“ZX isn’t focused on chasing trends – we focus on consumer problems and finding new, innovation solutions,” ZX Ventures’ (AB InBev’s innovation arm) chief Pedro Earp told Adweek.  “We’re focused on finding the new big thing before it becomes a thing.”  As example, Pedro pointed to ZX’s 2016 partnership with Kombrewcha, “well before hard kombuchas were even a well-defined category.”   Interestingly, AB was also early investor in hard seltzer, and now ramping up fast in segment, yet it didn’t catch much of the volume wave crashing over US shores.  Meanwhile, biggest “buzzword” in biz today still “disruption,” sez Pedro.  “Data, technology and innovation bring us closer to consumers around the world and help us drive business growth.”  ZX now has 1,500 people across globe, and “innovation drives not only our commercial strategy at AB InBev but also our supply chain, processes for supporting our colleagues and recruiting future talent.”

AB shipments fell 700,000 bbls, 3.1% in Q3 and 1.4 mil bbls, 2.2% for 9 mos. But sales-to-retailers down 3.5% in Q3 and 3.1% for 9 mos.  That near 1-point gap between shipments and depletions (-3.1 to -2.2) represents about 600K bbls that AB will ostensibly have to reduce shipments by in Q4 for shipments and depletions to converge.  On top of it, AB STRs haven’t been down more than 3% since 2010 (down 2.7% in 2018, 3% in 2017, 2% in 2016). So AB still not making much progress in terms of fixing sales.  But revs still flat (up 0.2%) and EBITDA up slightly (0.9%) in Q3.  And for 9 mos, AB sales growing 1.2% and EBITDA up 2.2%.  Much of that is premiumization and revenue management.  ABI rev per bbl up 3.4% in Q3 and for 9 mos.

ABI sez AB lost estimated 85 basis points of market share in Q3, but it’s losing far more share than that in scan data.  AB down 1.66 share of volume for 12 weeks thru Sep 8 in IRI multioutlet + convenience.  Similarly, AB sez it lost 35 basis points of share for 9 mos, but down 1.2 share in IRI YTD.  AB share loss “driven by the growth of hard seltzer” and “cycling of shipment phasing ahead of a price initiative in October 2018,” sez ABI.  Still, “we view the growth of hard seltzer as positive for the malt beverage category,” since it estimates “more than half of hard seltzer segment growth is incremental” to malt bevs.  AB finally officially fessed up to Bud Light Seltzer, “which we believe will leverage the equity of an established brand in a new category.”  In ABI’s view, “consumers will demand more choices” in seltzer.  And with Bon & Viv, Natty Light Seltzer, Bud Light Seltzer and more, AB sez: “We believe we are well positioned for success in this growing segment with our current portfolio and the exciting innovations we have in the pipeline.”  Not only that, but with Natty Light Seltzer “off to a strong start… our share of segment has nearly doubled since its recent launch.”  Editor’s note: AB seltzer $$ share at 9 in last 4 weeks thru Oct 6 in IRI data reported by Consumer Edge’s Brett Cooper.

AB biz still had some notable strengths in Q3.  Michelob Ultra “continues to grow double digits,” said AB, “gaining share in all 50 states.”  Michelob Ultra Gold Pure Organic still running fast, up 80% in Q3, and Michelob Ultra Infusions up more than 50%.   Then too, its regional craft brands still growing double digits. But once again, “mainstream segment under pressure as consumers trade up to higher price tiers” and its mainstream beers lost 1.75 points of mkt share in Q3, ABI said. 

ABI came in below analysts’ estimates and stock got punished this morn, down 9% at presstime, wiping out big chunk of this yr’s gain and losing $20 bil in mkt cap at one point.  “The weak results and downbeat outlook sent shares down more than 10% in early trading, underscoring that the Budweiser brewer still faces big challenges despite recent moves to trim its enormous debt pile,” wrote Wall St Jnl.  Not a good day (then again, even mighty Amazon had a bad earnings qtr—see below).  ABI total global beer volume down 0.9%, but it said it got “solid growth” in Mexico, South Africa and Brazil that “was more than offset by declines in China and the US, both primarily driven by shipment phasing impacts.” In US, it was certainly more than “shipment phasing.” While AB shipments down 3.1% in US in Q3, sales-to-retailers down more (see below). And there’s still almost a point difference between shipments and depletions for 9 mos.  That suggests Q4 will be soft as ABI sez full yr shipments and depletions will converge.  More broadly, ABI changed its guidance. Used to say earnings would be up “strong” in 2019, but “we now expect moderate EBITDA growth in 2019,” the co said, “given the additional headwinds faced in 3Q19 which we anticipate will continue into 4Q19.”  Ouch.

