Pabst Blue Ribbon – US Brewing & On-premise Recovery
Outlook – 26 May 2021
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Specialist:
Title:
John Wilhelm (JW)
Former VP, Legends Brands at Pabst Brewing Co LLC (Blue Ribbon Intermediate Holdings
LLC)
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Agenda:
1. On-premise beer sales recovery
2. Domestic consumption trends
3. Pricing and premiumisation product mix
4. Pabst Blue Ribbon's international opportunity
Contents
Q: Could you give us an overview of the US brewing industry, breaking it down by the top channels or
drivers and some of the top players in the market?
3
Q: Would you say the industry is fairly fragmented or it’s highly concentrated with some of the big players
you mentioned, such as Budweiser and Coors, or do you think there are a lot of upstarts and new players and
4
entrants into the market?
Q: What were 2-3 trends you were following pre-coronavirus in the brewing or alcoholic beverage industry?
How has that changed since coronavirus?
4
Q: Could you speak to the missed opportunity in onboarding women or considering them as an opportunity
to expand sales? What has been the challenge and how have firms such as Pabst Blue Ribbon grappled with
it? Did the company take it seriously or did it think women are never going to drink beer as one might have
expected?
6
Q: Could you give an overview of Pabst Blue Ribbon, some of the different categories it operates in and some
6
of the key brands?
Q: Could you expand on the local legends brands and the dynamics of that and why you think there is a big
opportunity there?
Q: Is Pabst jumping into each region or state and setting up a local brand named after a big heritage?
7
7
Q: Could you discuss PBR’s past distribution capabilities and the challenges behind distribution in brewing?
Each state has its own regulations. I think in Pennsylvania you have to have a licence and the state controls
the distribution. How does that compare to regular distribution of cans of Pepsi?
8
Q: Could you elaborate on the retailer-supplier relationship and how it has evolved, given off-premise is
70%-plus of the volume? What has that meant for a player such as Pabst who is smaller than Coors?
Q: How is the D2C dynamic across a number of different CPGs in brewing faring, particularly with brands
such as Pabst? I know with wine, you can order a big case of wine and have it delivered in about a week.
Q: Is there anything you have noticed as it relates to the rising input costs and inflation in the brewing
industry? I know you touched on freight. What are your thoughts on higher costs? Is this prevalent in the
industry right now?
Q: Could you describe that relationship between Molson Coors and Blue Ribbon
Q: Is it common for companies such as Pabst to not own its own brewing assets? Do you think this asset-
light model is more of an advantage to minimise costs on Pabst’s side?
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Q: Coronavirus aside, how are companies such as Blue Ribbon or Pabst strategically positioning themselves
to increase volume? Where is the next avenue for growth in this company? I know you mentioned the
opportunity within its Lone Star brands.
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Q: Out of each of the product line or portfolio diversification opportunities, whether it’s spirits or low-calorie
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or cannabis products, which would you say are critical?
Q: Could you touch on the international opportunity for Pabst and brewing in general? Are US companies
really focused domestically? How would you assess American brewing companies and their brand affinity
globally?
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Q: How strong is brand loyalty as an American consumer? How important is it, especially with companies
such as Pabst trying to roll out marketing strategies to reach new consumers? What does the consumer want
in a brand?
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Q: Can you discuss the shift towards cans over plastic and some of the sustainability issues? How serious are
regulations around how much plastic you can use? Do you think this is a serious issue that brewing
companies are coming to grips with, or it’s more so just a marketing play?
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Pabst Blue Ribbon – US Brewing & On-premise
Recovery Outlook
Transcription begins at 00:00:00 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview on Pabst Blue Ribbon – US Brewing and On-premise
Recovery Outlook. I am Nyree Hinton and I will be facilitating today’s Interview with Mr John Wilhelm,
former VP of Legends Brands at Pabst Brewing Co, formerly known as Blue Ribbon Intermediate Holdings
LLC.
John, before we get started with today’s Interview, please state I agree or I disagree to the following statement:
You understand the definition of material non-public information and agree not to disclose any such
information, or any other information which is confidential, during this Interview.
JW: I agree.
NH: Thanks, John. Could you start by giving the audience an overview of your background and various roles
that you’ve held in the industry?
JW: Sure, Nyree. Happy to. First of all, thanks for having me. I really appreciate the time. My background has
been primarily in sales and marketing for the last 25-plus years. I began my career working with Anheuser-
Busch doing field marketing and sales, then I made a shift and jumped into the agency side. I spent nine years
working at three different marketing agencies, all working on different beer brands, from Rolling Rock to
Miller Lite to Dos Equis to Bohemia, etc, Coors Light as well, too. Then in ’07, I made the switch and jumped
over to the brand management side, started working at Coors Brewing Company, spent five-and-a-half years
working at Coors Brewing Company on brands like Blue Moon and also Coors Light, and spent a good bit of
my time also on innovation and new product development. Took a bit of time off from the beer business for
about 3-3.5 years, worked at Air New Zealand. I was the Global Brand Manager for Air New Zealand for the
western half of the globe. Then I, in 2015, was asked to come onboard at Pabst Brewing Company and led
mostly the legends brands, the local legends brands like Lone Star, National Bohemian, Old Style, Rainier, etc,
for Pabst Brewing Company for about three-and-a-half years. Now I’m a Chief Marketing Officer for a
cannabis company here based in Colorado, vertically integrated. Again, spent the majority of my time and my
career mostly in the marketing and brand management side of things, but a bit of the sales as well, too.
