Just as Diageo’s US malt bev biz showin’ signs of improvement (see Dec 11 Express), its much bigger spirits biz saggin’ a bit.  Stock price took hit yesterday after North American chief Larry Schwartz said Thanksgiving sales “not as strong as we would have hoped” and pricing had gotten a little too aggressive (sound familiar?), reported Financial Times.  During same call, Larry said overall spirits $$ sales over last 12 mos slowed by “about a half point” from +3-+3.5% running 12-mo trend, according to Wall St Jnl.  Then too, while Diageo’s “luxury” biz, a parallel to craft beer tho much higher-priced, still strong, American vodka drinkers showing some “flavor fatigue.”  Indeed, Smirnoff flavored vodkas, including “fluffed marshmallow and whipped cream – are now in decline.”  Recall, flavored spirits now up to 1/3 of some liquor categories and drove much of spirits growth in recent yrs, including current American whiskey boom.  

One of fastest growing US craft brewers in recent years, Mich-based Founders Brewing announced decision to sell minority of its biz, to Spanish brewer Mahou San Miguel (as reported in sister-pub Craft Brew News yesterday). The deal, rumored for months and craft transaction numero ocho in 2014, allows Founders “to afford some liquidity to our long-standing stakeholders,” co-founders Mike Stevens and Dave Engers wrote for the co’s blog. It also provides the fast-growing US brewer with potentially significant “international growth opportunities,” Mike said, pegged to begin “in the medium term” by Mahou.

Founders has recently racked up a fair amount of debt expanding its Grand Rapids facility, but “the partnership had nothing to do with expansion,” Mike told INSIGHTS. So co will hold onto debt acquired thru $26-mil recently-completed expansion and current $40-mil expansion that’ll put “sellable capacity” near 600K bbls by mid-2016 and upwards of a million bbls if needed, Mike told us in Oct. Founders shipped just 12K bbls in 2008, 111K bbls last yr, expects near 200K bbls this yr and has forecasted 275K bbls in 2015. No plans in place for producing Founders brands at any of Mahou’s 7 breweries in Spain, and with that kind of capacity coming, may be no need.

Mahou produced just over 11 mil bbls in Spain in 2013, according to its website, +5.2%, even as $$ sales dipped 4.7% to about $1.37 bil. Mahou’s size and size of its stake in Founders means that the US co will need to be pulled out of Brewers Assn’s “craft” data set for 2015, as many have noted including Grand Rapids Press. It also means Founders likely to leave BA’s Export Development Program (EDP), the paper wrote. Pace of craft deals has picked up considerably in 2014 and expected to continue. “Mark my words,” Mike told Grand Rapids Press, “we’ll open doors that many more will follow.” At least 3 more deal books for top 30 craft brewers out for investor perusal, we hear.

But oppys offered by Mahou sure to eclipse those created by the BA’s EDP.  Mahou currently has biz in 50 countries on 5 continents. Chile, China and India represent biggest chunk of biz outside Western Europe. And it’s increased attention on int’l mkts in 2014, a key goal, according to report from Spanish paper El Mundo. Just last month it bought about a third of its distributor in Chile, per Spanish biz press Cinco Dias, after establishing a wholly owned subsidiary with brewery in India. Int’l sales represent 13% of Mahou’s biz, per El Mundo, but the co hopes to grow that to 20% by, you guessed it, 2020. 

More price rollbacks in a top ten state, following Calif and Chi mkt.  AB dropped frontline prices 80 cents on several packages for its hot Mich Ultra brand, as well as Bud Light Lime, Bud Light Platinum and Budweiser Black Crown.  Also discounting Bud half bbls $20 to $72 for next 2 mos, and $10 off 1/6 bbls, plus $20 bucks off Goose Island half bbls to $111 and $10 off 1/6 bbls. Some smaller volume Bud packages discounted too.     

AB will spend big bucks to expand its metal container facility in Arnold, MO, adding 70 jobs, co announced.  “The move will double the company’s aluminum bottle capacity in the US,” wrote St Lou Biz Jnl.  Aluminum bottle volume up 78% last 4 weeks thru Dec 6 in Nielsen all outlet + convenience.  The package gained 1 full share to 2.3 share.  AB has previously said IRI data showed it getting over 1 share with its aluminum bottles in recent periods.  Clearly, AB still sees plenty of growth potential.  But avg prices on aluminum bottles are declining by over $1 per case.  Down $1.11, 4.9% for 4 weeks to $21.44. That’s still quite a bit higher than avg premium prices, but a fairly sharp drop. 

Beer biz softened again on-premise too in latest period, down 3.6% for 4 weeks thru Nov 30, sez GuestMetrics ceo Bill Pecoriello.  That’s in line with yr-to-date, but softer than recent mos.  Wine down 1% and spirits down 0.7% same 4-week period. But beer has “highest price/mix” of 3 segments, notes GuestMetrics, up 3.6% last 4 weeks, while wine up 0.9% and spirits up 2.2%.  So beer and wine $$ each about flat, while spirits $$ remain up in this crucial channel. Meanwhile, craft share gains have slowed in GuestMetrics data (which doesn’t capture effect of tasting rooms, brewpubs and indy craft-centric accounts).  Craft $$ share up 1.3 for 4 weeks, compared to 1.9 YTD.  And premium lights losing a little less share too; down 1.6 share, vs 1.9 YTD.  IPAs up 1.3 share, sez GuestMetrics, which suggests craft share flat outside of IPAs.  Cider still gained a half share, “in line” with YTD. 

