To:
`Subject:
`Sent:
`Sent As:
`
`LISA A PIERONI(lap@kirschsteinlaw.com)
`U.S. Trademark Application Serial No. 98066281 - PICK ME UP - - Talea
`October 29, 2024 06:13:50 PM EDT
`tmng.notices@uspto.gov
`
`Attachments
`
`screencapture-www-anheuser-busch-com-newsroom-anheuser-busch-partners-with-hiball-
`energy-and-alta-palla-brands-17302203859031
`screencapture-www-canpack-com-news-a-fusion-of-alcohol-free-beer-and-energy-drink-has-
`hit-the-market-in-standout-canpack-cans-17302204789441
`screencapture-www-goodbeerhunting-com-sightlines-2022-1-13-monster-energy-finds-
`national-alcohol-foothold-in-canarchy-acquisition-17302206570261
`screencapture-www-northernbrewer-com-products-brewing-with-hemp-17302233322701
`screencapture-humboldtbrewingco-com-our-beers-17302235031311
`screencapture-www-anaviimarket-com-blogs-news-top-5-best-hemp-beers-sold-in-the-us-
`17302236454271
`screencapture-tworoadsbrewing-com-beer-pineapple-super-diesel-17302237855851
`screencapture-kettlehouse-com-Beer-fresh-bongwater-17302240266831
`screencapture-thebeerthrillers-com-2024-02-12-hemp-and-beer-is-it-a-good-combination-
`17302246558321
`7094789
`6381540
`6232592
`7508901
`6607118
`6996543
`5523612
`5832195
`6511468
`7063613
`6037764
`6591847
`
`United States Patent and Trademark Office (USPTO)
`Office Action (Official Letter) About Applicant’s Trademark Application
`
`U.S. Application Serial No.  98066281
`
`Mark:   PICK ME UP
`
`Correspondence Address:  
`LISA A PIERONI
`KIRSCHSTEIN ISRAEL SCHIFFMILLER & PIERONI PC
`66 PALMER AVENUE
`SUITE 49B
`BRONXVILLE NY 10708
`UNITED STATES
`
`

`

`Applicant:   Talea Beer Inc.
`
`Reference/Docket No.  Talea
`
`Correspondence Email Address:   lap@kirschsteinlaw.com
`
`
`
`
`
`
`REQUEST FOR RECONSIDERATION AFTER FINAL ACTION DENIED
`
`Issue date:   October 29, 2024
`
`Applicant’s request for reconsideration is denied.   See 37 C.F.R. §2.63(b)(3).  The trademark
`examining attorney has carefully reviewed applicant’s request and determined the request did not: (1)
`raise a new issue, (2) resolve the outstanding issue, (3) provide any new or compelling evidence with
`regard to the outstanding issue, or (4) present analysis and arguments that were persuasive or shed new
`light on the outstanding issue.  TMEP §§715.03(a)(ii)(B), 715.04(a).  
`
`Accordingly, the following refusal made final in the Office action dated July 24, 2024 is  maintained
`and continued: 
`
`
`•
`
`Refusal under §2(d) of the Trademark Act based on Registration No. 6859724.
`
`
`See TMEP §§715.03(a)(ii)(B), 715.04(a).  
`
`The examining attorney acknowledges and accepts applicant's amendment to the identification of
`goods, to read as follows: "beer, excluding beauty beverages, fruit juices and energy drinks containing
`nutritional supplements."  This change has been made of record.  
`
`LIKELIHOOD OF CONFUSION
`Registration of the applied-for mark is refused because of a likelihood of confusion with the mark in
`U.S. Registration No. 6859724.  Trademark Act Section 2(d), 15 U.S.C. §1052(d); see TMEP
`§§1207.01 et seq.  Applicant has applied to register PICK ME UP for “ beer, excluding beauty
`beverages, fruit juices and energy drinks containing nutritional supplements" in International Class 32,
`and the registered mark is  PICK ME UP POTION  (with "POTION" disclaimed)  for  "beauty
`beverages, namely, fruit juices and energy drinks containing nutritional supplements solely derived
`from hemp with a delta-9 tetrahydrocannabinol (THC) concentration of not more than 0.3 percent on a
`dry weight basis and contain no CBD" in International Class 32.
`
`Trademark Act Section 2(d) bars registration of an applied-for mark that is so similar to a registered
`mark that it is likely consumers would be confused, mistaken, or deceived as to the commercial source
`of the goods and/or services of the parties.  See 15 U.S.C. §1052(d).  Likelihood of confusion is
`determined on a case-by-case basis by applying the factors set forth in In re E. I. du Pont de Nemours
`& Co., 476 F.2d 1357, 1361, 177 USPQ 563, 567 (C.C.P.A. 1973) (called the “du Pont factors”).  In re
`i.am.symbolic, llc, 866 F.3d 1315, 1322, 123 USPQ2d 1744, 1747 (Fed. Cir. 2017).  Any evidence of
`record related to those factors need be considered; however, “not all of the DuPont factors are relevant
`or of similar weight in every case.”  In re Guild Mortg. Co., 912 F.3d 1376, 1379, 129 USPQ2d 1160,
`1162 (Fed. Cir. 2019) (quoting In re Dixie Rests., Inc., 105 F.3d 1405, 1406, 41 USPQ2d 1531, 1533
`
`

