for items to, you know, fail fast. We, we are pushing a lot of innovation. We've seen a lot of innovation on the seltzer, not only with, with core brands, but new and emerging brands in the space, and we're really trying to capitalize on, um, making sure that we get those offerings out in front of customers, but there's, it's the, the cold box is getting less time for items to earn, uh, once they're there, they have to be ready to go as soon as they hit, and I think that's the challenge with Coors is, uh, it's a, you know, it's a competitive landscape right now, especially when you're taking on, uh, truly and. And Whiteclaw and and they've had some major innovation launches this year as well, and they haven't given up an inch, and so I don't think it's a canary in the coal mine moment, and I agree with Danell. I think there's still some, some upside and, and plenty of uh branches to go, whether it's uh in the, the higher alk or, um, you know, there's still a lot of flavors to play with in the space, so.

Speaker 2 [27:29] Bart, do you see an opportunity for Kraft seltzers to make meaningful headway into the segment at this point, or do you think the die is kind of cast?

Speaker 6 [27:36] Yeah, I think there are opportunities, so we should be realistic about how large they are, you know, are, are they as big as they are in beer? You know, probably not. You know, we've seen how, how brand-driven the category has been. Um, but, you know, there are signs that, you know, A, the overlap between craft drinkers and seltzer drinkers in our consumer survey work has continued to grow. So, you know, you're, you're talking about one and the same, and so, you know, you can unlock some of the things that, you know, drives them to the seltzer occasion, but the craft branding, I think there are opportunities there. You know, a, a second thing to say is, as the category grows, you know, even if that long tail whole chair, that's gonna be a bigger number over time. And, and that's kind Kind of what we've seen is that, you know, the smallest players haven't really made a meaningful dent in, in the overall sheer numbers. There are some exceptions, um, but that they've risen with the category, and, and I think we can see that. And, you know, the final opportunity I see is, is in, well, a flavor, you know, Danell talked about as we get to more interesting, unique flavors, you know, seltzer diversifies if, if that's gonna happen, um, that that's something that, that craft brewers know well and, and can play. There, as well as, you know, craft distillers or, or, or small winemakers. Um, and then finally, you know, as, as the category grows, you're gonna see diversity in retail outlets. And, um, you know, seltzer has been a, you know, more chain-driven, you know, product so far. But if we see, you know, on-premise pick up more seltzer or, you know, smaller retail establishments, you know, go bigger into seltzer, that's a place where smaller nimble players can play, they can have more local offerings. So, You know, I don't wanna overstate, I, I don't think seltzer is gonna be a huge part for, for most small brewers, but as the category grows, there's gonna be more opportunity, um, and I think you'll see more small brewers look to, to play in the space just cause it's different and they know that their consumers are drinking there.

Speaker 2 [29:20] So, Jason, as we've seen the growth of hard seltzer and RTDs, how are you divvying up the cold space? How much more of that is going to seltzer and RTDs and then in the past, and where is that space coming from?

Speaker 5 [29:31] Yeah, it's a, it is a million dollar question cause our, our code boxes are, uh, you know, at a premium from a space perspective. Uh, when you look at the innovation just in the seltzer space alone, we've, we've had to really grow that size. Uh, we've done, uh, you know, Matt Pennington, uh, that is, uh, my beer category manager, really works hard to try and Uh, orientate, you know, orient packages to where it is, we, we're trying to get more out of that cold box space, making sure that we're protecting day's supply, but then really, you know, it takes, when we're talking about items that we have to fail fast on if something's not working, we have to free up that room quickly. Uh, we are, you know, trying to free up code box for both, uh, some additional. Hard seltzer skews, and then the, the bigger challenge for us right now is ready to drink, is ready to drink has been in our stores, really placed more uh warm in the spirit side than it has been in cold, but there's a customer demand for this to be in refrigeration, and if we're gonna add it into and merge it with um. Beer cold box, then those items have to be able to turn at the same velocity rate as beer, and right now, that, you know, not many of those items do. And so when you're looking at a ready to drink, uh, canned cocktail, you know, comparatively against spirits turns versus beer turns, there's a, a drastic difference there. So, we have to make sure that we're, you know, maximizing the real estate of those cold boxes, and so we are constantly evaluating it, but we are for sure adding and looking to add additional refrigeration. In our stores for ready to drink, and, and maybe not, you know, come at the expense of a beer cold box, but uh we're trying to get creative with ways to approach.

