As the end of the year approaches, just-drinks takes an in-depth look at the stories that made the headlines in 2020 across the global drinks industry. In part I, editor Olly Wehring picks out the highs and the lows for the global beer category.
We start with an apology. The concluding sentence of just-drinks’ 2019 review of the beer industry – almost exactly a year ago – looked forward to “a few more nice surprises in 2020”.
Sorry about that.
- COVID-19 & the End of Optimism
The hopes and the dreams for the year ahead were short-lived, as a disease – initially described as an ‘outbreak’ – grew to global pandemic proportions. The COVID-19 coronavirus prompted those brewers with operations in China to start the ball rolling in late-January, with Heineken restricting all business travel to the country and Anheuser-Busch InBev suspending production at its brewery in the virus’s ‘home town’ of Wuhan. Within a few weeks, the longer-term prognosis for beer started to become clearer, with Bernstein’s Euan McLeish forecasting that beer consumption in China alone would slump by 20% in the first quarter.
Much as many chuckled at Constellation Brands’ need to address “unfounded concerns” that COVID was affecting the performance of Corona in the US, the laughing stopped as the global on-premise channel was hit harder and harder and harder as the year progressed. Temporary closures of pubs and bars kicked off in March and spread like wildfire, with the UK’s on-premise facing an “existential crisis” that remains a threat to this day. Staff were furloughed, beer expired in pub cellars and – in South Africa and Mexico – brewing was halted altogether.
Brewers queued up to ditch their trading forecasts for the year as, despite a positive take on China’s return to business in May by A-B InBev CEO Carlos Brito, the prospect of normality returning any time soon faded to insignificance. Jim Koch at The Boston Beer Co was on the money in April when he warned the on-premise in the US had years of work ahead of it.
In South Africa, a 12-week ban on all alcohol sales made matters even worse for the likes of A-B InBev and Heineken, with both groups looking to force the hand of authorities in August with the cancelling of brewery investments in the country. Carlsberg, meanwhile, started getting its house in order as early as April, announcing a raft of cost-cutting measures to make sure the company could weather the COVID storm. That marketing spend was also reined in – not only by Carlsberg but also all of its peers – can explain why the advertising news on just-drinks from the world’s brewers has been a quiet space in 2020. Heineken’s approach was to rationalise its portfolio, with as many as 30% of its SKUs under threat in June as consumers stuffed their pantries with trusted brands in larger packs.
Asahi was looking on the bright side of COVID in September when the company re-launched its well-known Grolsch brand in the UK at a lower abv – a move prompted by the consumer trend towards moderating alcohol intake while stuck at home. Indeed, necessity has been the mother of invention in beer in 2020, with opportunities to connect with consumers in different ways pounced upon by brand owners.
- Selling Beer in the Time of Covid
Stockpiling and pantry loading has set the scene for the sales techniques of 2020 among beer brand owners as efforts in the off-premise grew in importance at the expense of the absent on-premise. Indeed, in late-March, beer sales were in good shape in US grocery, with Neilsen figures showing a 16% leap in the four weeks to 21 March.
Asahi was one of the first to join the trend towards larger pack sizes in the off-premise in June with five-litre mini-kegs from its Fuller’s unit in the UK, while Heineken followed suit in the US last month with Dos Equis.
As the larger brewers were able to pivot their existing off-premise footprint, however, craft brewers around the world saw the walls cave in. In the UK, sales for the members of the Society of Independent Brewers nose-dived in April, with the smaller players in New York state sounding similar alarm bells just a few weeks later.
With craft’s ingenuity muscles being forced to flex, notable moves came from the likes of London’s Forest Road Brewing Co with its home delivery of cold draught pints and BrewDog, which turned some of its bars into ‘drive thrus’ for takeaway beer options.
The major sales headlines for brewers were to be found online, with upbeat forecasts for the channel pre-dating the pandemic. In February, A-B InBev’s global growth and innovation group, ZX Ventures, flagged the potential for e-commerce to brewers in the US and UK. Sure enough, Carlsberg’s online ordering platform, ‘Carl’s Shop’, underlined the potential a few days later, with Molson Coors heeding the advice in November, launching ‘Revl – Drinks to your Door’ in the UK.
Attention should be paid to existing online retailers going forward, however: May saw Charlie Merrells, a former beer, wine and spirits category head at Amazon UK, warn that direct-to-consumer sales would be more frutiful through established e-tailers, such as his previous employer.
- Marketing’s Change of Focus
COVID also coloured the marketing arena in 2020. Once the shock had been absorbed – and budgets had been redrawn – beer advertising started to adopt a lockdown hue: To make up for the absence of music festivals over the summer, UK brewer Beavertown hosted a live-stream from a farm in the UK county of Somerset, home to the world-famous Glastonbury music festival.
Asahi gave Peroni Nastro Azzuro a global push in July that was designed to chime with consumers nearing the end of almost four months in lockdown, and A-B InBev marked the start of the US baseball season in the same month with an ad for Bud Light targeting at-home game viewers.
Finally, spare a thought for Heineken, whose high-profile tie-up with James Bond unravelled in 2020. A world-wide TV spot, featuring Bond actor Daniel Craig, was announced in January, four month’s ahead of the spy’s next outing in ‘No Time To Die’. As the premiere of the film drew nearer, a text message-based activation was unveiled in March, only for the pandemic to see the release of the film put back… to April 2021.
