Diageo will terminate several distribs of Goldring family in Tex, Ariz and La (well over $1 bil in revs with all suppliers, 5^th largest in US) effective Sep 15, 2002.   So this decision involves over $400 mil in revs.  In a statement last week, Goldring family said it was offered a new contract by Diageo, but “stringent conditions” of contract included “huge quarterly payments back to Diageo as well as other added costs.”  Diageo also demanded “additional and exclusive manpower” that would “have given them an unfairly dominant position in our companies.”  (Editor's Note:  Will Diageo eventually extend these demands to its malt bev brands?)  “Diageo appears intent on suffocating the entrepreneurship of one of its greatest assets—the wholesaler,” chairman Bill Goldring had previously written his other suppliers.   Bill estimated that “rebate” demanded by Diageo (reportedly over $3 mil per mo for his family’s cos) would “cost the wholesaler 50% of his profit.” “Moving the wholesalers’ profitability back decades,” Bill added “suppresses his excitement and motivation to build brands.”  So now Glazer’s will distribute those brands in Tex, La, and Ariz, while Goldring family has already picked up Brown-Forman brands from Glazer's in Tex and La.  At least 1 financial analyst, giant bank HSBC, thinks all these distribution moves will result in  “considerable disruption” for Diageo.  HSBC reiterated “sell” on stock, following news of Goldring termination.

The public outrage / media attention over radio contest which culminated in 2 people having sex in St. Patrick's Cathedral got highly-rated shock jocks Opie and Anthony fired. Also generated negative PR for Boston Beer, sponsor of "Sex for Sam III" contest. Turns out CEO Jim Koch in studio at time of incident. While nat'l media largely left Boston Beer alone, it's having tuffer time in its own backyard. Following flurry of articles, Boston Beer in damage control mode. Made statement calling Jim's appearance on show a "serious lapse of judgement." Jim apologized in Boston Herald, and also made personal phone calls to Catholic leaders and bar owners. Still, 27 Beantown bar and pub owners boycotting Boston Beer for "kicking Catholic church when it's down" and demanding additional apologies in major Boston and NY papers. Today, Boston Beer took out ad in Boston Globe. Jim acknowledged his actions "cast a shadow" over his co's "hard earned" rep, and wrote, "I hope... over time we will earn your respect again."

For 1^st time since intro, Smirnoff Ice down nationally in IRI data for 4 weeks thru Aug 11.  Down 3%.  Smirnoff cyclin’ big #s from last summer, plus clutter from all those new brands had to take a  toll. But slight decline is culmination of steady slowdown in 4 wk trend.  Down 3% for 4 weeks thru Aug 11, up 9% for 4 weeks thru Jul 14, up 31% thru Jun 16, 40% thru 5/19, 59% thru 4/21, etc.   So will Smirnoff reverse course or is party already starting to be over?  Meanwhile, GBIC wants to cut price on Captain Morgan in yet another effort to get it to move.  Stuck under 0.1 share in latest scanner data. 

AB dressing up Michelob to “make it look like it belongs on the high-end import shelf,” brand mgt veep Bob Lachky told USA Today. Changes include new $50 mil ad campaign, slope-shouldered longneck bottle replacing traditional tear-drop bottle and Michelob Ultra rollout.  “The brand is trying to get young and urban and have ethnic appeal” in new ad campaign, Bob added.  “We had to get young very quick,” Bob told St. Lou Post Dispatch.  “The biggest reason Michelob has been underperforming is that we haven’t been very consistent with marketing support,” Bob noted.  Bob also said: “I’m not sure we can compete against imports that have been here for 40 or 50 years….  But we need to put our best foot forward.” 

So concluded SG Securities in mid-Aug report that  downgraded SABMiller stock to “underperform.”  Following unsuccessful Jul effort to raise $1 bil in stock offering,  SG concluded “the holding company has very little or no capacity to gear up for an acquisition” and is “stretched because of its US dollar denominated debt.” ($2 bil it assumed from PM).  Chart shows that as holding co, SABMiller owns less than 100% of most of its several dozen subsidiaries, which means that “the holding company does not have access to subsidiaries cash flow to finance activities outside that legal entity.”  Has to rely on dividend payments.  SABMiller (part-owned by PM) does own 100% of Miller.

Imports alone have 24 share in 11-county area in southern Calif, including San Diego and LA, according to IRI data. Micros and malternatives at 3 share each. Interestingly, avg prices up 17 cents, 1% to $17.74/case but price increase is all from trading up. In fact, among top-10 brands, 8 sold at lower prices on avg YTD (30-90 cents/case), as scanbacks, other price discounts in widespread effect. YTD thru Jul 14, AB had 34.6 share (-0.6), Miller had 18 share (-1.3), Coors even at 14.7. Barton had 11.2 share, up 0.3. Biggest gainers: Tecate (a 4 share brand in this data) and Heineken each up about 25% with 80-90 cent per case price reductions.

State court reversed 2001 decision by state alc bev control board that Kirin had acted in bad faith and didn’t have good cause to terminate Virginia Imports when Kirin shifted brands to AB distrib.  Story convoluted but turns out court found Kirin followed rules.  It notified VI of deficiencies, but VI erred by not sending important letter to ABC board to say it was curing deficiencies and ask for hearing.  After specific time elapsed, Board told Kirin it was free to move brand (in fact, Kirin never actually terminated VI).  But then Bd backtracked, held hearing and whacked Kirin.  Court sided with Kirin down the line.  Not only said its actions legit, but said Bd “erred” by ruling Kirin’s termination “without good cause.”  Pointed out Kirin had plenty of reasons to terminate, and “no evidence” Kirin acted in bad faith.

Missed analyst expectations by wide margin, but reiterated full-yr expectation of double-digit earnings growth. First half EBITDA dropped 79 mil Euros, 12% to 573 mil; analysts had expected Interbrew to be even with yr ago. (Remember Interbrew had all of Bass last yr, but only what it didn?t sell to Coors since Feb this yr. Beck?s included since Feb.)

Tho Coors held share in supers in Southern Calif, according to IRI data thru Jul 15 (see last issue),  total Coors Southwest FBA (including Ariz) down 3.6% yr-to-date thru week 33.  Just a few  distribs showin’ slight pluses (2 up more than 1%) and majority down.  In LA cluster of distribs, Coors down 11% for 13 weeks, and 8.5% YTD.

At Labatt USA, first half import depletions up 7.7%, and “new marketing mix for Rolling Rock is beginning to show positive results,” reported Interbrew.  LUSA import growth  led by Tecate up 11.7%, and Labatt Blue Light up 19%, Interbrew cfo said during conference call. Stella “more than doubled,” albeit on small base.   Rolling Rock down 1% thru Jun compared to 7% drop in 1^st half 01.  But “uncertainty resulting from the delay in the integration process” for Beck’s  “has had a negative impact" there as Beck’s US depletions down 4% in 1st half.  Beck’s depletions “did improve in July and August," said Interbrew.