Justin Kendall [31:20] Well, speaking of RTDs, Sam, the big news of the day was the strategic partnership formed between Boston Beer and Beam Sun Tory, which is just another example of how the lines are blurring within the beer category. How do you see Dogfish Head possibly playing a role in that in the future and benefiting?

Speaker 3 [31:42] Well, I'll just start by saying, you know, we really do believe that, you know, uh, Boston Beer is the most consumer-focused beverage innovation company, uh, in America. And that means we intend to always be looking to go where the consumer wants us to go. So with this new partnership, well, you know, as, as Jason was just talking about the growth of the RTD space and, and sort of also the, the, the, the, um, sort of Expanse, expansion of what RTD means, all the different categories within the fourth category. It really reminds me of where IPA has gone, right? Where IPA was a category, and then it got to a scale where it's splintered into numerous subcategories from session to, to, uh, to Imperial, uh, to hazy. We all see that happening, albeit, I think at even an accelerated rate and with more volume, uh, in the, uh, RTD space. So I I think it's super complimentary to our space and myself, Jim Cook, Dave Bro, what we always uh try to talk about with our fellow leaders at BBC is being thoughtful when we look at our portfolio as sort of a, a, a chessboard and saying, here's the, the pieces that we want to play in the spaces that we want to play in, and being really thoughtful to break down this fourth category into all these complementary spaces, right? Like, for example, we intentionally They are keeping dogfish on the high end, both in ABV and in price point of our canned cocktail space. We're not going towards that uh high noon proposition at 4.5 and sort of that seltzer space. That doesn't mean there won't be a BBC play in that space, but we're really trying to be really thoughtful and methodical about where we're placing our bets in a way that's gonna be the most uh exciting for the consumer, but also that's gonna be the most Incremental for our distributors, uh, and our retailers. So I think with the announcement you mentioned today, it's gonna be super incremental, uh, with some other very trusted and renowned brands to complement those brands that are always, already in the BBC, uh, portfolio. But it's specific to your question on Dogfish RTDs, you know, we, we believe in that, that canned cocktail space for us. It's leaning into our twenty-year heritage of being one of the The original craft distilleries, i.e., spirits-based, uh, canned cocktails. But Dogfish has always been having fun with playing outside the box. One of our best-selling items at our Dogfish Miami that we just opened is Dogfish Head mojit tail, which is basically a mojito that's ale-based. So we're taking some of our, uh, undiluted, uh, truly soup-based, uh, DNA, blending it with our sequence wheat beard DNA, and then we're muddling, uh, you know, You know, fresh Florida cane syrup and lime juice and uh mints, and serving that by the pint over ice as a beer cocktail. So we'll keep putting the, the mental and experimental and the war in Delaware, but we'll also within the BBC portfolio, be really methodical about the lanes that we're choosing. The ones that we chose uh today, we're really, really excited about for how complimentary they are to the BBC portfolio.

Speaker 2 [34:47] That mojitole sounds delicious. So we can make that happen. Uh, so, Danelle, in recent years, uh, we've seen seltzer sales start to dip to varying degrees, uh, as soon as colder weather starts to set in. So, Danelle, do you expect seasonality to play out again this year? And with the growth of RTD spirits-based cocktails, which do tend to heat up a little bit in Q4, uh, do you anticipate a similar story?

