Drinks With Caroline
Caroline Levy, a veteran Wall Street analyst, delves deep into the world of beverages with some of her hero's.
Caroline’s quick wit, empathetic approach, and vibrant personality allow leaders to be vulnerable and speak truths not typically heard outside of closed-door conversations.
Drinks With Caroline
The Business of Beer featuring Beer God - Harry Schuhmacher
Caroline's first guest is investor's long-time favorite, no-holds-barred beer industry expert, Harry Schuhmacher. In this episode, Harry opines on the growing power of beer distributors, gets bullish on Anheuser-Busch, and predicts that non-alcoholic beer will hit a 5% share of the giant U.S. market.
And the incentive is these people want to keep their jobs. They want to keep the grants coming in. There might be a rainbow at the end of that tunnel, like Tobacco had, right? With trial lawyers coming in and getting billions of dollars from the states or whoever.
SPEAKER_02:Hello, friends, old and new, and welcome to Drinks with Caroline. I'm so happy you've joined me for what I believe will be another stimulating conversation with an industry expert, founder, or otherwise fabulous person in the consumer industry. Today I welcome Harry Schumacher. My first guest is the publisher and founder of three beverage business publications. One on beer, another on wine and spirits, and another on craft beer. All of these are issued daily. Harry's incredibly knowledgeable about beer and many other topics, and he's better connected in this industry than almost anybody I can think of. His annual summits are legendary, and we are lucky to have him here today. Welcome, Harry. You were always fabulous. There was one occasion when I was new in a job and you showed up with a couple of people who one might not have expected at a corporate event. But that was okay, and the clients loved it, and as always, you were a source of infinite wisdom. So I am super, super excited to have you on my podcast, Drinks with Caroline, being filmed in Los Angeles and San Antonio, which I understand is um you want to tease me about that, I know.
SPEAKER_00:That's well, no, I I because Caroline, I don't think that you realize that there is a central time. You you you seem fixated on mountain time and eastern time, but there is a central time. So and South African time.
SPEAKER_02:I I'm aware of that.
SPEAKER_00:Right, right. You know, because the sun sweeps across the country, and there's a little strip, including Chicago all the way down through Texas. So yeah, yeah, yeah. We're but I'm thinking we got the right hour. But honestly, what's funny is that I logged on two hours early instead of two hours later. So I'm the idiot. And I told Harrison, my son, I said, Hey, I'm I'm doing a podcast with Caroline. He was like, Oh my god, tell her hello. He goes, It was hold on, he had the funniest text. I'm gonna read it to you.
SPEAKER_02:So yes, please. Everyone should know Harrison spent a summer as my intern.
SPEAKER_00:Intern in New York Street, yeah, and he learned what a real job was. That's I mean, he was kind of a frat boy at UTE, and like I needed him to go to New York and learn how real people work. And he goes, and this is what he says how much I enjoyed interning for Caroline. Please tell her, especially towards the end where I was told to research which kegs were selling best. So I had to go from bar to bar on weekday afternoons and drink beers and make friends with the bartenders. Best job ever.
SPEAKER_02:So glad he had fun. I did have one scare, and we can cut this out if you want, but there was a morning when Harrison did not show up to work.
SPEAKER_00:Right.
SPEAKER_02:Not at seven, not at eight, not at nine, not at ten. By noon, I said, Harry, I don't want to be a tattler tail, but where is your son? I'm worried about.
SPEAKER_00:And he should have been fired by any standard. And I thank you for keeping him on another month.
SPEAKER_02:Well, I understand he's flourishing in real estate now, so I'm very proud.
SPEAKER_00:Thank you.
SPEAKER_02:One of my babies, yeah, very successful. Yes.
SPEAKER_00:That's right.
SPEAKER_02:They all grew up. Harry, I had the honor of speaking at your very first Beer Summit. Yes. And I had the great privilege of being at your 22nd Beer Summit earlier this month.
SPEAKER_00:22 years later. Still doing it. And you were at the you spoke at the very first one with Norman Atomy, was like the keynote. And then we had a but you were a huge draw because you were, you know, you are. I mean, the everybody looked to you as they should for guidance on really strategy. And then just a bunch of other people in a hot room, like 80 people showed up. It was anyway, but it was bothered to get a start.
SPEAKER_02:And it was a great fun event. And I think how many hundreds of people did you have this year?
SPEAKER_00:We had uh 350 is what the room will hold, and we cut it off, you know, in uh December.
SPEAKER_02:And elegant, beautiful drinks overlooking the ocean.
SPEAKER_00:The breakers you can't beat, honestly.
SPEAKER_02:Yep, and wonderful speakers. It was a really, really great event. So thank you. Let's kick off, Harry. First question. Twenty-two years ago, looking out to where we are today, what do you think are the biggest shocks in your mind about where we are in the beer industry, who the leaders and losers are, and you know, what constitutes a hot segment in brand?