[00:02:27]
Q: Could you give us an overview of the US brewing industry, breaking it down by the top channels or drivers
and some of the top players in the market?
JW: Beer as a whole right now is an interesting space and place. The beer business has been struggling for a
number of years and a majority of that struggle is coming at the expense of the wine and spirit space.
Obviously, some of the big players, Anheuser-Busch, MillerCoors, or Molson Coors now if you will, have some
pretty significant strongholds from a share standpoint in the marketplace, but a majority of their core and key
brands are continuing to struggle. One of the things that is, I think, really leading to a challenge in the beer
business right now is it’s in a position and in a space that it really needs to reinvent itself. Beer has gotten old,
it’s gotten tired and it’s been looked upon as, “That’s what my grandpa drinks, that’s what my uncle drinks,” so
there’s a big opportunity within the beer space right now, I think, to reinvent itself and add some more energy
and excitement back into the space.
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From a channel standpoint, we refer to it as on-premise/off-premise. Off-premise is anywhere from,
depending on the brand and the region, etc, but on a national basis off-premise accounts for approximately
70-75% of the overall volume within the industry. On-premise, bars, restaurants, taverns, clubs, etc, account
for about 20-25% of the industry there. Then the big key players. Obviously, from an off-premise standpoint,
I’ve seen in my career, 25-plus years in the beer business, I’ve seen a pretty significant shift into strength and
power within the industry sitting much more so on the retailers’ side than it is on the distributor and the
manufacturer side. You have large players like Costco and Sam’s, etc, Kroger, Safeway. Those are some of the
big players, obviously, on the off-premise side. We’re starting to see some change also in the on-premise as
well, too. They have a pretty significant foothold here and there, Buffalo Wild Wings and Twin Peaks and
Brinker Corp with Chili’s and different restaurants like that, Fridays, etc, also have a pretty good foothold
within the on-premise space.
[00:05:05]
Q: Would you say the industry is fairly fragmented or it’s highly concentrated with some of the big
players you mentioned, such as Budweiser and Coors, or do you think there are a lot of upstarts and new
players and entrants into the market?
JW: Yes, absolutely. Yes, there’s more fragmentation, I think, in the beer business now than there has been in
the last 20-30 years, reason being influx, to your point, of a number of new craft breweries popping up. Last
statistic that I saw was that there are more breweries now in the United States than there ever have been. We
have seen, if you think back prior to the industrial revolution, a big driver of why there were so many
breweries is because every either township or neighbourhood, etc, they didn’t have the opportunity to be able
to ship product as efficiently and effectively as we can these days. So it led to a tremendous amount of a
number of smaller breweries, distilleries, etc, across the United States. We’ve surpassed that now, and so that
fragmentation, I think, it’ll be interesting to see where it’s going to head in the coming years. I don’t
necessarily see it slowing down because localism is such a hot trend as well, too. It’s going to continue to, I
think, drive more of that fragmentation. The big players, you’re starting to see much more fragmentation as far
as number of SKUs in brands, so it’s becoming more challenging and difficult both from a retailer and
distributor standpoint, wholesaler standpoint, to be able to manage all of those SKUs effectively within their
own respective businesses. It’ll be an interesting place to watch and see what happens in the next 5-10 years.
[00:07:24]
Q: What were 2-3 trends you were following pre-coronavirus in the brewing or alcoholic beverage industry?
How has that changed since coronavirus?
JW: Good question. I would probably say I’ve got probably at least six or seven of them, but if you want two or
three, I’d say the biggest ones for me, I’d say the first big trend right now, one of the bigger trends that I’ve
been seeing within the industry as a whole, too, alcohol beverage industry, is diversification of portfolio. It’s all
around exploring and developing new products and new product lines in adjacent segments. For instance, you
see Pabst gone into spirits, so perhaps has a whisky now. Their Olympia brand has an exceptional vodka, really
beautifully designed, exceptional vodka. Anheuser-Busch is pushing more into the spirits space. MillerCoors,
I’ve noticed, has been hiring for some market managers in key markets, but they’re looking for market
managers with wine and spirits experience. That leads me to believe that they’re going to be moving and
pushing more and more into this space as well, too. That diversification of portfolio, though, is also pushing
and moving beyond beverage alcohol, so it’s moving into cannabis space as well, too. If you’re familiar, Pabst
has a cannabis seltzer in California at the moment as well, too. As we see more states taking on legalisation,
accepting legalisation of cannabis and cannabis products, we’re going to see, I think, a lot more of this as well,
too, in the space.
