Not just brewers and distribs battling it out in Ohio courts.  An unfortunate, ugly family lawsuit just broke out in one of top 20 wholesalers in US – Heidelberg Dist – huge AB and (many) others operation with multiple locations in Oh and Ky.  Prexy and 50%-owner Al Vontz sued his sister Carol (who owns other 50%), her husband Vail Miller Sr and 3 other Miller family members who work at Heidelberg.  They’re all on co’s board of directors.  Al charges Millers with “breach of fiduciary duty, shareholder oppression, violating corporate obligations and misappropriation of corporate assets and corporate waste.”  Net-net: Al charges the Millers: 1) “seized control of Heidelberg and [are] oppressing the third and fourth generations of the Vontz family” by taking control of the board (without holding required mtgs to do so); 2) are running distrib as “their personal fiefdom and are unconstrained by appropriate norms of corporate behavior” and 3) “enriched themselves through the misappropriation” of corporate oppys and assets. 

Specifically, Al sez Millers took over board without holding proper annual mtgs or votes in violation of Oh law and biz’s code of regs.  They also paid themselves “excessive sums” in salary and bonus, Al charges, noting Vail Miller Jr’s total package increased 28% in 2013 alone, 81% since 2010.  Other family members got similarly outsized increases and two earned 80%+ more than a non-family employee “in similar position” who’s been with Heidelberg for twice as long.  Big salary bumps and bonuses paid even when biz performance “lackluster,” suit sez.  Millers also got reimbursed for country club and “other improper expenses” which harmed Al and the company.  Al’s niece Brooke is Heidelberg’s chief legal officer; Al claims she specifically breached her fiduciary duties to him.  Al seeks unstated compensatory damages (tho well in excess of $25K), and permanent injunction to:  1) require compliance with Oh laws and Heidelberg’s code of regs; 2) prohibit “exorbitant and unreasonable” pay and expenses; 3) stop Millers from taking “unilateral control” of the biz; 4) remove Brooke as corporate counsel, plus costs and fees. 

BA ceo Bob Pease reacted to our Express item this morn about Beer Inst urging Congress not to support any new version of Small BREW Act or other bill that does not include all brewers and importers.  He found it “curious” that we “left out the cost of each bill.”  We pointed out that BEER has “much higher price tag” than BREW, but neglected to note (tho we’ve made point in past) that it’s $1.8 bil annually vs $64 mil, which BA has always thought is selling point.  Indeed, “10 years of the Small BREW Act ($641 Million over 10 years) costs about 1/3 of one year of the BEER Act,” Bob points out.  And while we noted that Small BREW Act gives Boston Beer $4.75 mil/yr in lower taxes, “the BEER Act would give AB around $900 MILLION annually,” Bob adds, and asks: “is that not relevant?”  Bob also asks: “Is AB Inbev creating jobs or eliminating jobs?  Would Anheuser-Busch Inbev take $900 MILLION and reinvest in their breweries and hire more workers or would that savings go to their shareholders?”  Bob’s point is well taken, but two additional points.  First, not clear that Boston Beer’s shareholders would not also benefit from any tax break, as well as other small brewers who may not necessarily invest all of the savings in expansion.  More important, excise tax issue used to be about giving relief to consumers who ultimately pay the unfair tax.  Not brewers. BI letter does mention any bill should recognize high taxes paid by “brewers, importers and their consumers.”  Any consumer interest, one of reform’s strongest selling points, not mentioned in BREW Act advocacy.   

Bob also shared BA’s official response to BI letter, calling its opposition to BREW “regrettable” and adding that BA “has never opposed any industry effort at tax reform, including the BEER Act.”  That’s even while BA’s website has video of Bob comparing BEER and BREW for BA members.  Bob sez that BREW is a “jobs creation bill” with “bi-partisan support,” benefitting small Main Street brewers.  In contrast, BEER supported by “the largest international brewing companies that stand to benefit the most.”  BEER is “not politically viable,” claims Bob, adding: “The bill’s real aims are political and not of enduring value to America’s small and independent brewers.”  Still, BA “has enjoyed a productive relationship” with BI over the years, sez statement, and looks forward to continuing to work with the BI on issues of mutual interest.”  BI has “clearly” noticed support in Congress for BREW, it continues, which suggests “that the bill could be enacted under the right circumstances,” attributing that support to Small BREW Act being about creating jobs/economic development.   BA “will continue to fight for the Small BREW Act because it is fair, fiscally responsible and focused on small American brewers,” statement concludes.

Dizzying pace of personnel changes continues at AB as it just announced it will be creating a US Commercial Strategy Office in NYC as a “hub for our sales and marketing operations.”  New office will be headed up by sales veep David Almeida and mktg veep Jorn Soquet.  This office will reportedly include much of sales and mktg teams currently in St Lou (tho far from all), will be located separately from global office in NYC and open sometime in Q1.  AB has not yet secured office space, but we’re not just talking about a few dozen folks.  This will eventually house as many as 250 folks. Sr execs in this office “will divide their time between New York, St Louis and other parts of the North American Zone,” AB execs wrote distribs/employees.  Sounds like a lot more frequent flyer (and/or corporate jet) miles coming.