SPEAKER_00:I would say that when I started Beer Business Daily 25 years ago, it was nine in 99, 26, we always thought that beer wholesalers were uh they're gonna be irrelevant. It's gonna, you know, the the the big brewer is gonna figure out how to direct ship, or you know, the wine spirits guys are gonna buy them all out, or and the opposite is true. Beer wholesalers are undefeated. American beer wholesalers are still undefeated, they still make the highest margin, they're now selling spirits in the form of RTDs in a can at really high margins, ready to drink with an RTD is right, and they are the only ones that are servicing in the alcohol business convenience stores and grocery stores more times a week, and so like everybody if if you believe that the beverage alcohol business is going to cans, which it is, meaning you know, single serve cans, beer wholesalers are winning and they're getting that business more and more. And even uh uh you know, news broke Friday that uh Reyes is gonna get Tito's in California for the whole state, the largest spirits brand by far, and but they've already gotten Sazerac in several states, including Texas, and but which includes Buzzballs, and they get atomic brands has moved. So I I guess my point is this that beer wholesalers are undefeated.
SPEAKER_02:Yes, you know, just to comment on that, uh, years and years ago in covering the soft drink companies, I remember Coke trading at a multiple that was 42 times earnings. And the butlers traded at multiples of about 10 times earnings. And there was just this view that the brands with everything and the poor schlips you have to carry it around. It's awful. And that has since changed so much because I think everybody's recognized the power of distribution. Just as an example, when Monster went into the coke system domestically and internationally, it was just, you know, a jump step in their success. And I think in beer, the Reyes, which Reyes is our private distribution company, for anyone who doesn't know, but they have tell us some of their brands, Harry, some of the biggest brands in the country.
SPEAKER_00:Well, uh, Constellation and Molson Cours are their main like anchor suppliers. And I have found that they will not really go into a market and acquire unless those two are together, Constellation and Molson Cours. And they probably take AB too, but there's antitrust reasons, right? So they have to have a competitor. And so that that's been their key, you know, they enjoy in many states, in most states, franchise protections on their beer brand. So, like you said, Caroline, the equity of the brand falls mostly to the wholesaler. If you uh calculated blue sky for, say, Boston Beer, and if you calculated the net blue sky, that by blue sky I mean intangible brand value across their wholesaler network, it's way more that's on the books at Boston Beer Company. So, yes, if you're a beer wholesaler like Reyes, you're able to bank that into buying wine of spirits like getting into Tito's and Coke and whatever else because you have this solid base that's in perpetuity because of your franchise franchise protection.
SPEAKER_02:And let's just segue from that into any sort of regulatory changes you see, either regarding distribution rights, and obviously we we should touch on tariffs.
SPEAKER_00:You know, I interviewed uh Bill Newlands, the the CEO of Constellation just uh two weeks ago at my conference. I said, What if, you know, because all of their beer is made in Mexico, all of it. And what if there's a 25% tariff? And I said, Would you eat it? And he said, Well, maybe. Depends on if we think it's gonna last a long time or not. And if they had to increase price, would everybody follow or not? So these are big questions for 25. And you know, honestly, personally, I think it's it's a it's a bluff by Trump. You know, uh I think he he's trying to negotiate whatever he wants. But if it does happen, I feel like it would be like for two months or something. But maybe not. Maybe not, we don't know. It's a wild card.
SPEAKER_02:It's a total wild card. If they were to raise prices and A B Molsen Close were in a position where they didn't need to, they wouldn't. So it I think it would be terribly damaging. And just for anyone who doesn't know, the constellation, the major brand, Corona Modelo, now bigger than Corona, I believe, and then Pacifica growing like crazy, and they've got a couple of other really strong brands. But almost their entire portfolio is made in Mexico, right? Is anything not?
SPEAKER_00:Yes, everything. I mean, they they have little breweries around. I don't know if they make some yeah, but yes, yes, 95% of their production is in Mexico.
SPEAKER_02:So I want to just ask, and then we'll come back to regulation, but you know, do you see any major change in behavior from constellation having had their first miss in beer or major miss in beer in the memorable past?
SPEAKER_00:I do not see any change in behavior. I think they have said, and I believe, because I've seen the data, that this is a macro demand issue, mainly with sea stores. If sea store traffic picks up, constellation picks up.
SPEAKER_02:And energy drinks pick up, talking about the soft drink business. You know, it's it really to see customer foot traffic in convenience stores go down is a very, very rare occurrence. If again, can we remember that happening in the past?
SPEAKER_00:No, and they do have tough comps, like sea stores did really well last year, really well. They carried the industry, the entire beer industry for sure, and they're going up against tough, you know. That's a lame excuse. Traffic's definitely down, and that's just the the consumers is tired and worn out and broke, and sea stores sell at a higher unit cost usually than uh other grocery.