The next trend that I’m also seeing is “better for you”. Better for you, it’s really driven more from a consumer
insight with millennials and Gen Zs in particular. That generation places a higher value on health and
wellness. It really leads to the whole idea that they feel it’s their responsibility to make a difference in the
Private and confidential 4
world, so they feel that they need to show up and show up everyday. It’s a bit different than Gen X and
boomers’ relationship with alcohol. That’s significantly changed. You’re seeing lighter-calorie products, more
of them coming on the market. You’re seeing more natural and organic products and ingredients coming on
the market. That better for you and health and wellness is, I think, also what’s leading to brands like White
Claw and Truly, etc. The seltzer is really taking a big push and a big boom. Health and wellness is a significant
trend and I don’t see that slowing down in the future. Flavours are also another trend, too, that I think is going
to continue. I think Bud Light has been doing quite a bit at, they’ve got flavoured beverages. Coors Light got
into that as well, too. So you are seeing some of the diversification of the portfolio by expansion into more
flavours to try to grab more share and grab more drinkers and grab more occasions.
Another big trend I’m also seeing too is more RTDs, ready to drinks, but also singles. RTDs, there’s also a big
push with the RTDs about canned cocktails, like Cutwater, for an example. They’ve got a whole line of Moscow
Mules and Bloody Marys, etc, in a can. We’re seeing more canned wine, canned spritzers, etc. Those RTDs are,
I think, going to continue to grow and you’re going to see more brands pushing more of them out. Within that
I mentioned as well, too, there’s also a push, I think, away from plastic and into cans. There’s actually a water
brand called Liquid Death. Liquid Death is all about, their whole tag line is “murder your thirst”. It’s canned
water, but they built a really nice brand around it that’s fun and has a lot of meaning, etc, but they’re all anti-
plastic. It’s all about recycling, being able to recycle aluminium, etc.
Another big trend I’m also seeing is feminisation within beer and alcohol beverage as a whole. This, I think, is
a bigger push and a bigger trend that’s happening across our global culture, definitely obviously in certain
countries more so than others, but you’re seeing, not just an acceptance but an embracing of that females
drink beer, too. Females drink alcohol beverages, and so you’re seeing within, especially in the beer business, a
push and a move beyond seeing women as just sexual objects. When I started in the beer industry, you’d walk
into liquor stores and there are bikini-clad posters all over the place and banners, etc, women bikini-clad, etc.
You’re seeing a much more shift and a move away from that. For example, the Coors Light brand, I’ve got to
tip my hat to them, came out a couple of years ago, a few years ago, with a TV spot that depicted a young
female coming home from work at the end of the day, she walks over to her fridge, pulls out a Coors Light,
pops the top on the Coors Light, sits down on the couch and proceeds to undo her bra underneath her shirt
and pull her bra off, obviously still fully clothed, but pulls her bra off. You wouldn’t have seen that in beer
marketing 20 years ago, so that feminisation is really being embraced much more so. I tip my hat to them, I
think it’s fantastic.
Also gender lines are being a bit more blurred as well, too. There’s definitely, art culture is becoming more and
more accepting and understanding of sexuality and sexual preferences, and so you’re seeing that very much
play out. I think PBR is doing a nice job of demonstrating within culture. If you take a look at their social
media, etc, demonstrating in culture how much they understand and embrace this blurring of lines, if you will,
of sexuality and seeing us all as humans and not necessarily as a specific sex or a specific ethnicity, etc.
Another big trend, too, is just the younger audience is drinking a lot less. If you look at Gen Zs and then Gen Zs
that are becoming of age, depending on your definition and who you look at, the oldest Gen Z is in the
neighbourhood of about 24 at this point, but their relationship with alcohol is much different than Gen X and
also boomers. They’re consuming less, consuming a bit less frequently, but that is a trend to also keep an eye
on as well, too.
I also think in certain states, I do think cannabis, as coming on from states like Colorado, California, Oregon,
Washington, etc, where recreational cannabis is legal now, that is also going to impact the beverage alcohol
industry, and is impacting it. There’s less disposable income to go spend at bars and things like that. Gen Zs
and millennials are definitely open to, and embracing of, cannabis as a way to decompress, relax, shed their
day, etc, vs alcohol. It’s also impacting another key segment, soccer moms. A majority of soccer moms are
moving more into where legal cannabis, etc, moving away from alcohol. Instead of putting the kids to bed at
19:30, 20:00, cracking a bottle of wine and having two or three glasses of wine so that they can have their
“serenity now” moment, that’s turned to pop a 10-milligram gummy and then also have a glass of wine
potentially and that’s how shed their day. Then in alcohol, I’d say in the spirit side, rum is the next big spirit, I
think. Mezcal is having its day, or had its day. Gin also had its fun in the sun. Rum is going to be the next big
one, I think, and because it’s such a complex spirit and very global in nature, it’ll be interesting to see where
rum goes.
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[00:16:06]
Q: Could you speak to the missed opportunity in onboarding women or considering them as an opportunity to
expand sales? What has been the challenge and how have firms such as Pabst Blue Ribbon grappled with it?
Did the company take it seriously or did it think women are never going to drink beer as one might have
expected?
