Stephen Carter King’s Post

To put a finer point on Fox News' observations: 1) NA beer has come a long way, and tastes a great deal more like traditional beer now than it did as recently as ten or twelve years ago, but the growth of the NA market will depend on continued innovation and investment in R&D. 2) Women are trendsetters, and their early support of the new wave of craft NA beers almost certainly augers an as-yet-unrealized growth in demand among men as well. 3) Young people are the future, and the craft brewing community should take note of what their spending habits tell us. Just as the first wave of growth in the craft beer market was driven by an earlier generation's demand for hoppier, more flavorful beer with a higher ABV than what was then being produced by the "big three", this generation of craft beer drinkers is looking for low-alcohol or non-alcoholic versions of the many flavors and styles of beer not available in mass-produced NA form. 4) Athletic is the only craft brewery on Fox's list, and the only one producing an IPA. This speaks to the massive growth potential of the craft segment of the NA market, even as the rest of the craft beer industry stagnates. 5) It's time for craft NA brewers to seize the day!

𝗨𝗞 𝘀𝘂𝗿𝗴𝗲 𝗶𝗻 𝗹𝗼𝘄-𝗮𝗹𝗰𝗼𝗵𝗼𝗹 𝗯𝗲𝗲𝗿 𝘀𝗮𝗹𝗲𝘀 𝘁𝗼𝗽𝘀 𝗼𝘁𝗵𝗲𝗿 𝗰𝗼𝘂𝗻𝘁𝗿𝗶𝗲𝘀: 🍻 UK sales of low-alcohol beer increased more than in any other market in 2023 thanks to a post-Brexit overhaul of alcohol duties. Sales of low-strength beer with less than 3.5% ABV doubled from 650,000 hectolitres in 2022 to close to 1.3 million hectolitres in 2023 after years of flat or declining performance, according to data provider IWSR. The UK market for low-alcohol beer expanded more than any other in volume terms, growing twice as much as the next-highest country, Venezuela, where sales increased by 325,000 hectolitres last year. The UK is now the eighth-largest global market for sales in this category of drink, up from 13th in 2022, IWSR told the FT. The world’s largest brewers have all launched zero-alcohol alternatives of their major brands in response to the growing trend for moderation among health-conscious consumers. Analysts said the low-alcohol beer market had taken off largely because of the post-Brexit changes to the alcohol duty system introduced last August, which mean products with less than 3.5% ABV are taxed at a lower rate than stronger drinks. IWSR senior market analyst Patrick Fisher said the UK had the largest-growing low-alcohol beer market largely due to brand owners reformulating existing brands to take them below the 3.5% ABV threshold. “Growth rates for the category are expected to normalise in the years ahead,” he added, with sales volumes of low-alcohol beer forecast to remain broadly flat between 2024 and 2028. Meanwhile, the share of pubs serving on-draught “no and low” options has risen fourfold since 2019, research by the British Beer & Pub Association showed. Recommendations include Athletic Brewing Co. Lucky Saint | B Corp™Below Brew Co IMPOSSIBREW®

