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Hitting New Highs in the High-End Mid-Year 2014 Beer Category and Craft Beer Review Dan Wandel Principal, Beverage Alcohol Client Insights August 2014 Beer Category YTD 2014 Off-Premise Summary • Beer Dollar Sales trends are outpacing both Wine and Spirits in Total US MULO for the first time in over four years. • Beer Volume Sales in the Convenience channel are in the black this year • The High-End Beer Segments (Craft, Super Premium, Imports, PAB’s & Cider) continue to fuel the Beer Category’s overall sales growth • 20 of the Top 25 Beer Vendors are generating positive Dollar Sales Growth in Supermarkets vs Year Ago including the Top 5 • Beer Category is following up two consecutive years of exceptional sales contributions from new products with another strong performance in 2014 • Craft’s Dollar Sales in Supermarkets have increased at an impressive +20.5% compared to year ago • Craft’s share of Total Beer Dollar Sales has increased by more than 2 share points in 7 of IRI’s Top 10 Food States as ranked by Craft Dollar Sales • 2014 is proving to be one of the best ever for new Craft product sales Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 2 “IRI and Guest Metrics Form Exclusive Alliance to Offer First Integration of On-Premise and Off-Premise POS Data” April 15, 2014 Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 3 Spirits sales continue to outperform Beer and Wine in the On-Premise Channel Y/Y $ Sales Growth (%) by Food & Beverage Category 2014 thru 7/13/14 versus year ago 2.5% 2.0% 2.0% 1.5% 1.3% 1.0% 0.5% 0.2% 0.0% -0.5% -0.4% -1.0% -1.5% -1.4% -2.0% Food Spirits Wine Beer Non-Alcoholic Beverages Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 4 Spirits continues to increase its share of Total Beverage Alcohol Dollar Sales at the expense of Beer primarily Y/Y Change in Alcoholic Beverage Sales Mix 2014 thru 7/13/14 versus year ago 1.00 0.80 0.60 0.40 0.35 0.20 0.00 -0.20 -0.06 -0.40 -0.29 -0.60 -0.80 -1.00 Spirits Wine Beer Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 5 Although Beer continues to lose share, Craft continues to aggressively increase its share of TBA Dollar Sales and is nearly 2x the gains achieved by Spirits YTD Year-over-Year Change in Alcohol Sales Mix (points) 2014 thru 7/13/14 versus year ago 0.80 0.63 0.60 0.40 0.34 0.20 0.00 -0.06 -0.20 -0.40 -0.60 -0.80 -1.00 -0.92 Beer -- Craft Spirits Wine Beer -- Other Guest Metrics data reflects new definition of Total BA Craft which includes Yuengling Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 6 Craft Beer makes up nearly 10% of Total Beverage Alcohol $ Sales and ~29% of Total Beer $ Sales Category Mix (by Retail $ Sales) -- Alcoholic Beverages 2014 thru 7/13/14 9.8% 23.9% Beer -- Craft 23.4% Beer -- Other Spirits/Cocktails Wine 42.9% Guest Metrics data reflects new definition of Total BA Craft which includes Yuengling Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 7 Craft and Premium Light are the two largest Beer Segments in On-Premise volume-wise Share of Beer Category by Segment (% of total units sold) 2014 thru 7/13/14 30.0% 26.9% 26.5% 25.0% 20.0% 18.6% 15.0% 13.3% 10.0% 9.3% 5.0% 3.7% 1.7% 0.0% Craft Premium Import Value/FMB/ Premium Premium Cider Light other Plus Regular Guest Metrics data reflects new definition of Total BA Craft which includes Yuengling Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 8 8 Beer volume trends have been particularly challenging in the core Bars/Clubs & Casual Dining channels Beer -- y/y unit growth (%) by restaurant segment 2014 thru 7/13/14 versus year ago 6.0% 5.0% 4.0% 3.0% 2.8% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -2.2% -4.0% -3.8% -3.9% -5.0% -4.5% -6.0% Total Lodging Fine Dining Bar/Club Casual Dining Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 9 Craft and Cider share gains have come primarily at the expense of Premium Lights Y/Y Change in Beer Volume Share -- by Segment 2014 thru 7/13/14 versus year ago 2.5 2.1 2.0 1.5 1.0 0.5 0.5 0.0 -0.1 -0.2 -0.2 -0.2 -0.5 -1.0 -1.5 -2.0 -2.0 -2.5 Craft Cider Premium Plus Import Value/FMB/ Premium Premium other Regular Light Guest Metrics data reflects new definition of Total BA Craft which includes Yuengling Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 10 The top gaining Beer brands in 2014 YTD have been a mix of primarily Craft, Cider, and Imports The share gains by Angry Orchard equaled the gains of the next 2 best performing brands combined! Guest Metrics data reflects new definition of Total BA Craft which includes Yuengling Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 11 IPA’s and IPA’s Styles, combining combining Styles, Guest Metrics data reflects new definition of Total BA Craft which which