Just as we were getting comfortable with notion of a shipments gain in 2014, domestic brewers’ taxpaid shipments bombed in Nov.  How bad?  Taxpaids off 561,000 bbls, 4.2%, estimates Beer Inst.  That knocked 11-mo trend back to -1.4 mil bbls, -0.8%.  Import gain thru Oct of 2 mil bbls still offsets that decline, but Nov loss took big toll.  For now, known yr-to-date trend sits at +600,000 bbls, 0.3%.  So Dec taxpaids and Nov-Dec imports will determine trend for the yr.   Stay tuned.   

Good news about teen drinking continues.  Monthly drinking rates among high school seniors, as well as among 10^th- and 8^th – graders, hit all-time lows this yr, according to annual Monitoring the Future surveys.  Among youngest students (8^th grade) just 9% had a drink in mo prior to being surveyed, 1^st time that measure dropped below 10%. And that rate is down by more than half over last 10 yrs, from 18.6% in 2004.  Among HS seniors, monthly drinking rate dropped by 22% and among 10^th graders by a third during same period.  Similar progress against closely watched measure of so-called “binge drinking” ‒ 5 or more drinks in a row at least once in prior two weeks.  Among HS seniors, rate of binge drinking down significantly this yr, almost 3 full pts to under 20% for 1^st time.  And that rate’s down by 1/3 over last 10 yrs.  MTF researchers also reported progress against “extreme binge drinking” (10 or more drinks in a setting) in recent yrs.  Importantly, all this progress in reducing teen drinking happened without higher taxes, new ad/mktg restrictions or other “environmental policies” advanced  by public health officials, CDC and others.  Lots more details in next issue of our Alcohol Issues INSIGHTS.      

‘Tis the season. Lotsa yr end deals either getting signed or closing.  As noted yesterday, Manhattan now has “formal agreement” with Windmill Distribution Co, L.P. (Phoenix/Beehive) “to acquire Windmill’s beer brand distribution rights,” co said in release.  Perhaps countering tomorrow’s press conference to be held by bodegas and home d’s objecting to deal, Manhattan notes numerous benefits of deals for suppliers, retailers and consumers.  “Suppliers will benefit from the wider distribution and greater efficiencies…. Retailers not currently served by Windmill will benefit by having access to the full expanded portfolio of beers.” And consumers “will benefit by having access to a broader variety of fresher products available at more outlets at competitive prices.”  Manhattan Beer was founded in 1978 with 35 employees, now has “highly diverse workforce of approximately 2000 people.”  Founder and ceo Simon Bergson “has grown the company through acquisition and organic growth while always remaining true to his core value of servicing the smaller customer with the same care and attention as the largest customer,” co sez in release.   Manhattan also spoke of its “industry leading service model” which “will enable us to provide even better and more efficient service to our 26,000 customers” in metro NYC. 

AB deal to buy Owensboro, KY closed quietly and without fanfare late last week, tho many expect KY legislative action attempting to limit or eliminate AB branches in 2015.   AB also got its license for 10 Barrel brewpub in Ida, but again distribs are objecting to that, filed suit.  So stay tuned.  But another deal closed, Markstein purchase of Nor-Cal in Calif.  While some thought AB potentially could step in on that deal, simply because it can own branches in Calif, note NorCal not contiguous to AB branches.  It is contiguous to Markstein, and Nor-Cal had significant Constellation and Sierra Nevada volume that could have been at risk if AB purchased, so Markstein deal made sense.

Biggest beer distribution deal of all time set to close today.  That’s Reyes Beverage Group purchase of 27-mil-case Gold Coast for a billion bucks or so.  As part of transaction, RBG will sell off ABI-owned brands like Stella and Presidente, nearly a million cases, to local AB distrib Eagle Brands.  Eagle, owned by Major Brands in St Lou, will now be about 8 mil cases.  RBG kept virtually all other brands.  

Yuengling ends 2014 “happy” but “not satisfied” with its approx 7% growth and “better second half,” coo Dave Casinelli told INSIGHTS. Biz “on fire” in much of South, good results in New England expansion mkts.  But total beer biz remains soft in Yuengling’s core of Pennsy (where industry shipments down -2.3% thru Oct), OH (see above), NY and NJ (industry shipments -4% thru Oct). Next yr, Yuengling aims to get “far more aggressive” in mkt in terms of “increased resources.” It’s beefing up both sales and mktg, “retooling” its approach, sez Dave and wants to get sales and mktg “buttoned down” before entering new mkts.  “We can’t keep putting the cart before the horse,” said Dave.  As far as expansion, “we don’t have anything planned” for early 2015 as of now. 

Taylor Largest Single Location Distrib  For the 2d time in last 2 mos, Dave publicly praised distrib JJ Taylor in Tampa.  Taylor up 17% and will sell about 2.5 mil cases in Fla this yr.  That will make Taylor Yuengling’s largest single location distrib (tho all Reyes houses combined sell more).  Incidentally, not just Fla, but Yuengling getting “strong” growth in Ala and Tenn as well.