ARE WE REALLY...?
WHY ARRIVAL OF NEW VODKA DRINK MEANS MORE BAD NEWS FOR BREWERS.
The final instalment of Are We Really …? — a three-part reality check on whether we’re living better.
The heads of the three largest beer companies in Canada were together on a stage, sitting around an unusually small table, talking about their collective decline to a crowd of bar owners and restaurateurs.
“Am I concerned? I’d be a liar if I didn’t say yes,” said Kyle Norrington, president of Labatt Brewing Co. Ltd., the Canadian wing of global beer conglomerate Anheuser-busch Inbev SA/NV.
A recent report from industry group Beer Canada had just shown a three- percent drop in total sales volumes in 2019 compared to 2018.
“We have to do something about it,” Norrington said at the Restaurants Canada trade show in Toronto on March 2.
Frederic Landtmeters, chief executive of Molson Coors Canada, called the size of the recent decline “unseen” in the industry. “Tough times for the beer industry,” he said, before trying to reassure the crowd. “We’re going to get through this together.”
But beer brewers might be the only ones in the alcoholic beverage industry fighting such declines. Despite signs younger generations aren’t as into alcohol as their parents, Canadians don’t appear to be drinking less overall, just less beer. Annual beer consumption fell by more than 10 litres per person aged 15 and older between 2004 and 2018, according to Statistics Canada’s most recent data. But in the same time period, the total volume of pure alcohol sold increased modestly, to 8.2 litres per person per year from eight litres.
One litre of pure alcohol is equivalent to 58 beers, cocktails or glasses of wine, so 8.2 litres is roughly 476 drinks per person per year, but Canadians actually drink more than that since Statcan data doesn’t include unrecorded sales such as cross- border purchases, which can add an extra 11 per cent, according to Tim Stockwell, director of the Canadian Institute for
Substance Use Research at the University of Victoria.
Stockwell said drinking levels vary, depending on the time frame you’re looking at, the age group and the region. For instance, if you look beyond the past decade or so, drinking steadily increased until the 2008 recession. After that, it dropped for several years before stabilizing and then ticking back up.
“The last 10 years have shown larger increases. If you go back 100 years, we’ve had a massive decline,” he said. “But on average, we’re drinking quite a lot. More than we used to for sure.”
Provincial regulations can also have an impact, notably the Ontario government’s recent embrace of buck-a-beer and relaxed sales rules, which are liable to boost consumption, Stockwell said. Consumption rates also depend heavily on the generation.
“There’s something weird that’s gone on, that young adults and youth appear to be drinking less and smoking less dope around the world over the last 10 or 15 years,” he said. “But those who are continuing to drink seem to be making up for the others, and the older generations have been picking up the pace.”
John Sleeman, the 66- year- old founder of Guelph, Ont.-based Sleeman Breweries Ltd., said it wasn’t unusual when he got into the industry to see somebody go to a beer store and pick up a case of 24 for the weekend.
“Now, my sons, who are in their 20s, may not drink beer all night — and if they don’t, they don’t tell me about it because I’d be pretty upset,” said Sleeman, who started his brewery in the 1980s. “But they’ll go out and they’ll have wine and they’ll have whiskies and they’ll have other things. It’s not that people are drinking less, they’re just drinking different.”
That trend is big beer’s big problem. It’s in the middle of an intensifying battle for market share — or, as the industry refers to it, “share of throat” — and it’s only become worse in recent years.
Beer companies are facing an ever- expanding assortment of things to drink and inhale. But, as of this week, Canadian beer is facing perhaps its fiercest competitor for throat share yet: White Claw Hard Seltzer, a new breed of cocktail- in- a- can that has rocked the market in the United States.
Anthony von Mandl, the Canadian behind White Claw, said he expects his drink to take a 10- per- cent share of both the Canadian and U.S. beer markets within the next two years, threatening to “disrupt” the brewers.
White Claw, flavoured with minimal sugar and five per cent alcohol, is essentially vodka and soda in a slim can, but it has become a sensation in the U.S. in just four years.
Cosmopolitan magazine noted it was the “drink of the moment” in the summer of 2019. The brand has inspired a flurry of memes, most poking fun at bro culture’s deep connection to White Claw.
“I’m a bro, I do dude things and get stoked and all that,” one Santa Monica man told
Business Insider last summer. “But I also just feel comfortable saying I like White Claw and that it’s good.”
Another man, a thirdyear college student, said you could “throw a dart at my fraternity composite and you’ll find a guy who’s into hard seltzer.”
The drink has become so popular that von Mandl’s Vancouver- based company, Mark Anthony Group Inc., has struggled to keep up with demand.
