## SHOW NOTES

### Key Themes This Week:

- **U.S. demand showing modest improvement** but still negative; off-premise total alcohol -1.2% (improved from -3.4%)

- **RTD/Prepared Cocktails remain the clear winner** at +7.4% dollar growth

- **Wine DTC in structural decline**: -15% volume, -$230M value, average bottle price up 11% to $56.78

- **Distribution disruption accelerating**: RNDC losing major suppliers; Delicato, Johnson Brothers, Breakthru expanding

- **Inventory overhang persists**: wholesaler levels ~45% above 2019 average

### Notable Deals & Moves:

- **AB InBev acquires 85% of BeatBox** for $490M (implies ~$575M valuation)

- **ABC Fine Wine & Spirits acquires Applejack** (Colorado) — first out-of-state acquisition in 90 years

- **Sazerac partners with Piedmont Distillers** for Midnight Moon distribution

- **Columbia Distributing acquires Point Blank Distributing** in Portland

- **Scribe Winery acquires Arrowhead Vineyard** (150 acres, Sonoma)

### Supplier Earnings Signals:

- **LVMH Moët Hennessy**: Q4 organic sales implied at -9%; Cognac & Spirits -12% for the year

- **Diageo**: Potential Q3 destocking risk; H1 organic sales outlook -2.2%

- **Campari**: Q3 organic sales +1.3% projected; holiday season slower than expected

### Regulatory & Legal Updates:

- **Chicago permits hemp THC beverages** (up to 10mg/12oz) at licensed venues; United Center to sell

- **Federal HEMP Act introduced** to place CBD under FDA oversight

- **Retailer shipping cases** seeking Supreme Court review (Arizona, Indiana)

- **Wynn Resorts** under federal probe for alleged liquor-contract issues

- **McIlhenny (Tabasco) sues Stoli** over pepper vodka trade dress

- **Uncle Nearest** remains in receivership; Feb. 9 court hearing scheduled

### Consumer & Market Data Points:

- Only **54% of U.S. adults** say they drink alcohol (Gallup) — lowest in 90 years

- Wine drinkers reducing: **46% cite calories, 39% cite sugar**, only 21% cite cancer risk

- Gen Z = **4% of alcohol sales**; Gen X + Boomers = **70%**

- Super premium beer now **40.7%** of beer volume

- High-ABV products **+11% YoY**; Non-alcoholic **+26% YoY**

- California wine crush estimates: **~2.1-2.25M tons** — potentially smallest since 1980

### Key Takeaways:

1. **The market is stabilizing, not recovering** — growth requires activating specific occasions and channels

2. **On-premise is the relative bright spot** — experience-led occasions showing better price elasticity

3. **Wine's challenge is as much perception as consumption** — sugar/calorie misconceptions driving substitution

4. **Distribution is a strategic lever** — realignments creating winners and losers

5. **The competitive set is expanding** — hemp THC, NA, and high-ABV all claiming occasion share

- **Theme of the week:** Stabilizing demand signals, but rising execution risk—driven by value-conscious consumers and major distribution disruption.

- **Wholesaler signal:** NBWA’s January Beer Purchasers’ Index rebounded sharply vs. December, with **below-premium** reaching an expansion threshold—though overall conditions remain cautious.

- **Beer pricing reality:** Industry leaders say the era of dependable annual price hikes is fading; focus shifts to **pack/price architecture** and tighter value ladders.

- **Moderation & substitution:** Dry January and longer-run data point to sustained moderation; **NA beer and RTDs** remain key beneficiaries.

- **RTD momentum:** RTDs continue to capture occasions and attract investment, reshaping innovation priorities.

- **Wine split:** Off-premise remains pressured while on-premise—especially fine dining—acts as a stabilizer; California supply may tighten later after a sharply lower 2025 crush.

- **Spirits overhang:** American whiskey faces heavy inventory and declining shipments, driving production/asset decisions and increasing the odds of future price pressure.

- **Big route-to-market story:** **RNDC exits California**, triggering rapid supplier and brand realignments (including Tito’s and Brown-Forman moves) and creating near-term service risk—and competitive opportunity.

- **California regulatory updates:** Expanded **DTC spirits shipping** (for qualifying craft distillers) and new **mandatory EFT payments** from retailers to wholesalers starting 2026; compliance scrutiny rising around kratom products.

- **Adjacent adult products:** Hemp-THC regulation pressure builds; Curaleaf exits hemp-THC, and retailers push for federally regulated, age-gated frameworks.

- **Macro undercurrent:** Private label and value retail expansion continue to pressure pricing power and reward operational excellence.

- **Theme of the week:** A “K-shaped” U.S. alcohol market—headline declines, but strong growth pockets in NA beer, RTDs, and select super-premium brands

- **Beer 2025 wrap:** Total beer finished down in dollars and volume; **domestic premium weakened** while **domestic super premium and NA beer grew sharply**

- **Channel signal:** Convenience stores are holding up better for beer, with **NA beer surging** and seltzer stabilizing relative to broader retail

- **On-premise vs off-premise:** Alcohol pricing **away from home is rising faster** than at-home inflation, reinforcing the battle for occasions and mix

- **Distribution disruption risk:** RNDC uncertainty and supplier exits are accelerating wholesaler consolidation; **route-to-market stability is now a P&L issue**

- **Demand + inventory backdrop:** Moderation trend remains strong; elevated inventories increase the risk of shipment volatility and promo pressure

- **Hemp tightening:** Federal and state actions are narrowing the intoxicating hemp playing field—**higher compliance costs, fewer gray areas**

- **Wine watch:** Ongoing off-premise softness plus new sourcing/transparency scrutiny (including “American” labeling proposals)

- **Big takeaway:** Growth is available, but it’s concentrated—winning in 2026 means aligning portfolio bets with the right occasions, channels, and distributors while staying ahead of regulation