Total US beer shipments down 585,000 bbls, 0.4% in 50 states thru Sep, according to latest Beer Institute data.  Number doesn’t totally agree with existing domestic taxpaid + shipments total, which is more like up 0.5%.  Unknown why at presstime.  But it’s definitely quite notable how much better beer biz doing in Southeast and West than in Midwest, Southwest and Northeast.  A few details. Beer shipments up 175,000 bbls, 1% in Calif for 9 mos and 177,000 bbls, 1.8% in Fla. Not to mention 126,000 bbls, 2.9% in Ga.  Up near a half-mil bbls in those 3 big states.  Compare to 145,000-bbl, 1.8% drop in NY, 155,000-bbl, 2.4% drop in Pennsy, 164,000-bbl, 2.6% drop in Oh and 144,000 bbl, 3% drop in Mich.  Down half mil bbls in those 4 big states.  Kinda in the middle: big Tex down 0.1% and Illinois down 0.5%.  Those 9 states about half of US beer biz.  

Tho their overall biz has declined, each of AB and MC have taken the flavored malt bev segment by storm in last couple of yrs.   First it was AB with its wildly successful launch of Lime-a-Rita and several subsequent flavors that catapulted family to total 1.8 mil bbls this yr.  AB is now largest player in FMBs.  More recently, Redd’s has been surprising growth engine for MC.  So who’s winning? Well, depends how you look at it.  The Ritas are far bigger, selling 12.6 mil cases in IRI multi-outlet + convenience yr-to-date thru Oct 5.  That’s almost 2x the 6.85 mil cases that Redd’s has sold YTD.  But Redd’s volume has more than doubled, up 127% YTD. 

With all the ups and downs of various flavors, in toto, Ritas family volume still up 12.4% yr-to-date.  The brands are 1.1 share of volume, but nearly 1.8 share of $$, up 0.14.   Lime-a-Rita and Straw-ber-Rita are down 40% and 46% respectively.  But Mang-o-Rita and Raz-ber-Rita entirely offset these whopping declines. And so Cran-Brrr-Rita and Mix-A-Rita are just icing on cake.  Actually, total Ritas trend even better, since cut we got didn’t yet have newest flavor, Apple-Ahh-Rita.

Speaking of apple, what is it with apple flavor in alc bevs these days?   Cider segment has doubled again so far in 2014.  And Redd’s is making hay with its apple ale and other variants.  The original Apple Ale is 63% of Redd’s volume and still up 54% YTD, tho declining in most recent periods.  But Redd’s Strawberry has put as much growth on board as Redd’s Apple this yr, around 1.5 mil cases in scan, and represented 25% of family volume.  Redd’s Variety Pack is also selling and it’s still early days, but Redd’s Wicked (8% ABV) is off to good start. 

The Colonel has embarked on a new mission.  Gold Coast Eagle of Fla, owned by John Saputo, Colonel USMC (ret.), has agreement to buy 3-mil-case Dickerson Dist in Monroe, Oh.  Deal expected to close in 1^st qtr 2015, pending supplier approvals.  Between Fla and Oh, Saputo family will sell almost 9 mil cases.  Dickerson has both Yuengling and Constellation, and deal includes those brands.  Deal also interesting because Monroe contiguous to AB branch in Lima, but of course AB precluded from getting bigger in OH as state passed law prohibiting branch expansion. It’s also contiguous to Heidelberg Dist.  Then too, consolidation oppys for other in-state AB distribs may be limited by non-alignment.  Gold Coast Eagle sales mgr Devyn Dugger will become prexy of OH distrib, which will be renamed Ohio Eagle Distributing.  John Saputo will be chairman and ceo of both Ohio Eagle and Gold Coast Eagle.  

Top execs at AB-InBev, Heineken and SABMiller each pointed to lousy weather – in different places – to explain poor Q3 volume numbers.  This morn, AB-InBev mgmt said “record cold temperatures” in China in Aug and Sep vs “record high” temps last yr, significantly impacted industry volumes in Q3.  ABI also noted “very poor weather” in Jul-Aug in Belgium and a “difficult weather” comp there.  And 10% drop in UK in part attributed to “very favorable weather” there in Q3 last yr.  Last week, Heineken cited “poor weather during the high-selling season in Europe” in its very first comment on Q3.  Then too, Nigerian biz “impacted by a prolonged wet season,” and combo of “unfavorable weather,” “unseasonably wet and cold weather” and “exceptionally high levels of rainfall” impacted Poland/Russia/Romania, Austria and Western Europe respectively.  SABMiller was first to finger the weather back in Oct 14 trading statement, noting “ongoing topline weakness in Australia and softer second quarter lager volume in China and Europe impacted by poor summer peak weather.”   