SPEAKER_02:So the channels are shifting. So it's funny. Was it at your conference where they said it's the Taylor Swift tickets that people borrowed to buy? And now we've got the the benefit concert for the people who went through the fires in in LA, those are going for two thousand dollars a piece too. Like, oh my gosh, back in debt.
SPEAKER_00:Back in debt, and also, Caroline, I said this, I don't know how much it resonated, but I don't know how much we can quantify how much young men are spending on online gambling with DraftKings.
SPEAKER_02:That was my biggest takeaway from your conference. I had never I'd heard of online gaming, but I was unaware of the scale of online gambling.
SPEAKER_00:Gambling, right. And you know who kind of first kind of brought it up was Nick Modi, your protege. Yeah, I I heard yeah, six months ago, he gave a speech somewhere, and and he was also his main focus was gaming, but he also brought up gambling. And you know, I went and kind of did a little bit of research, and it's in the billions of dollars, and it is highly concentrated to young men. And who drinks the most alcohol in the United States? Young men. And so the money comes from somewhere, it's competing somewhere, and there's only a certain amount of money for discretionary spending. I think it's a I think it's made and of course we can't uh deny that cannabis, uh legal uh D9 and legal cannabis has also had an effect at the margin.
SPEAKER_02:Right, and it's not in the form of beverages as some people thought it might be. And you know, companies made the bet that they would, you know, be able to say can sell cannabis in cans. That's a small part of the business.
SPEAKER_00:But it's it's small now, it's small now, but it it it is growing really fast in in places where it's legal, like in in Minnesota, in Texas, it's currently legal just because there's no law against it. It's uh the reason you know the problem is we don't really have numbers because they're not we don't have a scan category for it yet. But if you go to Total Wine here in in Texas, in San Antonio where I live, I go to Total Wine, the amount of shelf space they give to the D9 beverages is large, and that tells me that it is selling. But here in Texas, they're threatening to shut it down just like they did in California six months ago.
SPEAKER_02:So it's not even a a business yet because we don't even know if it's legal, and so you know But when it is and when you can bank the business, it has the potential to be very big and important, and distributors will want it, right?
SPEAKER_00:Yes, absolutely. High mar it's got everything, high margin, it's in a can. It you know, it if it's legal, there's definitely demand for it.
SPEAKER_02:Do you believe though that people going to you know going out, young people in particular, would rather drink it or have a couple of gummies and drink something else?
SPEAKER_00:I don't want to get into my personal experience. It's a different high and it's a quicker high. I I beverages are they hit different, but I think if you're sociable and let's just say you just like, I do not want to be hungover tomorrow. And so I'm gonna if I'm out, then yeah, I'm gonna switch to D9 after maybe two beers.
SPEAKER_02:But you can have a couple of gummies and then you can have a nice non-elk athletic.
SPEAKER_00:Athletic is the best.
SPEAKER_02:So how's the one you're trying, Harry?
SPEAKER_00:It's actually really good. I don't know, it's some kind of uh what's it called? It's called it's called Marine Odyssey, and it's a joint marketing with Netflix. Netflix, yeah. It's a rap camp and uh all their beers. I mean, I had Bill Schuft spoke at our summit. He's just such a genuine, honest broker that you don't see that often with CEOs, and especially from the financial side, if you want to say that. And he's just uh he built that company the right way. He did everything right. I'm sure he probably he's so uh, you know, he he probably wouldn't say that, but he really did everything right. He got distribution right, he didn't push it too hard in the beginning to over-distribute. And he's a and you wouldn't think of it, he's a natural salesman.
SPEAKER_02:In a very subtle way.
SPEAKER_00:Yeah, right. A soft sell.
SPEAKER_02:Well, I have the great honor of being on their board, and it has been a privilege working with him and his team and the investors, and you know, it's interesting because here's a company built with heavy asset investments, so three breweries now, and breweries are really, really expensive. And as you said, it wasn't all about let's go as fast as we can. It's like let's have an absolutely amazing product and make sure people understand what we have and thank the bartenders who carry it and you know, just keep working that distribution.
SPEAKER_00:If I had said, Oh, I'm gonna start a non-alcoholic brewery, I would have contracted it. I would have, you know, I would have done it the fast, easy way. And Bill did not do that because he's not me, but you know, he's he he has integrity and whatnot. So he you know built his own break.
SPEAKER_02:You've done a lot of heavy lifting to get to where you are today, which is doing no work and having everyone else run the business.
SPEAKER_00:Exactly, and you too, Caroline. Don't get don't get it twisted. But yeah, Bill, he built the breweries, he built the actual breweries, which is you know, which I don't know if people know is harder than building a regular alcohol brewery. Like it's way harder. And so there's have you toured any of the breweries? No, I good lord. I've to I've toured enough breweries in my life. I mean, God bless.
