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Brewers and liquor companies seek nonalcoholic alternatives as beer volumes fall and growth in wine, spirits slows

Americans are increasingly laying off the booze, prompting the world’s biggest brewers and liquor companies to push beyond their traditional fare and roll out teas, energy drinks and nonalcoholic spirits.

New data show that U.S. alcohol volumes dropped 0.8% last year, slightly steeper than the 0.7% decline in 2017. Beer was worst hit, with volumes down 1.5% in 2018, compared with a 1.1% decline in 2017, while growth in wine and spirits slowed, according to data compiled for The Wall Street Journal by industry tracker IWSR.

The fall in alcohol volumes reflects “a growing trend toward mindful drinking or complete abstinence, particularly among the millennial cohort,” says IWSR’s U.S. head Brandy Rand. Wine grew by 0.4%, down from 1% the year before, while spirits climbed 1.9%, compared with 2.2% in 2017.

In response to the slowdown, alcohol makers are trying to diversify. Molson Coors Brewing Co. has turned to kombucha, Budweiser brewer Anheuser-Busch InBev SA sells a spiked coconut water, and Smirnoff maker Diageo PLC wants teetotalers to start mixing cocktails with a pricey, alcohol-free gin alternative.

IWSR forecasts low- and no-alcohol products in the U.S.—still a small slice of the market—to grow 32.1% between 2018 and 2022, triple the category’s growth over the past five years. IWSR’s sales figures are based on products shipped.

Molson Coors, grappling with weak sales of Coors Light, wants to build out a broad portfolio of “brewed beverages,” Chief Executive Mark Hunter said in an interview. That means beer, tea and perhaps even coffee, he said. The company has invested in Boulder, Co.-based Bhakti Chai Tea Co. and bought a California-based maker of kombucha—a fizzy, fermented tea.

“We’re certainly not sitting on our hands,” Mr. Hunter said.

Industry executives say drinkers are increasingly concerned about health and that younger generations socialize differently from their parents, drinking less.

“Twenty years ago we didn’t have coffee shops open late, and pubs and bars open for coffee,” said Ben Branson, chief executive of nonalcoholic distilled spirit maker Seedlip Ltd., which is part owned by Diageo. “People are favoring experiences over ‘lets go drink on a night out.’”

While booze makers are partly responding by pushing pricier tipples—helping sales by value grow despite lower volumes—they’re also scrambling to offer a wider selection of drinks. Brewers, in particular, are under pressure as consumers abandon mainstream beer.

AB InBev last year created a new global position, head of nonalcoholic beverages, to lead its efforts to diversify. Nonalcoholic drinks—including energy drinks and nonalcoholic beers—already make up more than 10% of the Bud brewer’s volumes. In 2017 it acquired Hiball Inc., a maker of organic energy drinks. AB InBev recently began selling Budweiser Prohibition brew—a nonalcoholic version of its flagship beer—in Columbus and Detroit. Nonalcoholic beer volumes in the U.S. are expected to climb 9.3% over the next five years, according to research firm Euromonitor.

The beer company also has stepped up its efforts to woo consumers defecting to wine and cocktails. Its craft-style breweries in Oregon, California and New York have served as incubators for new, boozy versions of coconut water, matcha tea and agua fresca, a Mexican fruit-juice drink.

The brewer plans to later this month launch a seltzer brand, Bon & Viv, which it will advertise alongside its beers at the Super Bowl.

“People are looking for something that tastes good but also allows them to live well,” Chelsea Phillips, head of marketing for AB InBev’s Beyond Beer division in the U.S., said in an interview.

Volumes of ready-to-drink alcoholic beverages jumped 6.1% last year, according to IWSR, driven by hard seltzers, which executives say appeal to consumers because of their low calories and sugar.

Distillers also are embracing the popularity of lower-alcohol drinks.

Late last year, Diageo launched a lower-alcohol, botanical version of Ketel One, which it said has 25% fewer calories than the regular vodka. Alcohol content is 30% compared with 40% in regular Ketel One.

Diageo Chief Executive Ivan Menezes said last year that adults opting for lower alcohol options was “an important trend over the next many years” and that the company was “putting a lot of focus behind it.”

