New TV ads touting quality and uniqueness of Miller Lite take a deep dive into the beer, literally, with high-def GoPro cameras taking viewers inside Lite’s 700-gallon tanks, reported Advertising Age.  The new spots that debuted over weekend represent first efforts from TBWA since it won account a few months back and take MillerCoors plans for a “beer-focused approach one step further.”   New ads “bypass humor” and instead use “extreme close-ups” while telling viewer to “embrace their individuality” while another spot takes stand “against the misconception that the only good beers are heavy beers,” per MC memo. To see new work click here.  

In a package of 3 articles not exactly in holiday spirit (and which AB would regard as no gift), St Lou Biz Jnl painted tuff portrait of ongoing AB job cuts and its diminishing presence in St Lou.  Contrast this series with WSJ, which began with ABI board billionaires (among others) slicing oranges to make a craft beer.  “A building connected to Anheuser Busch’s main offices in Soulard is now largely empty,” St Lou Biz Jnl begins, “a daily reminder of the layoffs and cost cuts implemented by InBev.” Building used to house 300-400 sales and mktg folks.  “When you’re walking into work through the back door, you walk through a vacant building,” said ex-employee Roni Chambers.  “The emotional toll is huge.”  She now has a career development biz there. 

Before ABI deal, 6,000 people worked in St Lou for AB.  Co said about 4,000 worked there in 2011, but “refused to provide local workforce figures” to Jnl.  Brewery and plant jobs now make up 80% of ABI’s total employment in region, said St Lou Mayor’s chief of staff Jeff Rainford.  “They are primarily a manufacturer here, a producer of beer,” he added. “AB is still going to remain a major employer and we’re going to treat them with respect.” 

“Consistently over time they’ve reduced their workforce and increased profitability,” said Marc Greenspahn, a 31-yr AB vet, who now has extremely busy resume-writing and job placement service. Of 1000 resumes he wrote over last 5 yrs, 350 of ’em were for ex-AB employees.  Latest rounds are called “legacy layoffs,” inside ABI, sez Marc.  Folks still at AB in St Lou are calling him: “There’s huge uncertainty in their mind of what the future might bring.” Marc can’t keep up; of 85 clients in his resume queue, 30 are ex-AB.  

AB sure has been in news lots lately, including over holiday period with long interesting articles in Wall St Jnl this morn and St Lou Biz Jnl (Friday - see below).  “Beer Giants Cultivate Their Crafty Side,” headlined WSJ in article that opened with ABI board and ceo Brito peeling and slicing oranges to put in wine barrels and make Goose Island’s Sofie earlier this yr.  World’s largest brewer held its annual board meeting there at Goose Island, “a small brewery” in Chi.  “The reason,” sez WSJ, is that “small labels” are where there’s growth in beer biz. And not just in beer.  “When it comes to what Americans eat and drink, small brands are big,” said WSJ.  “It took us more time than it should to recognize the trends,” said ABI North American prexy Luiz Edmond.  “We are late to the game.”  So “you shouldn’t be surprised,” he told WSJ, if ABI “buys a few more craft brewers,” it wrote. 

Goose Island “expects sales to top 400,000 barrels this year,” said WSJ.   Including Blue Point and Ten Barrel, AB will have about ½ mil bbls in this segment.  Goose Island alone has 30 different brands now, up from 19 in 2011.  But “competition gets fiercer by the month.”  There are 90 breweries in Illinois today, almost double the 52 five yrs ago, Ill Craft Brewers Guild told Jnl.  Of those, 76 are in Chicago; 20 more are on the way.  

Sure, all that sturm und drang in Kentucky about AB branch not carrying craft brands spilled into many larger issues that have nationwide repercussions (branch expansion, AB relations with its own distribs, craft access to mkt, distribution choices, etc) which will crop up again and again.  But actual amount of volume affected was minute.  As AB closed on deal, AB’s director of sales and mktg for Louisville Branch gave some details in paper called the Messenger.  Less than 1% of volume or about 6,000 cases of non-AB volume sold off and only about 3,000 cases were craft brands.  The Hand family sold Sierra brands to Clark Distributing (MC), Magic Hat brands to Heidelberg Dist (statewide option) and Vermont Cider to Beer House Dist (statewide, an L. Knife entity).   Budweiser of Owensboro “appears to have sold only 30 of the 88… brands it could sell during 2013,” wrote Messenger.  Of those 30 brands, 12 were Sierra Nevada and 6 were Magic Hat.

We will probably publish at least once more in 2014, depending what’s happening.  Here’s wishing you and yours a very Merry Christmas.  

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No wonder Diageo’s North American chief Larry Schwartz said Thanksgiving holiday sales were disappointing (see last Express).  Control state spirits volume up just 0.2% in Nov, reports NABCA, with $$ sales +2.6%.  And that’s while Nov ’13 volume was -2.8%, a very easy comp.  For 12 mos, volume up 1.8%, $$ +4.3% in control states.  Meanwhile, IRI multi-outlet + c-store natl scans show beer volume +1.2%, $$ +3.7% for 12 mos thru Nov 30.       