SPEAKER_02:Well, my favorite story is when was it Heineken took you into the Iraq war?
SPEAKER_00:No, no, it was Diagio. It was Diaggio.
SPEAKER_02:Oh, Diagio, okay, I can't believe that.
SPEAKER_00:Yeah, they were trying to kill me. They were literally trying to kill me. How close did they get? They got pretty damn close. They got close.
SPEAKER_02:There was an escape through the desert in a there were bullet holes in our car in our suburban.
SPEAKER_00:We were in a suburban. I don't it was a Halliburton suburban. It was fun. I mean, it was we were yeehawing and just hauling ass, and we got through, and they were shooting at us. I was with uh this reporter from the New York Post. He was Australian. Steve Dunleavy was his name. Look him up, Google him. He was wild drunk the whole time, and I don't know how because there's no alcohol there. We're in a Muslim country. I I don't know where he got it, and I wish he had shared, but it was hot, it was 105 degrees, and he was smoking.
SPEAKER_02:But that was good, Harry, because you told me you told me that you were freezing on the flat over because you got on in a t-shirt thinking you were flying in a normal commercial flat.
SPEAKER_00:There's no heating, we're up at 30,000 feet is like 20 degrees in the plane.
SPEAKER_02:It was a military plane.
SPEAKER_00:It was a military plane, right? And everybody's vomiting. It was all it was awful. Thank you, Diagio. Thank you for sending me on that trip. You almost had me killed. And Steve Doug Levy.
SPEAKER_02:Oh, Harry. Oh, we're glad you we're glad that you made it. So getting back to the business of beer, our new head of health and human services, RFK, has a very different view on what we should eat and drink and what can be in our foods, um, to say nothing of vaccines, but we'll stay away from that. In conjunction with the fact that there is a lot of evidence being thrown around that no amount of alcohol is good for you and that drinking shortens your lifespan. I just would like to hear you weigh in on all of this. And in particular, because young people have been moving away from alcohol and think it's really bad for you. This sort of acts as proof, but you know, how should we put it into context? Because there are a lot of things that are bad for you that we do anyway, or dangerous that we do anyway.
SPEAKER_00:Right. Actually, I got a a note from Comil, another one of your proteges, who, you know, said walking. There's no amount of walking that's safe for you, or driving, or riding in airplanes, or whatever. And the thing is, is that if you look at the studies, overall mortality goes down with the certain amount of drinks that you drink a week.
SPEAKER_02:Where's that study?
SPEAKER_00:All you have to do is there's a a new website out there called Google.com all or ChatGPT, and you just go and say it's called the J curve. It's a J curve, meaning mortality goes down with a couple of drinks per week, and then once you get to a certain amount, like five or six, it then you start dying. The mortality goes up.
SPEAKER_02:And the reason is I think it depends where you where you drink it. I think if you're a Greek shepherd and you're at the top of your mountain and looking at the beautiful breezes and eating fresh cheese and bread, you can have a drink a day.
SPEAKER_00:And why is that? You know, all of this is observational metadata. So we don't know the other comorbilities that are in there. And it and so, yeah, like Dr. Stockman, who, you know, who's affiliated with the World Health Organization, he would say, Harry, Harry, Harry, having a few drinks per night is not is not causing you to live longer, it's a sign of long health because of other factors. And I would turn it back to him if he were sitting here and I'd say, Dr. Stockman, yes. But also when you say that there's no safe level and that cancer risk goes up, but don't people who drink five or six drinks a night also smoke? Don't they go into tanning beds? Don't they do all this other stuff? So, I mean, there you there's no way to tease that out. And yes, absolutely higher drinking levels cause an increase in types of cancer. But the data do say, and I I yes, I use data in the plural because that's the proper way to say it. The data do say that it's de minimis, it's so de minimis that it's not even statistically relevant on those first few drinks a day.
SPEAKER_02:And again, where can people go for that data? Like, do you know the source?
SPEAKER_00:Yes, it's called Chat GPT or Google.com.
SPEAKER_02:No, but the source that they're using.
SPEAKER_00:There's so many studies out there that nobody knows which one to pick from.
SPEAKER_02:I think, in fairness, that there are so many factors that affect uh longevity. And one of the most important we know is being social and not living a little hole and caving and cocooning, but actually being around people. And so I think you know, there there is certainly evidence that drinking too much is damaging. But even at athletic beer, athletic brewing is never saying, you know, don't drink alcohol. We're just saying if you don't want to start necessarily with an alcoholic drink after you've been working out, don't. If you want to mix this into your lifestyle, great.
