Posted: Dec 02, 2017
The beer category's high end segment could add about a 500 million more cases in the next decade, Constellation Brands chief marketing officer Jim Sabia said during Wednesday's Brewbound Session.
We believe it's all about premiumization, he told the gathering of nearly 200 beer industry professionals.
Constellation Brands; Craft Specialty division president Marty Birkel, who also joined the discussion, said the company currently owns a 27 share of the high end defined as products priced at $25 per case and above.
The high end growth is significant, he said. It's all of the growth in the beer category.
And craft will play a critical role in the future growth of the segment, the executives said. Birkel added that he expects craft to grow in the mid-single digits in the coming years, making it the industry’s second greatest source of growth behind Mexican imports.
“It’s an area that we’re really committed to and focused against,” Birkel said. “And we continue to build our presence in the category.”
Birkel said proof of that commitment was on display during Game 7 of the World Series when Constellation Brands purchased commercial air time for Ballast Point’s flagship Sculpin IPA.
“I think that’s great for the craft category,” Sabia added.
Ballast Point is the “centerpiece” of Constellation Brands’ craft division, and the brand that the company plans to build around nationally, Birkel said.
And the brand has plenty of room to grow, according to Sabia, as Constellation’s research found that 80 percent of consumers are still unaware of the Sculpin brand.
“It’s a great brand,” Sabia said, “and it’s taught us so much about the craft segment, and I think it’s helping us now with the latest one, Funky Buddha.”
In fact, Birkel didn’t hesitate when asked if Constellation Brands would have still paid $1 billion for Ballast Point, despite slower craft growth trends.
“Yes,” he said. “When we got into the business, there was a lot of learning that had to happen. The first thing that I learned was Jack White did an amazing job of building the culture and building the brand.”
Birkel said the time spent learning about Ballast Point’s culture has helped with the integration of Florida’s Funky Buddha, which the company acquired in August. He believes Constellation Brands can “add value” to the brand with back office and marketing support.
And by purchasing the Florida-based company, Constellation now has a “one-two punch” with a national and regional brand, Birkel said.
However, Constellation Brands has also benefited by finding a partner that was mostly aligned in its so-called “Gold Network” of distributors. It’s something the company has worked recently to better align Ballast Point in that network.
“When we started this process, we were in the mid 50s, percent of our business,” he said. “Today, we’re at 75 percent and we’re working on a few more states.”
Moving forward, Constellation Brands will be more cognizant of potential acquisition targets’ wholesaler alignments, Birkel said. And more acquisitions are coming because that’s part of the company’s “DNA.”
“It’s just a question of when and how,” he said.
As for Funky Buddha, the company announced Wednesday that it will expand its footprint into six markets — Alabama, Georgia, South Carolina, North Carolina, Virginia, and Washington, D.C. — starting in early 2018.
Meanwhile, Sabia said he doesn’t believe Constellation Brands is receiving the retail placements that it deserves, at least on the import side of the business.
“We have out of stocks on Modelo Especial on Saturday afternoons in a lot of accounts,” he said. “That’s where we’re working closely with our national accounts team and our category management team to work with the bigger retailers and show them … look at where the growth is coming from.”
Sabia added that many retailers and wholesalers are beginning to reexamine their relationships with craft’s long tail.
“It’s getting to the point where the distributorships aren’t as efficient as they need to be,” he said. “I think there’s going to be a lot of pressure from distributors, retailers and even consumers on how many different options and how many different brands are out there and then which ones do I want.”
And after 30 consecutive quarters of growth, Constellation will push for more space, Sabia said.
By Justin Kendall November 30, 2017 Source: Brewhound.com
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