`

`(Fed. Cir. 1997)).
`
`Although not all du Pont factors may be relevant, there are generally two key considerations in any
`likelihood of confusion analysis:  (1) the similarities between the compared marks and (2) the
`relatedness of the compared goods and/or services.  See In re i.am.symbolic, llc, 866 F.3d at 1322, 123
`USPQ2d at 1747 (quoting Herbko Int’l, Inc. v. Kappa Books, Inc., 308 F.3d 1156, 1164-65, 64
`USPQ2d 1375, 1380 (Fed. Cir. 2002)); Federated Foods, Inc. v. Fort Howard Paper Co., 544 F.2d
`1098, 1103, 192 USPQ 24, 29 (C.C.P.A. 1976) (“The fundamental inquiry mandated by [Section] 2(d)
`goes to the cumulative effect of differences in the essential characteristics of the goods [or services] and
`differences in the marks.”); TMEP §1207.01. 
`
`The overriding concern is not only to prevent buyer confusion as to the source of the goods and/or
`services, but to protect the registrant from adverse commercial impact due to use of a similar mark by a
`newcomer.  See In re Shell Oil Co., 992 F.2d 1204, 1208, 26 USPQ2d 1687, 1690 (Fed. Cir. 1993). 
`Therefore, any doubt regarding a likelihood of confusion determination is resolved in favor of the
`registrant.  TMEP §1207.01(d)(i); see Hewlett-Packard Co. v. Packard Press, Inc., 281 F.3d 1261,
`1265, 62 USPQ2d 1001, 1003 (Fed. Cir. 2002); In re Hyper Shoppes (Ohio), Inc., 837 F.2d 463, 464-
`65, 6 USPQ2d 1025, 1026 (Fed. Cir. 1988).
`
`With respect to the marks at issue -- PICK ME UP vs. PICK ME UP POTION -- it is well settled
`that one feature of a mark may be more significant or dominant in creating a commercial impression. 
`See In re Viterra Inc., 671 F.3d 1358, 1362, 101 USPQ2d 1905, 1908 (Fed. Cir. 2012); In re Nat’l Data
`Corp., 753 F.2d 1056, 1058, 224 USPQ 749, 751 (Fed. Cir. 1985); TMEP §1207.01(b)(viii), (c)(ii). 
`Disclaimed matter that is descriptive of or generic for a party’s goods is typically less significant or less
`dominant when comparing marks.  See In re Detroit Athletic Co., 903 F.3d 1297, 1305, 128 USPQ2d
`1047, 1050 (Fed. Cir. 2018) (citing In re Dixie Rests., Inc., 105 F.3d 1405, 1407, 41 USPQ2d 1531,
`1533-34 (Fed. Cir. 1997)); Made in Nature, LLC v. Pharmavite LLC, 2022 USPQ2d 557, at *41 (TTAB
`2022); TMEP §1207.01(b)(viii), (c)(ii).   In this case, the disclaimed word POTION in registrant's mark
`has little independent trademark significance, rendering the wording PICK ME UP the dominant
`element of the respective marks.  
`
`
`Moreover,  the greater the degree of similarity between the applied-for mark and the registered mark,
`the lesser the degree of similarity between the goods of the parties is required to support a finding of
`likelihood of confusion.   Made in Nature, LLC v. Pharmavite LLC, 2022 USPQ2d 557, at *44 (TTAB
`2022) (quoting L’Oreal S.A. v. Marcon, 102 USPQ2d 1434, 1440 (TTAB 2012)); In re C.H. Hanson
`Co., 116 USPQ2d 1351, 1353 (TTAB 2015) (citing In re Opus One Inc., 60 USPQ2d 1812, 1815
`(TTAB 2001)); In re House Beer, LLC, 114 USPQ2d 1073, 1077 (TTAB 2015); TMEP §1207.01(a). 
`
`The compared goods need not be identical or even competitive to find a likelihood of confusion.  See
`On-line Careline Inc. v. Am. Online Inc., 229 F.3d 1080, 1086, 56 USPQ2d 1471, 1475 (Fed. Cir.
`2000); Recot, Inc. v. Becton, 214 F.3d 1322, 1329, 54 USPQ2d 1894, 1898 (Fed. Cir. 2000); TMEP
`§1207.01(a)(i).  They need only be “related in some manner and/or if the circumstances surrounding
`their marketing are such that they could give rise to the mistaken belief that [the goods and/or services]
`emanate from the same source.”  Coach Servs., Inc. v. Triumph Learning LLC, 668 F.3d 1356, 1369,
`101 USPQ2d 1713, 1722 (Fed. Cir. 2012) (quoting 7-Eleven Inc. v. Wechsler, 83 USPQ2d 1715, 1724
`(TTAB 2007)); TMEP §1207.01(a)(i); see Made in Nature, LLC v. Pharmavite LLC, 2022 USPQ2d
`557, at *44 (TTAB 2022) (quoting In re Jump Designs LLC, 80 USPQ2d 1370, 1374 (TTAB 2006)).
`
`In its Request for Reconsideration, applicant argues that the channels of trade and classes of purchasers
`
`

