Photo: Truly Hard Seltzer
Should brands and retailers stop destroying unsold merchandise?
Boston Beer recently decided to throw away “millions of cases” of Truly, instead of discounting the product, in response to a broad slowdown in the hard seltzer category over the summer.
“We were very aggressive about adding capacity, adding inventory, buying raw materials, like cans and flavors, and, frankly, we overbought,” Boston Beer Chairman Jim Koch told CNBC last week. “And when the growth stopped, we had more of all those things than we were going to be able to use, because there is a shelf life.”
As a result, the owner of Sam Adams absorbed a charge in the third quarter of $102.4 million related to direct costs of the hard seltzer slowdown, including inventory obsolescence and related destruction costs of $54.3 million.
Mr. Koch told CNBC the reason promotions aren’t used to clear excess inventories is quality concerns. “Our mission is to sell high-quality products and to build high-quality brands. So rather than take a chance of it getting out in the market and going stale and consumers having a bad experience, we decided to make the hard decision and eat a lot of product, just to make sure consumers didn’t get stale product and have a bad Truly,” he said.
Brands or retailers destroying unsold merchandise is rarely talked about but more common than generally thought.
Supermarkets throw away about 43 billion pounds of food every year — accounting for 10 percent of all food waste in the U.S — due to administrative mistakes, breakage, spoilage, theft and other losses, according to the Upcycled Food Association.
Luxury firms and fashion houses are often called out for destroying some goods rather than leaving their wares to languish on discount racks and impairing their image.
Coach earlier this month said it would cease the practice of destroying in-store returns of damaged and unsalable goods after a TikTok video posted by an environmentalist showing slashed handbags went viral. The company said that the vast majority of its excess inventory is donated and that the damaged product being destroyed in stores represented around one percent of units globally.
- Third Quarter (13-week) and Year-to-Date (39-week) 2021 Financial Results – Boston Beer – Boston Beer
- The Boston Beer Company, inc (SAM) Q3 2021 Earnings Call Transcript – The Motley Fool
- Boston Beer tossed ‘millions of cases’ of Truly hard seltzer instead of discounting it, chairman says – CNBC
- 4 Ways Grocers are Winning Market Share & Boosting Margins by Reducing Food Waste – Upcycled Food
- It’s no more ‘burn, baby, burn’ for Burberry – RetailWire
- Why fashion brands destroy billions’ worth of their own merchandise every year – Vox
- Coach Says It Has Stopped Destroying Merchandise After Online Criticism – Business Of Fashion
- Amazon is introducing measures to reduce the amount of inventory it destroys after probes found it trashes millions of items a year – Business Insider
- Amazon’s new programmes give returned and unsold inventory new life – Amazon.com
Discussion Questions
DISCUSSION QUESTIONS: Did Boston Beer make the right decision in destroying “millions of cases” of Truly amid the slowdown in the hard seltzer category? What insights does the move offer around discounting, repurposing and destroying slow-selling merchandise?
Poll
Loading …BrainTrust
Dr. Stephen Needel
Managing Partner, Advanced Simulations
Bill Hanifin
CEO, Hanifin Loyalty LLC
This is an area of sustainability that has the potential to make a big difference. All retailers and brands should be looking for ways to waste less, and re-selling returns and end of life products should be part of this strategy. Given the dramatic rise in interest in the reuse market, finding more useful, environmentally sustainable ways to dispose of these types of products should be a priority. Boston Beer has come to their own decision on this, but to me destroying “millions of cases” of anything seems like a profound waste.
Boston Beer made a terrible error in destroying goods that could have been donated or sold on promotion. While they were afraid that discounting could devalue their brand, destroying goods will do worse to the brand image. Consumers are holding brands and retailers accountable for their actions and the power of social media could make or break a brand.
Leadership admitted to overbuying to the point they had to destroy product. Why not reuse packaging? Why not think of outside of the box ideas to become more sustainable and circular? This comes down to bad planning and bad management.
No matter the vertical, retail needs to put a spotlight on planners and we must hold them accountable for overbuying and overproducing. This is a non-negotiable for the sustainability and survival of our planet. Let’s all do better.
Very good points Liza. Consumer goods companies and retailers should be responsible and do the right thing. Whenever possible, donating goods to charitable organizations is a much better option than destroying products. Alcohol products are a little more tricky because charitable organizations probably wouldn’t accept them. However selling products at a discount is a much more socially responsible approach than destroying products.
In many states it is illegal to donate alcoholic beverages to charities. In others the charity has to have a retail license in order to sell alcoholic beverages even if donated.
Something is really wrong when brands and retailers have to be publicly shamed into doing the “right thing.” Why does the premium for growth so outweigh the penalty for overproduction? Why can’t businesses just back off the gas pedal a little, especially now in an environment when forecasting demand is more difficult than ever, and delivering on time and complete is more difficult than ever?
If abundance and liquidation lead to brand dilution, then scarcity and selling out can lead to brand enhancement. It’s not a difficult concept, and yet overbuying and over-production so often get the nod. There’s always going to be some level of stale, spoiled or irreparable inventory. But destroying perfectly good product is just crazy in a world where so many needs go unmet.
