Beer biz up 1.7% for 4 weeks thru Dec 27 in Nielsen all outlet + convenience, following 1.5% gain for 4 weeks thru Nov 29 and 2.4 % for 4 weeks thru Nov 1^st.  That’s sharp contrast between totally flat picture for 12 weeks prior to that (up 0.1% for 4 wks thru Oct 4, up 0.2% thru Sep 6 and down 0.4% thru Aug 9).  What are biggest differences driving better growth trend?  Imports accelerated sharply and premium lights turned from minus to plus. 

Imports consistently up 8-10% in recent 4-week periods, compared to 4-5% in periods earlier this yr.  Up 8.6% last 4 weeks, basically growing at same pace as craft, albeit imports have bigger base (recall Nielsen includes Blue Moon and Shock Top in craft).  Craft has slowed slightly in Nielsen.  Meanwhile, premium lights up 1.7% last 4 weeks.  That’s big difference from earlier periods in yr when largest segment declined 1-2%.  It’s still losing share, especially of $$, but slightly less (down 0.8 share of $$ for 4 weeks, compared to 1 full share for 4 weeks thru Aug 9).   Finally, c-stores went from flat to up 1-2% in recent periods.  At first blush, this would seem to be driven by economic improvements and lower gas prices.  If so, let’s hope it’s sustainable. 

Yet another interesting twist in evolution of pot legalization.  Attorneys General for Neb and Okla, strong supporters of states’ rights on issues of gay marriage and health care (and alcohol), petitioned US Supreme Ct to declare Colo law that legalized pot to be “unconstitutional and unenforceable” and to pay damages to both states.  They argue fed law pre-empts Colo’s law and that their states have suffered “direct and significant detrimental impact” from Colo legalization via increased enforcement costs of arresting and processing felons who bring pot across the border.  Fed govt, they argue, has “preeminent authority to regulate interstate and foreign commerce.”  And fed law does not allow any state to “establish its own policy that is directly counter to federal policy against trafficking in controlled substances” or set up system to allow possession, sales, etc that “interferes” with fed drug laws.  What’s more, Constitution does not permit “patchwork of state and local pro-drug policies” (sound familiar?) that would conflict with fed law, they insist. 

Not surprisingly, commentary has been mixed.  Columnist in Slate last week blasted these AGs for apparent hypocrisy, as each has claimed strict state sovereignty against Obamacare and marriage equality.  Same columnist warned that if they win case, could lead to “epic battles among the states over regulation of guns and pollution – and give Congress unprecedented power” to regulate both.  Elsewhere, columnist in Wash Post gave plenty of space to pair of academics who argue suit has merit under previous Sup Ct precedent based on “public nuisance.”  Citing environmental issues, these profs argue that states can’t impose unfair costs on neighbors and that’s what Colo may be doing here.  They don’t think injunction likely, but if Colo’s “legalization experiment produces harmful externalities that transcend” its borders, then a judgment “forcing Colorado to pay her neighbors for these injuries” is consistent with legal precedent.  We’ll see.  

Familiar stateside debate ratcheted up recently in Belgium, where 15 brewers penned open letter asking for law requiring brewers to name contract breweries on beer labels. The “brouhaha” hit the front page of the Wall St Journal today, with little reference to parallel American story. Old school brewers get in shots at the mostly digital work of contracting “beer creators” or “architects,” while mostly-young upstarts express frustration “at people acting like the guardians of the temple of brewing culture.” Whereas US brewers complaining about contract often reference “skin in the game,” the Belgians hinge on place: “in a country the size of Maryland, a few miles are enough to cause big controversy,” WSJ wrote. Some letter-writers take issue with a “fake beer firm” based in one city (and labeled as such) but brewing in another. “It’s not an abbey, it’s a playground,” insisted one founder of a coming small-scale Brussels brewery, which will send a single recipe per year for larger production elsewhere. Echoing a US craft sensibility, he added: “I want to come up with a new recipe every two weeks, not every 250 years.”  A past Belgian Brewers Foundation leader turned Flanders lawmaker acknowledged complaints but asked, “Do we really need a law?”