`

`for the respective parties' goods are different.  Specifically, applicant makes the following assertion:
`
`
`the goods sold under the registered mark are beauty-based potions sold either direct from
`registrant, through subscription services or in upscale grocery stores, upscale pharmacies or
`medical spa centers which offer non-surgical medical procedures such as fillers, skin peels,
`Fraxel® laser and other skin care procedures; whereas the goods sold under applicant’s mark,
`namely, beer, are sold either at breweries and/or other outlets that sell beer, such as beer
`distributors. They are not sold in the markets where registrant currently offers its goods
`
`
`However, applicant's attempt to restrict the channels of trade and classes of purchasers is improper.  It
`is well established that determining likelihood of confusion in ex parte proceedings is based on the
`description of the goods stated in the application and registration at issue, not on extrinsic evidence of
`actual use.  See In re Detroit Athletic Co., 903 F.3d 1297, 1307, 128 USPQ2d 1047, 1052 (Fed. Cir.
`2018) (citing In re i.am.symbolic, llc, 866 F.3d 1315, 1325, 123 USPQ2d 1744, 1749 (Fed. Cir. 2017)). 
`Because  the goods of the parties have no restrictions as to channels of trade or classes of purchasers,
`they are “presumed to travel in the same channels of trade to the same class of purchasers.”  In re
`Viterra Inc., 671 F.3d 1358, 1362, 101 USPQ2d 1905, 1908 (Fed. Cir. 2012) (quoting Hewlett-Packard
`Co. v. Packard Press, Inc., 281 F.3d 1261, 1268, 62 USPQ2d 1001, 1005 (Fed. Cir. 2002)); Made in
`Nature, LLC v. Pharmavite LLC, 2022 USPQ2d 557, at *49; In re I-Coat Co., 126 USPQ2d 1730, 1737
`(TTAB 2018); In re Melville Corp., 18 USPQ2d 1386, 1388 (TTAB 1991); TMEP §1207.01(a)(iii).  
`
`However, despite the fact that "energy drinks" are explicitly included in registrant's identification of
`goods, applicant nonetheless argues that "registrant does not sell 'energy drinks.'"  The examining
`attorney simply notes that,  under Trademark Act Section 7(b),  the presumptionis that the registrant is
`the owner of the mark and that their use of the mark extends to all goods and/or services identified in
`the registration. 15 U.S.C. §1057(b).  
`
`While applicant concedes the examining attorney's argument from the July 24, 2024 final Office action
`that "beverage companies increasingly offer a portfolio of beverage products, including beer and energy
`drinks," this is overwhelmingly supported by the evidence of record, including  evidence from the
`USPTO’s XSearch database consisting of a number of third-party marks registered for use in
`connection with the same or similar goods as those of both applicant and registrant in this case.  See
`attached printouts.  This evidence shows that the goods listed therein frequently  emanate from a single
`source under a single mark.  See In re I-Coat Co., 126 USPQ2d 1730, 1737 (TTAB 2018) (citing In re
`Infinity Broad. Corp., 60 USPQ2d 1214, 1217-18 (TTAB 2001); In re Albert Trostel & Sons Co., 29
`USPQ2d 1783, 1785-86 (TTAB 1993); In re Mucky Duck Mustard Co., 6 USPQ2d 1467, 1470 n.6
`(TTAB 1988)); TMEP §1207.01(d)(iii). 
`
`Moreover, the examining attorney has submitted substantial third-party website evidence that beer
`products, just as energy drinks, can be made using hemp as an ingredient.  Indeed, as one website
`states, "[t]he craft beer industry is no stranger to innovation, constantly exploring new flavors,
`ingredients, and brewing techniques. Among the latest trends to capture the imagination of brewers and
`consumers alike is the infusion of hemp into beer."  See attached printouts.  There can be little doubt
`that applicant's beer and registrant's energy drinks are highly related for purposes of §2(d) analysis.       
`
`Lastly, applicant argues in its Request for Reconsideration that there is no likelihood of confusion
`because "applicant has used its PICK ME UP mark in commerce for over two years in connection with
`its beer with no allegation of actual confusion."  However,  “‘[a] showing of actual confusion is not
`necessary to establish a likelihood of confusion.’” In re i.am.symbolic, llc, 866 F.3d 1315, 1322, 123
`
`

`

`USPQ2d 1744, 1747 (Fed. Cir. 2017) (quoting Herbko Int’l, Inc. v. Kappa Books, Inc., 308 F.3d 1156,
`1164-65, 64 USPQ2d 1375, 1380 (Fed. Cir. 2002)); TMEP §1207.01(d)(ii). “[T]he relevant test is
`likelihood of confusion, not actual confusion.” In re Detroit Athletic Co., 903 F.3d 1297, 1309, 128
`USPQ2d 1047, 1053 (Fed. Cir. 2018) (emphasis in original). “Uncorroborated statements of no known
`instances of actual confusion . . . are of little evidentiary value,” especially in ex parte examination. In
`re Majestic Distilling Co., 315 F.3d 1311, 1317, 65 USPQ2d 1201, 1205 (Fed. Cir. 2003).
`
`In short, the similarities between the PICK ME UP marks and the International Class 32 beverages of
`the respective parties are so great as to create a likelihood of confusion.  Accordingly, the examining
`attorney is compelled to refuse registration under §2(d) of the Trademark Act.
`
`Since  applicant has already filed an appeal with the Trademark Trial and Appeal Board, the Board
`will be notified to resume the appeal.   See TMEP §715.04(a).  
`
`
`/Nick Altree/
`Nick Altree
`Examining Attorney
`LO107--LAW OFFICE 107
`(571) 272-9336
`Nick.Altree@uspto.gov
`
`
`
`

