Hop Take Mid-Year Report Card: Scrutinizing and Scoring the Beer Industry’s Q2

Traditionally, the second fiscal quarter closes at the end of June every year. Yet two days into August, Hop Take’s second-ever quarterly report card on the American brewing industry is just hitting the digital wire. A late filing! Nobody tell Gary Gensler, alright?

It’s not that I forgot this editorial scheme since kicking it off in mid-April. It’s just that there’s hardly been a slow week for beer-business news in the intervening three and a half months. In that time, Mr. Chobani bought Anchor Brewing Co., Ballast Point finally found a buyer for its enormous brewhouse/albatross in San Diego, and so much more. There was simply too much news. The Hop Take Quarterly Beer Business Report Card had to wait.

No longer. This week, let’s once again zoom out on the beer beat to take stock (securities joke!) of the American brewing industry. As before, this evaluation is based on both facts and feelings. It’s fully subjective, but also somehow objectively correct? No opportunities for extra credit will be offered, so if you’re not happy with your grade, American beer industry, you’ll just have to apply yourself more next quarter. Let’s review.

Subject: Government
Grade: B+
Comments: As the nation grinds its way towards the election in November, the CHEERS Act, an industry-backed bill introduced to the House of Representatives in March that seeks to bolster flagging on-premise sales by changing the way draft systems are taxed, appears to have stalled out. H.R.7577 has been parked in the House Ways & Means Committee since our last check-in. On the other hand, brewing and distributing trade groups seem to have finally found a line of attack on the United Department of Agriculture’s dietary guideline revision process that they can all agree on — and their counterparts in other categories, too. The Brewers Association, the Beer Institute, and the National Beer Wholesalers of America were three co-signatories among 15 ofn a letter from industry orgs to the Secretary of Health and Human Services in June demanding more “transparen[cy]” and “stakeholder input” in the once-every-half-decade process of updating the guidelines. Witness all those member dues at work.

Subject: Fluid (Sales) Dynamics
Grade: B
Comments: With five weekends to go until Labor Day 2024, the traditional conclusion of the industry’s high season, the category’s performance is a real mixed bag 12 pack. Hard seltzers are getting pummeled by spirits-based canned cocktails. Craft is down overall; Twisted Tea is the only star currently shining Boston Beer Company’s mostly beat bench; even the mighty Voodoo Ranger brand family is showing some signs of trouble. Mark Zuckerberg’s cringe-inducing Independence Day performance may have helped Coors Banquet, but Molson Coors growth was nearly flat overall, suggesting those once-in-a-lifetime 2023 gains were harder to lock in than the brass envisioned. Tilray Brands’ first-half sales look great, their margins… not so much. Meanwhile, I saw one (1) person order a Bud Light on purpose in the on-premise last month, which may or may not help explain why Modelo beat Anheuser-Busch InBev’s still-flailing flagship like it stole something in off-premise dollars last frame. Most observers expected Michelob Ultra to overtake Bud Light at some point (the brand also did in off-premise dollars last month), but ‘twas a real “not like this” milestone for the world’s biggest macrobrewer. Heineken struggled globally and stateside last quarter; Pabst was flattish, but having fun out there.

Subject: Innovation Lab
Grade: D
Comments: I don’t particularly like that more macrobrewers (ABI, Sapporo, and soon Molson Coors with Peroni) are moving production of their foreign brands to American facilities, because I think it’s confusing to customers and mostly a play for margin, but the claim that it’s better for the environment not to ship beer halfway around the world isn’t untrue. Can you call that an innovation? I hope so, because there wasn’t a whole lot of actual brewing innovation bearing fruit at meaningful scale these past three months. As we’ve discussed, it’s “White Claw plus everyone else” in hard seltzer; it’s “Athletic plus boring macros plus everyone else” in non-alc. The BA’s chief economist Bart Watson announced at the Craft Brewers Conference in late April that he’d actually measured the once-unstoppable India pale ale segment “flat to down” last year, and I see no obvious heir-apparent style to “Immediate Profits Ahead.” Voodoo Ranger ain’t in danger overall, but Fruit Force’s serious sophomore slump suggests the firm may have found the American drinking public’s limit on hyper-hazy molar-rattlers. BBC is actually promising not to innovate Twea too much, which is sort of innovation-by-subtraction after the Truly debacle.

