Brew Talks Virtual: Wholesalers and Retailers Share How Receptive They Are to New Beer Products

Speaker 1 [00:20] Thanks everyone for sticking around for this 2nd conversation as part of Brewals brought to you by Dogfish Head. We're gonna discuss how retailers and wholesalers are viewing new products, core offerings, and innovating themselves. Joining our second panel are Terry Cecola, the president of Elite Brands of Colorado. Terry, I have a feeling I know who you are.

Speaker 2 [00:46] Well, I am the coronavirus, scary as it is.

Speaker 1 [00:53] This is the most 2020 costume. I, it's perfect. Also joining us today is Bart Watson, the chief economist for the Brewers Association, who I think looks like Michael PS Hayes from the fabulous Free Birds. But Bart, who are you?

Speaker 3 [01:10] Um, I'm a guy who just found things in my costume box. I mean, um, I'll go with an undecided American voter. That's pretty scary right now.

Speaker 1 [01:18] That is terrifying. So, this is the most terrifying panel I think that we've put together so far. Um, a last-minute conflict has prevented Mark Agnello from Wegmans from joining us today. Hopefully, we can get Mark on one of our programs in the future. We wish him the best of luck in his future endeavors. But in his place, we have a fantastic guest who was willing to jump on with us last moment. He didn't even leave after I screwed up the name of his business. So, thank you for being awesome. Thank you for being here, Jason Daniels, Chief Operating Officer for Halftime Beverage in New York. Thank you.

Speaker 4 [01:58] My pleasure. Thanks for having me and sorry, no costume, but uh at least I got some decorations behind me in the warehouse to kind of keep us

Speaker 3 [02:06] going.

Speaker 1 [02:07] See, I, I love that you're able to plug your business throughout this thing. Like, it's an unofficial sponsorship at this point. So, to our viewers out there, if you have questions, keep them coming. Text us at 617-336-8560. That's 617-336-8560. So, we asked our first panel, what's the scariest thing they're facing right now, since this is Halloween season. So we'll ask you all as well. What is the scariest thing in the industry right now that you're facing, and since Jason, you were awesome enough to join us last minute, we're gonna throw it to you first.

Speaker 4 [02:48] Sure. So, uh, I think the narrow it down, I think the scariest thing we'd be seeing would be, uh, probably health and safety of our employees, um, you know, screen guards at the registers, hand sanitizers, continuous cleaning, um, that's really our first and foremost priority is making sure that the stores are actually able to open. Um, and then obviously making sure distributors and breweries are able to get the products into the stores, but, uh, you know, keep it simple. We want our, we want our employees to be safe, happy and healthy and be able to keep employment. So that's really for us.

Speaker 1 [03:27] Bart, uh, you're a terrifying, undecided voter at the moment. Uh, what is the scariest thing that you're facing in right now?

Speaker 3 [03:36] Well, I think for our members, it's the continued weakness of the on-premise, you know, both in distributed draft and they're at the brewery sales, you know, the majority of small brewers get the majority of their revenue directly at their brewery. Um, and those sales are A down and, and B, we found in our third quarter survey, you know, about 2/3 are occurring outside. So, you know, that coupled with coming winter, I think is scary and um it's gonna be a tough winter for a lot of small brewers.

Speaker 1 [04:01] Terry, scariest thing.

Speaker 2 [04:04] Well, let's see. Besides the COVID virus, uh, our politics, I think it's the, um, the unknown of the closures that continue to happen, um, and just how people navigate without knowing what the road map's gonna look like, um, and that's when I think the most difficult, like Bart said with the restaurants and just their capacity being lowered all the time, uh, to keep be able to function.

Speaker 5 [04:29] So, um, Bart, let's set the stage here on how much new products mean to craft brewers, and you've brought a slide, so why don't you walk us through that to start.

Speaker 3 [04:37] Great. So, so hopefully, everybody can, can see the slide going up and, and what this is, is I looked through IRI data, and I just looked for all of the brands that appeared in one year, that didn't appear the previous year. So, you know, this is innovation in terms of new introductions, which obviously, some of those might be things that just popped up in scan that weren't there, but I think it's a pretty good measure of, of new things going in and Um, here you can see in the overall beer market on the left, that, that innovation is growing. Um, I think we, we've seen this pretty clearly. This has been a year where, um, you know, the, the beer magazines are more of the seltzer magazines than, um, than they are beer. Um, and so, you know, in overall beer, we've seen that growing. Um, and on the right, then we have, you know, BA craft, so, so small and independent brewers. I think there's a couple of interesting things here, you know, one is how much higher that has been, how important new brands, you know, the what's new has always been uh an important part of BA craft. Um, and I think it's also interesting, so each of these shows, the sales in that year, so for 2018, new brands in 2018, and the yellow, or excuse me, the orange is sales from the year before. So in 2018, That's new brands from 2017, how they did in 2018, and then the grays from two years before. Um, and the Kraft has done a really good job of not only having new introductions, but then having them be a big chunk of the industry in the coming years. And, you know, I think we're seeing that this year with some of the, the hazy IPAs that were introduced last year. Cycling, doing very, very well. Um, I think that's a challenge for the overall. The beer market is, is that it's had a lot of good innovation, but sometimes then that gets pushed out by the next wave of innovation as opposed to growing and, and adding that incremental growth for additional years. So, hopefully, that sets the stage. Innovation is growing in all beer. It's been a little bit more challenged in BA craft this year as people maybe turned to the familiar a little bit more, um, but NBA craft has been more important in recent years.

Speaker 5 [06:24] So what do you think is the challenge for smaller brewers who are creating those brands, and what's keeping them from establishing these products into things that aren't just like one-hit wonders?

Speaker 3 [06:32] Yeah, well, uh, you know, I think, just attention. There's a lot of those new brands out there that are competing for the customer's attention. So, you know, you've gotta find a way to continue to stay out when you know there's gonna be, you know, thousands of new brands coming in next year too. Um, you know, I think the second is, is finding a way to scale it in a way that Still meaningful. Um, I think a lot of, you know, small brewers do a great job as they, they take a brand and they, they sell a lot of it locally, but then, you know, working, not just in your local area, but scaling it up as you, you know, move to new distributors, coming up with new plans and, and finding relevance in markets that are a little further away. So, I think, you know, standing out and then finding ways to actually scale those, those things, so they're not just one-hit wonders or two of the main challenges for small brewers.