`

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`PRESS RELEASES
`
`JULY 20, 2017
`
`Anheuser-BuschPartners With Hiball Energy AndAlta Palla
`Brands
`
`(Anheuser-BuschPartners with Hiball Energy AndAlta Palla Brands
`
`Createsopportunityin healthy energydrinks andsparkling waters, twoofthe fastest-growing beverage categories
`
`St. Louis, MO and SanFrancisco,CA,July 20, 2017 — Today,Anheuser-Busch announcedits acquisition of Hiball, maker of the category-leading organic energy drinks and sparkling energy waters
`by the same name, as wellasAltaPalla ("high ball”in Italian), a brand of organic sparklingjuices and sparkling waters, Hiball’s success in the energy and sparkling water categories — twoof the
`fastest-growing categoriesin the beverageindustry - will further deepen A-B's investmentsin the no-alcohol sector, Hiball Energy andAlta Palla, Hiball's two signature brands, will benefit from
`Anheuser-Busch's brand-building experience,its amazing wholesaler network, and its operational expertise.
`
`Hiball's founders and team pioneered the category of natural, organic energy drinks aimed at consumers who want the boostof energy, with less or no sugar, and organic ingredients. Hiball’s
`energydrinks and sparkling energy waters are madewith a proprietary, organic-certified energy blend, consisting of caffeine, guarana, and ginseng. Hiball's products target someofthe most
`importanttrendsin the beverage spacetoday,including health and wellness, natural and sustainably-sourcedingredients, energy-boosting products,and attractive, aspirational brands.
`
`"Todd, Alyssa, Danandtheentire Hiball team havecreated anincredible business, developing someof the fastest-growingbrands in the beverageindustry and giving their loyal consumersthe
`choicesthey love,” said Jo’io Castro Neves, Presidentand CEO, Anheuser-Busch. "We are very happyto partner with these three entrepreneursand invest to help them achievetheir dreams”
`
`Castro Neves added: “The combinationofHiball's category-leading organic energy drinks and AltaPalla’s organic sparkling juices and sparkling waters together with our network and
`operational know-how will create tremendous growth opportunities for these brands, There are somekeysimilarities between our companiesincluding ourdesire to dream big, our passion for
`our people and cur products, and our commitmentto quality and sustainability in everything we do. Our goalis to deliver Hiball products to new markets, while preserving their culture and
`brandidentities. Hiball's mottois '/t's al/gooa!' and we couldn't agree more."
`Hiball was formed in 2005 whenitsfounder and president, Todd Berardi, beganselling the company’s signature energy drinks out of the backof his car. The company, which now has 20
`employees,isstill driven by a small team of very passionate people whoeat, sleep and drink Hiball Energy and Alta Palla. The company continues to aspire to reach an expanding audience of
`neanle who want euality inarediants Fallawina the clase af the aconisitian Tadd his wife Alvesa Warnack Hihall's Creative Director and Nasicner wha desioned all the hrandina and mackanine
`
`

