• 🚨 Gallo Makes ‘Strategic Investment’ in Montucky
• 🪿 Waterbird Acquired by Gallo in April
• 👀 Jim Koch: Boston Beer's Credibility Problem
• ⛰️ Timnath Beerwerks to Acquire Snowbank
• 💰 Jefferies: Boston Beer a ‘Buy’
• 🇺🇸 Loverboy Available Nationwide with Walmart

Gallo is getting into the beer business via a strategic investment in Montucky Cold Snacks. The wine and spirits conglomerate that found success in recent years with spirit-based seltzer brand High Noon Sun Sips announced a partnership with the founders of the light lager brand. 

Financial details of the deal were not disclosed. Beer Marketer’s Insights first reported the news this morning. 

Gallo EVP and general manager Britt West said in the announcement: “Entering beer offers Gallo an exciting new opportunity to reach consumers in different usage occasions, and we  look forward to collaborating and growing Montucky across the beer distributor network.

“We believe core lager is a big category with room for fresh and innovative propositions. We are super excited that Chad and Jeremy have agreed to stay on and help Montucky reach its full potential.” 

Gallo CEO Ernest J. Gallo added: “With Montucky Cold Snacks, combined with our expansion of High Noon into vodka iced tea, our partnerships with Canelo Álvarez on VMC and with Lotte on Soonhari Soju, our recent acquisitions of Fishers Island Lemonade, Salt Point, and Waterbird, and our continual wine innovation, such as VIBE by Vendange, we are constantly trying to bring new and better experiences to the consumer.” 

Montucky was founded by Chad Zeitner and Jeremy Gregory in 2012. The company has grown from 130,000 cases five years ago to nearly 1 million cases in 2023, per the press release.

Montucky was the 40th largest Brewers Association (BA) defined craft brewery by volume in 2023, entering the BA’s top 50 list for the first time. The company was also the 50th largest overall brewer, according to the BA. Specific production numbers have not yet been released from the trade group for 2023. 

Read the full story on the Montucky investment, including recent scan data for the lager brand. The story is free for all readers.

CEO Gallo’s comments point to a previously unannounced deal for spirits-based RTD maker Waterbird. A Gallo spokesperson confirmed that Waterbird was acquired in April and founder Wilson Craig “will continue to work with Gallo to ensure his brand vision and entrepreneurial spirit are carried forward to take the brand to the next level.”

In 2023, Waterbird increased dollar sales +66.1% and volume +67.4% in NIQ-tracked off-premise channels. The double-digit gains have continued in the last 13 weeks, with dollar sales increasing +40.9% YoY and volume +38.7%. 

Waterbird was named a Brewbound Rising Star in 2022. Craig spoked with Brewbound about the brand's ambitions and how the company was able to grow +600% in 2021. Watch the full interview in the link above.

Boston Beer Company founder and board chairman Jim Koch was brutally honest about some of the company’s past failings in a fireside chat with Goldman Sachs analyst Bonnie Herzog today during the investment firm’s Global Staples Forum.

Koch said: “We missed a lot of guidance in the last four years and that’s embarrassing and I don’t want to keep doing that. I want to make sure we meet guidance and establish credibility.” 

Boston Beer finished the first quarter of fiscal year 2024 with shipments growth of +0.9% year-over-year (YoY) and flat depletions. The company has maintained its full-year guidance of between low-single-digit declines and low-single-digit growth, with gross margin between 43% and 45%.

Koch said he aims to have a gross margin above 50% in the next five years, but that growth is “slower than you’d think.” Additionally, Boston Beer is still taking on costs from its efforts to rapidly expand Truly Hard Seltzer. 

Koch said: “It bothers me how much money is leaking out of the business unnecessarily. It's just a waste. There’s a lot of it.” 

Part of Boston Beer’s strategy to reduce costs is to reduce its third-party manufacturing costs, with about 79% of the company’s production now done internally, and the rest at partners such as City Brewing. However, Koch noted that there are “disagreements” internally on how much should be produced in-house, as Koch sees the benefit of the “super freight efficient system” that City provides, giving Boston Beer access to facilities in vital states such as Texas and California. 

Insiders can read more highlights from the conversation, including Koch’s thoughts on the opportunity for beer in the fourth category, the “tidal wave of clutter” in hard tea, how new innovation Sun Cruiser is performing and how Hard MTN Dew’s transition to beer wholesalers is going.

Timnath Beerwerks has reached an agreement to purchase fellow Colorado-based craft brewery Snowbank Brewing, the Coloradoan reported.

The deal is expected to close this summer, pending license transfer, and includes the purchase of all of Snowbank’s assets. 

Timnath’s acquisition of the Fort Collins-based brewery will allow the company to increase its own production capacity “to meet growing demand,” and will “streamline operations for both brands,” Timnath wrote in an announcement on social media.

Snowbank founder Dave Rosso said in the announcement: “Handing over the reins to Timnath Beerwerks feels like passing the torch to the next generation of breweries who share our dedication to quality and community.” 