Speaker 1 [07:14] Terry, we just heard from three craft breweries, with very different business models on how they're approaching things. Um, Elite Brands, it boasts a robust portfolio of craft breweries from Russian River to Brooklyn Brewery, the brewery, Epic, The Lost Abbey, Modern Times, the list kind of goes on. Um, you've likely sat through numerous presentations at this point, selling you on fall, and that, and on 2021 at this point. How did you approach those resets for fall, and how are you planning for the next year?

Speaker 2 [07:48] Uh, that's a great question, and I think we're in the middle of annual business plan meetings, which is somewhat humorous at this point. We should be calling it next week planning, uh, but like Sam said, I think we're taking it quarter by quarter, and, uh, sometimes it feels like week by week, but we're sitting down and, and the great thing is we have great partners and so we sit down. And just try to look at it together and say what can we do and some of the things we're doing is obviously we're being really cautious on draft um just yesterday Colorado went to a higher level of restrictions, so we're down to 25% capacity at restaurants so we know our draft numbers are gonna probably go down with that and who knows what the future brings. Um, and innovation we were talking about that just with the slide. It's, it is, it is really important right now and uh we find our breweries that are coming out with some thoughtful, um, meaningful and strategic innovation is gonna help the cores as well. So that's what we've been talking about with our brewery partners for next week, next month, and hopefully through next year.

Speaker 1 [08:45] Jason, uh, we're through this period. How did the fall reset period go for you? Were you open to taking numerous new products? I guess, how many did you even take on and how does that compare to previous years?

Speaker 4 [09:00] So ending the summer, we obviously saw one of the busiest summers we've ever had, um, as, as we know, alcohol sales are up quite a bit. Um, we took on, uh, every SKU and every product that we possibly could get into the stores. We actually did an inventory the other day and we're up to close to 5000 to 6000 SKUs just in our Mamaroneck location. Um, and we're trying to kind of reset and see where, where is everything going, where is it heading, you know, we've talked about. Uh, hard seltzers, and we've talked about ciders and, and different styles of beer. I think for us, we're also trying to figure out, we do growlers and growlers in our locations and you can't remove the mask to sample in store, so we've been a little bit hesitant about that. So we're trying to figure out. Where do we go for kegs on tap within the locations and, and where are we heading with, with that format as well. So I think from a, from a reset, um, we're assuming that the stores will continue to be busy through the holidays and into 2021 and we wanna make sure that we have all available products and also support all of the local breweries that are. Um, self-distributing to us and then all the breweries to the distributors so we can kind of keep having this large selection of beer and continuing to support craft breweries.

Speaker 1 [10:19] Jason, we, we heard so much about, you know, the, going back to tried and true brands and the large pack sizes for, for the customers at halftime. How did their purchasing behavior change during, over the last 7 months?

Speaker 4 [10:34] Sure. So I think one of our, I guess you could say claim to fames was our mix and match of our six packs that started back in the early 2000s and being able to break apart anything in the store. Um, and that, while that still hasn't really dropped, uh, we also have seen quite a bit of just buying cases, which for a number of years. No one, no one was really buying cases and 12 packs and 24 packs. Everyone wanted the variety is the spice of life. Why do I need to have a full 6 pack of something when I can do 6 individual beers? So we've seen quite a bit of uptick in large purchasing, um, and formats, uh, quite a bit of mixture of, uh, craft with macro, uh, some cider, hard seltzer. It's kind of a mixed, uh, bandwagon of what people are buying. Um. We've also seen a lot of, uh, some of the more expensive uh bottles that have sat on the shelf for maybe a little bit longer period of time and people saying, you know what, I'm gonna be at home. I might as well take a little bit of a, I wouldn't say risk, but a little bit more of a chance on some products that I've always second-guessed or second looked.

Speaker 5 [11:41] Terry, can you quantify how many new products you've taken on and, and how that compares to the past?

Speaker 2 [11:47] Um, we have, well, we haven't taken on any new breweries, um, since the pandemic, but we've really been focusing on our current breweries and what they're creating in the innovation field, but also their core and how do we keep that focus on the core, um, and also trying to help figure out that deficit from the draft and, uh. And bringing that on, but on the other side we've brought on, um, quite a few new segments if you will, or, or we've invested more in segments. Uh, that beer segment is, is pretty on fire right now. Our hard kombuchas are doing well. Our craft hard seltzers are doing well. Um, and RTDs, things like that. I think there's just that, that convenience piece on the other side with our spirits. Uh, we, we sell beer, wine, and spirit. It's, um, there's a lot of mixologists at home and so anything that they can put in those uh glasses to create something, uh, which they're using a lot of these products they're using a lot of the hard seltzers and hard kombuchas to try to create something creative at home, but I think that's the way we're seeing things and so we're kind of following that. I mean, even the bigs, most in Coors, they're all into spirits and NAS and so we're just, we're looking at, um, at all those categories as well.

Speaker 5 [12:57] That's really interesting, and I used to feel kind of bad about how often I added vodka to hard seltzer, so I'm glad I'm not alone. You are not alone. Um, so, but in a time like this, like Jason mentioned, you, you know, there's no way to sample when people are wearing a mask. So, how is it that you can introduce new products at a time when there's not really any way to sample? Like Terry, you said that hard kombuchas are doing really well for you guys, and that's really interesting because I would, I personally would think that hard kombuchas are a thing that require a little bit of in-person tasting and a big focus on education, and maybe even some handholding. So, how has it been to introduce all of these things?

Speaker 2 [13:32] Yeah it's, it's definitely a new challenge out there and you know first and foremost our staff has to say stay safe. I mean we've been lucky to our industry to stay essential um and our service and so we're out there but boy are they being safe I mean from the mask the gloves to. So they're really not tasting um unless the store person wants to taste so they'll leave a sample or find a creative way. A lot of them are going off of well if it's new let me try it just like Jason was saying they're bringing in everything they can so we've been trying to do that and then also that'll hopefully bring back some of the focus on the core too.

Speaker 5 [14:06] I feel like if it's new, let me try it. It's just a great life, life motto to live by. Jason, how are you guys approaching, uh, new segments and stuff like that? What are you doing in terms of in-store education?