SPEAKER_00:You mix it in. You mix it in. And listen, I think you're so right, Caroline. Like, nobody needs to be drinking if they don't drink, right? Or if they don't want to, but I don't think also, on the other hand, nobody should be scared from having a couple glasses of wine with their dinner because they've been told that it's gonna dramatically increase their chance of of cancer, because it's not true. It's not true. That it's clearly not true. There are so many factors, including genetics.
SPEAKER_02:I have to say, since I've been living in California, which is four and a half years, I'm scared of everything I do. I run the water, I'm thinking, is it safe? I take a breath of air, or am I imbibing you know, terrible?
SPEAKER_00:No, you should be scared. I know. I'm glad you are.
SPEAKER_02:Um I know, but it it's sort of everything you put into your body, and I think we're becoming incredibly self-obsessed with this hacking of our health and wellness as a subject. So much of it.
SPEAKER_00:So much of it has to do. I mean, we all have that one grandparent that drank a fifth of scotch a day and lived till they were 95, right? We all have that. And it's like he ate a pat of butter and pancakes, it's just genetics, but who, you know, it's not just genetics, but there are factors that you know they're just so mean.
SPEAKER_02:I think that's the point.
SPEAKER_00:And and and the really the point of this is that this the this kind of narrative runs in waves, it always has. And I remember in the late 90s, we had these kind of what we called at the time neo-prohibitionists, and they it's whoever gets funded, and they got funded by the Robert Wood Johnson Foundation, and so they had a lot of money for a while, and so it came in waves, and then now it's the Mandavi organization, grants from the World Health Organization. There's a fund of there's a lot of money funding that no industry money coming in at all because industry studies are tainted, so it's like, why even do it? Because they're painted as tainted. So, you know, like like Charlie Munger says, give me the incentive and I'll give you the outcome. And the incentive is these people want to keep their jobs, they want to keep the grants coming in, and there might be a rainbow at the end of that tunnel, like tobacco hat, right? With with trial lawyers coming in and getting billions of dollars from the states or whoever. I think that's wishful thinking because the difference in tobacco is that it's clear that the moment you start smoking cigarettes, your cancer risk goes up from the first cigarette up. Whereas with alcohol, there that correlation is just not there until you get to the heavier drinking patterns.
SPEAKER_02:Agreed. So moving on from that, Anne Haza Bush had a really, really rough year, but you've got Mick Ultra doing very, very well. And so what could where do you think A B could be 12 months from now and three years from now in terms of volume growth pricing and you know doing well in the US? I know that international is a large part of their business now, but in the US, where they've had a very rough couple of years, what do you see happening?
SPEAKER_00:I'm bullish on A B just from a US perspective. That's all I have vision on. But I I was they invited me to go to their what they call it, the SAMCom meeting, which is their distributor conference.
SPEAKER_02:Is it called SAMCOM?
SPEAKER_00:I think it's sales and marketing conference. It's a sh, you know, how these companies do this. And, you know, a lot of it's off the record, but what I can tell you is that I was impressed, and I think a lot of distributors were impressed. A B does what A B does best, which is flex their scale in the U.S. They still are the largest market share. They still they have 12 breweries around the country. You know, Constellation has two in Mexico, you know, even though they have modellos the bigger brand than Bud Light, A B still just sells way outsells them. And they have just they have that scale. And they have Bushlight that's growing in the subpremium segment, they have Mickle Ultra growing in the super premium segment, and you know, they're doing stuff with Stella, they're doing stuff with their craft portfolio, they're doing the A-B thing, which is doing it all that other breweries just can't do. I was very impressed. I thought their uh their their content was strong. I think I I went to last year's and the year before's, and I thought it was weak, and I would have told you that. So I think they're in the right direction. And and you know, they're out A B A B.
SPEAKER_02:They have easy comps.
SPEAKER_00:Yeah, and they have easy comps, exactly.
SPEAKER_02:But I mean it has tough comps.
SPEAKER_00:Yeah, right. And you know, and Midglobe Ultra is is gonna be the it already is the new Bud Light. You see them, they're putting a ton of the, you know, uh it's not I can't tell you how much of an increase they're doing because they asked me, but they're I can tell you they are increasing their investment significantly. And you will see McGlobe Ultra not just in the NBA and in the NFL, which are both increases, but you'll see it in the World Cup and you'll see it in the Olympics, which they have exclusivity on. And previously that would have been Bud Light in that, and plus the UFC. Now it's McClobe Ultra, and guess what? The margin's a little higher. So yeah, I I'm kind of bullish on on A B. I don't know why. I don't know why I'm saying it, but you know, because they'll see.
SPEAKER_02:Everything goes in cycles, and you know, it's been sort of fun to see the loser, I mean the the biggest guy being a little knocked down, but it would be super fun to see them come back, you know, it would be fun.
