RECENT NEWS UPDATES

Surly Case Challenges Tip Pooling Mandate By Jane McClure, Foodservice News

A key decision in a case involving tip pooling returns to Hennepin County District Court this fall, after a judge ruled in favor in July of a former employee who filed a lawsuit against Surly Brewing Company. The case centers on the sharing or pooling of tips at Surly. At a bar or restaurant, tipped employees who deal directly with the guests may opt to divide the tips at the end of the night with non-direct service staff, including cooks, bus staff, hosts, barbacks and food runners. Click here to read the full article.


Minneapolis to Propose Zero Waste Plan

Below is an email sent out to businesses in the Second Ward of Minneapolis:

The City is ready to present a DRAFT of a new citywide zero waste plan that could be finalized and approved by the Council before the end of the year. To get it right we need your attention, input and help now.

Approval of this plan is a critical next step towards reducing waste and reaching our goals to recycle and compost 50% of our overall waste stream by 2020 and 80% by 2030. Once approved it will be up to all of us to implement it. For some strategies to be successful your continued and vocal support and pressure could be vital.

To share the plan and gather feedback, I am co-hosting a community meeting with my colleague Abdi Warsame THIS Thursday, September 14th from 6-8pm at Matthews Park, 2318 29th Ave S.

We will provide an overview of the plan and plenty of time for discussion.

If you want to review the plan before the meeting, you can find it here https://www.scribd.com/document/358292142/Zero-Waste-Draft-Plan

Councilperson Cam Gordon


Boozing Takes a Bruising: New NSDUH Data on Cannabis and Alcohol Source: Cowen, September 12, 2017

2016 NSDUH data showed continued growth in cannabis incidence in the U.S., coming at the expense of alcohol, in particular among young adult consumers. Access to legal weed in the West resulted in the most disruption. We favor defensible alcohol names (STZ) and exposure to U.S. cannabis (KSHB), and are cautious on alcohol that over-indexes to lower-income consumers (TAP). Click here to read the full article.

Access: Disruption in the West
Access to legal cannabis, in particular for recreational use, has been concentrated in the Western U.S. (notably Colorado, Washington, Oregon and the loosely regulated California market). This has resulted in outsized adoption of cannabis use in the region, which past month cannabis incidence grew 1.6 pts to 12.2% in 2016. Interestingly, the West is also where we’ve seen the most notable drop in adult alcohol incidence, falling 220 bps to 54.2% in 2016, representing the lowest incidence we’ve seen in 15 years. These trends reinforce our thesis on the interaction between the two social lubricants, as adult-use legalization continues to not only drive further increases in cannabis incidence, but continued declines in alcohol as well.

Age: Alcohol Popularity Slipping; Strong Growth in Cannabis
As the cohort that consumes the most drinks per occasion, we often see alcohol companies focus on marketing towards younger LDA (legal drinking age) consumers. However, consistent with the trends seen in 2015, alcohol incidence continues to decline with this key 21-25 year old cohort, while cannabis incidence continues to climb. While a key cohort for both alcohol and cannabis, the cannabis industry has the secondary benefit of significant growth among older consumers. Indeed, the absolute number of past month cannabis users in the U.S. over the age of 55 have grown at a strong double-digit CAGR over the last decade, now accounting for 18% of total consumers (vs. only 5% 10 years ago).

Attainment (Educational): Diverging Trends at the High and Low-End
Alcohol incidence skews to higher-income consumers, with college grads boasting past month incidence of 67%, more than 2x that of adults with less than a high school degree. This gap in alcohol users by education has become more pronounced over time, as past month alcohol users with at least some college education has grown at a 2.7% 5-yr CAGR, while users without a college education has declined at a 3.4% CAGR. While use by education is less discernible for cannabis, use is growing among most of the educational cohorts, most notably among highly educated consumers. Indeed, the 5-year CAGR for cannabis users with at least some college has grown double-digits, far exceeding the LSD growth seen among less educated cannabis consumers.

Stock Implications
While we continue to see modest growth in the underlying alcohol user base, growth has been slowing, in particular among younger adult consumers, while cannabis uptake continues to be robust. Lower-income consumers in particular look to be moving away from alcohol, and selectively into cannabis. The long-term declines in the number of less educated consumers raises the question of whether value-priced alcohol, and in particular beer, is ceding share to value-spirits, or cannabis, or just to broader economic malaise. Regardless of the driver, it reinforces our more cautious stance on TAP (which over-indexes to lower income drinkers), while keeping us constructive on STZ, which premium beers should prove more sticky with higher income consumers, where drinking is more popular. As well, we continue to like small cap KSHB which offers pure-play exposure to the U.S. cannabis market.