Speaker 4 [14:17] Yeah, I think that's kind of the tricky part. It's, uh, education with a mask and gloves on and having a lot of people in the store at once. It's kind of a fine line of, of a balancing act. Um, we're, we're seeing people getting more and more comfortable with shopping again, um, and then we're also seeing, you know, curbside pickup and a lot of these other facets kind of continue to be, uh, have a robust nature. So I think we're coming into the store, um, we're, we're trying to bring in every facet, any, any new product that we can get our hands on and kind of see what's moving. I think, as I just stated before, people are looking to kind of experiment and try new products. Um, and there's so much stuff kind of coming into the marketplace, uh, still, I think a lot of smaller craft breweries out there who are doing funky new Oreo style. Pastry style stouts or off the wall craft seltzers. Um, I think people are at home and they're turning to alcohol a little bit more and, and, uh, getting together and doing virtual events like this and sharing beers through, through virtual capacity. So we're, we're trying everything new that we possibly can.

Speaker 5 [15:29] So Bart, we didn't have a spring reset. Um, where do you see the opportunities for craft brewers in the back half of this year and early next year?

Speaker 3 [15:36] Yeah, you know, I think it's, you know, craft brewers have the challenge of, of not having, you know, the scale to kind of just command that space. So, you know, they're gonna need to, to tell the story about, you know, bringing excitement and customers into the store. I mean, that's one, you know, we use the, the brewers Association try to tell that, you know, craft has always been something. And that, that punches above its weight at retail and dollar sales, but it's also, you know, part of the excitement in, in getting customers back and shopping, and I think that's more important than ever, uh, for, for retailers right now, you know, they want customers in store as well. Um, so, you know, I think the opportunities are in are in a variety of places around, you know, things that, that, that people are excited about right now. And, and within craft, I think that's it, kind of both ends of the ABB spectrum. So, some of the big, you know, barrel age, pastry stouts, double IPAs that, that Jason was just talking about, um, but also in the lightning sessionable where we're still seeing a lot of craft growth as well.

Speaker 1 [16:30] As we start looking forward to 2021, with the pandemic not letting up, how, how do you all expect the reset to play out next year or next year in the springtime, and I'd, I'd start with Terry there.

Speaker 2 [16:46] Yeah, the, the spring is gonna be interesting. I mean, I think, you know, we're talking the brewers are talking on the other panel about the on-premise influence on the off-premise and how without that it's really changing the landscape a bit of what people are willing to try or what they're going to look for when they go to the off-premise and go look at the sets. Um, I think the data that's been coming out from, you know, Mark Brown and the VA and everybody is helping people determine what is the consumer's. What are they doing now? And we're seeing a few things, you know, like people were talking that we, you know, saw the brand loyalty or the people who are comfortable with something that's what they're buying in big packs and now I feel like it's shifting a little bit. The consumers may be looking for how do they treat themselves. They're gonna be home that night, so how do they try something a little, you know, more expensive or something they never tried before. We've seen a little uptake in the ABV level which, you know, it wasn't long ago it was all sessionable, and now I feel like we're seeing a little bit more of the purchasing. And the and the higher ABV so I think it's gonna be a combination of those things, um, and, and seeing what the stores data is to figure out what they're gonna set and us trying to make sure we're following suit with them.

Speaker 1 [17:54] Well, I, I know my own purchasing behavior, or my own drinking behaviors at home, and there have been moments within this pandemic that I've definitely wanted something higher, ABV. We've definitely run through those moments. Jason, as you look ahead to the spring of 2021, what are you looking to buy? Like, uh, what, what's sort of on the, the slate for you?

Speaker 4 [18:17] Yeah, I think Bart touched on this earlier. Um, I think, uh, juicy, hazy style IPAs have still haven't gone away. I think you're seeing a lot of people still wanting to have pilsners and lagers and sessionable crisp beer, especially when springtime comes around. Um, for a while, big format, 750 mL, you know, 22% ABV style, huge beers kind of left the scene for a little while. Uh, but as we said, people are now home and are looking for new, new things to do at night, so those are starting to come back a little bit. Um. I think we're trying to figure out just from a sales perspective, uh, we want to bring in everything, we want to feature as much as possible, uh, you know, we, we were talking earlier before about hard seltzers and uh sessional beers and IPAs and lagers. I mean, you can go across the board, but, um, we, we think core brands allowing people to kind of get into the store. Get a 12-pack or a case of brands that they've fallen in love with over the past 1520, 30 years, get that, and then also try to bring in all the local guys and support them as much as possible. So, it's kind of a good eclectic mix. You can get macro, you can get some small craft brands, you can get your core, Sierra Nevada, Dogfish, Boston Beer Company, Sam Adams, uh, and I think just kind of allow everyone to To have the, the, the opportunity to buy whatever they wanna buy. I, I wish I had a crystal ball, uh, but I think we're gonna go with the shotgun effect to buy everything and see what moves. I wish I had a better answer.

Speaker 1 [19:52] Well, Bart, do you have a crystal ball? And if so, beyond hazy IPAs and hard seltzers, what do you think might be some of the products in 2021 that we're, we'll all be talking about?

Speaker 3 [20:06] Well, you know, I mean, I've been saying for years, I don't think there's gonna be one thing that, you know, replaces IPA is kind of the next big thing in craft. I mean, it continues to take share and so, I think we'll see new variants there. Um, you know, I've been thinking a lot about what kind of innovation means in a time when, when people are, are shopping differently. They're not spending as much time, and so I think you're gonna see a lot of brewers focus on, maybe this is an oxymoron, but pre predictable innovation. Um, you know, things that are new to that company or brand but might be familiar to the customer. Um, and so I think we're gonna see some of that. I think we're gonna see, you know, brewers doing more of the, the rotator series. I think that's another form of this kind of predictable innovation where, you know, we're giving you something new and different, but in a format and a brand that you already know and like. Um, so, I think that in the short term, I think is what some brewers are gonna be focused on. I still think there's a lot of interesting things too, in, in combining, you know, the flavor that craft brewers are known for with lighter sessionable, which is gonna be more important is that millennial demographic ages and looks for a little bit lower ABV. So, you know, some of the Pilsners, there's interesting spins there, you know, Italian-style pilsners. Um, I know they're just kind of, you know, dry hop versions of, of light things, you know, gold, blondale. Um, I think there's a lot of growth opportunity there as well.