SPEAKER_00:Yeah, it was it was fun, by the way. It it was really fun to see Molsencours and Paps and Yingling and these companies that have all been fighting A B tooth and nail because A B's the Darth Vader of the industry, and they got a win, they got a big W. And you know what? God bless them. They got that year of just and they I mean, actually, they increased their share to a step level up, and they're not gaining anymore, but also then they've lost a little bit, but they still are at that step level up, so that's a win for you. We're talking about mulsencours and constellation, especially constellation, but also multi-cours and also paps. I know you don't care about paps because private, but and and yingling about private companies now.
SPEAKER_02:No, you don't feel let's talk about happy dads. I love the happy dads and white claw and truly. What do you think is going on in the hard seltzer world?
SPEAKER_00:I don't know why everybody like poo-poos uh seltzers in the analyst community. It's a huge category still, and it's flat. You know, it's a little down maybe. You know, Mark Anthony is the clear winner there.
SPEAKER_02:They that's the white claw owner, isn't it?
SPEAKER_00:White claw, yes, and they keep eking out. They have a new hydration drink, non-out coming out with with Lionel Messi. I I would say that as an independent private company that I know you don't care about, it's really hitting on all cylinders.
SPEAKER_02:Harry, I'm on the board of two private companies.
SPEAKER_00:Okay, okay, so you do care. All right.
SPEAKER_02:I care.
SPEAKER_00:So yeah, and then another one's happy dad. Happy Dad, you know, is the the bro uh drink, uh they they are affiliated with the Nelk Boys. I've been out with these guys many times in Austin and San Antonio, and and they uh they have the young dude, the young man. They have that locked up. They have great brand recognition and they're beloved. And uh, you know. uh Sammy and John who run that business they they work they're really hard workers you see a lot of people you come into this business you've seen it Caroline where it's like okay yeah you're gonna have to spend a lot of time with distributors and retailer those guys get it and they and they they're making the switch as we speak from R and D C to beer wholesalers which is a natural progression uh but that beer should be sold in a C store and that's where beer wholesalers shine.
SPEAKER_02:Yeah well I I've had the privilege of being an advisor to them this year and well last year. Um they've got a very interesting story in the sense that hard salt's were in decline as a category and they've been growing really really rapidly and that brings to mind um beatbox uh wine beverages because the wine sector has been decimated with a few exceptions. Um Galler has some huge successes and then there's beatbox so what do you make of that?
SPEAKER_00:It's a beautiful proposition it's a 12% and a tetra pack it's resealable it's uh you know they aligned early with music festivals so it's cool I would feel cool drinking it and it you know it tastes great they hit all the right things and what's amazing is that their largest distributor is owned by Anheuser Bush their largest distributor is AB1 in Los Angeles and uh if you can make it in that house then you're doing well I don't know how much A B is pushing that brand but you're doing well and and there there are other ones that get it as as far as being in the trade and making relationships with wholesalers and doing all the right things.
SPEAKER_02:Yeah it really is a a magic some combination of magic but I think the common thread of of all these entrepreneurs who rise to the top and make it to the$50 100 million dollar mark in sales it's always that leadership that is just they they believe they have belief and they work very hard and they inspire people and when when things get difficult they just work harder it it's quite remarkable.
SPEAKER_00:Yeah because you know beatbox their their first two products failed like and they just kept going back to the drawing board you know they had this big bladder thing and they had you know they went to Walmart and they got they've they've been through all the they got burned and they went through all the hard times and they came out with the perfect kind of on the third try a perfect package liquid and margin opportunity for wholesalers that's the three things you have to have the margin opportunity for wholesalers being something we maybe wouldn't think of as a consumer. Have to have it because they're motivated to run through a wall for you. They'll put up the racks which you have to have at the point of sale for that product to sell. They will do it because it's a huge margin. They'll, you know, and they recognize the opportunity and so yeah they've done a great job. I love those guys. Yeah absolutely fantastic and then Gallo is a private company that is huge but is they they don't love telling their story publicly in any way so a little mysterious but they've had some major wins what do you think of of how they're doing you never bet against Gallo ever never never never never never and you know because ever since I've been in the business if you there's ever a survey of retailers of who's the best beverage alcohol supplier Gallo's either always number one or number two always wow who else is up there well at the time A B because they'd service so well but Gallo's always up there and then you know also when if you survey the beverage alcohol leadership everybody's either come from Pepsi or Gallo because they train their people the best right the top people always come from Gallo or Pepsi and that's just because they I don't know what they do they have magic. But if you know that somebody came from Gallo, you're like okay that person's solid that person knows their shit they're not weak and they're just a good incubator of people which tells you they're a great company.
SPEAKER_02:They're also great at hiring I think when you start with really high quality hires it's a little bit like Procten Gamble as well just incredible hires and then the work ethic and the training and the discipline and the the use of data which of course has become ever more important.
SPEAKER_00:Right.