How Athletic Brewing Made Millions on… NONALCOHOLIC BEER? Athletic Brewing Recently, a nonalcoholic beer company, Athletic Brewing, is making big money and keeping up with its boozy competition. After its latest fundraising effort, the brand is valued at over $800 million. In this article, we cover how they’re dominating the marketplace and their plans to keep growing… Athletic Brewing is Capitalizing on Growing Demand Brands like Liquid Death are already proof that nonalcoholic beverages are becoming more popular. However, beer sans alcohol has been a tough sell… Until now. “WE’RE OUT ON A MISSION TO CHANGE HOW PEOPLE DRINK.” WITH THE MARKET FOR NON-ALCOHOLIC BEER EXPANDING, @ATHLETICBREWING CEO BILL SHUFELT EXPLAINS WHY HIS BREWS ARE MORE POPULAR THAN EVER. WATCH #MORNINGINAMERICA: HTTPS://T.CO/61AQBHOPRY PIC.TWITTER.COM/8W8DDGFAA7 — NewsNation (@NewsNation) February 6, 2024 To that end, Athletic Brewing is looking to make NA beer and cocktails popular with a brilliant strategy… MAKING THEM TASTE GOOD AND GETTING THEIR PRODUCTS INTO MORE GROCERS NATIONWIDE. Yes, that sounds simple. However, it has not been well-executed until co-founder and CEO of Athletic Bill Shufelt got into the “non-beer” business. From a background in hedge fund investing, Shufelt realized that his entire lifestyle was attuned to health… Except his consumption of alcohol. After that, Athletic Brewing was founded and is now in the top twenty breweries nationwide. Further, that includes ones that brew regular alcoholic beverages. That success has resulted in an extremely successful capital-raising event that totaled around $50 million. So, what are they planning to do with all that beer money? How the Brand Plans to Use New Capital In an interview with The Wall Street Journal, Athletic Brewing revealed their plans for the newly raised funds… Adding a third facility to double its brewing capacity in the near future. An impressive feat considering last year they sold 258,000 barrels of booze-free brew. With trends as they are, it’s probably the investment will pay off.

Factors including the growth of ready-to-drink canned #cocktails and consumer trends away from beer and malt beverages are contributing to a contraction in #craft beer sales. https://buff.ly/3UW2xOL

Good to see Arkansas beverage production growing! Arkansas has tremendous potential in craft beverage. "Arkansas beer production surged in 2023 — mostly on gains made by a single brewery." "Beer-makers in the Natural State brewed 60,782 barrels of beer and hard seltzer products in 2023, up 14% when compared with 53,511 barrels for the prior year, according to figures provided by the Alcoholic Beverage Control Division of the Arkansas Department of Finance and Administration." "In response to emailed questions, Jesse Core, founder of Core Brewing and Distilling, said in 2023 the operation produced 20,165 barrels in total, when an additional 5,225 barrels from contract manufacturers is added to the product made in Arkansas. He said growth came from a combination of expansion of the Core’s hard seltzer line Scarlet Letter, the company’s entry into ready to drink products, and its private label partnerships. “We will be up approximately 5% in 2024, and 2025 is shaping up for 30% plus growth,” he said. https://lnkd.in/gBfeng2g

🍻 Beer struggles 🚫 📉 Beer production fell by 4% year-on-year in the first eight months of 2024 as breweries struggled with declining profits, an industry association leader has said. 🗣️ Nguyen Van Viet, chairman of the Vietnam Beer - Alcohol - Beverage Association, said the industry has been hit by the stringent drunk driving policies and difficulties in the economy, and this has affected the labor market and other industries that supply materials and services to beer manufacturers. "Over the last two years large companies in the industry have seen a 6-12% annual decline in revenues and profits." 🍺 Dutch brewing giant The HEINEKEN Company said its global beer production fell by 4.7%, mainly due to the Vietnam and Nigeria markets. It had to shutter its factory in Quang Nam Province at the end of June. 💬 SABECO - Saigon Beer Alcohol Beverage Corporation, another industry leader, said its profits inched up in the first half but could plummet in the second. 💰 Other brewers also reported a fall in profits in the first half. Saigon - Western Beer saw an 18% year-on-year drop, while Saigon - Phu Tho Beer lost VND1 billion (US$40,700) as against profits of VND260 million in the same period last year. 📰 At a press conference last Tuesday, Ly Kim Chi, chairwoman of the HCMC Food and Foodstuff Association, said consumption of beverages, including beer and liquors, has decreased due to the government’s tight regulations and consumers’ belt-tightening. 📈 Beverage firms are dealing with rising costs and outdated production processes that make it difficult for them to be competitive, she said. 💪🏼 To improve performance, the beer industry needs to develop products that align with modern consumer trends and upgrade their technologies, she noted. 🚨 Viet called for policies to support the beer industry: "I support restricting drunk driving, but regulations need to be adjusted to suit Vietnam's transport system." https://lnkd.in/gKCMsGR7