Speaker 4 [35:15] Yeah, I definitely think we'll continue to see seasonality. So over the past 34 years, we've seen, you know, the, the spike in sales in the summer for Hard seltzer. Last summer we saw um the peak of seltzer share for the total category at around 4th of July. Um, last week, seltzer share was Almost at 12%, it was like for the latest 4 weeks it's like 11.8%. So I think um when we look at Fourth of July numbers, that's where we're gonna see Seltzer peak in terms of share and then we'll see um that, that slowly decline into the fall and again that's what we've seen every year and so that's what we should anticipate. Um, ready to drink spirit cocktails, there's some seasonality to them too, and then also, I mean, the industry, when we talk about ready to drink cocktails, in a lot of cases, we're also including seltzers for spirits. So High Noon, for example, is included in, in most everybody's numbers when they're talking about ready to drink, um, spirit cocktails. So there's some seasonality, especially when we're talking about summer, there's still some seasonality they're ready to drink spirit cocktails too. Mhm.

Speaker 2 [36:21] So, Bart, the BA recently shared results of its annual consumer survey, which we always tune into and cover every year, and one takeaway for us was that while craft has slowed a little, it's still growing, and the number of craft drinkers is at an all-time high. You also coined my new favorite beer industry term, maybe my new favorite word in general, omnibiborous, to describe the growth of cross-category consumption. So, how do you see these omnibiborous ways that we've all developed continuing into the future?

Speaker 6 [36:48] Well, you know, first, we're on a, we're on a beer podcast where we've talked about seltzer, spirits, RTDs. So, so, so clearly, I mean, this world is here and, and, you know, I think once that, that genie is out, you know, especially when it's driven by the consumer, it's hard to put back in, you know, you know, craft consumers are at the forefront of, of being omnivorous, of drinking wine, drinking spirits, drinking, drinking everything with beverage, alcohol, and, and I don't think we see them going back and, you know, for, For, for producers, for brewers, you know, this is a challenge and an opportunity. Um, you know, the challenge is that there are now more options for almost every occasion. Um, you know, to, to the question Danell just answered, um, you know, will RTDs, you know, be seasonal? Probably cause everything's seasonal, but, but I think they're gonna be less seasonal than, say, seltzer because they have a broader range of occasions they can play in with different flavors and ABVs and, you know, Sam talked about the fracturing. So, so that's a challenge. But at the same time, you know, this, this world where people are drinking lots of different things, I think is an opportunity for, for small producers because there's just so many more niches, and there's so many more places to play between categories, you know, we're seeing, you know, all these weird little fun things, you know, you know, beers and, you know, kombucha beer hybrids, and, you know, braggets coming back, and just, you know, all sorts of stuff that, that small producers who I've always been focused on, on innovation, on doing crazy things. I think just have some advantages and, you know, it's gonna take a shift in mindset for some companies to break out of kind of traditional beer categories. But, but I think in the long run, it's, it's good, it's gonna push innovation, and it's a place where, where small producers just have inherent advantages cause they can move very, very quickly, um, to, to chase some of these really fun, unique consumer trends as we, as we see drinkers, you know, bounce around different places.

Justin Kendall [38:33] Jason, with all these omnibiborous ways, how have you, how has your approach to the fall resets this year changed maybe than previous years?

Speaker 5 [38:43] Um, um, the, the big thing is, is for us is, I mean, innovation is, uh, is kind of a pillar within our organization and, and trying to make sure that we are getting, uh, these really innovative items, uh, out in front of our customers and doing that much quicker than we've been able to historically do. I would say that would be our largest, uh, you know, single change when we look at fall recess and really across beer, wine, and spirits is that we're really trying to, uh, push the envelope and, and ramp up the innovation story, and we're probably adding more items in a fall set cycle than we've ever added before, cause it usually we always considered, you know, fall as a kind of a pull and plug, you know, very minor adjustments to sets, and that. You know, that's evolved, we get, uh, really, um, a lot of innovation launched, not just in spring windows now, but really year round. And if we only approach major innovation, uh, cycles with spring in mind, then we're leaving a lot on the table. So we're just adding a lot more, uh, uh, SKUs and, and really trying to make sure that we're. Uh, being more granular in our approach than we ever have, uh, down to not only, you know, store level, but, uh, individual segments and, and how our customers are interacting, uh, with our stores and, and, um, and so there's just been a lot more, uh, it's, it's made it a lot larger set cycle than what it has historically been from a fall timing perspective.

