Ohio, one of quintessential Midwestern states and 7^th biggest in US, turns out to be prime example of the kind of disruption that US beer biz facing in last 5-6 yrs.  First of all, each of AB and MC lost 14% of their volume 2008-2013.  That’s over 1 mil bbls and about 6 share between ‘em. And they’re down again in 2014.  But equally notable is effect of all the new suppliers and brands that have entered the OH mkt.  Easy to identify 10 share of $$ or more that didn’t exist in state a little more than 3 yrs ago.

Interestingly, total beer sales in supers up 1.7% yr-to-date thru Nov 30 in IRI.  But total state shipments down 2.8% thru Oct, so supers taking biz from other channels this yr.  AB and MC each down slightly and have lost 2.75 share of $$ between them YTD in foodstores.  Yuengling declining 7% YTD, but still has 5.1 share of $$.  New Belgium at 1.6 share of $$ YTD (1.4 last 13 weeks) in intro yr, Angry Orchard brands at 1.3 share, Deschutes at 0.3 share.  Those 4 suppliers alone at 8.3 share of mkt. They didn’t exist in state until late 2011.  Don’t forget that total state volume down 7% 2008-2013, so OH is one tuff mkt.  And it’s changing rapidly. 

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. 

Months after big deal between Manhattan Beer and Phoenix/Windmill to create 45+ mil-case consolidated MC, Constellation, HUSA distrib became public, contract finally signed today.  Deal expected to close Feb 1, pending supplier and govt approval.  But not everyone is celebrating.

Column in yesterday’s Daily News headlined deal “could threaten thousands of minority owned bodegas.”  Both Bodega Assn (which represents 13,000 bodegas) and Empire State Beer Assn (NY’s unique 4^th tier of home ds) object to deal.  They will hold a press conference later this week and release a 23-pg report: “The Fight for Business Survival in an Age of Box Stores and Wholesaler Consolidation.”  Report will make “it clear why the merger is a bad idea for them and for consumers,” wrote Daily News. “Our coalition opposes the merger,” said the Bodega Assn.  “It seriously threatens the New York State beer market as a whole.” Crain’s NY Biz wrote today that campaign’s “supporters say the U.S Department of Justice and New York State Attorney General Eric Schneiderman are eyeing the merger.”  What, if anything, that means, remains to be seen.

If deal happens, “we would have to deal with a monopoly,” Ramon Murphy, prexy of Bodega Assn of US told Daily News. “They would dictate prices, limit brands and make it much more expensive for the public.  There are anti-monopoly laws and they need to be enforced.”  The combined co would be “one company of cyclopean proportions capable of imposing a chokehold on the city’s beer market,” News columnist agreed, ratcheting up the rhetoric.  “The small guys are not taking it lying down,” said columnist. “They are hoping Mayor de Blasio will oppose the merger.”  Bodega owners will also intro legislation in Jan “that would set posted beer prices to prevent discrimination.” Parts of this bill have been kicking around for yrs, according to Crain’s.   

Bodegas sell 60-70% of beer in NY and beer is about 25% of their biz, yet “franchise wholesalers discriminate by refusing to give the independents a true wholesaler discount, and by charging bodegas more for beer than chains and box stores,” according to forthcoming report.  Manhattan Beer ceo Simon Bergson disputed that.  “Our pricing to bodegas is the same as to club stores,” Simon told INSIGHTS.  But club stores are willing to work on 6-12% margins, while bodegas work on 25-30%, he added.  Stay tuned. 

“Business will continue as usual. There will be no change in management.  The company is strong and we do not expect to pay damages,” said Heidelberg ceo Vail Miller Jr about lawsuit Express reported yesterday.  

“Our entry into craft beer has allowed us to become more valuable to customers, being a true total beverage consultant and providing them with high quality brands their consumers are looking for.”  So said Danny Wirtz, exec veep of Wirtz Distrib group, to Shanken News Daily (SND) in today’s edition.  Danny answered question about whether Wirtz, primarily a liquor/wine distrib, finding “synergies” between its craft and its core bizzes.  Wirtz has picked up some key craft brands in recent yrs in its Ill and Wisc mkts; it also sells alc bevs in Mo, Nev, Minn and Ia.  Wirtz’s craft biz still in “early stages” in those 2 states and it has to “earn each tap handle or facing in the cold box,” but the “deeper penetration into accounts has benefited our total portfolio.  There is great value in being able to extend the buyer conversation into beer.” 

Danny’s comments echo those made by Constellation ceo Rob Sands about his co’s “total beverage alcohol” approach at our INSIGHTS Seminar in Nov, noting that TBA is where retail buyers, consumers and the liquids themselves are going.  And in case you were wondering, Wirtz hasn’t closed the door to further expansion.  “We’ve worked hard to build a consistent model across all our markets,” Danny told SND, “and are always looking for ways to expand our footprint where there are opportunities.”    