Subject: Social Studies
Grade: C-
Comments: After watching transphobes catch ABI like a deer in the headlights and then run the firm over with a lifted F-150 of bigotry last year, it wasn’t surprising to see rainbow capitalism in retreat at the industry’s biggest corporate players during Pride Month 2024. It was gross, though! Ditto, Hulk Hogan’s corny conservative pander-brand, Real American Beer, which was, of course, never actually meant for “for Republicans and Democrats” so much as “Trumpites” and whoever’s unlucky enough to wind up at their tailgates. I’m genuinely excited to see whether an overeager brewery manages to incur a regulatory backlash by pushing its newly granted TikTok advertising privileges too far before the app gets banned in the U.S., but that’s more of an industry pitfall than a “positive.” When it comes to our definitely not-captured judiciary, bright spots include the rejection of Reyes Beverage Group’s “absurd” effort to cadge fair market value for Anderson Valley Brewing Co.’s California distribution rights without contractual or statutory claims to them, and the revelation that Supreme Court Justice/amateur vexillologist Samuel Alito taking a haircut on his bad stock trade against ABI during the Bud Light fiasco’s fifth month. Fun! Also a revelation, but less fun: new disclosures last month showed Leonard Leo, the hard-right rainmaker who architected SCOTUS’s minority rule, helped to fund the supposedly grassroots reactionary tantrum against Bud Light to the tune of millions of dollars.

Subject: Craftology
Grade: B-
Comments: The craft brewing business got really hard, really fast, and the mid-year snapshot from the BA was correspondingly gnarly. Layoffs at Artisanal Brewing Ventures and Monster Brewing Co.’s Cigar City Brewery were just two testaments to said gnarliness. We got word last quarter from San Francisco that Hamdi Ulukaya, the billionaire founder of Chobani, had snatched Anchor whole from the jaws of piecemeal liquidation (hooray!), and no word on whether he intends to make good on his vague statements about hiring back its former workers, many of whom are unionized and even more of whom appear to still care incredibly deeply about the place. ATTN: Probiotic Papi — there’s still time to do the right thing! Athletic’s aforementioned acquisition in May of Ballast Point’s colossal Miramar is a serious vote of confidence from the pioneering NA firm in the segment’s future. (I’m more glass-half-empty than -full on that, and Athletic’s just-minted $50 million valuation; your mileage may vary.) Gallo’s investment in Montucky Cold Snacks’ is smart for both sides of the deal, and yet another example of compelling branding trumping unremarkable liquid in the beer aisle. Maybe a lesson there.

🤯 Hop-ocalypse Now

A little while back, I pondered what it would take to derail Modelo’s ascent to undisputed, year-over-year, on-premise and -off No. 1 spot on the big board of American beer sales. The upshot was “not much.” Since then, Constellation’s golden lager/goose has continued its rampage, but new considerations have come to mind. In addition to the potentially destabilizing impact of an immigration crackdown I mentioned, analysts have also begun evaluating damage that another round of Trump tariffs could do to the firm’s imports from south of the border. More astonishing: a month after I filed, the North American Drought Monitor reported that 76 percent of Mexico is experiencing drought, the highest measure in 13 years. The fight for fresh agua is already a potent Mexican political issue that forced Constellation to bail on its partially built $1.4-billion Mexicali plant last year. The longer the drought lasts, the murkier Modelo’s stateside future becomes.

📈 Ups…

Happy Dad, the hard seltzer of YouTube’s NELK Boys, grew more than 100 percent year-over-year in off-premise dollars and volume, per Circana… Urban Artifact outta Cincinnati is taking a run at Pennsylvania’s “protectionist” beer-shipping rules in federal court… ABI reported an additional $1.45 billion in underlying profit in its first earnings call since it “lapped comps” on last year’s mess…

📉 …and downs

With ABI all in on vodka-based NŨTRL, Bud Light Seltzer was down over 50 percent in both dollars and volume year-over-year through mid-July… Heineken took a nearly $1 billion impairment charge on its big Chinese investment last quarter… BrewDog ditched its “carbon negative” claims, blaming dicey offset schemes that overpromise and underdeliver…

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