Speaker 5 [21:20] Really interesting point on how people are shopping differently. I feel like this was the perfect time for supermarket sweep to make a comeback, and it is one of my life goals to be on that show. But, um, so Terry, I know I feel like we've, we've kind of danced around this, this topic, but in the early days of the pandemic, you know, all we were hearing was that customers were really gravitating toward trusted brands, stuff they knew, stuff they were familiar with, and larger pack sizes. So, have those trends changed at all, and have you advised your brewery partners on what they need to be giving you to meet that market demand?

Speaker 2 [21:51] I do think it's been changing a bit and again who knows what the consumer is gonna do next? I mean, I think this whole pandemic has been such an emotional effect on people's purchasing habits. I mean, most people get on their phones at night. I mean, I mean, I wish I was part of Etsy right now. I'd be, uh, be another business, but, uh, but I think there's, there's so much emotions that go into. People's buying habits and trends and I think now that we're realizing we're not out of this for a while and I'm gonna be sitting here a lot longer at night they're going to look for that. So our brewers, I think, are trying to be as innovative. I don't know. I like that part, the predictable innovation, um, because how risky do you wanna go at this time, right? where everybody's already hurting and so how risky do you wanna go? So maybe that predictable innovation. Not a bad idea. Um, I think packaging is just tough, right? There's the, the can shortage, which I'm sure we're gonna talk about, and, uh, some of the raw materials upstream that are causing challenges. So what are the, what's available, um, to, can we change some packaging that would be that would fit this time and place when you're at home by your fridge more, um, not at a bar or a restaurant as much as you were?

Speaker 5 [23:03] So Jason, are halftime customers looking for those larger packs, and if so, do you want to see more of those from craft brewers?

Speaker 4 [23:10] Yeah, people are looking for large packs. They want to get into the store. They want to wear their masks. They want to sanitize their hands. They want to throw as much in the cart as possible, leave the car running, and kind of get out the door. So I think it kind of allows them the opportunity. Uh, to get craft beer, to get what they're looking for, and to get in and out. Um, I think it's a, I think it's a great idea. I know we've seen, uh, 15 packs and, and, uh, 18 and 21s and all the new, new essence of these larger scale packs kind of come over the past couple of years, um, and I would strongly encourage that. I think, uh, a mixed 12 pack was A foreign site in the store for a couple of years because that kind of stopped. Happening, these explorer variety packs, and I think even that's starting to kind of come back around where you can get into a store, have 12 or, or, or 3 or 4 different style of beers in a pack and, and, and get out, uh, allows someone to experiment with the brewery but also have a bunch of different styles. Uh, at the same token, have 15 or 18 beers at the same beer, and it's just in a larger pack and they can get in and out as well. So, if for COVID rules and standards, I would advise, yes, to, to, to do that.

Speaker 1 [24:21] Or how, how much of craft beer flows through those larger pack sizes, and how equipped are brewers to meet demand for 12 packs and up?

Speaker 3 [24:30] Yeah, I, I'm glad you asked that cause, you know, that, that's certainly is something I think we're gonna see some brewers lean into, but for most craft brewers, doing a 12-pack is just not something they have the equipment or the ability to do. Um, I pulled some IRI data and, and we have seen 12 packs and, and to a lesser extent, you know, larger pack sizes, 1524, 30 increase. Um, but 6 packs are still, 6 and 4, you know, are, are still the majority of, of craft beer. So, um, in IRI at least, for instance, 12 packs, which are the second largest behind 6-pack, have. Gone from 29 share of volume to 31 share of volume. So, we've seen a shift, but it's, it's not huge. Um, and I think a lot of that is, is just that brewers can't produce those. Um, so I imagine if we looked at the brewers who could produce 12 packs, that shift would be bigger, uh, because, you know, I think the customer is demanding, right, that, that right now, and they are shopping differently, but, you know, most brewers, they're not gonna make the investment in a piece of capital equipment for something that, that might last a year or two and then everybody goes back to buying six packs like they did before.

Speaker 1 [25:29] Jason, uh, how are retailers such as Halftime accounting for those larger packs and fitting them into their shelf sets or floor cooler space, and what's it coming at the expense of?

Speaker 4 [25:42] Yeah, so I mean, Bart makes a great point just based on packaging and cardboard and supplies even on, on, on short basis runs. So it's tough for a lot of these breweries to kind of scale up and do that. Um, Luckily for us, we have the location I'm in right now is 20,000 square feet of beer. So our cooler doors, you know, one of the largest beer coolers in North America, and we have plenty of space for all of the 12 packs, 15 packs, 18 packs. Nothing is really at the expense of anything because we have the square footage and the space, um, but I think from a, from a craft brewery standpoint, they need to be able to kind of weigh the odds of, you know, 4 packs and 6 packs and how they're currently generating it, um, and is the ROI kind of essentially there for them. Um, but for us. We're able to kind of take on anything and everything, but from a typical retailer standpoint, um, they'd have to kind of look at how their shelving is, and a lot of them have the mixed singles, so you're able to pick 16 ounce cans out of the fridge or 4 packs or 6 packs. Um, but I guess it's based on kind of bottle shops and some of the smaller guys out there that might not be able to take it on, but That's kind of the benefit of us being a package store or a home that's able to have the square footage and floor stacks and different racks for it, so we're kind of set up for it. Terry, what,

Speaker 1 [27:04] what are the conversations that you're having with brewers on those packs? Uh, like if, if a craft supplier came to you and said, I, I, I wanna do 12 packs, are you gonna be able to take them? Are you gonna have the retailers that are gonna want them? Is it a case by case basis? How do those questions, or how do those, uh, conversations go?

Speaker 2 [27:24] Yeah, we, we had that conversation a lot because, uh, obviously right in the beginning of COVID that's what everybody was going to, so we're like, well, do we jump into that? But just as Bart was saying, not everybody has the capability of doing that. What we found, uh, at least for Colorado, is the mixed pack, the mixed 12 pack is typically the number 2 SKU from each brewery for us. Um, it's usually the one that's selling right below their number 1 or their flagship, uh, and that's the variety pack. The single SKU 12 pack we have not found um for craft I think it's a price point thing or I'm not sure but probably a price point is that's not pulling as fast so we have not been having hardcore discussions with our breweries to try to get the single SKU 12 but the variety pack we find is key uh for all the reasons that have been stated here it's it's always been pretty strong, but I feel like, uh, during the COVID and the COVID buying time, uh, that it's been even been even stronger.