What do a former AB CEO and 5 other ex-AB InBev execs “do with the money we made and the time we have?”  If you’re Luiz Edmond and his colleagues, you create a company called Dreampact Ventures, a venture capital firm that targets investments in “financial technology, education technology, entertainment, longevity and wellness and what it calls the ‘connected world,’” reports St Lou Biz Journal. Luiz, along with Odilon Queiroz (ex-chief info officer), Pablo Gonzalez (ex-logistics veep), Fued Sadala (ex-logistics/procurement veep), Joao Guerra (former cfo in North America) and Gustavo Pimenta (ex-chief info officer for South America) have “kept a low profile” since launching Dreampact in Apr 2018, but just announced it “led a $3.5 million seed funding round for St Louis construction technology startup Ryvit.”  Dreampact has also invested in a financial tech startup, a wellness firm, an education tech startup and an e-sports company and sez it will announce another portfolio addition soon. Focus is US but Dreampact also open to intl firms with US operations.  Luiz and co provide more than $$, they say, “seeking to provide startups with its principals’ expertise in topics such as sales, pricing, logistics, procurement and finance,” Biz Journal notes.   When startups go to market “and they have between $500,000 and $1 million in revenue, that’s where we think we can start creating value for them,” Luiz said.  Echoing ABI’s “Dream People Culture” mission, Luiz adds that Dreampact inspired by entrepreneurs with big ideas: “At the end of the day, it’s not only the ideas they have or the big dreams they gave, but also the impact we can have on their dream.” 

As requested by US Appeals Ct last week, US Dist Ct judge reissued injunctions and modifications in Corngate case between MC and AB (See Oct 21 Express).  In one-page order yesterday, Judge Conley enjoined AB from: 1) using phrase “100% less corn syrup” in Bud Light ads; 2) using “corn syrup” lingo in ads that mention Miller Lite/Coors Light “without reference to ‘brewed with’ or ‘made with’ or ‘uses’”; 3) saying “corn syrup” is an ingredient “in” finished product; 4) using “no corn syrup” lingo on its packaging after Nov 1.  Meanwhile, AB continues to assert that “through independent testing we determined that corn syrup DOES appear in finished Miller Lite and Coors Light products,” as repeated in an AB statement yesterday.  Recall, lots of documents, including expert opinions, filed under seal in recent weeks.  AB also filed motion to unseal some info that’s been redacted.  Judge ordered hearing for Oct 31 on that motion.  For its part, MC notes judge’s order yesterday and points out: “We have won three major rulings in this case already, and we are going to continue holding Anheuser Busch accountable for intentionally misleading American consumers.”

Nice win for distrib in franchise rights/arbitration case.  In situation discussed at NBWA convention last mo, Washington state distrib Olympic Eagle went to court after it lost arbitration to Monster, after Monster terminated it and offered severance fee of $2.5 mil in 2014.  Olympic Eagle argued that termination violated WA’s general franchise law as termination without cause.  But arbitrator agreed with Monster that Olympic Eagle not protected by WA general franchise law, and awarded Monster its atty fees.  US Dist Ct upheld arbitrator and tacked on Monster’s fees for court proceedings.  So, Olympic Eagle lost the arbitration and was on hook for $3 mil.  But distrib just won reversal of both arbitration and US Dist Ct awards at US Appeals Ct.   Now, it can either go back to square one or settle with Monster. 

Turns out, arbitrator failed to disclose that he had ownership stake in JAMS, (Judicial Arbitration and Mediation Services) which did the arbitration.  That failure to disclose, “coupled with the fact that JAMS has administered 97 arbitrations for Monster over the past five years,” created a “reasonable impression of bias,” enough to vacate the arbitration award, Appeals Ct ruled.  For same reason “we also vacate the district court’s award of post-arbitration fees to Monster.”  Dissenting judge on panel warned dismissal will create slippery slope of “redone” arbitrations and “endless litigation,” but reversal stands.  Commenting on decision, NBWA Alcohol Law Review blog said it provides “important guidance to help preserve the integrity of the arbitration process.”   Beyond disclosure issues, a brief filed by NBWA in this case, which Appeals Ct panel found “relevant and useful,” noted the arbitrator ignored recent interpretations by WA Sup Ct of its franchise law and applied standards from a different state. 