`

`Peer tree neering egress
` Freee per een iment rene nent ren ere ere rie Serge eee sre mer eng ett eer
`and DanCraytor, VP of Business Development,will continue to lead and managethe business.
`“Wearethrilled to partner with a companythat shares ourvision for where we can take Hiball Energy and Alta Palla in the future, and brings real passion and dedicationto their work everyday,”
`said Mr. Berardi. "This deal is the beginning of a new and exciting chapterfor me and my team, and|can't wait to get started, Together with Anheuser-Busch,wewill be able to bring our
`delicious, refreshing and organic/fair-trade products to more consumers in more places, growing our brands and our shareof the energy and sparkling markets. When | founded this company,|
`had a single goalofdelivering the very best organic, natural productsto like-minded consumers. | am excited to join the Anheuser-Busch team so we can share our products with more
`consumers and give our team even more opportunities to grow.”
`
`Anheuser-Busch plans a phasedtransition of the Hiball Energy andAlta Palla brands to our wholesaler partners. David Stokes, Chairman of the Anheuser-Busch Wholesaler Advisory Panelsaid,
`“Wearethrilled to partner with Todd andtherestof the Hiball team. Hiball Energy andAlta Palla are great additions to our developing no-alccholportfolio, and we have beenasking A-B for a
`partnership opportunityjustlike this. Adding these outstanding brands to our wholesaler system increases the breadth of our product portfolio and strengthens our network as we offer more
`innovation to our customers.”
`
`A-B will draw onits extensive, proven track record of working with founder-driven companies,like Hiball, to help them expand their consumer base while preserving the company's distinctive
`culture,its commitmentto quality organic andfair-trade ingredients, and brandidentity. Hiball also shares A-B's commitmentto the local community and,as part of the A-B family, will maintain
`its relationships with the non-profits and athletes Hiball already supports.
`
`Following today’s announcement,A-B and Hiball expectto closethis transactionin the third quarterof this year. The termsof the deal were notdisclosed,
`ABOUT HIBALL
`
`Hiball Energyis the pioneerof energydrinks for the health-conscious consumer: premium,refreshing, sparkling energy waters and organic energy drinks made with organic andfair-trade
`ingredients wheneverpossible. Hiball Energy products contain a proprietary organic energy blend of guarana, ginseng andcaffeine with the additionof B-Vitamins(B3, B5, Bé, B12). Hiballl Energy
`is currently oneofthe fastest growing natural/organic energy drink brand according to SPINSO andis sold nationally at fine retailers. Alta Palla ("high ball”in Italian), Hiball’s non-energy brand of
`sparkling juice beverages, was launchedin 2016 and contains organic andfair-trade ingredients, and less sugarand calories than its competition. In 2017, Alta Palla organic sparkling waters were
`launchedin 1602 cans.Sinceit was foundedin 2005, the company has grown quickly,butis still focused on having the best team, making the absolute best products from the bestingredients.
`Pleasevisit wwwhiballer.com and wwwaltapalla.com for moreinformation.
`ABOUT ANHEUSER-BUSCH
`
`For more than {40 years, Anheuser-Busch andits world-class brewmastershavecarried ona legacyof brewing America’s most popularbeers. Starting with the finestingredients sourcedfrom
`Anheuser-Busch’sfamily of growers, every batch is crafted using the sameexacting standards and time-honored traditions passed down through generations of proud Anheuser-Busch
`brewmasters and employees, Anheuser-Busch ownsand operates21 breweries, 21 distributorships and 22 agricultural and packagingfacilities, employing more than 17,000 people across the
`United States, For moreinformation,visit www.anheuser-busch.com,
`
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`CANPACK Capabilities ~|AboutUs ¥Create That Feeling Sustainability ¥ Investors ¥ Contact Us Ea
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`Home