Speaker 5 [28:20] So a friendly reminder for everybody at home, you can text your questions to 617-336-8560, and we will get them answered. Um, just got an audience question that is near and dear to my heart, because I feel like, you know, we've been covering the, the fact that the, uh, souls of, of 10 billion unhad cans are haunting all of us to make this a little bit spooky. Um, so there's a can shortage, there's gonna be a bottle shortage. Packaging is really tough. What do you guys think about more 5 L packaging options for craft breweries, mini kegs, I don't know, wine Tetra packs? Could we see some really weird stuff in the next few months, or do you think brewers are just gonna stick to tried and true cans and bottles? All right, let's start with you.

Speaker 3 [29:03] Sure, you know, I would say similar things to what I just said about 12 packs, you know, is, is a brewer gonna invest in putting beer into a new format, you know, without, without commitments that people are gonna buy it, and, and are the customers asking for this. You know, the reason that we have a shortage is cause the customers want certain things and they're buying lots of it. Um, and so, you know, I'm always up for a, a brewer trying to zig when everyone else is zagging, and, and we'll probably see this at some small scale, but, you know, customers are buying particular things, and that's why we have a shortage. And so, trying to avoid that as opposed to trying to find ways that you can, you can sell what the customer wants, I think it's gonna be a challenge. Challenge. So, it'll probably lead to some small invasion. We'll see some brewers who, who have the ability to try this, you know, maybe try it in smaller brands. I'm sure we'll see some of that to go from the brewery, um, as a way to get some volume out the door, but I don't think this is gonna be a meaningful shift because there's a shortage because people wanna buy those things.

Speaker 5 [29:57] Great point. Jason, do you guys carry any of these off the wall packaging options?

Speaker 4 [30:02] We used to sell the 5 L, the, the BSG mini kegs, um, as kind of an other option. We actually just did an event with Captain Lawrence and Snyder's pretzels that crashed our website, um, where we actually filled the 5 L kegs with a Snyder's pretzel on top and We had 1300 orders come in in 6 minutes that crashed the site. Um, so that could be an innovation standpoint. Um, I know that, you know, growlers and growlers and trying to get more draft out into the marketplace, but as you know, everyone is kind of stopped, stopped with draft. Um, you know, uh, uh, it's, it's tough to see. I, I, I would love to see some innovation. We would adapt, we would try whatever's out there. We'll sell whatever the breweries can send us at this point. We know, everything's constantly changing, but again, it's kind of hard to To make this huge drastic change for 369 months, maybe it's a year longer. I don't think anyone knows. And then all of a sudden one day there might be this magical pill and every, everyone's fine and they had invested a ton of money, these canning lines and everything else out there, uh, as I can attest, we're next to a brewery here. All those products are very expensive, so.

Speaker 5 [31:12] Definitely. Terry, do you guys have any, you know, room in your warehouse or your hearts for any of these strange packaging options?

Speaker 2 [31:20] I like the strange word, uh, you know, I, I'm curious on what somebody could come up with, right? You never know what they're gonna come up with, but we don't have a lot we don't see any of our breweries again as the investment point that are looking at doing this. Uh, I think the mini kegs is interesting. We do have one of our Belgian breweries that's, uh, sending some over on the next. Container, uh, and after you know, uh, Jason's story there, I think, uh, we'll do it, um, but to sell them a mini kegs, I think again that could be when you think about I'm home, I've got more than just me at home, how do I do something a little bit different, uh, and creative? I think that could be one of them, but I haven't seen anything else. Tetra packs would be difficult, I think.

Speaker 5 [31:59] Yeah, I don't know how it would hold carbonation, um, or maybe we can just make sure everybody gets a keggerator and they can all have 60. I wanted to register one and for my wedding, and my mother told me I drank too much beer as it was, so wouldn't let me, but Um, Terry, what kind of conversations are you having, uh, with suppliers about innovation? How do those go right now?

Speaker 2 [32:20] Yeah, well, I mean they're brewers and doggone good brewers for a reason, right? So we really listen to where are they coming up with their ideas, what's what's working, what's, you know, they, we work on giving them data on what we see is working and not working and then they really bring their ideas forward and I've been super impressed by some of the um. The innovation they've come up with that doesn't like, you know, freak you out but uh makes you hey what's gonna happen to that logger a series of different loggers very cool. What, what different things can you do to a pills, uh, that will tweak somebody's interest so they've been bringing a lot to us and I, I feel like they've been really thoughtful again they're trying to adjust with. The times and how do we make up for that deficit with the draft and uh I, I think they're doing a great job so we just um we share we share our experience uh what our sales team is saying out in the marketplace for everything from the big big stores here in Colorado, the big, big alcohol stores, and the little guys. Right, and out of, uh, we support the locals and support the bigs all at the same time because it's, you know, they're, they're all everybody's everybody's suffering out there, everybody's doing things differently to make up for that deficit of whatever they've lost during this time. So we're pretty open, um, I don't think we say no much right now.

Speaker 1 [33:31] Speaking of that loss, uh, has much draft production come back through your warehouse, or is it a lot of six stools at this point?

Speaker 2 [33:41] Yeah, so obviously when it, uh, the restaurants closed down back in March it was a little devastating like stop the kegs, um, from coming in, but, uh, and we've just been really, um, cautious with our purchasing and we're looking at again what are what are the restaurants that are open, what are they doing? We're finding they are either. Going with, um, half barrels of core or inexpensive uh value beer uh or they're looking at 6 stools to have that variety and be able to, you know, if they have to go food and have to go beer that they can they can kick kick that ring up a little bit by, uh, putting an extra, you know, growler or growler or, you know, to go cup, uh, full of beer on there. So a lot of the 6 stools, I think is really what we're hearing the most of out there.

Speaker 1 [34:23] And one more for you here, Terry, uh, we're in seasonal beer season, and how, how is that playing out for you? Is it pumpkin beer again? Is that a thing, or, you know, have all the pumpkins been returned to the jack-o'lanterns at, you know, Wegman's and Stop and Shop?