JW: That’s a good question. I think that’s also why seltzers are so popular. Seltzers are very female-friendly,
primarily if you take a look at their taste profile and palate, something that tastes a bit lighter, brighter, but
also has some flavour and different flavourings, etc, to it. If you take a look at the White Claw portfolio
compared to a standard Coors Light, Miller Lite, Bud Light, it’s a bit more interesting. There’s something that
can draw and pull in female consumers to be able to fit their taste profile and their palate. Also, I think it’s
being demonstrated too in packaging design. If you take a look at packaging design and some of the newer
brands and newer things that are coming out, it definitely is a softening of masculinity and I think a
strengthening of feminine and feminisation, if you will. You’re seeing that primarily, I think, also in package
design. You’re also seeing that in lighter beverages, too. Primarily, you will see more females will have a
tendency to turn to a lighter-calorie, lighter-alcohol percentage beverage than a typical male consumer would.
Males will go out and will have a tendency to, if you’re into craft beers, etc, lean more into IPAs and things like
that that are a bit stronger in flavour and in nature compared to, one of Pabst, in their portfolio, came out with
Pabst Easy, a very low-ABV beer with a nice, bright light blue and yellow packaging design, that if you think
about it, it’s not being depicted as a very bold, masculine line extension or offering from the brand. It
definitely fits more in a lighter-flavour, lighter-palate, lighter-alcohol, lighter-calorie offering, in particular.
[00:19:03]
Q: Could you give an overview of Pabst Blue Ribbon, some of the different categories it operates in and some
of the key brands?
JW: Absolutely, yes. There’s Pabst Brewing Company and Pabst Blue Ribbon is obviously the brand or the
core main brand under Pabst Brewing Company, so I’ll refer to that as PBR, just in case, as we’re moving
forward. I’ll refer to Pabst as the company and then PBR as the brand. PBR is the lion’s share. If you take a
look at public data, the lion’s share of the company sits within PBR. One of the challenges that the brand has
faced, if you take a look at where their pricing index is compared to some of the other larger national brands
like a Coors Light, a Bud Light, a Miller Lite, their pricing index is still probably in the high 80s to maybe low
90s index compared to a Coors Light, Bud Light, Miller Lite. The pricing index has been a bit of a challenge, I
think, also, too, because if you take a look at, across the board, what’s referred to as the below-premium
segment which includes brands like Keystone, Miller High Life, etc, PBR does sit a bit within that, below
premium. That segment within beer has been struggling, has really, really been struggling, from a volume
standpoint.
I think one of the challenges is it’s very much a value-shopper proposition. Obviously, I think, from a COVID
standpoint, we typically see if you have either recession or challenges or disasters like a COVID situation, etc,
unemployment, tough times like that, typically, what you see in the beverage alcohol industry is folks have a
tendency to down-trade. Previously, if I was purchasing a 12-pack of craft and then maybe another 12-pack of,
quote, regular beer, that probably then has shifted and changed into, “I’m going to buy an 18-pack or a 24-
pack of regular beer and maybe I’ll buy a six-pack of craft every third or fourth trip to the store and take the
same.” That’s been, I think, one of the challenges for Pabst. From a pricing standpoint, etc, that’s all public
knowledge and information. It’s interesting to also see, if you take a look at Pabst as a company, they have, I
think, an absolute amazing opportunity with the local legends brands, brands that I was managing and leading
and overseeing. Localism is still a significant trend across the globe and I don’t foresee that changing or
shifting, really. I probably only see it strengthening. To be able to leverage the, quote, local legends brands like
Lone Star, Rainier and National Bohemian with that local pride and that local history and heritage, I think is a
tremendous opportunity for them to be able to lean into.
Private and confidential 6
Then you also see, from a PBR standpoint, they’ve been diversifying their portfolio into spirits, into hard
coffee, into seltzers, into different spaces and places to try to capture volume share and dollar share within the
market. PBR is a brand that’s interesting as well, too, because as far as the brand, it has a solid foothold in the
off-premise, but also has a pretty decent foothold in the on-premise as well, too, primarily from a draft
perspective, cans as well. You’re seeing a lot more cans in the on-premise. You didn’t really see cans in the on-
premise 10-15 years ago, so you’re seeing a lot more of that, so that iconic 16-ounce can, for Pabst, I think is a
really good opportunity for them in the on-premise.
[00:23:26]
Q: Could you expand on the local legends brands and the dynamics of that and why you think there is a big
opportunity there?
JW: Yes, absolutely. For instance, when you take a look at a brand like Lone Star, and I think Lone Star is a
really interesting example as well, too. Rainier, I think, is another good one, too, I can touch on that one. If you
look at Lone Star in the state of Texas, Lone Star, as a beer brand, has taken its name after the Lone Star State.
I’m a Texan by birth and I have Texas blood running through my veins, and as Texans we have a tremendous
amount of pride in being Texan and what we stand for and who we are, and so if you have a brand that
represents that tremendous amount of pride, man, that is super, super powerful. Very, very powerful. It
becomes difficult also, too, obviously in the state of Texas because you have brands like Miller, they have a
brewery in Fort Worth, Anheuser-Busch, they have a brewery down in Houston, so they can also lean into,
quote, their local aspect as well, too, but a brand like Lone Star I think is an absolute gem and a diamond that
can really, really connect with the hearts and minds and the culture in Texas. Same thing with the Pacific
Northwest and Rainier. There’s a tremendous amount of pride of being from Seattle and from Washington or
from Portland and Oregon, and that pride and then also the localism trend I think positions the company very,
very well to be able to fully leverage that portfolio of brands.