FIFCO USA’s “Beyond Beer” portfolio depletions up 11% for last 52 weeks, while its beer down 5.7%, chief sales officer Josh Halpern told distribs at its annual sales meeting in Philly yesterday.  FIFCO at about 10 mil cases in FMBs, it said.  (INSIGHTS estimates FIFCO sold about 31.5 mil cases overall in 2018.) FIFCO doubled its FMB biz in last 5 yrs.  Vast majority of that is Seagram’s Escapes, enjoying 10^th yr in a row of growth. Up 4.4%.  But total FIFCO “faced some challenges,” acknowledged Josh, and co down slightly, tho it didn’t give trend.  Up 0.3% in IRI multi-outlet + convenience data thru Oct 6, provided by Bump Williams Consulting.  FIFCO imports down 5%, FMBs up 11%, subpremiums up 7% in IRI YTD. 

FIFCO USA “Top Priority,” Partnerships Coming; Beer Trends “Unacceptable,” Sez CEO Ramon  Recall, FIFCO, a Costa Rican conglomerate, bought North American Breweries in 2012 for $388 mil.  That was NAB’s peak volume year at 2.7 mil bbls. Last yr, it sold estimated 2.3 mil bbls. At meeting, FIFCO ceo Ramon Mendiola spoke of FIFCO’s “very strong” financial results, but noted that US a “bit more moderate.”  However, FIFCO USA “remains absolutely the top priority for our holding company…. We will continue doubling down in this market.” FIFCO USA is “pursuing partnerships like we have never done before” in US, Ramon said, and co seeks to make partnership “a core competency.” With only a 1.3 share of US mkt, that’s “our route to grow in the US.”  Tho he revealed no details, FIFCO USA “pretty close to the finish line on a number of great initiatives.”  Ramon praised FIFCO USA’s “extraordinary performance” in FMBs, but called FIFCO’s performance in beer “unacceptable.” So what is FIFCO USA doing about that?

Two New Labatt Campaigns; Soft Trends; Genny’s Ruby Red Kolsch Flew in Wegman’s Labatt brands are its biggest beer brands by far (almost half of FIFCO USA’s total volume) and stayed soft in 2019. Labatt Blue and Blue Light each down 6-7% in IRI multi-outlet + convenience yr-to-date thru Sep 8.  For 2020, Labatt will launch 2 social media campaigns, one asking consumers to vote on tongue-in-cheek questions for Beer Partisan Debates.  Labatt will use this platform as it becomes “premier partner” with Barstool Sports, social media force that gets 10 mil unique monthly visitors.  Another campaign will focus on its Blue Citra line extension, #3 new brand in its core mkts, execs said (#2 in upstate NY) with “extremely encouraging” repeat rates.  Campaign features comedian who touts that Citra both “hoppy and refreshing,” saying it’s a “Beeracle.” 

Genesee Specialty Division, a value craft line priced near premium, is just small chunk of FIFCO USA biz but up 88%, Josh said. This past summer, Ruby Red Kolsch was #1 SKU in leading upstate NY chain Wegmans mid-Jun to mid-Jul.  That brand will expand in 2020. Specialty Div also intro’d a new Lemon Strawberry Cream Ale in test mkts that totally bent trend and catapulted Original Cream Ale to growth as well.  FIFCO USA’s craft brands are a fraction of their former selves, down by 2/3 from time FIFCO bought them. But Magic Hat and Pyramid are seeing “green shoots,” including Magic Hat up 1% in NYC, and up over 40% on 15-packs. 