- M&A Takes a Back Seat
The first few brewing transactions of 2020 suggested more of the same for the year ahead – consolidation moves by craft brewers and bolt-on ‘nice-to-haves’ for the multinationals. Exhibit ‘A’ for the former saw Texas-based Two Rivers Beer Co buy control of Bare Arms Brewing at the start of January, with Molson Coors providing evidence for the latter a couple of weeks later, snapping up Detroit’s Atwater Brewing.
The priority rapidly shifted to keeping the money in the bank, though, resulting in the bulk of M&A centring around the tying-up of loose ends.
Constellation made its pre-announced exit from Ballast Point in March, while A-B InBev closed its takeover of Craft Brew Alliance – but not before the group conceded part of the unit’s booming Kona brand’s operations – in September.
Staying with A-B InBev and the company’s Australia withdrawal finally got the go-ahead in April as competition watchdogs in the country had their conditions realised by Asahi. Upon completion in June, the US$11.3bn sale threw up one final surprise four months later as Heineken bought the licences for A-B InBev’s Beck’s and Stella Artois brands in the country.
The only other deals of note included Carlsberg’s consolidation of its brewing operations in the UK with Marston’s – another transaction that drew the authorities’ eyes before closing in October – and Heineken’s Peru entry through Tres Cruces.
Ones to watch next year are in Vietnam, where the state is expected to divest its remaining stake in Saigon Beer Alcohol Beverage Corp (SABECO), and Europe, where rumours of Molson Coors’ withdrawal persist.
- Beer’s Hard Seltzer Problem Becomes an Opportunity
The threat of cannabis to the beer category failed to materialise in 2020, with little mention beyond a 5% dip in beer volumes in Canada last year following legalisation. Instead, hard seltzer stole the limelight with brewers clambering for a piece of the action.
In January, analysts at Cowen & Co forecast soaring sales for alcoholic sparkling water in the US in 2020 and you could hear the engines starting. Molson Coors stepped up with the Vizzy brand in March, joined by Coors Seltzer later in the year.
Category leader Mark Anthony Brands, owner of the White Claw brand, highlighted the explosive growth of hard seltzer in the US with a sizeable capacity investment at the start of the year, with White Claw earning a namecheck from A-B InBev’s CEO in August: Carlos Brito has the brand in his sights as Bud Light Seltzer continues to make ground.
Also occupying Brito’s bandwidth this year was The Boston Beer Co through its number two seltzer player, Truly. However, Boston Beer CEO Dave Burwick, gave the likes of Bud Light Seltzer and Constellation’s Corona Seltzer short shrift in February, describing the pair as “elephants getting into the bathtub”.
Also joining the party this year were Heineken, through Pure Pirana in September and Arizona Sunrise a month later, and Carlsberg, whose Somersby hard seltzer was launched in Singapore in October.
Molson Coors, meanwhile, will have high hopes for Topo Chico Hard Seltzer in 2021, having agreed to manufacture and distribute the brand in the US for owner The Coca-Cola Co. Indeed, the group also has ideas of its own thanks to a production capacity leap of around 400% for Coors Seltzer and Vizzy this month.
- Low- & No- Go Overground
The acceleration of the moderation trend among consumers really took hold this year, with brewers already on hand to capitalise. In the US, ‘Dry January’ served as a hook for both Heineken, with its Heineken 0.0 offering, and Molson Coors, through 2.8%-abv Miller 64.
Heineken even went so far as to bring James Bond in, with the character ditching his vodka martini for a bottle of the brewer’s zero-alcohol brew. And, if Bond wasn’t mainstream enough, low- & no-alcohol was boosted in August by Heineken’s decision to replace its Amstel brand as a headline sponsor of UEFA’s Europa League soccer competition with Heineken 0.0.
A-B Inbev also further leveraged the Budweiser brand in the category this year, switching the Budweiser Prohibition Brew name for its no-alcohol beer play to the more-straightforward Budweiser Zero.
Not to be outdone, Diageo unveiled Guinness 0.0 in the UK and Ireland two months ago. The group came undone last month, however, thanks to a product recall for the beer. As we said at the time, though, the combination of a strong brand name and a booming moderation trend means the recall will likely be little more than a setback, rather than a death knell.
- All Change at the Top for Heineken
Our final word on 2020 for beer has to go to Jean-François van Boxmeer, who in February called time on his 15-year tenure at the helm of Heineken. Van Boxmeer oversaw a transformation of the group, more than doubling its size on the world stage and positioning Heineken as the only really serious contender to A-B InBev.
Change is still afoot, however, with his replacement, Dolf van Den Brink, starting to shuffle his executive pack with vigour this year. Even before van den Brink assumed the hot seat, we saw the appointment of Heineken’s first chief digital & technology officer, a switch of Asia-Pacific and Europe leads, a new chief corporate affairs & transformation officer and a fresh face to guide the group’s namesake lager brand.
Since the end of June, when the transition took formal effect, Heineken’s chief HR officer has moved on and a new chief commercial officer is now in place. If we’re looking for a sense of Heineken’s strategy going forward, we’d do well to consider last month’s addition of Unilever’s chief operating officer to the board.
Of course, size-wise, Heineken is still lagging A-B InBev. But, as rumblings in September suggest, maybe the beer market leader has some senior changes of its own coming up in 2021.