[00:25:16]
Q: Is Pabst jumping into each region or state and setting up a local brand named after a big heritage?
JW: For the company or for the brand or for PBR?
NH: For PBR, from a strategic standpoint and how it’s coming up with these localised brands.
JW: Sorry. I didn’t mean to cut you off. Yes, so these brands are classic heritage brands that Pabst has
acquired over the years, so Rainier, Lone Star, Old Style, National Bohemian, Stag in St Louis, Stroh’s in the
Pacific Midwest. These are all brands that Pabst had acquired over the years once those breweries had
shuttered. If you go back and look at Stroh’s, for instance, at one point Stroh’s was one of the top-selling beer
brands in the United States, had a significant amount of strength and power. The company lost its way for
various reasons, Pabst had the opportunity then, once the brewery shuttered, to purchase the brand, the IP, all
the assets, etc, and have continued to make that brand and continued to push it. These brands are all authentic
brands. They originated in those local regions, in those local markets. Some of them aren’t necessarily 100%
brewed still in those local markets, but there’s still a tremendous amount of affinity and love for those local
brands in particular. It’s not necessarily about them crafting these brands, but it’s more about leveraging these
brands because of the strength that they have within their local markets, if that makes sense.
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[00:27:13]
Q: Could you discuss PBR’s past distribution capabilities and the challenges behind distribution in
brewing? Each state has its own regulations. I think in Pennsylvania you have to have a licence and the
state controls the distribution. How does that compare to regular distribution of cans of Pepsi?
JW: Yes, absolutely. The name of the game when it comes to distribution in the beer business is to be able to
leverage scale at a geographic level. If you take a look at, for example, Anheuser-Busch has 12 breweries across
the United States, and with 12 breweries across the United States, one would think, “Wow, that’s a pretty
complex brewing operation and brewing system.” Anheuser-Busch probably has one of the most efficient
brewing systems across the United States, even though they have 12 locations, but those 12 locations are very
strategically positioned across the United States, from a geographical standpoint, to be able to minimise the
amount of freight required to move beer. Obviously, beer products, liquid, it’s heavy, it’s not cheap necessarily.
It can get expensive to be able to have to ship product across the states, across the country, etc. That’s why
originally, if you take a look at then MillerCoors, I believe that’s why the brewing operation, or the brewing
agreement and contract brewing and co-packing agreement that MillerCoors and Pabst had, and is winding
down now, works quite well for Pabst, because they were able to leverage low freight because MillerCoors has
6-7 breweries across the United States, pretty strategically placed.
As, from what I’ve been seeing and reading in the papers, you can tell that, obviously, this relationship with
MillerCoors, or Molson Coors I should say now, and Pabst is coming to an end, I think Pabst was faced with an
opportunity to say, “How can we best maximise our scale and geography to service the markets that we need?”
That’s why I believe they had embarked upon this opportunity with City Brewing and partnership now,
because if you take a look at what City Brewing can bring to the table, plus now the California brewery that
Pabst owns, they now have brewing operations in southern California, they have brewing operations in the
Midwest, they have brewing operations in the northeast at the old Latrobe brewery, and they have brewing
operations down in Memphis now. So they’re at a position, I think, my opinion, to better leverage their scale at
a geographic level to be able to service the markets that they need. That’s really where I think their opportunity
lies. Again, public knowledge, but if you take a look at a majority of the distributorships and wholesalers where
Pabst is, it worked quite well for them previously because those were also a majority of the distributorships
and wholesalers where Molson Coors, or MillerCoors, was doing business as well, too, so it worked really well
for them, I think.
[00:31:16]
Q: Could you elaborate on the retailer-supplier relationship and how it has evolved, given off-premise is 70%-
plus of the volume? What has that meant for a player such as Pabst who is smaller than Coors?
JW: Yes, absolutely. When I started in the beer business and started my career in about the mid-’90s, I saw a
lot more strength and power in the suppliers. It seemed the suppliers had a lot more strength and power in
that relationship. To me, it’s shifted a bit now. You have some very strong players that have a tremendous
footprint and have driven a tremendous amount of scale, and they have shifted the dialogue and shifted the
conversation to be more around, “What are you going to help me do for my shopper?” As opposed to, “Okay,
sure, yes, you can put that new brand and 12-pack on the shelf.” It’s becoming much more about shopper
marketing focus, especially when it comes to the larger grocery chains. They’re becoming much more
sophisticated in how they service and provide an experience for their shoppers. Kroger, Safeway, Costco, Sam’s
Club and Walmart, etc, they’re very sophisticated retailers that do a fantastic job of understanding what really
influences purchase and how to drive a better and deeper experience.
Now the breweries, even the biggest of big, ABI, are having to come up with more shopper- and customer-
specific solutions, so a Kroger solution, a Walmart solution, a Costco solution, because they want to make sure
that they’re catering specifically to that shopper within that specific channel. When it comes to smaller
companies and smaller brands, it makes it more difficult because you don’t have the resources available to be
able to compete against some of the category management teams that someone like an Anheuser-Busch has or
that a Molson Coors has. They have much more resources, headcount, etc, to invest, address those specific
customer needs, like a Kroger, Safeway, etc. It makes it a bit more challenging for probably a company like
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Pabst or Mark Anthony Brands, etc, to be able to address the needs of those specific retailers.