SPEAKER_02:I don't think you can be a great marketer without the data anymore.
SPEAKER_00:You know it's not no you can't you can't and that's one thing that Constellation's really good at that I don't I'm not even sure they get credit for that. But like uh Malika Montero like put to you know she she led this and I'm sure she had people great people working for her as well but they jumped early on the app thing like delivery apps like uh DoorDash or uh Uber Eats or or whatever. They jumped early on that and they got the data to flow directly into the app through the retailer right you can't you have to go through the retailer and so that the image looks correct it's the right package it's the right price and that's important because a lot of these kids they're gaming right they're all at home gaming and they get uh they get they get it delivered through DoorDash.
SPEAKER_02:I think that's also where our money's going is it's so expensive by the time you've added the delivery charge and the tip.
SPEAKER_01:Yeah.
SPEAKER_02:So there are a lot of places where spending is going up and I guess it's all coming out of I mean on premise kit well kids also saying well I don't expect to ever buy a house so right I'm just gonna do this and and have a great lifestyle outside the home and or cocoon.
SPEAKER_00:Yeah I mean I have three children in their twenties one one's 30 and none of them own a house and you know it's not like they're deprived they're they're very privileged in every way and yet they don't even own a house. Yeah and I own two houses by the time I was 30. It is a different world.
SPEAKER_02:Yes and and I have to say owning a house in LA a couple of weeks ago felt like a very silly thing. Yes but there is something in human nature I think that does like to feel like you have this piece of land that is yours. Uh yeah I think so and you're safe where you are right Caroline It didn't feel so safe I am now please God but it didn't feel so safe when you had fires raging on either side of you and highlands it was it was terrifying. Yeah it's been really really sad speaking to friends who've lost homes and and everything whole neighborhoods I mean I think almost everyone will say the home is bad losing that losing whole neighborhoods and communities is devastating.
SPEAKER_00:Devastating yeah I I've read in I've read somewhere today that the most celebrated origami artist in the world had his house in LA or is there anything like you and I can save our writings and stuff on our computer and it's on a cloud origami there ain't no it all burned gosh if you're in an origami honest I mean you should be living in like Louisiana on an island covered with marsh and water and we're well I don't know it's called flooding oh you shouldn't be is that what you said you should be so that there's no fire.
SPEAKER_02:But there could be floods Harry okay I think we div I think we digress. So have we talked um Molson Coors has been they've just had this role of second fiddle to Anheuser Busch for a long time and then to Constellation brands as well and even Mark Antony and some other brands seem to be you know outgrowing them and then they have moments of glory and they're doing quite a lot with innovation even outside of beer but where do you see their future in the next couple of years?
SPEAKER_00:Well that's that's really hard to say I mean like I said they have to step up at share. They've held on to some of it they've held onto some shelf space so that's good news but their innovations really haven't caught anybody's imagination a fire and honestly I don't know I mean people have always speculated that they should team up with Heineken at least in the US do a JV years decades before yeah decades right and it makes sense because they need a high end they need a high end portfolio and Heineken needs scale and if they got together they'd have both and so that's that's the reasoning behind that but uh you know it has to be the right the right thing. Exactly now you know keep in mind that uh Multicours does license a brand from Heineken called Sol, a Mexican beer brand which they've done nothing with I don't even nothing probably because they have to split the margin. So they're like why would why would we push this?
SPEAKER_02:And by the way Multicours splits the margin on all of their brands most I mean they split it on uh Yangling they split it on Topo Chico they split it on Simply uh they split it on Zoa they split so I mean they they have partnerships which are great but it those always dip into margin coke has to get their slice yep yep they've always been lower margin just because they have fewer breweries than Anneheiserbusch by a lot yeah plus that to the transport costs and all that yeah so Harry let's talk a little bit more about the world of non-alcoholic beer wine and spirits what is your view on non-alcohol beer is about one and a half percent of the category today in the US there's some countries where it's 10. What do you think happens in the US over the next five years?
SPEAKER_00:We split the difference with Europe and we we're at five okay that that's exciting that's huge we'll never be 10 like Europe because we're just not that fancy. We're just not there we're we're rednecks at heart okay so we'll have we'll get at five percent I I do believe I do not think that non alco wine or spirits will get anywhere near that level just by nature of what they are. A non-alk beer makes sense to a regular you can it's in a can it looks like beer it tastes like beer it tastes like beer it really does right but what is a what is a non-alcoholic rum supposed to taste like exactly what's a and a non-alcoholic wine it's like everybody says it's grape juice you know and so it's it's hard I think they have a no I'm not gonna say I'm not here to say it's not gonna grow I think it will and there'll be mocktails and you know spell you know yes it'll all but it's never gonna get to five percent of that category or even close.
SPEAKER_02:And it's a much smaller category to start with wine for example.