Since White Claw was launched in 2016, sales have grown from one million cases to a projected 150 million cases in the 2020 fiscal year, ending March 31. In 2020, von Mandl’s company doubled its revenues to US$2 billion and the company expects to hit US$4 billion next year. ( White Claw sales accounted for 60 to 75 per cent of total revenues.)
In the next two years, von Mandl is forecasting White Claw’s annual sales in Canada to hit 25 million cases, typically retailing at $ 49.99 a case. At 8.5 litres per case, that’s 2.13 million hectolitres in total. By comparison, Canadian beer sales were 21.41 million hectolitres last year, down from 22.08 million hectolitres the previous year, according to the Beer Canada report last month.
“Beer is bloating,” he said. “Perhaps it’s Instagram and people photographing themselves. They care about what they look like and they care about what they feel like.”
Von Mandl, who is reportedly now a billionaire, began his career as a wine merchant in British Columbia and then started Mike’s Hard Lemonade in 1996, the first generation of ready- to- drink cocktails. He sold the Canadian and international rights for Mike’s Hard to Labatt in 2015 for a reported US$ 350 million, along with a handful of other brands including Palm Bay vodka coolers and Okanagan Premium Ciders. His company then turned its attention to White Claw.
The deal for Mike’s Hard with Labatt meant the Mark Anthony Group couldn’t operate in Canada for four years, which partially explains White Claw’s lag in coming north. Von Mandl said it was important to launch in the U. S. first anyway, since “all great brands today really start off in America.”
Compared to Mike’s Hard, White Claw is less sugary, with subtler fruit flavours such as black cherry, natural lime and mango. It’s aimed at drinkers who want something relatively healthy and “sessionable” — industry code for something you can drink plenty of without tiring of the taste or getting too drunk.
The brand is also “gender neutral,” von Mandl said. “You won’t see any lifestyle beer advertising, anything of the sort. You won’t see us on mainstream television and sports events. You know, girls in bikinis and the usual frat-type humour. That’s not who we are.”
But, if Youtube and Twitter is any guide, the fraternity set has certainly embraced White Claw nonetheless.
From the start, von Mandl has relied on a bit of insight from research he saw decades ago: A quarter of men didn’t like beer, but drank it because it wasn’t socially acceptable to drink anything else. That “tribal pressure” to drink a certain brand of beer has since disappeared, he said. Without it, competition becomes about taste.
“Younger males, in their 20s and into their 30s, now have permission to drink anything they want. It could be purple or have an umbrella in it,” von Mandl said. “I think it’s a sign of the times. It’s where we’re going.”
The firm has committed two million cases of 24 cans for its Canadian expansion, though orders have surpassed internal expectations.
Last year, von Mandl believes he could have sold 20 million more cases in the
U. S. of White Claw if he had more supply.
White Claw is the latest headache for the big brewers, who were already beset by the ongoing craft beer expansion and cannabis legalization. The number of breweries in Canada between 2013 and 2018 more than doubled to 995 from 380, according to Beer Canada.
Legal weed’s impact on beer drinking, or alcohol consumption habits in general, is tougher to calculate. Stockwell, at the University of Victoria, said attitudes toward cannabis were already relaxed in Canada, so it’s hard to measure the impact of legalization. If anything, legalization made it harder to buy cannabis in many places, given the crackdowns on illegal dispensaries and supply issues in the legal market.
But generally, around the world, there is some evidence that increased cannabis use cuts into alcohol consumption, Stockwell said. “But not to a huge amount.”
Beer brewers on Monday’s panel didn’t seem alarmed about cannabis, which was a competitor long before it was legalized, said George Croft, chief executive at Waterloo Brewing Ltd., one of the bigger craft brewers in Ontario, and the fourth and final brewer on the panel.
“This isn’t new for our category,” he said. “There’s no real data, so it’s premature to suggest that any of us have the handle on what impact cannabis has had.”
The brewers on the panel didn’t mention White Claw specifically, despite the fervour around its launch days earlier, with lineups outside the first liquor store to sell the brand in Canada. But they talked about the trend toward different flavours and having lower alcohol, sugar and calories.
Croft cautioned against chasing trends. “We don’t want to be caught in the innovation gerbil wheel because our core portfolio’s not healthy.”
But the big beer companies have responded to the hard seltzer trend with new brands of their own, adding to brand rosters that had already expanded to include alcohol-free and low-alcohol beers and radlers.
“You’ve got to keep going, you’ve got to keep trying things. That’s exactly what we’re doing,” Labatt’s Norrington said.
YOU WON’T SEE ANY LIFESTYLE BEER ADVERTISING, ANYTHING OF THE SORT. YOU WON’T SEE US ON MAINSTREAM TELEVISION AND SPORTS EVENTS. YOU KNOW, GIRLS IN BIKINIS AND THE USUAL FRAT-TYPE HUMOUR. THAT’S NOT WHO WE ARE. — ANTHONY VON MANDL