[00:34:22]
Q: How is the D2C dynamic across a number of different CPGs in brewing faring, particularly with brands
such as Pabst? I know with wine, you can order a big case of wine and have it delivered in about a week.
JW: Yes, good question. It’ll be interesting to see because I think that’s why you see things like Drizly and
some of those other direct-to-consumer delivery services partnering, I’ve seen them partner with Anheuser-
Busch, I’ve seen them partner with some Molson Coors brands, etc, to be able to get that direct to consumer.
It’s interesting because I think it’s going to be a big uphill battle because the three-tiered system within the
beer business and the beer industry as a whole is something that’s existed since pretty much prohibition at
various levels, at varying, different states. I don’t foresee that necessarily going away. The distributor network,
wholesaler network, when it comes to beer, they are fantastic at what they do at a local level. They have the
resources to be able to get the product from their main distribution centres out to individual retailers and
they’re well-equipped to do that. For, I think, beer companies to take that on, that’s a significant outlay of
capital and resources that would be required in order to be able to achieve that, and my gut is telling me that
that, I don’t think it’s going to be happening.
I do potentially see something, maybe like an Amazon stepping in because they have the resource in order to
do that, they’re well-equipped. I could see someone like an Amazon stepping in, potentially, to do that as well,
too. It is very much a different model than a traditional, typical CPG model. There are some local craft
breweries that have a pretty solid… if you take a look at the brewery in Placentia, California, they have a pretty
solid online presence and a majority of their online sales are, you do online sales, come to the brewery, pick it
up type of thing. They can ship where legal, but I think they’ve done a pretty solid job of trying to curate a
unique customer experience with the line of products that they offer and who they’re trying to connect with.
[00:37:07]
Q: Is there anything you have noticed as it relates to the rising input costs and inflation in the brewing
industry? I know you touched on freight. What are your thoughts on higher costs? Is this prevalent in the
industry right now?
JW: I would say the higher cost, this is just my opinion, I think, from a higher cost standpoint, everything
across the board is going to be impacted. If you’re looking at dry goods, you’re looking at packaging and
packaging material. As we’re coming out a bit of the recession as far as COVID is concerned, I think we’re
seeing a rise in increasing costs across the board, and I do think that that is going to impact the brewing
industry. If you look at a company like Canarchy, if you’re not familiar with Canarchy, Canarchy was created
when a handful of smaller craft breweries decided to join forces to try to leverage some scale, collective scale if
you will, vs what little scale they had individually. They have upwards of five, six, seven pretty solid local craft
breweries. Everything from Cigar City down in Tampa to Deep Ellum Brewing to Dale’s Pale Ale and Oskar
Blues based here, primarily in Colorado. They got together, pulled their collective resources to try to, again,
generate some collective scale. That will definitely bode well, I think, especially as you’re seeing an increase in
COGS and increasing freight, I think they’re going to be in a better position compared to probably some others
out there.
Yes, rising costs are definitely going to be a significant factor and challenge. It’ll be interesting to see when the
GPI, or the general price increase, how that’s going to be affected or impacted come this fall. That’s usually
whenever the GPIs are announced by all the different breweries. Usually, the GPI comes out and they’ll say,
“We’re going to be at two-and-a-half points,” but then as you see the pricing then settle, sometimes it goes
down to only a point, point-and-a-half give or take, depending on the brand, depending on the brewery. It’ll be
interesting to see how that’s going to impact pricing come this fall.
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[00:39:50]
Q: Could you describe that relationship between Molson Coors and Blue Ribbon, its importance and why the
relationship is unwinding?
JW: From what I read in the papers, again, I think the importance for the relationship for Pabst, as a
company, was a pretty significant one because Pabst did not at the time own their own brewing assets, so they
had to find a way to brew the beer for their brands and get it out to market. MillerCoors at the time, now
Molson Coors, was an ideal solution, again, from a geographic standpoint, strategically. That relationship I
believe, obviously, if you’re taking your partner to court, it’s probably not a very solid relationship, would be
my assumption, my guess. The fact that it was settled, I assume that benefited Pabst pretty significantly. If you
take a look at Pabst now has the rights to, owns the old Miller plant, the old Miller brewery down in Irwindale,
California. Again, I think it was a very important relationship from Pabst’s standpoint. You could deduce that
maybe it wasn’t necessarily as important of a relationship from a Molson Coors perspective. Again, hence the
lawsuit and then the overall outcome of that, of the settlement of that lawsuit, from what I’ve read in the
papers.
[00:41:43]
Q: Is it common for companies such as Pabst to not own its own brewing assets? Do you think this asset-light
model is more of an advantage to minimise costs on Pabst’s side?