SPEAKER_00:Right. And and I just think beer has a what this is you know you could be anywhere and it looks like you're drinking a beer and you feel like you're part of the party and some people really like the taste of beer.
SPEAKER_02:Nobody's gonna say I want a glass of wine because I like the taste like what no they might but the wine I don't know who these people are Caroline that you hang out with but I don't know anybody it's no I've yet to try a non-alk wine that tastes anything like oh my gosh this is a wonderful wine that enhances my meal. They tend to be very sweet and lacking in any uh depth or um substance literally like they mouthfeel they call it yeah they feel very liquidy very watery right and so that to me there's a much bigger question on wine and spirits brands about non-alk wine and spirits about what differentiates you from a soft drink than there is on beer.
SPEAKER_00:Right.
SPEAKER_02:That to me is what needs to be overcome.
SPEAKER_00:That's right. And maybe it'll happen you know because you know why not just have a diet coke with a lime in it. You know so I mean that it's a different proposition. I think it's just a harder proposition.
SPEAKER_02:That's all well it's certainly fun to try all the different ones because there are many fun flavors and a lot of them are now with adaptogens and you know but there's also a part of me thinking well what am I putting into my body? I don't really understand what that means.
SPEAKER_00:Right. Yeah what is in here?
SPEAKER_02:Yeah I think the the the non-al beer makes the most sense and even then it sounded like an oxymoron when someone first talked about non-alcoholic beer and now it's becoming better understood and and and you know Heineken zero zero delicious product more and more really good tasting products is good for the whole category.
SPEAKER_00:Sure. And it allows the industry to partake in those occasions where you're you're either splitting your let's say it's on premise you're you're having every other one so that you're not too intoxicated or if you're at home the same thing if you have people over you don't want to look like you're drinking a Diet Coke because that's lame can we all agree on that just drinking a Diet Coke would be lame but if you're calling this that has Netflix on it that's cool.
SPEAKER_02:I feel so cool. Where do you think I mean liquid death is not an alcoholic drink and you largely focus on alcohol but how do you see liquid death in in this whole game?
SPEAKER_00:What a brilliant product.
SPEAKER_02:I wish I thought of it I mean well the marketing is absolutely dropped and hilarious. It's no it is so funny.
SPEAKER_00:And it starts with the name liquid death and you're thinking oh it must be bad for it's water the but the the literally what keeps you alive. So that dichotomy is interesting. I love that it looks like an alcoholic drink. So you look cool if you're at a base you know your child's baseball game and you're not supposed to be drinking you're like oh I'm drinking liquid you know I went ahead and just drank straight beer but whatever. But you know how these days these parents are all but yeah no it's it's a brilliant product their marketing's brilliant love it.
SPEAKER_02:The the other interesting thing they've done is very very successful collaborations with brands outside of their sector. So liquid death and e.lf makeup I don't know if you saw hilarious there's one with a soap that is it's just so silly and outrageous.
SPEAKER_00:And then one with with a wonderful ice cream company Van Leuven I think it was well uh Jen uh you know our senior beer writer got me a liquid death diaper and it's a a leather diaper with spikes on it you put a diaper in it you know it's leather and yeah I mean I don't know what use occasion I would have for this thing uh but she thought it was never never would be hopefully never but I mean she thought it was an appropriate gift for her boss and so I don't you know do I hang it on the wall what do I do with this thing but it's beautiful and yeah look what that it it's so clever it's so so so clever. I love those guys.
SPEAKER_02:So Harry what's on your agenda what are you most excited for for the rest of the year spending more time with my dog uh tell us about your dogs Harry.
SPEAKER_00:I have a uh a Basset Hound puppy that was so bad and causing me so much strife that I sent it to a military boot camp like literally like like this green beret. No but it's for dogs. And yeah this he's a green beret. He first of all he wouldn't take the dog I had to convince him and now he takes the dog and I'm just looking at his Instagram right now and he's like doing selfies with him and like putting him in his bed and shit. Like he's the I told him the dog will make you fall in love with him and that's what happened.
SPEAKER_02:And now he's not even training it I don't think we might have to end with this there's a great New Yorker cartoon and it's two dogs chatting and they're saying good dog good dog always good never great it's true it's true good dog biscuit just good dog Lulu I have mine too yeah just just not great you know just not great well Harry Shoemaker publisher of Beer Business Daily Wine and Spirits Daily founder owner inspiration amazing fun and the best friend a girl could ever have oh thank you Caroline's such a pleasure podcast it was such an honor to be your first guest Caroline and you know I love you so much.
SPEAKER_00:You you what I love about you is you have an instinct for beverages that goes beyond just being a financial analyst it's beyond the numbers you always have an instinct for what's working and what's not and I've always admired that.
SPEAKER_02:Well thanks Harry so from one fan to another see you soon