Beer’s Weirdest Year

Breweries are used to chasing changing tastes; war and boycotts are another matter. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

November 19, 2023 Read in Browser Good morning and happy Sunday.   The kings of brewing have already struggled for some time to devise a strategy for selling all the craft-beer brands they stockpiled over the last decade. Throw in questionable marketing tactics, changing consumer tastes, and the war in Ukraine and you've had a particularly odd and challenging year for the beer industry.   But before we crack into another hefty newsletter, let's hear a word from our sponsor.   It's no state secret that the market is, to put it mildly, in a state of transition. Nine months ago, with inflation still raging, the prospects for a soft landing felt bleak. 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Take pity on the sector's major players — they've had issues.   It's an especially dark time for Bud Light. As part of an ad campaign to coincide with college basketball's March Madness, AB InBev partnered with transgender actor and influencer Dylan Mulvaney to promote Bud Light, a move that many loyal drinkers of the US' top-selling beer didn't appreciate: A boycott ensued, and by June, AB had lost $27 billion in market value, and Bud Light lost its No. 1 spot to Modelo Especial, which is ironically owned by AB InBev everywhere else in the world outside the US. In an effort to recover its mainstream bona fides, Bud Light recently signed a deal worth more than $100 million to be the Ultimate Fighting Championship's official beer in 2024. From Russia without Love: Denmark's Carlsberg has been toiling to set up a sale of Baltika, its Russian-based subsidiary of eight breweries that saw profits double to $110 million in 2022 even as Carlsberg took a $1.4 billion write-down on the division.   When the company announced this June that it had finally found a buyer, Russian President Vladimir Putin, who prefers green tea to alcohol, ordered a "temporary seizure" of Carlsberg's stake. The struggle intensified last week when Russian authorities arrested two Baltika executives and charged them with fraud.   "There is no way around the fact that they have stolen our business in Russia, and we are not going to help them make that look legitimate," Carlsberg CEO Jacob Aarup-Andersen said recently.   My Goodness, My Guinness: Last week, Diageo, the makers of iconic Irish Guinness stout and Johnnie Walker whiskey, saw billions of dollars wiped off its market value after it warned of slow sales in Latin America and the Caribbean, a region that accounts for about 11% of the company's total sales.   Diageo blamed "macroeconomic pressures" (hello inflation) and said customers were opting for cheaper products. On top of that, Diageo's organic sales in North America — where nearly 40% of its business is done — were flat in fiscal 2023 after soaring 14% a year earlier. Diageo expects to recapture that lost ground in 2024, but that'll mean a whole lot of money going toward marketing campaigns. (Photo Credit: Frank Luca/Unsplash) Macros Go Micro and Back Again At the start of the 2010s, beer drinkers were still mostly consuming affordable, domestic iterations produced in huge commercial batches. But then came the dawning of the craft beer era, spurred by an interest in unique flavor profiles and higher alcohol contents. In 2014, after several years of double-digit growth rates, craft beer's retail dollar value was estimated at $19.6 billion and represented nearly 20% of the beer market share, according to the Brewers Association.   The trend wasn't lost on the beer industry's giants, especially AB InBev, which for years had seen decreases in both Budweiser and Bud Light sales​. So, the big players began buying up all the small breweries they could. Throughout the rest of the decade, the company purchased regional craft breweries including Chicago's Goose Island, Oregon's 10 Barrel Brewing, and Craft Brew Alliance — a brewing company based in Portland, Oregon, that was originally composed of five beer and cider brands — and more.   But for craft beers, what went up most definitely came down, and the fallout has proceeded swiftly: In January 2022, Molson Coors sold San Diego's craft brewer Saint Archer after owning it for seven years. Constellation Brands sold Florida's Funky Buddha Brewery in Oakland Park and Dallas's Four Corners Brewing this past spring back to their original, respective owners. In the summer, AB sold eight breweries to Tilray, Canada's largest cannabis producer. And maybe most tragically of all, Sapporo liquidated and closed San Francisco-based Anchor Brewing — one of the oldest breweries in the US — after owning it for just six years. Chris Ericson, owner of the Lake Placid Pub & Brewery in Upstate New York, said the biggest hurdle for any craft brewery is expansion — getting in more stores — and that problem doesn't go away just because a macro brewer acquires the company. There's still only so much refrigerator space at convenience stores and supermarkets.   "(The macros) thought they could buy successful, regional craft breweries, ride their coattails, and hopefully expand distribution," he told The Daily Upside. "But the grocery store chains that drive such a volume in our industry aren't making bigger coolers, and the distributors control who gets a spot in there."   Ericson added that in the past few years, craft beers have been losing out to seltzers and flavored malt beverages. They're products that macro breweries can easily make in-house, and when they get priority in the fridge, that usually means a craft brew or three is likely getting kicked out.   Speaking of Changing Tastes Alcohol consumption, especially in extreme amounts, comes with plenty of downsides: serious health problems, poor decision making, nasty hangovers.   Consumers get it, especially the young: A recent Gallup poll found that the number of Americans who believe moderate drinking (1 to 2 drinks a day) is bad for your health rose to a record-high 39%, up 11 percentage points from 2018. The rise was even higher among 18-to-34-year-olds: their opinion of moderate drinking as harmful rose 18 percentage points.   That leaves a decent piece of the population who still want all the taste and socializing that comes along with beer but without the negatives. Unsurprisingly perhaps, sales of alcohol-free beer and "near beer" — beer with such little alcohol you'd have to drink dozens of cans one after the other just to get a buzz — have been soaring recently: Non-alcoholic beer sales rose 32% year-over-year in the 52 weeks through Sept. 9, and have averaged 31% growth for four years, The Wall Street Journal reported. Sales are being driven by health-conscious younger generations as well as typical beer drinkers who want to moderate their alcohol intake, especially at lunch time and before driving. All the macro brands including AB, Molson Coors, and Diageo are getting bullish on nonalcoholic (NA) beer. Heineken boasts its 0.0 line is now the top-selling non-alcoholic beer in the US with around 20% market share, and the brewer says it's putting 25% of its Heineken-brand global advertising budget behind Heineken 0.0, WSJ reported. "Lagunitas has an NA product, 10 Barrel Brewing has one, there's Athletic Brewing, which is just all non-alcoholic," Kellie Rellis, a market development manager in the beer industry, told The Daily Upside. "Almost every big brewery has that option, and I don't see it going anywhere anytime soon."   For decades, NA beer was rather bland, both in smell and taste, and had little chance to match the appeal of its alcohol-laden siblings. But with new technology and innovations in brewing, NA beers are starting to taste like the real thing, giving the world's brewers another lifeline for growth in a constantly shifting industry.   *****   And now, a word from our sponsor:   Imagine Buying a $2,800 Stock for $15 Then you should be listening to The Motley Fool.   Waaaay back in the day (2002, to be exact) they made one of their greatest stock picks to date with a little company called Amazon – maybe you've heard of it?   At the time, $AMZN shares went for $15.31. 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