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`News
`> Afusion of Alcohol-FreeBeerandEnergy DrinkHasHit the MarketinStandoutGANPACK Cans
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`A FUSION OF ALCOHOL-FREE BEER AND
`ENERGY DRINK HASHIT THE MARKETIN
`STANDOUT CANPACK CANS
`COMMERCIAL | SEPTEMBER15, 2023
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`KRAKOW, POLAND(September 15, 2023) - Polish brewer Warka has collaborated with CANPACKto launch a completely novel alcohol-free canned beverage. Warka Energy 0.0% is
`anew subbrandthat combines non-alcoholic beer with lemonade, natural caffeine, and ginseng extract.
`Market researchers Market Data Forecastproject that alcohol-free products will be an increasing proportionof the global non-alcoholic beverage marketin the future. Warka, one of
`Grupa 2ywiec (Heineken Group)brands has always been aheadof the curve in terms of consumertrends and preferences. They werefirst to introduce canned Radlers into Poland in
`2012, then non-alcoholic versions two years later. Theywerealso the first beer brand to enter the world of gaming. The Warka Planet of Gamers with its Planet of Gamers Cup
`tournament, plus a dedicatedlottery, is already a hit with gamingfans.
`This year, in responseto the growing popularity of energy drinks and non-alcoholic beers amongyoung adults, Warka hastakenthingstothe next lev
`two.According to the brand, Energy 0.0% is being marketedasideal for staying fresh and focused during the long hoursof gamingwith friends.
`Marcin Filipiak, Marketing Director for Warka reports: “The product has received great reviews from consumersurveys and weare convincedthatthis is the start of a completely new
`beverage category.”
`is available in 500 mi cansproduced by CANPACKanddesignedbyGlobal Shopper Marketing Sp. z 0.0. Their punchy,
`Warka Energy 0.0%, now in a range of mixed fruit flavours,
`colourful designs are enhanced with CANPACK’s special matt varnish. This signature effect creates that feeling ofvelvety softness underthefingertips. This extra-smooth touch makes
`the cansstandouton the shelves andin hand.
`
`ith their unique mash-upof the
`
`
`
`Stephen McAneny, Chief Commercial Officer at CANPACKadds: “Weare delighted that thanks to our long-standing relationship with Grupa 2ywiec we could be part of bringing this
`noveltyto the beverage market . As always, we are proud tobe at the cutting edge of both technicalandprint innovation.”
`
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`HAZY IPA MIXED PACK
`
`Update, Jan. 14: Brewbound reports Fireman Capital private equity is not CANarchy’sseller:
`In a move unannounced in media, HPS Investment Partners reportedly took control of
`CaNarchy’s board from Fireman around July 2020. Thefollowing year, equity restructuring
`gave HPSfurther ownership. Neither HPS nor CANarchy would elaborate on ownership
`details to Brewbound. The original story follows.
`THE GIST
`Monster Beverage Corporation, maker of Monster Energy drinks, will purchase CANarchy
`Craft Brewery Collective LLC, a craft beer and hard seltzer company,for $330 million in
`cash. The deal gives Monstera footholdin the alcohol market through a nationwide
`network of breweries and distribution connections—a goal the energy drink company has
`
`long telegraphed. That desire recently fueled speculation Monster was considering a
`merger with beer, wine, and spirits company Constellation Brands.
`Founded in 2015, CANarchy is owned by Fireman Capital Partners, a Massachusetts-based
`private equity firm. The collective includes Oskar Blues Brewery, Wasatch Brewery, Cigar
`City Brewing, Perrin Brewing Co., Squatters Craft Beers, Deep Ellum Brewing Co., andall
`their accompanying hardseltzer spinoffs, which most noticeably include Wild Basin Hard
`Seltzer, the #19 brand family in chain retail, (From 2018 to 2021, it also included Three
`Weavers Brewing, which founder Lynn Weaver bought back from CANarchylastyear.)
`
`ans
`ma
`FEW
`
`Creating beverage
`brands withfeeling.
`
`ferretaSoc a
`
`As the clockticks for Fireman Capital's return on investment in CANarchy, this may have
`
`