Justin Kendall [40:19] So, Bart, what is your expectations for seasonal performance, uh, this year for craft brewers? What's gonna be hot?

Speaker 6 [40:28] Um, you know, I mean, I think we, we've seen in recent years that, that seasonals have come back a little bit, you know, that expectations got reset, you know, we had, we had a year, a couple of years back where, you know, everybody bet big on pumpkin, and, you know, it really, it fell a little flat. Um, but I think since then, And we've seen, you know, everyone reset expectations at kind of more of a right level, um, and, and, and so those have come back. Um, you know, I, I think here, you know, this is where the, the data gets a little bit tricky, you know, seasonal packs, just in general, haven't done quite as well in, in recent years. I think. You know, there's been a lot written and talked about here that there's just so much innovation, as Jason talked about that, you know, seasonal used to be the, the what's new. I'm gonna pick up the seasonal pack to, you know, try the new beer, and now there's, you know, 20 of those options and, you know, a beer portfolio and, and way more cross- beverage alcohol, so you need that a little bit less. To, to contradict myself again, which, which economists are good at it, I do think that, you know, we, we've seen people want seasonal, uh, Um, over the past year, and, um, you know, that giving some sense of normalcy and touchstone to life in a, a world that's been, uh, turned up. So, I think there's some, some mixed signals, but I think we're seasonal on the weird comps that we're on, you know, so, you know, versus 2019 is what I really mean. It, it, it's poised to grow a little bit this year. And, and, and while that's not the only place for innovation now, we're seeing more brewers understand how having that regular seasonal calendar can help them. And, um, so, so we're gonna see a good fall, and we're gonna see fall seasonals do pretty well.

Speaker 2 [41:55] So, Danelle, we always want to know what's next. And when we look at the beer category, what do you see as the most disruptive products right now? Or what's a small but fast-growing segment that should be on everybody's radar?

Speaker 4 [42:06] Um, I think, um, I think looking at consumers first, then that helps us to understand what's gonna, what's gonna be coming. What, um, we continue to hear across total consumer goods of consumer trends is around, um, health and wellness and mindful drinking, um. The kind of need an idea for experience and um convenience. And so, I think any products that offer those are gonna help to um kind of, that's where we're gonna see some of the biggest growth rates. Um, Sam talked about uh active lifestyle brands, and so I don't know. When we all started calling them active lifestyle brands and maybe that came from Sam a long time ago, but that's where we continue to see a lot of growth rates from active lifestyle brands. They're up about um somewhere between 20 to 25%, so up, you know, much higher than um what we we're seeing the current category, the total category right now. Outside of that, I think, um, Still opportunities for growth and seltzer that I talked about before, but even, um, not only exploration within flavors, but additional subsegments, so the lemonade, hard seltzers, hard tea seltzers, um, and any type of, uh, tequila inspired seltzer product, agave-inspired, um, or agave-based, um, product. And then a lot of products that I would call um maybe Hispanic-inspired or Latinx inspired in some way. So if you look at the um medelo, um, chilada, mango in Chile is doing really well. Um, Topochico as a brand is doing well. Um, they're, we're seeing more lime and salt seltzers, um, If you think about like 805 Cerveza, so all of those, that's, I think we're gonna continue to see um growth within those segments too. Um, and then finally, in some of kind of those, uh, smaller segments, not necessarily just in beer, but across total alcohol, um, frozen, I mean, Sam's got ice cream, and so, so I, I want that, but when we talk about the alcohol base itself, um, frozen pops, and we're seeing that a lot in spirits, so it's a really, really small base right now, but a lot of. Happening there. And, um, you know, we're seeing more and more frozen seltzer type products too. So, um, one other thing that, that I would add to that, and it goes back to the health and wellness piece and where we're seeing consumers, I always like to look outside of alcohol to understand what potentially we're gonna see next in alcohol. So when you look at the non-alcoholic segments for beverages, that's where, um, You know, last year, energy drinks and sports drinks weren't doing as well for a lot of reasons related to the pandemic. They just weren't the, the drinking occasions relevant to them, but we're seeing a, a lot of pickup in that space. And then any um fruit and vegetable type drink where there's, um there are a lot of health claims that go along with it, which, of course, is very specific to a non-alcoholic space, that's, it's, you know, very different um idea and ways that suppliers can play with alcohol. That said, I still think it's um always important for us to understand kind of where consumers and how consumers are purchasing across total food and beverage. So when you look at what Nielsen IQ is tracking in terms of health and wellness claims across total food and beverage, the, um, the claims that we're seeing as the strongest growth rates are still coming from keto, low sugar, low carb, paleo, anything related to low sugar, no sugar, and then also anything related to plant-based. So those are kind of all things that consumers are really thinking about when they're thinking about health and wellness. And one more, um, piece of that I think is related to the no-alk space, um, not non-alcoholic segments like carbonated beverage, but non-alcoholic beer, wine, and spirits. We continue to see really strong growth rates, um, even right now, you know, we're seeing growth rates of 40% versus a year ago across beer, wine, and spirits. Um, we're seeing vegan wines pop up, we see low elk, no elk, um, Uh, ready to drink cocktails that are coming. So I think we're gonna continue to see a lot in that space too. That was a very long answer to your question of just a couple of segments. It was just to ask me that.