FIFCO’s Focus on FMBs; Seagram’s Escapes Celeb Partners; New Low Cal Flavor; Pura Still  By far most focus in program was full 2 hours devoted to FIFCO USA’s FMB biz, including healthy Seagram’s brand, ambitious but struggling Pura Still and more. Big news for Seagram’s was its partnership with The Bachelor host Chris Harrison and new low cal flavor called Tropical Rose, with a tv spot ready to air in January. This followed on heels of successful partnership with Real Housewives of Atlanta star Cynthia Bailey, which produced turnaround in Peach Bellini flavor.  Both celebs appeared on stage at length.  Seagram’s Escapes will also have an Italian Ice variety pack.  Pura Still still has “incredible potential,” execs maintained. “Strangest launch I’ve ever been part of,” said Josh.  After a tweet went viral, FIFCO sold 50% of yr 1 forecast in 30 days, distribs and retailers loaded up way in advance and in excess of demand.  So too much product got into the mkt too soon. And even tho it sold and was #1 innovation in 18 states, according to Josh, retailers/distribs said “Pura isn’t selling through.” But “I fully believe in this brand,” said Josh.  Top women’s soccer star Carli Lloyd works on Pura brand and also interviewed by Josh. And 2020 will see renewed Pura push.  FIFCO also featured its 8% Hemptails (No CBD, no THC) and its Fun Wine partnership.   

Dueling summary judgment motions dropped in US Dist Ct yesterday in MC vs AC corn syrup battle.  But scant detail available since almost everything – and it’s a ton of material – filed under seal.  AB sez it’s entitled to SJ since “undisputed facts” show MC can’t prove its claim of false advertising.  What’s more, MC has “unclean” hands, presumably due to the “misappropriation” and other counterclaims AB made last week (see Oct 17-18 Express).  MC seeks partial SJ since AB’s ads made “false” assertions regarding corn syrup and AB’s Bud Light ads “intentionally and willfully deceived consumers.”  It also rejects charges of unclean hands and that MC delayed process.  That’s it.  In addition, AB filed brief to support motion, plus findings of fact, new expert deposition and declarations with 30 separate exhibits, all sealed.  MC filed its own brief in support, proposed findings of fact and declaration with just 3 exhibits, ditto.

Strength in high end (FMBs, imports, superpremiums, avg price $30+ per case) and lowest end (budget beers, about $15/case) continue to drive better overall industry numbers.  Yr-to-date volume up 0.6% in Nielsen all outlet scans thru Oct 12; $$ still running +3.5%.   Above premium segments continue to grab serious share, even with craft slipping.  Below premium continuing to lose share overall, but lowest-price budget beers up 1% yr-to-date, holding share.  In most recent 4 wks, overall volume +2.9%, $$ +6%.

There may or may not be a law that applies to White Claw, but it sure ain’t gravity.  Seasonality may be out the window too.  Indeed, for 4 wks, White Claw franchise accelerated to +370%, vs +282% yr-to-date.  Way back at end of September, same figures were +333% vs +277%.  So, 4-wk/YTD gap widened by over 30 points in just 2 weeks.  At same time, 8 of top 10 growth brands in most recent 4 wks were flavored non-beers: 3 Claws, 2 Trulys and 3 Nattys.  (A Truly replaced Michelob Pure Gold.)  Then too, Mich Ultra and Modelo Especial also trended higher for 4 wks than YTD. So, they’re not comin’ down to earth either.  Finally, as FIFCO holds natl meeting with distribs in Philly today, its volume turned positive for last three 4-wk periods in Nielsen: +1.1% in most recent period, tho still -1.7% YTD.

Terse trading statement from Heineken this morn offered typically little detail on US beyond the basics.  Heineken USA volume down high single digits in Q3 “due to the negative impact of the phasing of sales last year, the continuous decline of Tecate and shortages of 24 oz cans, partially offset by a better underlying trend in Heineken.”  Indeed, Q3 was HUSA’s best qtr last yr; off just 3% or so vs estimated near 8% decline for the full yr.  Meanwhile, Tecate -15% yr-to-date in IRI MULC scans thru Sep 8, Tecate Light -17.1%.  HUSA execs called out can issue at recent mtgs with distribs.  Brand Heineken off just 0.7% in IRI yr-to-date (Dos Equis had similar trend) and there’s pop from Heineken 0.0 too.  All in, HUSA -4.6% in IRI yr-to-date thru Sep 8, similar to -5.3% trend for 52 wks.  Soft Q3 followed mid-singles decline in 1^st half.  More details on HUSA distrib mtgs later this week.

Globally, Heineken reported organic volume up 2.3% in Q3, tho trends all over the map: up double-digits in Asia Pacific, down slightly in Americas, up slightly in Europe, Middle East and Africa.  Globally, Heineken brand +7.4%.  CEO Jean-Francois van Boxmeer cited “increased volatility across a number of our markets,” which he expects to continue thru year end.  Heineken also forecast 2019 operating profit growth to be 4%, at bottom end of original guidance of mid-single-digits.