Diageo has been working to help expand Seedlip, in which it took a minority stake in 2016. The London-based brand, which can be drunk with tonic or used in cocktails, markets itself as solving the dilemma of “what to drink when you’re not drinking.”

Seedlip is available in 6,000 locations, including 500 in the U.S., where it recently opened its first office. The upscale brand sells three variants, which cost about $30 a bottle upward.

This spring, Seedlip plans to launch a new nonalcoholic brand called Æcorn Aperitifs, designed to be drunk before dinner. The liquid will be made from English grapes, herbs, roots and bitter botanicals, and is aimed at consumers who want a nonalcoholic option to drink with food.

Industry veteran Toledano is chairman of Victoria Beckham Ltd., part of NEO’s investment stable.

LONDON – Ralph Toledano is taking his relationship with NEO Investment up a notch, becoming a partner of the firm that has stakes in fashion and lifestyle brands including Victoria Beckham Ltd., Ami Paris, Valextra, Miller Harris and Alain Mikli.

An announcement is expected today.

NEO said Toledano’s role is effective immediately, and that he will “actively participate” in all investment activities and partner with entrepreneurs and management to accelerate brand growth.

Toledano has spent his career in the fashion industry, heading brands including Karl Lagerfeld, Guy Laroche, Chloé and Puig’s Fashion Unit. He is currently chairman of Victoria Beckham Ltd., and will continue in that role. He is also president of the Fédération de la Haute Couture et de la Mode and a board member of the Institut Français de la Mode.

David Belhassen, founding partner of NEO, said he and Toledano “have developed strong ties over the years, based on our shared values and ambitions, both human and professional.”

Belhassen said he would be working with Toledano “to foster the development of our partners and help entrepreneurs unleash their creativity.”

Toledano described Belhassen as “a great business partner and friend of many years,” and said he looked forward to working with the top Neo team “to boost cult brands and help ambitious creative entrepreneurs fulfill their dreams.”

The executive was re-elected president of the Fédération de la Haute Couture et de la Mode last July. Toledano has held the post since 2014, when he succeeded Didier Grumbach. His appointment was approved unanimously at the federation’s general assembly, and his third term as president has been extended to four years from two years.

A pensive and discreet executive in the vein of Grumbach, Toledano has strong relationships with a broad swath of retailers.

NEO Investment Partners took an undisclosed stake in Victoria Beckham Ltd. in November 2017, investing 30 million pounds in the London-based brand. One of its first major moves was to name Toledano chairman last March.

At the time, Toledano called Beckham “an artist, designer and entrepreneur who remains driven in her ambition for her brand. She is at the forefront of the shifting and increasingly digital fashion landscape and, having established her brand vision over the past decade, is now uniquely positioned to communicate this vision directly to her customers.”

He added that his ambition is to turn the brand into a modern luxury group.

Toledano was instrumental in the appointment of Paolo Riva as chief executive officer of Victoria Beckham Ltd. He described Riva as “smart, professional, strategic and the kind of person who sticks to his guns. But he also listens, and he clearly loves fashion and product. More importantly, he has the reputation of being a great leader, which is very important for this company.”

NEO, which was founded in 2009 and is based in London, said it aims to identify “outstanding brands with unique DNA and visionary entrepreneurs.” It wants to transform its businesses into “borderless cult brands.”

Among its other investments are Tom Dixon and Vuarnet, as well as French patisserie chains Ladurée and Paul.

LVMH and Rihanna have been in secret talks to launch a luxury house under her name, according to multiple sources.

PARIS — Rihanna is getting ready for her next act in fashion, and with the world’s largest luxury group as her partner, WWD has learned.

According to multiple sources, LVMH Moët Hennessy Louis Vuitton and the music sensation have been in secret discussions to launch a luxury house under her name. That would make it the first fashion brand industry titan Bernard Arnault has launched from scratch since Christian Lacroix in 1987.

LVMH has already handpicked a clutch of employees from within, including some from Louis Vuitton and Celine, to work on the project in tandem with Rihanna and some of her key associates, sources said.