As Boston Beer continues to morph, it has had successive big volume bumps from Angry Orchard (especially) and Rebel IPA. Next yr, it’s launching Curious Traveler shandy nationally in Feb, part of its Alchemy & Science subsidiary headed by Magic Hat founder Alan Newman.  “Curious About the Traveler” is title of brief piece about Traveler from RBC analysts Nik Modi and Bill Kirk.  They note that Alan “downplayed” impact of launch, but Boston exhibited “similar caution” around Angry Orchard and Rebel IPA launches.  Shandy is much bigger than cider was back in 2011 before AO.  Cider only about 400,000 bbls, growing 20% back in 2011 and then “dominated by a single player (Woodchuck).”  When Angry Orchard launched, it “quickly gained 50% share as the category accelerated to 75% growth.”  Shandy pegged at over 1 mil bbls  by RBC and also dominated by single player, Leinenkugel, RBC notes.  If Curious Traveler gets just 15 share of Shandy next yr (“about their share of craft beer”), could be approx 200,000-bbl opportunity.  That’s 5 points of incremental sales for Boston Beer, which Nik and Bill estimate at 4.2 mil bbls in toto in 2014.  Could easily be more, they suggest.  “For Boston Beer, Curious Traveler is a product to attentively watch,” they conclude.  

Miller Lite finishing out 2014 with best trend of big-3 mega-lights, as trends improved again in latest 4 wks thru Nov 30 in IRI multi-channel + c-store (MULC) scans.  Lite volume +4% for 4 wks, +3% for latest 13 weeks.  That’s by far best Lite trends in long time, and startin’ to sustain.  Indeed, Lite volume up 0.7%YTD.  Meanwhile, Bud Light about flat for 4 wks, slightly up for the yr; Coors Light improved a bit to -2% for 4 wks;  -3% YTD.  Michelob Ultra Light posted best trend among major light beer brands: +10% yr-to-date.  Its volume gain for 4 wks (326K cases) bested every brand except Modelo Especial.

Modelo Especial still up 21% in latest 4 wks, matching YTD pace.  AB’s Rita intros (Mang-O and Raz-Ber) continue to provide solid incremental pop, yet total Rita family has slowed to only up 1% in latest 13 weeks.  Similarly, Redd’s Strawberry and Redd’s Apple among top growth brands this yr, yet each down double-digits these latest 4 weeks.  Angry Orchard Crisp Apple trend slowed again in latest 4 weeks by over 30 pts to +53% vs +87% YTD.  Rolling Rock keepin’ up its 20% plus pace.  Coupla top import brands, Corona Extra and Dos Equis, slowed slightly for 4 wks to +4% and +17% respectively. 

Last mo, AB rescinded price hike in Calif on 30 and 36 packs.  This mo, it’s MC leading domestic 12-pack pricing down in its most important mkt Chi.  Wha’ happened? Quick answer is probably that several suppliers were a little shy of yr-end numbers and hit price button.  Started with importers as HUSA did scanback that got it $11.99 12-packs in a coupla chains.  Then Constellation reacted with its own hot pricing.  And inevitably MillerCoors then had 12-packs in mkt priced at $7.99, purportedly to close gaps with Constellation.  “Everybody’s got to have an excuse,” said one source.  That’s basically giving back fall price increase (combo of front-line and discount reduction).  AB reportedly didn’t follow.  But one key retailer will feature Bud family at $6.99 anyway, INSIGHTS understands.  Altho only on 12-packs, these prices have upset the pricing architecture in mktplace and could easily prevail thru Super Bowl, say several sources.  But one optimistic that things will “straighten out” in Feb-Mar of next yr.  

As expected, NBWA also sent letter to the Hill, asking members to “refrain from committing your support” to any “renewed BREW Act legislation in the 114^th Congress,” which gets underway in Jan.  Letter yesterday follows similar BI letter that went out Monday (see Dec 9 Express).  Like BI, NBWA expresses “concern” regarding Small BREW bill, stating NBWA “does not support this legislation. Policy proposals that would change the industry structure and could create a new classification of a small brewer are problematic. If Congress wishes to reform excise taxes for beer, it should do so in a way that reflects current industry structure and covers all brewers.”  Recall, BI said re-definition of “small” (up to 6 mil bbls) “potentially affects state laws governing the structure of the industry.”  BI also stressed that any tax relief should include “all brewers and beer importers.”    NBWA also asks members to contact NBWA to further “discuss our concerns and position in greater detail.”   

Interestingly too, BI letter pointed out that assn represents 90% of beer volume in US, plus suppliers, and has “represented the beer industry before Congress since 1862.”  Similarly, NBWA letter encourages members to “consider NBWA as a resource on any legislation that directly or indirectly addresses the beer or alcohol industry,” including transportation, taxes and regulations as well as “policy considerations that affect privately-held, American ‘Main Street’ businesses like independent beer distributors.”  And that’s while response to BI from BA letter claimed it is “the voice for America’s 3,200 small Main Street breweries and brewpubs” in Washington and elsewhere.  So there’s clearly some jockeying over who will be the industry’s “voice” in DC going forward.     

Notable trend change:  Diageo Guinness USA volume up 6.1% for last 4 weeks thru Nov 30 in IRI multi-outlet + convenience.  That’s a total change in direction compared to -3.9% yr-to-date.  Recall, DGUSA biz struggling for last couple of yrs.  But it’s now up 0.7% for 13 weeks.  What’s giving its biz a shot-in-arm lately?  Guinness Blonde is selling well, at least in some areas, distribs say.  New brand is up to as much as 20% of Guinness totals in recent weeks in scan data, INSIGHTS hears.  Then too, Guinness Black Lager also provided a boost, at least initially.  So question is whether this will be sustained.  Meanwhile, most other DGUSA brands also doing better in most recent period, including  Guinness Extra Stout up double digits for 4 weeks (up 4% YTD), Smirnoff Ice up 6% for 4 weeks (up 0.7% YTD), Red Stripe up 4%, compared to flat YTD and even Guinness Draught down 0.8%, compared to 3.1% drop YTD.