JW: That’s a good question. I think it depends on the brewery and the organisation. I think if you go back to
one of my previous comments, I think if you take a look at Anheuser-Busch, they have a very, very effective
and very efficient, I should say, brewing operation system, even though they have 12 breweries across the
United States. If you take a look at smaller companies that are either starting up or have been around for a
while, contract brewing and co-packing has been something that’s been taking place in the industry for quite
some time. If I wanted to start John’s Brewing Company here, Wilhelm Brewing Company in Colorado, for me
to even get to a place and space where I can actually brew a decent amount of beer for a market, let’s say like
Colorado, I’d have to shell out anywhere from USD 25m to USD 30m, maybe USD 50m in capital just in order
to get my own brewing operations underway and continue to drive some success behind my business and my
brand. The challenging piece with that as well, too, is I also then am betting on the come for Wilhelm Brewing
brands to become popular and grab a foothold in the marketplace, etc.
If you take a look at some of the smaller craft breweries right now, they’re facing some significant challenges
because craft overall in the industry is down pretty significantly, and that’s because they had so much of their
business tied up in the on-premise and the on-premise, obviously, has been in a very challenging position over
the last 12-18 months. Those craft breweries now have invested a tremendous amount of capital into assets
that are, what I’m going to guess, pretty underutilised. Underutilisation of assets within the brewing industry
is going to continue to be, I think, a pretty significant challenge for people to face. If I step into the space and I
say, “Wilhelm Brewing,” instead of me outlaying, let’s say, USD 30m in capital to build a decent little-sized
brewery, “You already have a brewery? You have some capacity? Great. Okay, why don’t you brew my beer for
me? Let’s come up with a co-pack agreement, and that way I don’t have to shell out the capital and also I’m not
assuming the risk, necessarily, of betting on the come that my brands are going to be huge and successful in
the marketplace by outlaying that much capital to build my own brewery.”
[00:44:43]
Q: Coronavirus aside, how are companies such as Blue Ribbon or Pabst strategically positioning themselves to
increase volume? Where is the next avenue for growth in this company? I know you mentioned the
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opportunity within its Lone Star brands.
JW: That’s a good question. I’ll give you my opinion based on what I see on social media, what I see on their
websites, what I see as far as what they’re putting out into the marketplace. I think the opportunity exists in
continuing to diversify their portfolio. Again, you take a look at the seltzers and you take a look at hard coffee
and getting into cannabis and different things like that, that diversification of portfolio I think is going to
continue to bode well for them because, again, I think beer as a whole is struggling because beer is getting old,
it’s tired, except for seltzers are now onboard and how many new IPAs do we really need? Those things are
getting a bit tired and they’re old and they’re getting a bit played out. I think for a company like Pabst to
continue to diversify their portfolio and demonstrate that they are not just an old tired beer brand will
continue to bode well for them. With COVID, obviously, things are starting to open back up. Different states
are at different levels and different things. California is in a very different place from a COVID standpoint
compared to where Texas is. As more bars and restaurants, etc, are opening up, what I’ve seen, based on some
articles and things that I’ve read, I’ve seen that food occasions are driving a lot more of the visits to the on-
premise vs drinking occasions, but, typically, it’s not just a food occasion or drinking occasion. Usually, there’s
quite a bit of crossover between the two.
As the on-premise starts to come alive again, I think that’s a tremendous opportunity again for Pabst, the
company, to make sure that they’re in a position to be able to capture more folks going to more bars, more
restaurants, etc. Obviously, a lot of folks have been purchasing over the last 12-8 months. I think purchase
habits and patterns have shifted a lot more to the off-premise and not so much in the on-premise, but I do
think that that’s going to be a good opportunity for Pabst to focus more on. Then also spirits. It’s interesting to
see, going into Pabst whisky and Olympia vodka and things like that, those things, and Rainier gin, Rainier
came out with a gin a little bit ago as well, too. I think continuing to focus on those things because that’s going
to also help get the company and their brands a stronger foothold in the on-premise because spirits have been
taking it to beer in the on-premise. Spirits have been taking it to beer for the last 10-15 years and spirits are
winning in the on-premise and they’re winning that fight, so I think it’s smart for Pabst to continue to focus on
those types of areas and spaces as well, too.
[00:48:43]
Q: Out of each of the product line or portfolio diversification opportunities, whether it’s spirits or low-calorie
or cannabis products, which would you say are critical?
JW: Yes, good questions. I’d go health and wellness. I think health and wellness is a trend that is going to
continue to grow and increase. If you take a look at the health and wellness category as a whole, it’s been
growing by leaps and bounds. I think having more product offerings and addressing more occasions I think is
also critical. Having the right products that address more of those occasions and more of those needs from a
health and wellness standpoint, that’s where I’d focus. To me, it’s interesting, I look back at my career. There
are craft breweries now, there’s a craft brewery in St Louis, that they do nothing but non-alcoholic craft beer.
To me, I’m like, “Wow,” 20 years ago I wouldn’t have even thought about that. So non-alc or super-low-alc, but
then also other spaces and places, more functional types of beverages with different either botanical and
nootropics, things like that, that actually benefit folks, I think that’s going to continue to grow and increase.
That’s where I’d put my bet.
[00:50:31]
Q: Could you touch on the international opportunity for Pabst and brewing in general? Are US companies
really focused domestically? How would you assess American brewing companies and their brand affinity
globally?