Also moving to NYC: just-opened AB hi-end biz unit headed up by Felipe Szpigel. Hi-end biz unit announced this summer with much fanfare.  In Chicago.  Now it will move to NYC too “but will otherwise be unaffected,” said AB. Things change. AB’s “craft operation within the high-end business unit will remain based in Chicago.” The NY office “will afford us greater exposure to developing trends in a diverse urban center; proximity to marketing partners, including sports leagues, the music and entertainment industries and advertising agencies,” said AB.  Plus, and this could be one of keys: “close ties with the Anheuser Busch InBev global functional office in NY.”  US is still largest unit of global ABI.  These latest announcements may cause a whole ‘nother round of concern in St Lou, regarding city’s role in the future of the world’s largest brewery, since the commercial guts of the operation moving to NYC.  

Doesn’t happen too often, but both AB and MC announced new region vps within days of each other in some of tuffest areas for top 2.  First, AB completed its regional reorg with appointment of Bary Benun to Region veep West.  His name floated for several weeks before announcement.  Bary most recently prexy of ABI’s China biz unit. So he’s 3d region veep (out of 7) recently appointed, without US field sales experience.  His region includes Calif, Ariz, Nev and HI, about 12.6% of AB’s biz last yr.  MC just announced Brian Ehrhardt as it Pac region veep; different states, but also about 13% of MC volume. He’ll replace longtime region veep Mike Magee, who is retiring and whom MC prexy Tom Long heaped praise on in speech to Calif distribs a couple of weeks back.  Brian most recently MC veep of rev mgt.   

That didn’t take long.  Idaho Beer & Wine Distrib Assn filed suit for declaratory judgment that AB will not be able to run the brewpub currently run by 10 Barrel Brewing Co in Boise, Oreg-based brewer AB bought early last mo.  Tho AB said it intends to run the brewpub, Ida law is clear, distribs claim, that only brewers that brew up to 30K bbls (in Ida or elsewhere) can have brewpub license.  What’s more, same small brewers can get a distribs license in Ida.  “If one interprets” statute at hand “to read the 30,000 barrels of beer brewed  in the state of Idaho then the effect…is truly catastrophic to the three-tier system,” distribs argue, since “world’s largest brewer” would be able to “provide beer directly to retailers, at which point the destruction of Idaho’s three-tier system will be complete.”  The assn seeks ruling from Director of the Idaho State Police that the “special status and exemptions afforded to small brewers” under Ida law apply only to brewers “who brew less than 30,000 bbls of beer without regard to the location or state where the brewing occurs.” 

At presstime, we got response from AB’s craft ceo Andy Goeler, who sez: “State law in Idaho allows for brewpub ownership and we look forward to providing the service and offerings 10 Barrel brewpub guests expect.”  So looks like another battle brewing between AB and its distribs.

Stepping up its opposition to Brewers Assn-backed Small BREW bill, Beer Inst prexy/ceo Jim McGreevy sent letter to all members of Congress yesterday.  He urged them to “refrain from co-sponsoring” any successor to HR 494 and S 917, the House and Senate versions of The Small BREW Act, or any bill “that does not meet the criteria of covering every brewer.”  In addition to not providing relief to all brewers, BREW redefines “small” to 3X current defn (2 mil bbls to 6 mil bbls), covering “multi-national brewers who are far from the average person’s definition of ‘small’,” Jim notes.  Then too, “of more concern” to BI and others, “is that such a change would significantly expand the already-generous market advantages enjoyed by just a handful of players in the brewing sector and potentially affects state laws governing the structure of the industry.”  Jim did not detail further, but gotta note that BREW would give Boston Beer additional $4.75 mil/yr and significant sums to small number of biggest craft brewers, while vast majority of craft brewers get very little, and big brewers and importers nuthin’.  And defining “small” at 6 mil bbls could lay groundwork to alter self-distribution, franchise protection and other state laws with smaller caps.       

Recall, BREW bill would reduce fed excise tax from $7 to $3.50 on first 60K bbls, from $18 to $16 on volume up to 2 mil bbls for all US brewers up to 6 mil bbls total production. The House and Senate bills currently have 181 and 47 co-sponsors respectively, according to latest BA legislative update.  Beer Inst has never supported BREW; its BEER bill seeks tax break for all brewers.  For mos, BI and BA have discussed compromise legislation with different formula that both groups can support.  So far, no such compromise has been reached.

NBWA does not support BREW (or BEER), and certainly does not support a definition of “small” that goes up to 6 mil bbls.  Be interesting to see if NBWA follows BI with message of its own to Congress.

Jim’s letter points out that BI represents nearly 90% of beer consumed in US, that BI has “for years…sought fair and equitable federal beer excise taxes for brewers and beer importers of any size.”  BI will continue to support tax cuts “for all brewers and importers,” which “maintains a level playing field in the marketplace” and recognizes already-high taxes on beer.  Recall too, BEER eliminates fed tax on brewers up to 15K bbls, halves current tax on large brewers from $18 to $9.  For brewers up to 2 mil bbls, BEER reduces current tax on bbls 15,001- 60,000 from $7 to $3.50 and for volume up to 2 mil bbls, from $18 to $9.   It has much higher “price tag” than BREW and is generally seen as a defensive measure to halt any proposed increase.  BA believes BREW has a shot at passage, either as standalone or part of broader tax reform.