Speaker 2 [34:42] Uh, pumpkin's back this year. We, uh, we never know, right? Going in, but this year we've seen a, a nice, uh, shift back to the pumpkin. All of our pre-sales and the beers that we have in stock are selling really, really well. So, uh, we were pleasantly surprised by that as well as seasonals. I, and again I try to go back to where's the mental part of, of people. Being at home and I think they're trying to create a uh an event right trying to create something so be it pumpkin or spiced or you know scary Halloween stuff uh what is it they can purchase that they could create that experience at home, um, instead of going out to somewhere to get that so I, I feel like all those innovations and the pumpkins again this year are doing well.

Speaker 1 [35:24] Jason, are you seeing some of those trends play out uh in your stores?

Speaker 4 [35:29] Yeah, I mean, seasonals, and I'm sure Terry can attest to this better than I can. Over the past couple of years have sometimes been a little bit of scary. Uh, do I buy too much? Do I buy too little? Does pumpkin run out in August when it should last through October, uh, winter seasonals, you know, on our end, we've seen a lot of distributors kind of not buy as much on the seasonal end. So typically our summer seasonal sold out in spring and our pumpkin ended in August and our winter seasonal came in a couple of weeks ago. Um, so from a seasonality standpoint on the beers. We're seeing people want to buy more and more and more of that product, but I think at this juncture, a lot of people are nervous on what to bring in and too much of, of one thing. So, uh, we're seeing consumers want it. We're not sure if the distributors, distributors on our end have taken a little bit more of a less of a risk this year, which I don't blame them, especially on draft sales and what else is going to come in, so.

Speaker 1 [36:30] Bart, how are those seasonal trends playing out in the numbers that you're seeing?

Speaker 3 [36:35] Yeah, you know, seasonals are doing a little bit better this year. Um, I think some of the reports of, of seasonal success is, is just a change of perception, you know, for years, we had seasonals that, uh, you know, uh, overpromised and underdelivered, and, and this year, I think people had their expectations low, and they've, they've exceeded those low expectations, and so, you know, that's a success for seasonals. Um, you know, in scan data, we have seen seasonals, you know, reverse some of their declines, but, you know, they're not taking back share from IPAs right now. So, I would kind of go in between, you know, the, the seasonal is back and, um, certainly seasonal is doing better than it, than it used to, but it's not a, a full recovery, and, you know, we'll see how that cycle next year too now we've gotten slightly better numbers.

Speaker 5 [37:19] Great audience question and and friendly reminder if you want to send a question to these guys, you can text it to 61-733-6-8560. Um, great one just came in. Given the shifts the pandemic has thrown the industry into, what do online sales in 2021 for beer sales, what will online look like, and then what role will wholesalers play in in these sales? Terry, have you guys had these conversations?

Speaker 2 [37:42] Yeah, uh, like we're talking about, there's so many people are ordering online on their phones, uh, you know, their Instacarts or anything that gets, you know, grocery delivery that can also deliver beer. And so the question for us is how do we get our place in that? How is craft getting a place in, in front of when you open your app for the beer section of whatever store you're shopping at? How does the craft show up there, um, and so that's, that's something we're working with other. You know organizations that do online ordering and trying to get our place in there and make sure our brands are first and foremost because I think that's the hard part is how are they getting the attention online, uh, that you don't get when you're going to when you go to a store you get to see it all right and touch it and then somebody may be standing there to help you. Uh, figure out what you're looking for and all those options are kind of gone now. People aren't going in as much and, and like Jason said, people are going in, getting what they need and getting out and, um, and you don't have hand sellers or people standing in the, the aisles anymore. Those aren't, those things aren't happening and so it's gotta figure, figure out a way to get craft in the forefront and again those those buying trends of the. The consumer right now might actually put those up there naturally uh for the big stores as well. They're making more money on craft and uh they can get that out the door with their normal you know 24 pack of whatever it's gonna help them as well.

Speaker 5 [39:04] So Jason, you shared with us a little bit ago, you had uh an item online that actually was so popular it broke your website. What does e-commerce look like for halftime? How do you guys approach this?

Speaker 4 [39:13] Yeah, so we kinda have the three different facets, uh, order online, pickup in store, which we're restarting to relaunch that. Um, so our phones aren't ringing all day for curbside pickups. Um, we've also launched, uh, which a lot of other people have, which is Drizzly, uh, which is another delivery platform, and then, We, we ship beer direct to consumer as well, which has kind of been our bread and butter over the past 1015 years. Um, and that has seen a major uptick as well. Um, so I think from our standpoint, uh, we've definitely added on new facets with some of the pickup in store and drizzly and then our direct to consumer, but Uh, we don't think that's going anywhere for the foreseeable future, especially with alcohol sales. You're seeing that, uh, online purchases have basically doubled, and, uh, people that now were used to Amazon Prime are now learning Amazon beer shopping but not using Amazon, using basically anyone that can go online and purchase the product. So, um, we're, we're pretty confident and excited for the future with that. We think it's a new, new wave of beer shopping and uh. You know, you're seeing breweries as well, not only us who are, who are legally allowed to ship into certain states are following suit as well. So I'm curious to see what happens down the road.

Speaker 5 [40:31] Bart, what are you hearing from BA members about e-commerce? Is this something that they're considering?

Speaker 3 [40:36] Yeah, I think a lot of them are, are interested in exploring opportunities. Um, you know, I would, I would echo what, you know, Terry and Jason said that, you know, I think there's, there's a lot of growth potential there. Um, you know, that was true of e-commerce in general. I mean, the trends have been, you know, up for, for years and overall, and beverage alcohol has lagged and And this was really an awareness event for, I think a lot of consumers who may not have been aware. Um, I haven't seen hard numbers on this, but I would have to imagine the percentage of people who are now aware, they can buy beverage alcohol via e-commerce has gone up. Um, and they found new ways to do it, you know, whether it's pick and click or drizzly or some other, you know, delivery service or, you know, direct from a brewery. So, I think we're seeing a lot of brewers navigate how they can, they can do this and actually make money, um, you know, selling beer and making money. on beer are two different things. So figuring out the platforms that work for them and, you know, you add, you know, add another partner in there, does the margin still work? And I think you are gonna see brewers where it makes sense, look to develop this and, and a lot of brewers who, who saw their kind of one main channel lose a lot of volume, try to build that in as part of a, a more robust portfolio of selling channels going forward. So I think there's gonna be a lot of interest and we're gonna see, you know, brewers um invest in figuring out how to do this more in the coming years. We've heard a lot of

Speaker 1 [41:52] scary stories about the unrelenting haunting of out of stocks. Are those tales real, or are they all a bunch of hocus pocus, and I'll ask Terry that.