Details about the launch and its timing could not immediately be learned. LVMH officials declined comment Wednesday.

On Tuesday, the Internet lit up with speculation about the origins of the bold, gold shades Rihanna wore while stepping out in Manhattan — her Fenty brand name spelled out across the temples. Sources said the music star was simply test-driving a prototype, while dropping a colossal tease about her next major foray beyond music.

Rihanna has demonstrated a serious interest in, and influence on, fashion — along with formidable design chops and acute instincts — with her recent tenure as the creative director of Puma, energizing the German activewear brand with her Fenty by Puma project, and following it up with successful forays into beauty and lingerie — the former with LVMH-controlled Kendo; the latter with California-based TechStyle Fashion Group.

Her public appearances generally stir the paparazzi, and her fans, into a frenzy, with outfits ranging from sultry off-the-shoulder styles to streetwear to, at the Met Ball, showstopping numbers that are the highlight of the occasion. In May, for example, she wore a Maison Margiela crystal-encrusted gown and bolero jacket, complete with a hat resembling a bishop’s mitre.

It is understood her collection with LVMH will span ready-to-wear, leather goods and accessories, and could be released in tandem with her ninth album, expected out sometime later this year, one source said.

For LVMH, the Rihanna line signals a further move outside its comfort zone of heritage brands as it continues to diversify its holdings, having recently invested $2.6 billion in luxury travel operator Belmond Ltd., owner of the Venice Simplon-Orient-Express train and hotels including the Copacabana Palace in Rio de Janeiro.

Kendo, which functions as an incubator making products that end up being retailed by LVMH’s Sephora perfumery chain and other outposts, signed on Rihanna in 2016. Her Fenty Beauty products racked up sales north of $100 million in a matter of weeks, and was hailed as a transformative brand.

It also cemented Rihanna as one of the hottest-selling celebrities in the world of licensing.

Just a year after its launch, Fenty Beauty by Rihanna is a digital innovator and champion for diversity, using its platforms — 6.3 million Instagram followers, 490,000 YouTube subscribers and 372,000 Twitter followers — to showcase makeup on women of all complexions and sizes. The brand engages with its followers regularly, reposting user-generated content and collaborating with avid fans on videos and posts.

Rihanna’s proximity to LVMH stretches back to at least 2015. After attending shows for Christian Dior, one of Arnault’s most treasured fashion properties, she appeared in “Secret Garden IV,” a campaign and short film shot by Steven Klein inside Versailles. It featured her in Dior sunglasses, carrying the brand’s bags and wearing looks from the Esprit Dior collection.

A year later, she created a range of futuristic sunglasses in collaboration with Dior as part of her brand ambassadorship.

Sources inside LVMH describe her as a hands-on type who is extensively involved in product development. It is understood LVMH started assembling her fashion team about six months ago in Paris, with the project being overseen by Sidney Toledano, chairman and chief executive officer of LVMH Fashion Group, a stable of fashion houses that includes Givenchy, Celine, Kenzo and Marc Jacobs.

Rihanna’s talent and beauty have made her a favorite of fashion designers worldwide. The Barbados native has previously modeled for Gucci, Emporio Armani and Balmain.

She made her debut in design in 2013 with British high-street brand River Island, creating a collection of clothing and accessories.

“Launching at London Fashion Week is a dream come true for me,” she said at the time. “I have wanted to design my own collection for a long time and to present my collection for River Island alongside all of the other great design talent at LFW is a real privilege. I can’t wait to see the reaction from my fans and the fashion press.”

While at Puma, Rihanna staged high-energy shows — one featuring motorcycle acrobats — in Paris and New York. Indicative of her wide appeal, her collection landed at Bergdorf Goodman in New York and spawned a consumer frenzy — and knockoffs galore — for several hit shoe styles, including creepers and furry shower slides.

TechStyle co-ceo Adam Goldenberg told WWD in a recent interview that he chose Rihanna because he needed “the right partner to bring instant credibility and exposure” to a new proposition in the lingerie category.