Justin Kendall [46:39] Well, that's all right, because we're right at the end here, and we're gonna do one last question and final, final rapid fire. Give us one bold prediction for the beer category for the rest of 2021. So we'll start with you, Jason.

Speaker 5 [46:54] One bold prediction.

Justin Kendall [46:56] Yep, rapid fire. Yeah, that bold as you can get.

Speaker 5 [47:01] Um, I, I, I don't have a, a bold prediction for the category. I think we're just gonna continue to, uh, to, to thrive in the, in the market. I, I, we, we've had tremendous success, and I'm, I'm looking forward to driving it, uh, home in the back half. I just want to get, uh, some more inventory in, in-house, and, uh, and we'll be good, but I don't have a, uh, a Super Bowl prediction, but we're gonna finish the back half strong. So,

Justin Kendall [47:28] Bart, what's your bold prediction?

Speaker 6 [47:30] Uh, I, I'll put a bold prediction that by late summer, uh, draft will be back to where it was. Uh, I think we're, we're getting close and, and late summer is kind of where it peaked last year, so I think late summer will, whether we keep there, I don't know that, um, that's too bold for me, but I think we'll get back there by late

Justin Kendall [47:45] summer. Danell, what's your fast, bold prediction?

Speaker 4 [47:50] Not necessarily bold, but I would just say that innovation is gonna continue to play a really, really important role both in the craft beer space and the beyond beer space, um, for the rest of the year.

Justin Kendall [48:00] Sam, take us home.

Speaker 3 [48:03] Yeah, echoing a ton of, tons of talk today about innovation. I do wanna circle back that, you know, the fact that a, a great innovation that we heard from, from, from Jason, the fact that, you know, a lot of retailers just consider that fall moment as like a, a cleanup moment, and to see, you know, Kroger saying, no, we need to think about this in the same way we think of the big moment of the spirit cause so Much innovation is coming, is really encouraged for those of us that love innovation. And so my, but my prediction is someone who also loves beer, and the company that bears, uh, the middle name is that this late this year and next year will be the year of the Pilsner, you know, winemakers say it takes a lot of uh good beer to make good wine. If you go into Any of these breweries of all scales across America, as they're making their hazy IPAs, in the warmer months, they're drinking their Pilsners while they make those IPAs. It probably goes back to the trends Dannell's talking about, super flavorful. It's like the seltzer of hundreds of year old beer style, super flavorful, low calorie, beautiful to drink year-round, so the return of the Pilsner is my prediction.

Justin Kendall [49:10] Good enough. Bart, Danelle, Jason, Sam, this has been great. Thanks for doing this. Everyone out there, stick around, we will be back with a conversation on the future of craft beer bars.