The need to protect brand integrity is paramount, but the wastefulness of using more resources to destroy a product that took resources to be manufactured in the first place is not the right way. It sends a message that product is more important than people, and today’s socially and environmentally conscious Gen Z and Millennial shoppers pay attention to how brands behave in the real world. Surely the brilliant product engineers employed by these companies can find a way to de-brand and repurpose products to add value and, in the process, generate goodwill toward the brand. Perhaps end of life planning should be a mandatory part of all product design going forward.
In today’s environment, we need to continue to find better ways to mitigate waste. Destroying goods like this when there are other options such as discounting or donating seems like a poor choice, not only for the environment but also for their brand image.
I would have thought a smart marketer could have done an “Oops” campaign (like Cap’n Crunch did for years) and turned this into something positive.
This was a waste and wasted opportunity for Boston Beer. Why not use this as a way to gain and connect with new customers? How about free “we made too much, come try us out” pop-ups? Why not donate it to charitable organizations to use/sell at fundraisers? To simply throw out product at a time when sustainability is top-of-mind is a brand breaker.
That brands want to protect their price points and positioning is understandable. However destroying perfectly good products is wasteful and isn’t a good look when more consumers are concerned about sustainability. For food, there has to be a more imaginative solution, whether it’s pushing the product into alternative channels like dollar stores, discounting, or giving it away to those in need. When you’re talking about millions of cases of product, it also represents a complete failure of forecasting which has negative commercial implications.
There’s always a secondary and tertiary market for goods, even beverages. Yes, there is shelf life to beverages but Boston Beer should have plans in place for the disposal of unsold products to other agencies, groups, businesses, and countries. It’s one thing to destroy product due to a FDA recall, but here I see a lack of imagination on the part of Boston Beer.
Yes. It’s unconscionable on multiple levels.
While I understand Boston Beer’s decision to destroy millions of cases of Truly it seems like such a waste. The company could have had fun with a “We made too much” limited time promo.
As for the other industries in the article there are better options. Does destroying food when people are hungry make sense? Or trashing apparel and accessories rather than take a markdown? It doesn’t to me. In a world where sustainability and recyclability are so important surely these companies could find a better way.
When brands and retailers solely take a marketing approach to the business, they make bad decisions. The day has come when sustainability ought to inform business decisions. On economic, social, and ethical levels, the destruction of inventory is a heartless and inhumane act.
As long as there will be consumers of high-end, exclusive fashion items, there will be merchandise destruction. You just can’t have, for example, last year’s Louis Vuitton purses being sold at Marshall’s. The brand will lose its cachet. So when it comes to high fashion, the only way around this is to forecast demand more accurately so that destruction is not needed or limited. More easily said than done.
Brewers are strictly forbidden from selling alcohol directly to the public due to the antiquated three-tier distribution system. While selling product at a discount would also undercut the premium nature of the beverage, the real issue for Boston Beer was freshness. Believe it or not, hard seltzer goes “stale,” and because this inventory had been sitting around too long, selling it would have meant possibly hurting its reputation with an inferior product.
There’s also nothing to say Boston Beer won’t be recycling the packaging. CEO Jim Koch said the brewer would be “crushing” the old inventory, which sounds like it could very well be recycled.
While there is often a good reason to discount, donate, or otherwise use a product instead of wasting it, that doesn’t seem to apply to Boston Beer’s situation.
Anyone with an inquisitive mind about sustainability might first ask about why Amazon often suggests that customers keep an item that doesn’t fit or had some other problem. More than anecdotally, I have asked the owners of my local UPS store how many returns they process for Amazon and I was surprised to learn they are instructed to discard the majority of items rather than ship them back to Amazon.
In the case of Truly, here’s an idea that would complement their brand and protect against margin erosion through discounting. Finishers of Tough Mudders are offered a free beer. There is often a free beer offered at marathons and similar events. Truly could negotiate with a large event organizer and supply beverages for free, just asking the event organizer to pay for shipping and organize logistics. Seems like all would be winners in this type of scenario.
Anyone like that idea?
The movements around social responsibility, corporate accountability, sustainability, and environmental consciousness are here to stay. It will take our collective efforts to make the sustainability movement a reality. Unfortunately, what Boston Beer did by destroying their product goes against all the guiding principles of what is necessary for our global movement around sustainability and responsibility.
We have lived through the ages of excess, where we have far too much product, food, and goods to the point where waste becomes overwhelming and has a material impact on our environment. The retail and consumer product movements around product curation are not only good for creating an outstanding customer experience but also play a significant role in driving sustainability by mitigating excess product waste.
It’s a PR disaster — “we’re destroying something … so that we can keep the price high” — actually looked at that way it’s a double disaster that likely overwhelms any other concerns (though to be fair, there are likely restrictions about giving away alcoholic beverages, so their options may have been more limited than we realize).
This highly publicized incident notwithstanding, the issue is usually more subtle: quiet disposal of perishable items (How big I’m not sure: it makes little sense to me to include “theft” in the category). Obviously everyone would be in favor of a perfect system where nothing ever expires, or some charity is able to absorb it when it does, but “perfect” is just that … not realistic. How much better we can do, and at what cost, I don’t know.