JW: Yes, it’s a good question. My opinion is, I think those brands that have, and can demonstrate, what I’m
going to call some Americana have opportunities in certain markets where there’s still a tremendous amount
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of affinity for American products, American culture, American goods, etc. So some markets in Asia, even in
Europe, in the UK, I think there’s an opportunity. Canada to a degree as well, too. Even though we as
Americans aren’t necessarily the most popular country on the planet, given the number of fights that we like to
pick with folks, there’s still a tremendous amount of Americana opportunity, I think, and I believe that could
bode well for Pabst, in particular for PBR because I think PBR does a pretty nice job of embodying some of
that Americana but trying to also embody the good parts of the Americana and not necessarily the less
favourable parts of the Americana, if that makes sense.
[00:52:05]
Q: How strong is brand loyalty as an American consumer? How important is it, especially with companies
such as Pabst trying to roll out marketing strategies to reach new consumers? What does the consumer want in
a brand?
JW: Yes, it’s interesting. It’s a really good question because I think it’s a bit of a dichotomy to me. I don’t think
brand loyalty in the beer business is nearly as strong as it used to be in the beer industry because there’s a lot
of promiscuity, because I think, also, there is such a saturation of brands in the beer business. I think the
millennials and of-age, legal-age, drinking Gen-Zs, they’re experimenting, they’re trying a little of this, they’re
trying a little of that. “I might try this beverage this night, I might try that draft beer that night. Wow, you’ve
got an interesting cocktail. That sounds pretty cool, I’ll try that.” I think there’s a lot of promiscuity. I don’t
necessarily believe that there is, quote, unquote, brand loyalty, not nearly as much as there used to be 20-30
years ago. You had Bud Light’s Spuds McKenzie and people freak out about it. “Oh my God, that’s my brand.
I’ll get Bud Light tattooed on my arm,” or something. I don’t see that happening as much.
What I do see more of, though, from a consumer standpoint, is I see higher expectations of what brands
should be bringing to the table from a consumer standpoint. They expect that you stand for something and
have meaning. They expect for you to have a why, a purpose. Brands that have a stronger why behind them are
the brands that are going to be more successful. The brands that can play a role and contribute to culture,
those are the brands that are going to win. The brands that I think are still stuck on old positioning, traditional
brand positioning statements, or just talking about features and benefits, especially in the beer business,
they’re going to lose. It’s not going to happen, it’s not going to work for them. They need to drive a deeper
meaning and they need to make a bigger impact and make a difference in culture. Those brands that are going
to make a difference and impact in culture, it’s those that are the ones that are going to win.
[00:54:56]
Q: Can you discuss the shift towards cans over plastic and some of the sustainability issues? How serious are
regulations around how much plastic you can use? Do you think this is a serious issue that brewing companies
are coming to grips with, or it’s more so just a marketing play?
JW: No, I see sustainability is going to be something that’s going to continue to increase. The sustainability
trend and care for the planet is going to be a trend, I don’t see that going away. In fact, I see it actually getting
stronger and stronger and stronger. Sustainability and care for the planet, and the reason being, you go back
and you take a look at it from an insight standpoint, millennials and Gen-Zs, to be blunt, they’re pissed at Gen-
X and boomers. They are frustrated with those generations because, I’m a Gen-Xer, they’re frustrated with us
because they feel like we’ve left them a steaming heap or a steaming pile to deal with, and that if we don’t
change things now, we will not have a planet Earth for future generations to enjoy. So that sustainability trend,
to me, is going to continue to increase. Yes, you’re seeing a bigger shift, especially in the craft side. If you go
back to the initial craft boom in the ’90s, there was so much craft beer being served in big bottles and glass.
Glass costs a lot to ship, and it’s much heavier to ship glass packaging than it is to ship aluminium packaging.
While yes, you can recycle glass, and you can recycle plastic and you can recycle aluminium, there’s been a
significant shift in the beer business more towards aluminium. You’re already seeing more cans in the on-
premise, like I mentioned. You’re seeing a lot more craft breweries that are moving and shifting only to cans
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and not doing bottles, or they’re doing draft and cans.
That to me, I think, is a serious issue and it goes beyond just a marketing ploy. To me, I think it is now, and is
going to continue to be in the future, a table stakes. That’s an expectation that consumers are going to have,
that these brands and these breweries are sustainable. Obviously, there’s a spectrum of sustainability, in my
opinion, but they’re going to expect a lot more out of brands and breweries. I challenge breweries, especially
the big ones, to do a lot more and become more active in the sustainability space. Can recycling started and
originated with Coors Brewing Company. Bill Coors started that. He was the first one to build an aluminium
can. Instead of patenting that, he decided it was best to offer that technology out to the industry for the
betterment of the people, for the betterment of the planet and for the betterment of communities. I don’t see
that going anywhere, I think it’s just going to continue to get stronger and stronger.
[00:58:31]
NH: Awesome. We are just about out of questions, so we’ll end the Interview there. Let me just close by saying
thank you, John, for your input, really interesting Interview. Thank you, clients, for joining Third Bridge
Forum’s Interview today. Clients, if you wish to speak with our specialist in a private call or meeting then
please let your relationship manager know. Thanks all. Goodbye.
JW: Excellent. Thank you.
Transcription ends at 00:58:49 of the recorded material
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