Speaker 2 [42:04] Way to slip in the word hocus pocus, Justin, uh, well, I mean, we, we see our, our brewery struggling with different things what I call the upstream and that's, uh, I, I, I believe it's real, or, uh, they'd be making us some more beer, uh, if they could, right? And, uh, I have been impressed by the innovation in creating whatever they have in their warehouse or figuring it out. I've seen, you know, multiple local breweries here in Colorado, including some of our bigs. You know, wrap a a can that had something else on it before because they had it in their warehouse or, you know, just getting really creative with what, what supplies they do have while they're waiting for their shipments to come in. So I, I don't think it's focus focused. Uh, I think it's a real challenge, and, uh, I commend our breweries for working as hard as they are to, to keep the stocking going.

Speaker 1 [42:53] Jason, how big of an issue have out of stocks been for halftime?

Speaker 4 [42:58] Um, I would say pretty huge, um, more on the macro side of things, so on the, the bigger brands, I think from a craft standpoint, uh, they've been able to kind of shift and be a little bit more nimble and move away from draft and get more into package to us. Um, but on 36 packs across the board, we've seen, uh, huge issues with stocking, um, even on 12-pack cases, more macro brands. Um, but we have seen a lot even with import, you know, getting, getting it, getting a lot of beer back into the country through freight and, and exporting and importing, um. So we've seen a lot of, of brands struggling to kind of keep up with demand or create it, um, but I think at this point we're starting to see a little bit more back to normal, um, and things starting to even out, uh, quite a bit.

Speaker 1 [43:51] We have an audience question that came in uh for Terry, for e-commerce, seasonal beers with the same UPC are an issue. Would wholesalers and retailers prefer unique UPCs

Speaker 3 [44:02] for each beer?

Speaker 2 [44:04] Oh, that's a million dollar question. Uh, we find that the, um, it's really hard to change the UPC code for big stores and and specifically chains, so the same UPC typically is easier to get into the set. So that's where we, we advise that way.

Speaker 1 [44:22] Jason, what, what's your advice on that one?

Speaker 4 [44:26] Um, we would always prefer, uh, Um, unique UPC codes on every single solitary product, so it rings up. What we do is when we generate a sale, we generate the same UPC and then they can either buy it by the bottle, the 6 pack, 1218, and then our employees have to go through it. There's an issue sometimes with inventory by ringing that up. If it's the wrong UPC code and there's a cinnamon roll stout versus a maple cinnamon roll stout, you have to make sure that the employees checking the SKU and the inventory to make sure it matches up. So if you have a different UPC. It kind of makes things a little bit easier how we book it into our point of sale. But at the end of the day, it, it's not easy and for, for breweries and distributors, I, I, I, I would rest more on their shoulders and make sure that it's, it's whatever's faster, easier and more effective and more efficient to get it to us. I think at the end of the day, it's, it's kind of working with a partnership. So I don't wanna make it more of a pain in the butt for Terry than it needs to be. So that's, that we, we'd err on the side of caution with that.

Speaker 1 [45:28] Bart, we've got another audience question and uh, I'll throw out the number again for anybody that has questions. The number is 617-336-8560. Um, Bart, are breweries having to pull back from their normal distribution area due to the can shortage?

Speaker 3 [45:47] Um, you know, I think it varies on brewery, you know, their size, what their, their distribution was, and, um, and, you know, their ability to get cans, you know, we had brewers who had stocked up beforehand. Um, we are seeing that some, you know, we have brewers who have pulled back from areas because they can't supply them, um, you know, and, and often their sales are up in their homes. Market as well, you know, their, their typical core market. So when you combine that with, with the can shortage, it has caused some brewers to pull back from, you know, secondary markets that are a little bit less core to them. Um, but it varies based on brewer, you know, and their availability to get stuff and, and that's probably gonna continue for the next year or so, um, as we, as we try to get more capacity coming online.

Speaker 1 [46:28] Someone else wants to know if that's your natural hair color on your head or your face.

Speaker 3 [46:34] Yeah, I, I dye the beard, you know, I, this is the natural color, clearly.

Speaker 1 [46:40] Perfect. So, we've got another audience question. Terry, are, are, you've slowed down on the, the amount of new suppliers you're bringing in due to COVID. Do you see that switching at any point?

Speaker 2 [47:01] Oh I'm sure I mean everybody likes what's new and hot coming up and uh we've just been cautious, right? Trying to make sure we're taking care of our current uh portfolio but we have brought on a couple new suppliers but not in the beer categories um you know, anything that can go into those cocktails. That's been a pretty big thing for uh for our consumers here so yeah but we I think we will I mean um we we can't sit back all this time and just wait for, you know, COVID to go away uh we are always looking for the right partners and we're in a lot of discussions we just haven't launched any, uh, we're just trying to find the right time that makes sense for for them for us and that we feel like they could actually, you know, get get peace of mind in the marketplace during this time.

Speaker 5 [47:43] So consumers may have gotten through the summer with safer outdoor gatherings, but that's not gonna be an option for, for the holidays for half of the country. So, as we look into the holiday beer selling season, like Terry, how are your your Q4 orders compared to those from last year?

Speaker 2 [47:58] You know, interesting enough, quarter 4 is doing great, uh, and, and especially I think September, I think most people will talk about how great September was, uh, being at that, you know, Labor Day was right at the end of the first week, we had a whole week in September and we had extra, uh, business days in the month. It just was a great. The month and so I think it gave everybody a lot of confidence and then we've seen it roll into October so we're, we're pretty optimistic, um, again we do beer, wine and spirits and, uh, we know the spirits are, are up a lot across the board. So but we get, but across the board we're doing well and I, I think O&D could be pretty ridiculously good. With everybody buying and going home to celebrate, um, to, to make up for, you know, uh, what they're missing out for not being able to go out or have holiday parties and that kind of stuff so we're we're pretty excited and optimistic.

Speaker 5 [48:46] Well, that's a bit of good news. Jason, how are you guys planning for the, the holiday beer selling season? Like, what's your merchandizing plan? Are you, are you putting in huge holiday displays, or are you taking it kind of, you know, a cautious wait and see approach?