New TV ad that debuted during College Bowl games New Year’s Day and will run on NFL Playoffs this weekend takes Bud Light’s “Up for Whatever” campaign in new direction and puts focus on the “100 different messages” added to Bud Light labels, reported Advertising Age.   Bud Light label messages are designed “to position the beer for spontaneous fun,” noted mag.  New ad is also “notable for its product close-ups and description of the liquid as ‘crisp,’ ‘smooth,’ and ‘refreshing.’”  Those visuals and “quality” messaging seem similar to new approach for Miller Lite ads.

One of nation’s largest fast-casual chains, Olive Garden with 800 units, will “replace” Blue Moon with “a Shock Top draught mandate beginning Jan 15, 2015,” MC’s chief customer officer Kevin Doyle wrote in memo dated Dec 30.  While “earlier this year,” Olive Garden turned down ABI “bid,” ABI “escalated its offer several more times.”  MC “puts its best foot forward to win the business,” but Olive Garden “ultimately did what they believed was in the best interest of their business.”  MC language seems to imply offer included unspecified inducements.  If so, could they potentially run afoul of fed/state regulations against giving a retailer things of value?  Recall, Mass ABC presently investigating so-called “pay-to-play” after craft brewers’ comments and Boston Globe articles.  And it’s become topic of much discussion in industry behind-the-scenes.

AB still hasn’t responded to specific charges in attempted class action suit filed in Calif state ct in Nov (see Nov 17 Express).  But it got case moved to fed ct.  Recall, handful of consumers claimed Rita labeling, marketing and advertising mislead consumers by using word “light,” which normally means fewer calories and carbs, tho brands have approx 220 calories and 22 grams of carbs, per 8 oz, far more than in 12-oz Bud Light, Bud, indeed all other AB brands.  Plaintiffs claim they relied on “deceptive, concealment, omission and misrepresentation of the ‘light’ product labeling” in buying Ritas.  They would not have bought the products had they known proper calorie count, they say.  AB actions violate FDA regs, TTB regs and numerous Calif consumer protection statutes, lawsuit alleges.  TTB regs, for example, bar any malt beverage labeling that misleads as well as labeling that uses “cocktail name as a brand name,” suit sez.  (Editor’s Note:  AB likely to point out that TTB has already cleared the labels.) 

Plaintiffs seek order to require AB to: stop misleading consumers, run a “corrective advertising and promotions campaign,” disclose accurate calorie info; pay undisclosed damages.  They cite IRI data showing total revs from brands at $775 mil in 2012/2013.  Again, AB hasn’t yet responded to specific charges, but did point out in  filing to move case to fed court that since 2012, AB’s “aggregate gross revenue” from Rita sales in US, “is in excess of $900 million” and that sales in Calif alone exceed $70 mil. 

Once again most global and major US brewers posted double-digit stock price increases in 2014.  Constellation Brands and Boston Beer set sizzling gain pace in 2013; growth in their stock prices decelerated in 2014 but remained quite impressive.  Constellation grew another 39.5% in 2014 after nearly doubling in 2013 and gaining 71% in 2012.  Boston Beer stock price finished yr at $289.54. That’s a 20% gain, following 80% jump in 2013. 

ABI not able to sustain double-digit gain pace in 2014 and stock finished yr up 5.5% on NY Stock Exchange, about half gain pace of S&P 500 (+11.4%).  But ABI up more than 20% on Brussels exchange (in Euros).  SABMiller stock price up 8.4% in 2014 following 10% gain in 2013 and 25% increase in 2012.  Heineken posted a 20% gain last yr, up from its 18.4% gain in 2013.  Molson Coors stock posted a 2d consecutive yr of very strong gains: +32.7% following 31% gain in 2013.  Those 30% gains for TAP followed 2% decline in 2012. Diageo stock price fell 8% in 2014 after posting 5 straight yrs of double-digit growth.  The pending Coca-Cola deal helped Monster Beverage stock price accelerate to a 60% gain in 2014, up from +28.3% in 2013.  Meanwhile Coca-Cola stock didn’t move much, up 2% for yr following 14% gain in 2013. Another craft brewer, Craft Brew Alliance, saw its stock price fall 19% in 2014, after soaring over 153% in 2013.  