Snowbank’s existing workforce will be “offered employment interviews” and production of both brands will be “redistributed between the two brewhouses to meet current business needs,” according to the announcement. 

Timnath owner and head brewer Cy Bevenger added: “Timnath Beerwerks' existing team members are highly valued, and we are thrilled to also offer them new opportunities within the expanded organization.”

Additionally, Snowbank’s location will close temporarily for renovations, with Timnath noting that “updates on reopening, name changes, beer options and other details will be shared on the respective brewers’ social media pages” in the near future.

Boston Beer Company emerged with a “buy” rating following the results of financial services firm Jefferies’ 11th bi-annual beer distributor survey. Jefferies equity analyst Kaumil Gajrawala cited Twisted Tea’s dominance of the flavored malt beverage (FMB) segment, and the “stabilization” of Truly Hard Seltzer trends leading to less volatility, among the reasons for the improved rating. 

This led to “speculation” about a potential sale of the company, although Jefferies’ report called a “takeout by a foreign brewer … unlikely.”

Other quick takeaways from the survey included:

• Anheuser-Busch InBev (A-B) is expected to lose less shelf space than expected;
• Molson Coors is expected to gain less shelf space than anticipated;
• Constellation Brands’ depletions are expected to grow +7% in calendar year 2024;
• Hard seltzer is expected to “stabilize, while [hard] tea/FMB/RTDs keep thriving;”
• Industry volumes are expected to decline -1% this year;
• And promotional activity is expected to be equal to last year.

On the case for Boston Beer … Gajrawala wrote that Boston Beer is expected to return to volume growth for the first time since 2021. Twisted Tea now makes up the largest chunk of volume for the company (41% in 2023), followed by Truly (31%), Samuel Adams (16% ), Angry Orchard (7%), Dogfish Head (3%) and other brands (3%).

Market leading Twisted Tea is now a $1 billion-plus brand in off-premise tracked channels over the last decade, and “double-digit growth” for the brand is expected to continue,” Gajrawala wrote.

Hard “seltzer declines are slowing” and Truly “seems to be finally finding its floor,” Gajrawala added. The brand has been “a longstanding drag” on Boston Beer’s valuation due to “uncertainty around the category’s floor, which brands would remain post retailer rationalization, and the company’s over-indexation to the category,” Gajrawala added.

Additionally, the rest of Boston Beer’s portfolio of beer and cider brands, which collectively account for 28% of its volume and are declining in the low-single digits, is “too small to matter” compared to the collective size of Twisted Tea and Truly. 

“[G]iven their relative size to Twisted/Truly, their headwinds should have minimal effect on total company trends going forward,” Gajrawala wrote. 

Keep reading to get more insights on shelf space expectations for A-B and Molson Coors and weak early year trends.

Loverboy has signed a nationwide distribution agreement with Walmart to place its hard teas in nearly 1,500 stores.

Six-packs of White Tea Peach and Lemon Iced Tea will be available for Walmart shoppers, as well as two new variety 8-packs: 

• Cool Classics (Lemon Iced Tea, Half & Half Tea, Black Cherry Vanilla Tea and Strawberry Lemonade Tea);
• Vacay Vibes (White Tea Peach, Pineapple Hibiscus Tea, Mango Pear Tea, Hibiscus Lime Tea).
  

The new variety packs will also be available across the rest of Loverboy’s distribution footprint, including Total Wine & More, which will feature new end caps with the tagline “Summer Never Tasted so Good,” highlighting the variety packs, along with Loverboy’s other hard tea, spritz and canned cocktail offerings. 

The variety pack offerings are each 90 calories, with zero grams of sugar per can, and have a suggested retail price of $14.99.

Loverboy has added more than 4,000 points of distribution to its network ahead of the summer selling season, including placements at Whole Foods, Kroger and Walgreens. 

Co-founder and CEO Kyle Cooke said in a press release: “Everyone is calling 2024 the year of hard tea, so being embraced by the likes of Walmart and Total Wine & More, just as peak season heats up, says everything about Loverboy’s power to attract incremental shoppers looking for better ingredients and better taste into the category.

“Our new, summer-themed variety packs nail it with all-time favorites formatted in 8-packs that everyone wants, with graphics that literally pop right off the shelf. They’re getting embraced by retailers at first sight and we can’t wait to see them perform.”

The Brewbound Live business conference returns December 11 and 12 in Marina del Rey, California.

Brewbound Live will feature beverage-alcohol industry leaders taking part in business-focused conversations, data presentations, networking and much more across two days at the Marina del Rey Marriott.

Brewbound announced the first speakers for this year’s conference. They include:

• Russian River co-owner Natalie Cilurzo;
• Deschutes Brewery CEO Peter Skrbek;
• National Beer Wholesalers Association chief economist and VP of analytics Lester Jones;
• Draftline Technologies founder and president Jennifer Hauke.

Additional speakers will be announced in the coming weeks.

Register for Brewbound Live 2024.