Tex a hotbed of MC consolidation these days.  This will be 4^th deal in less than 12 mos putting together unconsolidated Miller and Coors distribs in Tex.  And this deal for Capitol Wright to purchase KEG 1 in Austin brings together Coors and Miller in one of more important remaining unconsolidated MC mkts in entire US.  Austin is #35 top metro area and a key influencer mkt.  Recall, earlier this yr, Capitol Bevs of Austin (Coors, Constellation, etc) formed JV with Wright Distributing and bought Coors distrib Saunders Dist in La Grange.  That JV alone would be over 10-mil case entity.  But with purchase of approx. 2.3 mil case KEG 1 in Austin,  fully consolidated Capitol Wright will be about 13 mil cases in Austin metro, pending supplier approval.  That’s the 3d largest MC distrib in state, behind Andrews, which purchased Fort Worth, earlier this yr, and Glazer’s, which is part of JV with Giglio called GG Dist LLC that bought Coors of Longview in another MC consolidation earlier this yr.

Recall, KEG 1 is consortium of 10 MC distribs around US that formed back in mid-2000s with objective of providing an alternative acquisition vehicle for Miller and Coors distrib consolidation.  And KEG 1 did make several deals in Tex.  It bought into Austin in early 2011, with the clear objective of acquiring Capitol.  Now instead, less than 4 yrs later, the shoe is on the other foot.  Capitol will be acquiring KEG 1 in Austin, tho KEG 1 keeps its other Tex distribs.

That was quick. Just days after announcing parting of ways with Goodby, Silverstein & Partners, Constellation Brands Beer Division said it had chosen Ogilvy & Mather Chicago as its new ad agency for Corona Light and Modelo Especial. Those brands “have tremendous upside potential for growth,” said CBBD cmo Jim Sabia.  “We look forward to working with” Ogilvy “to capture more of the marketing opportunity.”

Recall, Corona Light got new campaign this yr, following the ill-fated sheep ads of last yr.  And since it’s changing agencies, one would guess Corona Light likely to get new campaign again.  “There will likely be a new campaign,” said Constellation Beer’s sr director of communications Mike McGrew.  But it will be more “evolution than revolution,” he added. “We’re not completely abandoning” current campaign, but will “take it a step deeper with customer insights.” Corona Light growth picked up last couple of yrs (3.5% last yr), but clearly Constellation believes it has potential to grow faster yet.

Modelo Especial will be up more than a half mil bbls for 3d yr in a row, passing Heineken to become #2 import and also a top 10 brand in total beer biz in 2014.  Yet Constellation clearly feels some oppy still not being captured.  What could that be?  Heretofore vast majority of Constellation mktg efforts aimed at Hispanic consumers, but there is “opportunity to appeal to a broader base of consumers,” Mike noted.  Constellation Brands Beer Division will “aggressively put emphasis, investment, time and resources” against those brands, added Mike, aimed at “realizing” such opportunities. 

Barring Nov-Dec disaster, imports on way to best yr (by far) since 2006 when imports jumped nearly 4 mil bbls, 15%.   Import shipments up another 181,000 bbls, 8% in Oct, reports Beer Inst from Commerce Dept data.  That was slowdown from torrid double-digit pace Jun-Sep, but right in line with yr-to-date trend.  Imports gained 2 mil bbls, 8.5% for 10 mos.  Mexican shipments up 16% in Oct, Belgian shipments jumped 45% and German shipments up 24%.  But Dutch down 11% and Irish/UK biz way off. 

For 10 mos, Mexican brands up whoppin’ 2.3 mil bbls, 17%.  Interestingly, Mexican trend and total very similar to craft segment. And they’re carryin’ the biz right now.  The Belgians are helping: up 370,000 bbls, 28% Jan-Oct.  But Dutch shipments down 183,000 bbls, 4% same period.  Canadian, Irish, UK and German shipments each off double-digits for collective loss of nearly 600K bbls, 16%.  With domestic brewers’ taxpaid shipments off 741,000 bbls, 0.5%, yr-to-date US biz up 1.3 mil bbls, 0.7%.  Nov-Dec domestic/import total has to be down over 4% for industry not to post gain for yr.      

Tho direct shipping still hasn’t taken off in beer – logistics and price issues continue to hold it back – more and more wine goin’ direct.  Consumers spent $1.8 bil on direct wine sales last yr, reports Wines and Vines, citing data from ShipCompliant data service.  That was up 15.5% and just below 5 share of total wine retail $$.  Volume up 13.6% to 3.95 mil cases.  Both trends far exceeded overall wine biz last yr, according to IRI and GuestMetrics reports.  Avg bottle price sold direct: $38.40, up slightly but about same level as two yrs ago.  Still not a lotta beer selling at that price, but given more and more specialties, taprooms, geeks and competition – tho still far more wineries (8100) than breweries (3200+) – be interesting to watch whether direct beer sales can grow to significant size.