“Despite improvement in the US market, it has been the toughest year in a decade for some of the biggest names in the $117bn global spirits business,” reported Financial Times, due to “a number of wider economic challenges and tougher trading conditions in both emerging and more developed markets,” Diageo ceo Ivan Menezes told paper.  Indeed, Diageo “suffered its first fall in operating profits in nine years,” and profits at Pernod Ricard “fell for the first time since 2008.”

Meanwhile the US remains the primary “emerging market right now,” and most profitable spirits market “accounting for 7 percent of global drinks sales, but 21 percent of profits.”  However, landscape in US shifting too as “resurgence of whiskey” (tequila and gin to lesser extent), and success of “newcomers” like Tito’s vodka have been at expense of “mainstream vodka,” sez paper.  “Sales of both Pernod’s Absolut and Diageo’s Smirnoff fell in the financial year ending in June 2014,” as whiskey sales trend (+4.5%) outpaced vodka sales (2.7%) in US in 2013 for first time in “two decades.”  Flavored whiskies like Sazerac’s Fireball (now 2 mil cases) and Jack Daniel’s Tennessee Honey (1 mil cases) have exploded onto scene, but FT notes reason for caution as “proliferation of flavored vodkas…is now blamed for its slowdown.”  At same time, spirits drinkers, like beer drinkers, are expanding their portfolios, becoming less brand loyal than in past.  Indeed, “we know the days of drinking Johnnie Walker for life are over,” said Ivan Menezes, so “our goal is to make sure that Johnnie Walker figures in the top two or three drinks you’d think of.”

Both Wall St Jnl and Seeking Alpha indirectly supported notion that Coke could be a target for AB InBev down the road.  Key point made by both (and previously by other analysts): while both co’s finding organic growth more difficult than in decades past, Coke is “structurally bloated,” as WSJ put it, and way behind ABI when it comes to cutting costs.  How far behind?  Coke’s adjusted operating costs as % of rev in 2012 was 39%, vs ABI’s 27%.  SABMiller and Diageo were at 30%, according to WSJ.  Meanwhile, both co’s finding it harder to build revs.  Coke revs have been “stagnant” since 2011, Seeking Alpha noted; ABI revs up about 10%.  And ABI has much better recent profit trends.  ABI profits per share jumped 93% since 2009, notes Seeking Alpha, vs Coke gain of 42%.  And Coke has said it will miss 2014 and 2015 profit targets. 

Coke announced $3 bil in cost cuts a coupla mos back, including some moves that will sound very familiar to those who watched what happened when InBev bought AB in 2008: 2,000 or more job losses (tho that’s not big bite for Coke and fewer than at AB), zero-based budgeting, some open-floor layouts vs individual offices, less travel expenses, more streamlined IT and mktg approaches and more.  In all, “the austerity push is a culture shock for a company that traditionally has grown, not shrunk, its way to prosperity,” as WSJ wrote.  One suspects shock would be greater still if ABI were making the cuts.        

While most AB distribs have added brands at a willy-nilly pace, at least one prominent distrib going in other direction. Krey Distributing prexy Steven Busch told St Lou Biz Jnl that “in November, the company decided to divest its non-AB beers and distribute A-B products exclusively starting Jan. 1.”  Steven said he’s “seen sales of AB products increase recently,” tho article didn’t define trends or timeframe.  Steven explained his rationale: “We have few if any no-buy accounts” for AB products. “The nut of it is we’re gaining distribution, and AB is adding more distribution than ever.”