Craft BA includes Metrics data Guestreflects newdefinition of Total Pale Pale Ales Ales continue to be be to continue for 30 Volume Mix by Beer Style within Craft% 2014 thru 7/13/14 of Craft Craft of 25.0% 12 20.0% Copyright Copyright © 18.6% two of the most popular Craft popular most Craft the oftwo 15.0% B 12.6% 2014 Information Resources, Inc. (IRI). Confidential and (IRI).Proprietary. Confidential Inc. 2014 Resources, Information 11.2% eer sales eer 10.0% 7.3% 6.3% 5.7% 5.0% 4.4% 3.8% 3.8% 2.9% 2.8% 2.7% 2.7% 2.0% 2.0% 1.9% 1.8% 1.7% 1.3% 1.2% 1.1% 0.9% Yuengling 0.5% 0.4% 0.3% 0.2% 0.0% in in On SEASONALS STOUT STOUT (ALE) WHEAT (ALE) WHEAT SAISON (ALE) SAISON PALE (LAGER) PORTER (ALE) PORTER BROWN (ALE) BOCK (LAGER) BOCK SCOTTISH (ALE) SCOTTISH AMBER (LAGER) AMBER PILSNER (LAGER) PILSNER INDIA PALE PALE (ALE) INDIA BELGIAN WIT (ALE) BELGIAN WIT AMBER / RED RED (ALE) AMBER / - PALE / BITTER PALE (ALE) / ALT (LAGER) / ALT DARK OTHER / OTHER UNKNOWN BELGIAN (ALE) BELGIAN OTHER DOPPELBOCK (LAGER) DOPPELBOCK Premise Premise GOLDEN (ALE) / GOLDEN KOLSCH IMPERIAL INDIA PALE (ALE) IMPERIAL INDIA STRONG / BARLEYWINE (ALE) BARLEYWINE / STRONG BELGIAN DARK STRONG (ALE) STRONG BELGIAN DARK FRUIT / PUMPKIN / FLAVORED / / PUMPKIN FRUIT BELGIAN GOLDEN STRONG (ALE) STRONG BELGIAN GOLDEN MARZEN / OKTOBERFEST / (LAGER) OKTOBERFEST MARZEN 12 2014 Mid-Year Off-Premise Beer Category Review 13 IRI MarketPulse Survey Highlights • Price is becoming less of defining factor for Premium products with consumers • Millennials and Baby Boomers employ different shopping strategies as it relates to premium brand attributes. Millennials are more drawn to convenience and attractive packaging, while Boomers are more likely to seek out quality ingredients and brand names. • Consumer confidence appears to be rebounding after experiencing a jump in Q1 and maintaining that in Q2. Millennials in particular are beginning to feel more comfortable after suffering longer than most. • As consumers continue to develop a more positive outlook on the economy, it is likely to lead to both increased shopping trips and spending on premium brands. Source: IRI MarketPulse Survey Q2, 2014 Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 14 Premium Products Primed to Perform 15% of consumers surveyed said they plan to increase their usage of premium products in the next 12 months IMPORTANT FACTORS IN PREMIUM BRANDS BY HOUSEHOLD INCOME 89% 93% Quality Ingredients 85% 89% 64% 70% Makes Life More Convenient 60% 64% 26% 23% Attractive Packaging Greater than $100K 30% 26% $55K -$99,999K 15% $35K -$54,999K 23% Higher in Price 31% Under $35K 25% Total Population Source: IRI MarketPulse Survey Q2, 2014 Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 15 Premium Products Primed to Perform Although wealthier households purchase more premium products today, increased premium purchase behavior is more prevalent across lesser-earning households. CURRENT PURCHASE HABITS AND FUTURE INTENT BY HOUSEHOLD INCOME Currently purchase premium brands Plan to increase purchases of premium brands 44% 30% 30% 31% 20% 15% 16% 16% 17% 11% Total Population Under $35K $35K -$54,999K $55K -$99,999K Greater than $100K Source: IRI MarketPulse Survey Q2, 2014 Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 16 Beverage Alcohol Category Four-Year Sales Trends Total U.S. Multi-Outlet (MULO) Beer dollar sales trends are outpacing both Wine and Spirits for the first time in over four years. IRI Data : YTD 2014 Ending 07.13.14 Copyright © 2014 Information Resources, Inc. (IRI). Confidential and Proprietary. 17 Top 15 Bev Alc Growth Segments – Dollar Sales Change YA Total U.S. MULO Once again, Craft is the top growing Bev Alc segment based on Actual Dollar Sales Change vs Year Ago Dollar Sales % Change vs YA Dollar Sales Chg YA CRAFT - BEER $144,561,255 20.6% $846,225,094 DOM SUPER PREMIUM - BEER $78,703,084 10.8% $810,514,540 IMPORT - BEER $72,885,181 5.4% $1,418,848,885 ($11.00-$14.99) TABLE WINE $71,989,760 13.6% $600,062,299 ($8.00-$10.99) TABLE WINE $68,641,129 6.5% $1,130,483,061 WHISKEY $67,038,269 9.7% $761,236,326 CIDER - BEER $50,703,529 68.9% $124,245,691 DOM PREMIUM - BEER $25,073,925 0.9% $2,860,032,752 ($20.00+) TABLE WINE $23,497,696 15.9% $170,927,711 ($3.50-$4.99) BOX TABLE WINE $22,975,528 19.8% $138,994,390 PAB's - BEER $22,687,912 6.9% $353,670,051 VODKA $21,018,817 2.8% $761,998,458 ($15.00-$19.99) TABLE WINE $16,935,429 7.8% $233,041,897 COGNAC $6,379,376 15.6% $47,335,939 (<=$3.49) BOX TABLE WINE $5,560,586 2.3% $248,146,281 IRI Data : YTD 2014 Ending 07.13.14 IRI definition of Craft includes Craft like brands from CBA, NAB, Goose Island, Blue Point, etc., but excludes Shock Top, Blue Moon, Yuengling Copyright © 2014 Information Resources, Inc.