AB’s conference call this morn lasted for about 1 and1/4 hours with majority of questions on its US biz.  In prepared remarks, ceo Brito assured that following 7% EBITDA drop in US in Q3, “we do not view the third quarter result as a proxy for future US performance.” Indeed, he focused on positive developments this summer, such as: Bud Light gained fully 1 share of premium light segment in IRI data.  Ritas returned to share growth, up 10 basis points, plus “significant improvement” on-premise.   Interesting to note: AB just had one of its better SAMCOM meetings with all its distribs in St Lou earlier this week.  Many distribs we talked to felt AB headed in right direction.  Usually it’s distribs who are more questioning than analysts, but this time it was the reverse.

Asked if AB realizing smaller net rev per bbl increase meant AB using price more as competitive tool, Brito said (again) that it’s mainly 25 oz can and that “you’ll see a more normal” rev per bbl increase starting in Q4 as AB laps a full yr since intro of 25 oz package (for price of 24 oz).  “We’re really very happy with Bud Light,” Brito said, noting that it gained share of premium light every week this yr.  In one way or another, better Bud Light came up several times. But recall, Bud Light down 2% in Q3, even with huge new expenditures.  Still, Brito said “if Bud Light healthy” then “everything is in a much better place….  Every time you invest in your base brand, the consumers come,” he added.  ISI’s Robert Ottenstein said he found ABI’s reduced mkt share loss in US in qtr “very impressive.” He asked Brito if AB “close to a tipping point” of “maintaining share.”  “No, we’re not giving that kind of guidance,” responded Brito.  Tho several analysts tried, Brito refused to give guidance on share, pricing, mktg investment, or the overall US mkt. He did acknowledge that big ramp up in spending this yr is a “one timer,” before adding “no guidance.”  And he also said that while Busch Media Group very good at what it did, “media landscape” changed, rendering “very clear” decision to move. Mediacom buys so much more media “of course they buy at a better price” and so AB will be able to “increase media pressure with the same amount of money.”  More details on AB in BMI next week.   

In striking contrast to ABI’s “big miss,” as per Societe Generale’s Andrew Holland, Boston Beer’s quarterly results were a “big beat,” said Cowen Insight and a “big treat,” said Goldman Sachs’ Judy Hong.  Boston growth likely to pull back some in Q4 in part because shipments ahead of depletions and also because of tougher comps, but that will still leave it with well over 20% growth for yr.  And it expects 10-15% growth next yr too.  Goldman’s Judy Hong expects Boston to crash thru $1 bil in revs next yr.  “Craft is likely to maintain a low double digit growth rate next year and we would like to get a reasonable share of that,” Boston ceo Martin Roper said on conference call.  Boston “could grow our craft portfolio in the high single digits,” Martin added.  

US beer biz did indeed soften in Q3, with sales-to-retailers down estimated 1.3%, selling day adjusted, according to ABI.  So AB mkt share performance improved tho its STR trend about same.  It estimates 0.3 share loss in Q3, compared to 0.65 in Q2.  Total beer biz STRs down 0.8% for 9 mos, sez ABI, compared to 2.2% drop same period last yr. So while industry still soft, ABI again touted expected “improvement in the trend of US industry volumes compared to 2013.”

Bud Light “continues to make good progress,” according to ABI.  STRs down 2% in Q3, compared to 0.5% drop in Q2, but “gaining share of premium light” and lost 0.2 share.  Ritas returned to mkt share gain in Q3, up 0.1.  Bud Light family down 0.2 share for 9 mos, sez ABI, while Bud family down 0.4 share.  Meanwhile, Michelob Ultra gained 20 bps of share in the qtr and hi-end brands another 20 bps (0.2).  Montejo “off to a good start.”  Value brands  had “strong quarter” gaining share of segment and mkt. 

AB’s “Best Buds,” a sequel to last year’s popular “Puppy Love” Super Bowl ad, debuted this morning on the Today show.  AB “couldn’t resist going back to the well” after last year’s puppy/Clydesdale spot proved widely popular and ranked #1 in USA Today’s ad meter, noted Adweek.  But “sequels are tough,” and “for every Godfather Part II, there’s a Godfather Part III,” cautioned mag.  The 60-second spot is “nicely produced,” and “will be well liked,” in Adweek’s view, but overall it found ad to be a “decent sequel - but perhaps not a world beating one.”  AB’s 90 second spot for Bud Light debuted a full 10 days before the game during the Tonight Show on NBC, which is airing the game.  The ad, which already has almost 7 mil views on YouTube, will air during 4^th qtr.  Latest installment of its “Up For Whatever” campaign features a surprised man competing in a life size Pac Man game at a high energy club.  AB’s other ad during the Super Bowl will highlight beer quality.       