`

`been the best momentto cash out.
`+ From 2016-2020,thecollective averaged +18,7% year-to-year growth, including
`+20.5% and +30.1% in 2019 and 2020, respectively.
`In-store sales fell in 2021 because oflast year’s record highs, induced by the COVID
`pandemic that closed bars and restaurants and forced sales momentum to grocery,
`convenience, and otherstores.
`CANarchy's sales slumped -11.4% in 2021 (craft beer was -5.4%), butstill managed
`its second-best year ever as a collective.
`With the sale, Monster gets a route into alcohol production,sales, and distribution, and
`Fireman Capital gets a return on an investmentthat faces increasingly difficult
`competition.
`WHYIT MATTERS
`Monster's acquisition of CANarchy knits togethertworealities in the current beverage
`alcohol landscape. Beverage companies are spending moneyto diversify their portfolios
`across alcohol categories and non-alcoholic offerings, and the investorsin large craft
`breweries are becoming impatient as those beer brands face anincreasingly challenging
`sales market.
`Atypical timeframe for private equity firms to seek a returnfalls between three-to-seven
`years, and Fireman was already onthe far endof that timeline.Fittingly, CANarchy's sale
`comes the same week as Molson Coorsdiscontinued Saint Archer Brewing Company,
`selling its physical breweries to Kings & Convicts Brewing Company, and Uinta announced
`a sale to new joint owners.Interested buyers have found eagersellers.
`The CANarchytransaction also signals to some analysts that Monster may be souring on a
`rumored merger with Constellation in favor of taking alcohol production in-house. Nik
`Modi, analyst for investment bank RBC Capital Markets told Reuters the CANarchy
`acquisition provides Monster with critical access to nationwide alcoholdistribution.
`Monster’s co-CEO Hilton Schlosberg echoedthat in apressrelease, stating: “The
`acquisition will provide us with a fully in-place infrastructure, including people,
`distribution andlicenses, along with alcoholic beverage development expertise and
`manufacturing capabilities in this industry.”
`What Monsterlikely sees as most lucrative about CANarchyis not its beer or brands, but
`its logistics and regionally rooted distribution networks. Speaking to VinePair in 2018,
`CANarchy president Matt Fraser said the brewery collective model allows CANarchyto be
`“infinitely local and nationally accessible.” There are few other companies of this model
`that Monster could have acquired with this type of national muscle and regional-local
`presence.
`Yet the distribution overlap between Monster and CANarchyisn’tlikely to be seamless: As
`Diageo's Pacific sales director Jonathan Urch noted on Twitterin light of the news, some
`beer wholesalerssell Monster, but more sell Monster's primary competitor, Red Bull.
`Molson Coors Beverage Companyis also bettingbig on Zoa,its energy drink brand, further
`complicating energy drink priorities among beerdistributors.
`In spite of potential speed bumpsrelating to energy drinks on beer trucks, CANarchy
`might have simply been too gooda deal for Monsterto pass up. The “per barrel”cost of
`breweries have beenall over the map in recent years:
`In 2015, Ballast Point sold to Constellation for $1 billion, almost $3,5000 per barrel,
`In 207 AR InRav nurchaced Craft RrawAlliance ata roet af about C424 ner harral
`
`