He confirmed her deep involvement in products that bear her Fenty brand name. “Every single item we have designed she has been involved in the process and seen it on a model, made her own adjustments, decided if we are going to bring it in stock, down to every element of the campaign,” he said.

Nasdaq is discussing a potential deal to buy Oslo Bors, and rival Euronext’s €625m bid for the Norwegian exchange.

The US exchanges operator, which also owns the main exchanges in Denmark, Sweden and Finland, is meeting the Oslo board today to discuss a possible combination, two people with knowledge of the process said. Nasdaq declined to comment. Oslo Bors could not be reached for comment.

Oslo faces an unsolicited takeover from Euronext, which also owns the Paris, Amsterdam, Brussels, Dublin and Lisbon stock exchanges. The Paris-headquartered group is trying to take full control after purchasing 45 per cent of shares in December, put up for auction as a block by a group of shareholders. Euronext has agreed to pay NKr145 per share.

It subsequently bought another 5.3 per cent on the market, giving it majority ownership and making it the fourth-largest shareholder.

But Oslo said subsequently it had been contacted by interested parties who did not participate in December’s auction. One of them is Nasdaq, the people said. The auction was run by Carnegie, the Swedish investment bank.

Euronext, which announced the deal on Christmas Eve, earlier this week launched a tender process to buy out the other shareholders.

Oslo’s two largest shareholders, DNB Bank and Kommunal Landspensjonskasse (KLP), have said they will wait for a board recommendation. The two collectively own nearly 30 per cent of shares.

“It is crucial for us to have a complete picture of how a potential new owner will contribute in developing Oslo Stock Exchange as a suitable market place for Norwegian companies, both large, medium and small,” KLP said in a statement on Tuesday. “This is more important for us to consider than what at any given time gives us the best price.”

European bankers hoping for a modest lift-off this year will have to wait longer

European bank share prices raced downhill in 2018 faster than grand slam skier Kamil Stoch approaching a jump. Cheerier bankers in Paris, Frankfurt or Zurich hoped for a modest lift-off this year. Société Générale shows the sector can still land as flat as Eddie the Eagle.

The French bank warned fourth-quarter capital markets revenues were roughly 20 per cent lower than the €1.35bn reported a year earlier. It suggested shareholders might prefer dividends in shares rather than cash. Oh, and it would write off €240m following disposals. SocGen’s shares fell 5 per cent, extending the loss over the past year to 37 per cent.

How big a setback? SocGen is not alone in blaming trading conditions. Financial markets hit the wrong kind of snow. Volatility paralysed investors. Most unreasonably, they did not call their banks to trade the dips.

SocGen gushed about the “solid” performance of its international retail banking and financial services businesses. The capital markets revenue slide was larger than reported by US banks, according to Berenberg. That hints at even greater woes in European markets. It bodes ill for rivals such as Deutsche Bank. Switzerland’s Credit Suisse has already warned of a tricky fourth quarter. In France, Natixis is taking a €160m charge after the hedging of equity derivative risks went awry.

SocGen also warned of a “significant increase” in market risk-weighted assets. The scrip dividend further heightened concerns about its capital strength. An expected core tier one equity ratio, a commonly watched measure of financial capital strength, in the 11.4 to 11.6 per cent range means the 2020 target of 12 per cent remains plausible. But this assumes half of dividends would be paid in shares.

European banks were last year’s great unloved stocks. Sentiment was hit by worries about bad loans, stalling economies, regulatory burdens and flaws in the construction of the euro. Tough trading came on top of all that.

January has seen a rebound. The FTSE European bank index is up 6 per cent, compared with 3 per cent for European stocks. SocGen trades at just 0.4 of tangible book value — below BNP Paribas at 0.6 and only slightly higher than Deutsche on 0.3. Analysts, who rationalise bad news with the élan of Mr Stoch leaping 240m, will see a turnround in sight. SocGen suggests they would be wrong.

Berlin considers raising security requirements for building networks that would exclude China tech giant

Germany is exploring ways to ban the use of Huawei Technologies Co. products in the country’s telecommunications infrastructure, according to a government official, extending the Western backlash against the Chinese tech firm over security concerns.