It has been a long week for The Boston Beer Company ($SAM). On 5/31, the WSJ reported that Japanese spirits maker Suntory was in "early talks" to acquire $SAM, maker of Samuel Adams beer and Truly hard seltzer. Shares rose +22%. Historical trends in Beer M&A and with these players in particular make this an interesting one to watch: -- Craft brewer takeout multiples: Historically, beer assets have transacted at mid-teens multiples or higher (vs. 10.9x for $SAM before the news) --Suntory's deal history: Suntory bought Jim Beam in 2014 for $16bn--a much larger deal than $SAM--and paid a healthy 19.9x LTM EBITDA. A similar multiple would yield +55% upside from SAM's current share price --Existing partnership with Jim Beam : In 2021, SAM signed a partnership with Jim Beam to produce & market "ready to drink" canned cocktails. Despite being a small percentage of sales, it represents a toehold relationship between $SAM and Suntory In an interesting twist, the Journal reported on 6/4 that Canadian cannabis producer Green Thumb ($GTII.CN) had thrown its hat in the ring, offering to explore a merger with $SAM in a letter sent over the weekend. Notwithstanding Green Thumb's unclear ability to pay (its market cap of $2.8bn is smaller than SAM's) and dubious strategic rationale (no clear overlaps in production, sales & marketing, or distribution), SAM now seems to be in play with two bidders circling. Putting aside founder Jim Koch's voting control of Boston Beer, the competitive dynamics seem to set up nicely for something to happen here. But it's hard to get away from the underlying fundamentals of the business: --US Beer consumption is in decline --The Craft category is growing but overcrowded (the number of US craft breweries has grown from 1,500 in 2009 to 10,000 in 2023) --Even though 85% of SAM's 2023 volume was in non-beer products (cider, seltzer, malt bevs, etc) commanding 23% share of the "beyond beer" category, shipments of Truly—Sam’s flagship asset in the category—comped down -15% and -21% in 2022 and 2023, respectively. Not great. All of this is reflected in SAM's financial profile, where profitability per unit of volume has deteriorated over time due to gross margin degradation and higher promotional spending. The potential upside of Suntory paying a high premium beckons, but without it, $SAM’s only secular growth engine (seltzer) has ostensibly jumped the shark and the unit economics seem to have gotten structurally worse concurrently with that initial growth spurt. It's a common conudrum for Special Situations investors. Betting on binary strategic outcomes is tough. But if you’re going to get involved, you might as well get to know the asset you’ll own on the other side of your catalyst. You can check out our fundamental analysis here: https://lnkd.in/e9ajqU-C See how Understory's exhaustive fundamental data--available in minutes--can help you sharpen your pencil on this or any situation.

Factors including the growth of ready-to-drink canned #cocktails and consumer trends away from beer and malt beverages are contributing to a contraction in #craft beer sales. https://buff.ly/48AHyUP

6 groups account for ~65% of global beer production Over the past two decades, companies such as Anheuser Busch InBev, Heineken or Carlsberg have consolidated hundreds of beer brands under their roofs, creating an illusion of choice for consumers around the world. Take the five most valuable beer brands according to Brand Finance for example, four of which belong to AB InBev, which owns world-famous brands such as Budweiser, Beck’s, Stella Artois, Leffe, Modelo and Corona. And while the company was forced to sell the U.S. business of the latter two to Constellation Brands due to antitrust concerns in relation to its acquisition of Grupo Modelo, it still goes to show what a wide variety of international brands the world’s largest brewing group owns. You could easily go to a bar, try five different beers from five different countries, nay continents, without realizing that AB InBev was your exclusive beer provider for the evening. And while we have seen a boom in independent craft breweries over the past few years, their output is still dwarfed by the aforementioned global players. According to the Brewers Association, America’s 9,118 operating craft breweries produced 24.8 million barrels (around 30 million hectoliters) of beer in 2021. AB InBev alone produced nearly 20 times that according to official company figures tracked by hops specialist BarthHaas. Meanwhile, the 40 largest brewing groups in the world, accounted for 91.4 percent of global beer output in 2021, showing how small the impact of independent brewers is at a global scale.