`

`Pe eee ee renner pete eeimeae Serer Ren conemaneiae ate we es ory cena er per ener
`and Boston Beer brought Dogfish Headinto the fold for around $1,100 per barrel.
`+ For CANarchy's roughly 500,000 barrels, Monster is paying $660 perbarrel.
`The range of these purchasesindicate that in some cases, brandaffinity and a company’s
`assets in terms ofinfrastructure andlogistical support can matter. In that VinePair story,
`Fraser notes the strength CANarchycarried with “raw material purchasing, can pricing” and
`a companythathadbuilt consolidated staff for “IT, HR, accounting, banking, excise tax
`reporting.” With CANarchy, Monsteris effectively buying a turnkey operation for a great
`price at the sametimeit's finally making moves into a new space: beverage alcohol. The
`stars have aligned and financial markets have taken notice, pushing Monster's stock price
`to record highs.
`In selling the company, CANarchy leadership is acknowledging strong headwinds facing
`national and regional craft brands, and a more modest outlookfor the trajectory of these
`brands in the years to come,
`Last year, CANarchy brandscollectively sold $141.3 million in IRI-tracked chain retail, a
`decrease of -11.4% from 2020 (worse thanthe craft category) but an increase of +16%
`over 2019 (better than the craft category). Deep Ellum (+1%) was the only CANarchy family
`to avoid sales losses in stores in 2021.
`Two CANarchy brands struggled more significantly than others in 2021: Oskar Blues
`(=20.4%) and Perrin (28.9%). The Oskar Blues declines are especially troublesomefor the
`collective, given thatit's the second largest brand within CANarchyby sales dollars,
`earning half as much as the largest brewery in the portfolio, Cigar City Brewing. Cigar City
`was down -2.19% in chain sales last year,
`Surely though, Monster sees raw materials to be mined, polished, or reformulated within
`CANarchy’s beverage portfolio. As with Anheusser-Busch InBev's purchase of Craft Brew
`Alliance in 2019, Monster acquires nationally relevant brands as well as more regional and
`local plays. For example, Cigar City has a quietly large hit on its hands with Florida Man
`Double IPA, which is up +66% in IRI-tracked sales in 2021 and will see a second, hazy
`version launch next month. (CANarchy’s portfolio also includes hard seltzers, both
`through the Wild Basin line and throughindividual breweries’ hard seltzers, though the
`collective's flavored malt beverages as a whole were down -25.2% in 2021.)
`AccordingtoBeverageDigest, on aJan. 13 Monsterinvestorcall, the company expressed a
`focus on hard seltzers—both Wild Basin and the prospect of developing its own “natural
`hardseltzer product.”
`How Monster manages CANarchywill be an early case study in the recent crescendo of
`beer and non-alcoholic beverage company partnerships and acquisitions. This particular
`deal could only become more apropos to 2022 if Monster next picked up a cannabis
`adjacency.
`
`About Sightlines
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