Speaker 4 [48:59] We're putting in huge displays. I think that we've seen such an uptick throughout, um, the spring and summer and even through the fall. Uh, we started to see a little bit leveling out in September and October with sales starting to dip down a little bit to more normal levels, but they're still up, you know, 20%. So I think we wanna offer the same experience, um, that customers are generally able to get when they come to halftime with big displays and floor stacks and display, you know. I think we wanna kind of keep somewhat normal, normal, some normalizing going on throughout this. So if we want people to come in and say, you know, we're used to these displays and interacting, uh, we, we'd like to offer it to them.

Speaker 5 [49:43] That's great. Bart, what's your kind of sense for what Q4 is gonna look like, cause I, I have a feeling holidays, you know, might be a little bit different. What, what are you thinking brewers should be expecting?

Speaker 3 [49:53] Yeah, I think it's gonna be a mix, you know, October, November, December is often a great time for craft brewers. They have a lot of, you know, specialty beers that released this time of year. They have, um, you know, things that are full of flavor that I think match well with the holiday season, you know, both Thanksgiving and Christmas. Um, but obviously, it's gonna be different. So, you know, some of that package sale may actually be better for many brewers. The specialty releases may go as well, if not better. Um, but some of the draft is obviously still gonna be down and, you know, I think as the weather gets colder, it's gonna Be harder to, to see that market bounce back. So, um, you know, and, and it's just gonna change some of the patterns. So, you know, that, that Wednesday before Thanksgiving is often a, a really big on-premise day. Um, does that volume shift to the off-premise? How much, or do people still try to have those, you know, events in outside, or, um, I think there's a lot of variables we don't know, but I think it's gonna be, you know, an opportunity for craft brewers hopefully to get some, some sales on those specialty beers before we hit winter, and, um, you know, we're gonna look for ways to promote that as we can.

Speaker 1 [50:52] This thing has flown by, uh, I, I gotta ask you this question, Bart, because we're probably gonna get it nailed with it a million times before we get out of here. How are the brewery and planning numbers looking, and how has that changed since the pandemic began? And I guess if, if you have any updates on openings and closings, throw those out there too.

Speaker 3 [51:13] Yeah, I don't, I don't have, uh, up to-date openings and closings data though. we'll be looking at that and, and I think it's pretty similar to what we saw at mid-year from what I've been watching that, that openings are down some, uh, but they were down prior to the pandemic, and so we're gonna be down a little bit this year. We're not gonna be 1000 openings. We might be 800, 700. We'll see how much it tails off at the end of the year. Um, and closing still, you know, there's closings for sure, uh, but they haven't, we haven't seen the apocalypse yet, um. You know, we'll see what this winter brings. Um, in terms of planning, we have seen that weaken. We see that both in our brewery and planning membership number, um, and in the TTB numbers, which the, the latest quarter, uh, which they released at the end of September, that permit growth was the slowest we've seen in, in a number of years, and I think we're just gonna start to see that show up. I mean, throughout the last 67 months, you know, some people have asked if that's dropped, and it's worth remembering that a lot of those breweries and planning were ones who Started 2 years ago. They raised money, they found a facility, they invested in equipment, you know, they were gonna be damn sure that they opened and, and so I think we're really gonna start to see that play out over the next 6 to 12 months where the people who now have had a little bit more time, didn't have all the money in their bank account, you know, and really have to decide if they're gonna go forward with this, um, you know, continue to do so. But, you know, in the long term, the demand is there and, and I think we will see some people still open.

Speaker 5 [52:31] Thanks, Bart. So, uh, we're almost at the top, we are at the top of the hour, so we're gonna go lightning round for our last question in keeping with the theme of, of this being spooky Bretox and Halloween is Saturday. Um, so for everybody, well, I'll start with you, Terry, but what has been one trick and one treat for this year? So one trick, something that surprised you, maybe in a good way, maybe in a bad way, and one treat, something that actually was pretty good and it's making you feel better about 2021.

Speaker 2 [52:55] Oh my gosh, um, the trick was, um, we have to think of everything differently and how do we do that and, uh, pull the team together. And our treat was, um, when COVID struck, we had 5 people on our staff who were pregnant. So we've had 5 babies, uh, elite babies during COVID, so that's definitely our silver lining.

Speaker 5 [53:18] That's so exciting. What is your favorite candy?

Speaker 2 [53:22] Favorite candy? Oh, depends. I'm either a licorice girl or a dark chocolate.

Speaker 5 [53:28] Interesting, very interesting. I don't think that we ever really get anyone saying licorice up front, so

Speaker 2 [53:33] I did it. I did it.

Speaker 5 [53:36] Uh, Jason, what is your trick, your treat, and your favorite candy?

Speaker 4 [53:41] Trick would be the amount of money we spent on hand sanitizers, sneeze guards, gloves, um, cleaning supplies, um, worth it, very expensive. Um, treat would be watching the brewery next door to us open up and getting some traffic in there, seeing some people smile, have beers outside, walk their dogs, bring their kids, some normalcy back. And favorite treat, hands down Reese's pieces all all day. Big peanut butter chocolate guy, so.

Speaker 5 [54:16] Nice. You wanna give that brewery a shout out? Who,

Speaker 4 [54:19] I don't know if you said, uh, decadent ales here in Mamarin. Yeah,

Speaker 5 [54:23] awesome. Bart, what's your trick, your treat, and your favorite

Speaker 3 [54:25] candy? Yeah, I think my trick is, you know, COVID hitting the, the part of the craft brewing business that was growing the fastest was at the brewery sales. I mean, that's, that's so tough for brewers when that was their business model and, and that really getting hit, um, you know, a treat is the brewers have been able to pivot, you know, it's been great to see the, to go. Sales, the delivery, the DTC, the, you know, the Crowlers be able to make brewers, you know, get through this, and, and then that closing rate hasn't gone up, at least yet. Um, favorite candy, you know, Terry and I are gonna end on an agreement. I, I'm a, I'm a dark chocolate guy, so, uh, you know, dark chocolate all day.

Speaker 1 [55:02] And that's the 3rd and final Brew Tas event of 2020. Thank you all for tuning in today. A big thank you to our partners at Dogfish Head for once again sponsoring this year's series. Although we couldn't be sharing beers with you all in person, we're glad we could do it virtually.