Berlin was considering tightening existing security requirements for the construction of so-called 5G next-generation mobile communication networks in Germany in a way that would make it impossible for operators to use Huawei equipment, the official said.

Germany is one of Huawei’s most important foreign markets. Huawei’s European headquarters are in the German city of Düsseldorf. And Germany has the biggest economy in the region of Europe, Middle East and Africa, the market where Huawei gets the largest percentage of its revenue outside China. In 2017, it got 27% of its $92.6 billion in revenue from that region.

The effort marks a change of tack for the German government. The U.S. government has been pressuring allies for months to ban Huawei products from their infrastructure for fear they could make it easier for the Chinese government to spy on communications. But German officials had so far expressed skepticism about those concerns, for which they said there was no evidence.

Last month, the Federal Office for Information Security, the German cybersecurity watchdog, told The Journal it was in talks with international telecom equipment vendors to set up security labs in the country that would allow government experts to vet the safety of their equipment.

The latest considerations go much further however.

“We are conducting a thorough interdepartmental analysis of how we could amend the security requirements in a way that would affect Huawei,” the official said. “There are serious concerns about the building of a 5G infrastructure including warnings about back doors in hardware components, data flows…this would affect everything from communication to self-driving cars.”

The change of tack comes days after Polish authorities arrested a former senior Polish security official and a Huawei sales director in that country, and charged them with spying for China. Huawei fired the employee and said his alleged action wasn’t related to his employment. Neither man’s attorneys were available for comment.

On Wednesday, The Wall Street Journal reported U.S. prosecutors are pursuing a criminal investigation of Huawei for allegedly stealing trade secrets from U.S. business partners, including technology used by T-Mobile US Inc. to test smartphones. Huawei has said it settled with T-Mobile in the matter in 2017, after a U.S. jury verdict found no willful or malicious conduct by Huawei.

The German daily newspaper Handelsblatt reported first about the initiative Thursday, saying the effort was focused on indirectly banning Huawei from operators’ so-called core networks, the essential backbone of a mobile phone network. The paper said the move could also affect older 3G and 4G networks.

A Huawei spokesman in Europe said “Germany is a big and important market. The German government has so far had a very balanced position and has been able to resist outside pressures. It is up to German authorities to make their decisions and we will of course comply and respect any decision.”

“But politicization of the 5G issue is proceeding in several European countries,” the spokesman said. “Limiting access to certain market players means prices would go up and innovation would slow down.“

The German official said raising security requirements would be the only legal way to de facto exclude Huawei from all crucial tenders in Germany as the country has no other legislation that would justify an outright ban.

The timing of the talks come as Germany is scheduled to host its auction for 5G spectrum licenses this spring, in which telecommunications carriers are expected to bid for rights to host ultrafast internet connections. Huawei is already a significant vendor to carriers within Germany. Last month, Deutsche Telekom said it would review its procurement strategy for equipment in light of concerns about Chinese manufacturing of telecom infrastructure.

Dieter Kempf, head of Germany’s powerful business lobby BDI said Thursday that no equipment vendor should be excluded from Germany’s 5G network as long as there is no proof against them.

“I think it would be completely misguided to insinuate a danger of any vendor, no matter what its name or origin, if this hasn’t been proven,” Mr. Kempf said when asked about efforts to ban Huawei from the network build out.

The initiative is led by the Federal Network Agency—the country’s overall networks regulator—and the Federal Office for Information Security and involves the Federal Interior Ministry, the Transport Ministry, and the Economics Ministry, the official said.

A spokesman for the Federal Network Agency didn’t have an immediate comment.

The Network Agency and the Office for Information Security have been working with vendors and operators for some time on updated security requirements for mobile communications. The changes could be included in a planned reform of Germany’s telecommunications law, according to Handelsblatt.

While concerns about the integrity of Huawei equipment and about the company’s practices have existed for years, these have escalated in recent months.

- About 62% of Amazon's US customers are Prime members

- The research says Prime Members spend an average of $1,400 annually versus $600 per year for non-members

- 36% of Prime members pay a monthly fee, 58% are on the annual plan, and 7% are on a free trial, share a membership, or don't know how the fee is paid

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