Yuengling yet again went with mostly AB distribs in Massachusetts, but the exceptions are big and notable ones.  That makes its choices in Mass more of a hybrid distribution network than in several recent states where Yuengling just went with the AB network.  In Mass, Yuengling went with 5 AB distribs, 1 MC distrib and 1 craft distrib.  But the MC distrib (Atlas) and the craft distrib, Craft Brewers Guild of Boston, will get Yuengling in some of the most populous and desirable territories.   The L. Knife and Son companies (Sheehan family) emerged as a big winner in the Yuengling sweepstakes.  L. Knife got the brands in its Seabord Products and L. Knife territories.  In both, it is an AB distributor. But L. Knife also got Yuengling in the city of Boston, where it sells craft and imports.  Other AB distribs that got the brands include Quality, Williams and Girardi.

Choosing Craft Brewers Guild of Boston changes the distribution landscape in the Boston metro area.  The Craft Brewers Guild sells somewhere approaching 1.5 mil cases statewide, vast majority in Boston metro.  Getting Yuengling means it will compete on a much broader basis in Beantown in a crowded distribution landscape with at least 6 competitors, including an AB branch at near 10 mil cases, Burke Dist (MC, Boston) at around 6 mil cases, Harpoon self-distributes around 600,000 cases, Horizon is a large wine and spirits distrib that also sells around 2 mil cases of beer in Mass (mostly Heineken) and also there’s Atlantic Importing (with a number of craft brands led by Dogfish Head).  Yuengling is set to enter Mass at the end of 1^st qtr 2014.    

Customer traffic at bars and restaurants fell 3.3% in latest 4 wks thru Dec 1, and after “encouraging improvement” in Oct, “traffic has fallen back to its weakest level” since Feb, according to GuestMetrics.  Traffic is down 1.8% overall Jan-Nov.  Situation at bars/clubs got worse as traffic fell 7.1% in Nov, “a fairly sharp decline” from -4.6% previous 4 wks.  This time period includes Thanksgiving holiday too, a period that usually brings lots of young adults out to bars/clubs.  On-premise traffic is “particularly weak” after 10pm, down 8.5% Jan-Nov, which is “likely a reflection of younger adults remaining under significant economic pressure.” 

A separate report in Nation’s Restaurant News also shows that despite an improvement in same-store sales, restaurant biz remains challenged. Same-store restaurant sales were up 0.8% in Nov, a slight drop from 1% gain in Oct, per Black Box Intelligence, a mktg partner of Consumer Edge Research.  Same-store restaurant traffic improved for 5^th straight month but was still down 0.9% in Nov.  Data from co called People Report, tracking employment data, shows “rising turnover levels for both restaurant managers and hourly employees” as chains expand and put further pressure on staffing levels.    

First the good news.  Q3 beer sales in UK had “biggest quarter-on-quarter increase this century,” according to British Beer & Pub Assn, recording a 5.2% increase.  AB InBev reported its UK beer/cider volume up 4.2% for the qtr, Heineken posted gain too and Molson Coors said trends improved.  But UK govt predicts beer’s long-term decline, now into a decade or so, will continue.  Office of Budget Responsibility forecasts beer volume to “fall back a further 15%” from 2013 thru 2018/19, reports Morning Advertiser.  And wine/spirits outperforming beer there too. Same UK govt office expects wine volume to jump 54%, spirits to gain 31% over same period.  Ouch!

Citing progress after “several weeks of productive bargaining,” AB InBev and Teamsters announced resolution of “local, non-economic issues” for the 12 breweries, reports St Lou Post-Dispatch.  Details not released, but these “typically include issues such as seniority and work rules,” according to the paper.  Next up: meetings next week to start talkin’ about national non-economic issues.  Current 5-yr contract runs out Feb 28.

Citing progress after “several weeks of productive bargaining,” AB InBev and Teamsters announced resolution of “local, non-economic issues” for the 12 breweries, reports St Lou Post-Dispatch.  Details not released, but these “typically include issues such as seniority and work rules,” according to the paper.  Next up: meetings next week to start talkin’ about national non-economic issues.  Current 5-yr contract runs out Feb 28.

Goldman Sachs’ Judy Hong is a self-professed “out of consensus” bull with her “buy” rating on Molson Coors, in part because she sees “potential for better than expected volume recovery in US as employment improves and the payroll tax impact is lapped.” Not much sign of those better numbers yet as Nielsen all-channel data for 4 weeks thru Nov 30 (now including week after Thanksgiving) is down 0.9%, with premium and subpremium volume down 4-5% each and they lost 3.4 share of $$ between ’em.

But Judy sees lotsa other potential for TAP.  Molson Coors will be nearing its leverage target of 2-2.5x debt to EBITDA in 2014 and so “we expect investors to focus on the cash usage outlook,” (TAP will throw off some $770 mil in free cash flow next yr, sez Judy) including higher dividend, share buyback or potentially more m&a.  “Full ownership of the US business could be appealing if it became available,” sez Judy, because it is “TAP’s strongest market,” Molson Coors “could likely gain significant synergies by combining its US and Canadian businesses” and “it could improve efficiency and decision making processes by having one clear owner.”  Molson Coors operating margin is 20% in Canada, compared to ABI’s 38%.  TAP “has indicated” that “as much as half of this margin gap could be structural” because ABI has “integrated US/Canada platform…. Removing that structural difference could mean an additional $200 million in EBIT,” Judy said.  