C&C Group saw US volumes decline 21% for six mos thru Aug, driven by tuff 29% decline for lead US brand, Woodchuck, co announced on its half-yr report.  That’s steepest decline for Woodchuck brand by far since C&C purchased VT Hard Cider Co in late 2012 for $300+ mil.  Shipments were down just 1% all of last yr (thru Feb 2014).  “In the US, performance remains below expectation and the Woodchuck brand has been further impacted by the disruption of new market entrants,” ceo Stephen Glancey commented in note to shareholders.  This yr was indeed a big one for new cider entrants in US from larger global cos like ABI’s Johnny Appleseed, MC’s Smith & Forge, and Heineken’s revamped Strongbow, aside from all the smaller local cos poppin’ up across the country.  When C&C bought VT Hard Cider, it was #1 cider in US.  Since then, Angry Orchard has zoomed to the top, grabbing well over half of the biz. 

Recall C&C recently realigned its distrib network, and just completed “new state of the art cidery” in late Aug, so remains to be seen what impact that’ll have on biz.  That and increased mktg investments – new packaging, new “Give a Chuck” campaign and targeted investments in Great Lakes region and home state, VT – “as volumes declined” drove operating profits in US down nearly 90% for 6 mos.  “We believe we are doing the right things with Woodchuck and execution is key to return the brand to growth,” co stated in report.   “While we have re-based our expectations in the US, the market remains both attractive and dynamic and we are confident in the long-term prospects for the category generally and specifically our US cider business,” sez Stephen.  Meanwhile Magners has rebounded in 2014, up 14% for 6 mos thru Aug, and some smaller imports like Tennents and Blackthorn have grown “albeit from a low base.”  No mention of Hornsby’s which was notably scaled back last yr; US shipments down 40%.

C&C total net revs up 9% for 6 mos, but operating profits fell 2.7% to €69.2 Mil  ($88.9 Mil) with gains in Ireland and Scotland “offset by challenges in the US and England & Wales.”

C&C Proposal for UK-based Spirit Pub Co Rejected C&C Group recently was rejected on offer to purchase Spirit Pub Co, a UK-based company with “over 1,200 pubs nationwide and a portfolio of award winning brands,” per co website.  “Several expressed surprise at the approach,” and share price has since dipped 11%, reported Financial Times.  “C&C’s  rationale” is that “it faces stiff competition from Heineken, which integrates its beer and cider brands with its Star Pubs and Bars, consisting of about 1,250 UK premises,” noted paper. 

In unending “deal or no deal” speculation in global bevs, two new reports yesterday continued the chatter.  Recall, a coupla weeks ago, Bloomberg floated notion that Warren Buffet, who owns 9% of Coke, and big Brazilian ABI investors 3G might seek to take Coke private in LBO.  Nomura analysts followed up with detailed 30+ page report yesterday concluding: “We would not rule this out.”  If recently announced cost cutting (a mere $3 bil) and other measures to “create value” at Coke proceed too slowly, “we see some attraction for an LBO, which could more aggressively tackle value creation,” wrote Nomura analysts.  That could create value in Coke shares of  more than 2X current level to $90 per share.  Buffett and Brazilians could use “finance structure…that would be similar” to one they used for Heinz purchase last yr.  Note tho that Buffett had said no chance of KO buyout back in Jun, Bloomberg reminded.

Elsewhere, ISI’s Robert Ottenstein threw cold water on ABI buying Coke, “at least not yet,” and he still sees a move on SABMiller as “most likely scenario.”  Responding to ABI-KO talk that “is “now a topic in almost half of our meetings with investors,” Robert ripped thru 7 reasons why he thinks ABI-KO “unlikely anytime soon.” Here they are: 1) for now, KO board supports plan to improve operations, so a “friendly” deal unlikely;

2) Buffett doesn’t like hostile deals and hard to imagine he’d support hostile move on “the most iconic” American co, which would also involve “enormous” financing demand; 3) ABI mgmt very strong, but lacking experience in “important and challenging” Coke mkts in Africa/India; 4) KO has lotsa large, indie bottlers with “different incentives” that would create “friction” and “institutional dissonance that ABI would presumably want to avoid”; 5) “front end dis-synergies” in US, as 3-tier protections for beer absent in soft drinks, which could lead retailers to “reach through the CSD” biz to squeeze beer concessions; 6) risks of distraction on both bevs by complexity of putting them together; 7) potential antitrust issues by creating by such a bev behemoth.