Elsewhere, Nielsen reports natl spirits volume and $$ trends off premise slowed by 0.7 pts for latest 4 wks thru Dec 6 vs 12-week gains.  Volume +1.6% for 4 wks, $$ +3.8%.  Analysts at both Citibank and Cowen Insight note strength of brown goods, softness in vodka. Distiller trends mixed with Diageo and Beam losing share, Brown Forman, Constellation gainin’.    

“While it’s too early to really assess” Montejo’s “traction” in US, its “traction appears limited so far,” Morgan Stanley’s Dara Mohsenian said in same report.  Calif so far accounts for 55% of Montejo sales in IRI and Montejo “has only reached 1.6% of STZ beer sales” there in latest week thru 11/23.  What’s more, “this penetration has been level for each of the last 4 weeks, again signaling limited interest for the brand.”  Montejo at 0.7% of STZ sales nationally in IRI.  On flipside, Modelo Chelada has grown rapidly since natl launch and now represents 20% of Bud/Bud Light Chelada totals, up from 12% back in March.  Yet Bud/Bud Light Cheladas still up double digits.  Dara forecasts that Modelo Cheleda can rise to 33% of Bud/Bud Light Chelada totals without too much cannibalization and so represents “a compelling growth opportunity.”

Morgan Stanley’s Dara Mohsenian issued a 50-pg report recommending Constellation shares, citing similar reasons as other analysts, i.e. its strong growth prospects and potential for margin expansion.  But he provided key new detail that further quantifies Constellation’s opportunity.  Fully 40% of Constellation volume is consumed by Hispanics, sez Morgan Stanley, according to a “national consumer study from Experian Simmons.” And that’s compared to 14% of domestic beer brand volume consumed by Hispanics.    

Demographics alone should give Constellation 3% of topline growth, Constellation has said, according to Dara.  Hispanics are about 17% of US population now, but are expected to grow to 19% of population by 2020 as total number of Hispanics will grow 18% in next 6 yrs, at an annual rate of 2.4%.  Meanwhile, rest of the population will grow 3% (avg growth of 0.4% per yr) same period.  So gotta be pretty key that Constellation’s volume skews Hispanic at a rate of almost 3 to 1 compared to the rest of beer. 

Specifically, Dara sees STZ growing volume 5.75% per yr and prices at avg of 1.75% per yr for the next 5 yrs.  And Dara expects robust margin expansion from current 32% operating margin, “we forecast beer margin upside to 37%.”  Perhaps because of this report and for other reasons (i.e. stock mkt going great guns!), Constellation hit yet another 52-week high: almost $98 per share at presstime, having basically quintupled since ABI deal for Modelo announced.   

 Tuff to get read on beer biz with so many different and often conflicting signals.  Following last week’s weak Nov numbers for taxpaid shipments and on-premise, here comes accelerated growth in off-premise Nielsen data in slightly more current period thru mid-Dec.  Go figure.  Beer biz up 2.1% in Nielsen all-outlet + convenience for 4 weeks thru Dec 13.   In fact, biz so good in period that premium lights actually showed over a 1% volume gain.  Up 1.3% for last 4 weeks. But premium lights still lost 0.8 share of $$.  And above premium segments gained 2.4 share to 39 in last 4 weeks.  Above premium hit 52.5 share of $$ in supers.  

Join us for the Beer INSIGHTS Spring Conference, once again focused on the exciting and dynamic high end of the beer biz.  The conference will be next May 11 and 12 at the Ritz Carlton in Chicago.  More details coming soon. 

“US sounds on the up,” wrote Nomura’s Edward Mundy, who met with Molson Coors top brass recently, including incoming ceo Mark Hunter.  Mark marks “no big change” strategically, in Mundy’s view, other than “new emphasis on sales and marketing excellence.”  Optimism about US based on dropping gas prices, natch, which has “traditionally…fed through to better beer volume, especially in the on-trade.”  Molson Coors also watching c-store biz “closely” and beer biz competing vs spirits better thru “focus on localness, authenticity and the cocktail occasion,” Mundy wrote.  Analyst also picked up another signal about more difficult pricing environment in US.  Molson Coors got pricing in most of US outside Chi and Calif.  At same time, co does “accept that price increases in value beer may have been too aggressive in recent years and these will slow.”  MillerCoors operating margins not likely to catch up to AB’s in US, but it will “close some of the gap,” Mundy sez.  Tho Molson Coors mostly happy with portfolio in US, lack of Mexican brand “makes it difficult to perform in imports.”  (Nor does MillerCoors have Belgian import, only other growing import niche of substantial size.)   Imports of Coors Light into Mexico (via Heineken) “should raise awareness for the brand with the Mexican community in the US.”

Elsewhere, UK mkt has become “more rational” with stable volume; Molson Coors has #1 brand there (Carling), plus growing hi-end/niche portfolio.  Outlook for Canada “subdued,” given oil biz so important there that lower prices could actually hurt consumers, more competition coming from SABMiller and, as in US, there’s still “substantial margin gap” (about 15 pts) between Molson Coors and key competitor AB InBev there.