No indication that SAB’s interest in MC JV is available.  But under the JV agreement, starting earlier this year, either party could offer to sell their stake, according to Judy.  Yet “it will be another 5 years until either party is allowed to make an unsolicited offer for the other party’s stake.”  Molson and Coors families “remain involved” and have 93% of Class A shares and 16% of the B shares “giving them an 18% economic interest in TAP,” said Judy.  Editor’s note: reverse also seems possible, i.e. that Molson and Coors families could decide to sell somewhere down the road, but both would have to, as Judy notes, otherwise it’s “an automatic ‘no’” on any transaction.  Meanwhile, Judy’s analysis is latest example that such talk is more in the air, but some also see TAP’s stock as value play.  It sells at 8.8x EV/EBITDA, well below the “developed market consumer packaged goods average of 10.5x.  Our sum-of-the-parts analysis shows that TAP’s US beer business may be particularly underappreciated,” according to Judy.   

MillerCoors sez that its aluminum bottle weighs far less than AB’s, contrary to what AB claimed in recent meetings.  MillerCoors Alumi-Tek 16 oz bottle at 23.5 grams, compared to AB’s 30.91, sez MC veep Pete Marino, adding that’s 32% less.  

Calif class action atty Joe Alioto refuses to go away.  Recall, US Dist Ct judge dismissed challenge to ABI-Modelo deal in Sep, finding Alioto’s antitrust arguments on behalf of consumer-plaintiffs “unpersuasive.”  (See Sep 17 Express.)  But Alioto is now claiming Constellation and ABI made “misrepresentations” in legal docs and at Aug hearing in this case that create a reason to reconsider.  Alioto cites our Aug 19 beer marketer’s INSIGHTS report that Crown “more aggressive on price than it has been in years,” that it had plans to increase prices in Calif and Fla this fall and that Crown would be “much more likely” to follow AB price hikes given current price gaps.  (Actually, we had reported Crown Fla/Calif hikes as early as Jun 17.) 

To Alioto this “newly discovered evidence” means that Crown/Constellation claims to “compete vigorously” vs ABI (and take share from it) “had already been discarded” and supports his original theory that Constellation would be ABI’s “puppet” and raise prices at expense of his consumer plaintiffs.  He also cites “intended inferences” made by Constellation that it would not raise prices or follow AB price hikes, even tho it was already implementing plan to do so.  Judge should vacate decision to toss original suit, Alioto now argues, and “grant discovery” for all data on pricing, including depositions of ABI ceo Brito, Constellation ceo Rob Sands and any Crown exec “responsible for the pricing and price increases.”

ABI/Constellation responded to this “spurious motion” by arguing: 1) “alleged misrepresentations” don’t affect reasons why judge “properly dismissed” lawsuit’s claims in Sep; 2) current claims “have failed to show that any misrepresentation occurred”; 3) so-called “newly discovered” info (from INSIGHTS) was available to Alioto “well before” judge decided case. 

Court dismissed suit based on “specific agreements” between ABI, Modelo and Constellation, not “statements made outside the scope of the pleadings and about future intended conduct,” ABI and other defendants insist.  New info is “irrelevant” and “simply reports on Crown’s independent business decision with respect” to Modelo pricing in the US, which has “nothing to do” with original claims that ABI will “control” Constellation.  Nor does new info indicate any agreement between ABI and Constellation to fix prices.  Besides, “raising prices by itself,” defendants remind, “is not inconsistent with vigorous competition, especially where the price mover continues to take market share from rivals.”  Then too, Crown execs never said they’d not hike prices.  So this “latest attempt to resurrect this case should be summarily denied” ABI, et al, conclude.

The red-hot cider segment continues to score big gains, up 52% in 3d qtr and up 53% YTD on-premise thru early Nov, per GuestMetrics report.  Cider is still just 1 share of on-premise volume in US.  Distribution for ciders on-premise is up to 70% at bars/clubs while just 47% casual and 24% fine dining restaurants carry ’em so far.  “While we track about 240 cider brands,” ceo Bill Pecoriello noted, the Angry Orchard family of brands along with Strongbow and Stella Artois Cidre “together account for 45% of total cider volumes and drove 99% of the volume growth.”  The “230 or so” other ciders managed gain of just 0.3%.  He also noted it will be “interesting to track closely” the pricing of those top-3 brands, as HUSA’s strategy to position Strongbow as an upscale cider has its avg on-premise price at $5.64, “a 13% premium above” Angry Orchard at $4.99.   

NYC could raise $49 mil per yr if it nearly tripled beer and liquor tax and added new wine tax, said city’s Independent Budget Office today, recommending move as part of its annual wish list.  It looks for beer tax of 34 cents a gallon, up from 12 cents, $2.80 per gallon on liquor up from $1 and new wine tax of 30 cents per gallon.  These moves would need to be approved in Albany, notes Politicker. 

Meanwhile, just yesterday, NY Post editorialized against fed beer excise taxes.  It wants ’em eliminated entirely: “the best and fairest course would be to get rid of this tax altogether,” the Post noted.  Post also favored big brewers’ BEER bill over small brewer BREW bill because BEER “would lower excise taxes across the board.”