Gerry’s Insights: Beer DSDs Have Got Them Baby Done Ghosted Me Blues

In my newsletter Beverage Business Insights a few weeks ago, I riffed on that Albert King blues classic, “Born Under a Bad Sign.” You know, the one with the lament, “If it wasn’t for bad luck, I wouldn’t have any luck at all.” For the beer systems singing the blues on their non-alcoholic fortunes, it should really be, “I wouldn’t have NA luck at all.”

The context was the flight of Ghost Energy from the Anheuser-Busch system to Keurig Dr Pepper, a cutover that will take place a few months into 2025. For Bud wholesalers, here was a brand they’d help build beyond half a billion in retail sales in no time at all, yet it would be departing for a spot on the Dr Pepper trucks alongside C4 Energy. What added insult to injury was that A-B’s CEO, Brendan Whitworth, was a co-creator of the RTD line: back in his days as chief commercial officer, he approached the supplement marketer about doing a RTD version of the Ghost supplements he purchased at nutrition stores. (The Ghost team blew him off the first time, assuming the approach was a prank.) It seems Ghost soured on its partner some time ago, despite the unquestionably strong results on the energy RTD.

The pending exit was frustrating enough on its own, but it was just the latest aggravation for beer wholesalers who’ve seen a flock of terrific NA brands they incubated flee their systems for the soft drink guys: Monster, Rockstar, Bang, Celsius and C4 Energy drinks, as well as Body Armor and Electrolit hydration drinks. (OK, if we want to go back to the paleolithic era, Vitaminwater, Fuze . . . you get the picture.) Among the other big beer strategics, Molson Coors forged a tie with La Colombe, one of the elite RTD coffees in the space, and somehow couldn’t make it work; it’s now ensconced in the KDP network and seems to be doing fine. And Constellation made a bet on a BioSteel hydration brand that spent way too much ahead of the curve and

Personally, I’m a big advocate for the beer networks. Many of the most perceptive people I’ve encountered in all these years tracking beer and NAs have been wholesalers rather than the smug but disconnected-from-reality types I often encounter at the strategics who cite consumer “insights” that their brands’ performance in the marketplace prove to be off the mark. Aside from some NA-only distributors like Big Geyser in New York, Honickman in the Mid-Atlantic, Polar in New England and Intrastate in Detroit, they comprise the heart of the incubation network where innovative brands get their first serious traction. (Kalil in Arizona was another but they just got acquired by you-know-who – KDP.) As I like to remind people, it’s hard to think of any shelf-stable brands that haven’t employed that DSD network in their breakout phrases, aside maybe from some multipack water brands like La Croix, Waterloo and Zevia. (Though Zevia’s pushing into DSD now.)

So those of us who like to see fertile ideas garner traction have reason to root for the beer guys. But there is some serious dysfunction there too. While many beer houses of all sizes have proved to be superb incubators of promising new brands (I’d name names, but then they’ll get blamed the next time I print a leak), there are just as many that are basically mailing it in on NAs. Given the headwinds beer is facing, this is inexplicable to me, but it’s a fact of life. So much so that key retailers like Walmart are putting severe pressure on suppliers to skip the beer wholesalers and just go direct. It seems they have lost patience with the inconsistency across the Bud and Miller/Coors networks, where service can be superb in one territory and completely AWOL across the county line. Man, beer houses need that volume and need to get their act together!

So what else is going on, NA-wise, in beer-land? Here’s a good one: it seems Molson Coors spent the better part of a year perfecting a new sports drink that would go out under the name of Leo Messi, arguably the best player of his generation. Then, guess what? Mark Anthony Brands somehow filched the deal from under Molson Coors’ nose and now is running with it, under the brand name Mas+ by Messi. So, OK, the silver lining here is that we can’t blame Big Soda for this one. But it’s not a good look for Molson Coors’ efforts to play in NAs.

Remember, Molson Coors changed its corporate name from “Brewing” to “Beverage” to signal its serious intent in NAs and other beyond-beer categories. So where does that stand now? It’s going all in on Zoa Energy, the Rock-fronted stimulator. On the surface, the company made some rookie mistakes in incubating it – or actually, in not incubating it but rather rolling out a flawed concept – but its faith hasn’t wavered and it just took a majority stake at a seeming enterprise valuation exceeding $500 million. On the surface that seems absurd for a brand with a half-point share three years in, but apparently there’s more going on than meets the eye: the brand seems to do big numbers at Costco and on Amazon to justify that valuation. That suggests that if MC wholesalers put their shoulder to the wheel, it could prove to be a Ghost-level success in energy. How inspired they are after the earlier fumbles remains to be seen. And MC seems to be soldiering on with its sports drink, albeit without the Messi affiliation. Since it shares many wholesalers with Mark Anthony, it will be offering this new brand to houses that already are running with Mas+, but we still don’t know how successful that launch will prove.

Of course, the elephant in the room where the beer houses are concerned is that flight risk. That’s what made the Ghost exit from Bud so aggravating: they figured that, with their core supplier an inception partner and equity holder, they would be safe. Clearly, Molson Coors is hoping that the move to take majority control will allay that concern over Zoa, assuming the wholesalers see enough value there to have any concern. Of course, buyouts and, sometimes, equity stakes help mitigate the loss of hot brands but the exits often happen too early for those numbers to be sizable. Volume siphoned off to direct customers like Walmart can also erode the payout.

Are there any safe harbors? As I noted to my newsletter readers recently, this issue of brand flight may provide another reason to look at the nascent hemp-derived Delta-9 THC category with an open mind. After all, things remain highly unsettled on the regulatory front, thus keeping Big Soda rooted to the sidelines. True, that uncertainty makes the segment difficult to navigate, but for those in D9-friendly states, the growth and high margins offset the complexity. And if legislators and regulators in Washington continue to kick the can down the road on federal legalization, the segment may be safe from the soda-pop poachers for a few years longer.

Longtime beverage-watcher Gerry Khermouch is executive editor of Beverage Business Insights, a twice-weekly e-newsletter covering the nonalcoholic beverage sector.