US Dist Ct judge in MO just awarded a class of workers at Busch Entertainment from a decade ago $57.1 mil in a long-running pension suit.  Those workers “denied a company-promised boost in pension payments” after Entertainment div sold to private equity group Blackstone in 2009, the yr after InBev bought AB, reports Law360.

Meanwhile, AB InBev’s Asian IPO got off to good start in Hong Kong, with stock price up more than 4% on its first day, reports Reuters.  “The performance is much better than expected,” analyst Steven Leung told Reuters, “and it’s mainly helped by demand from institutional investors who are confident about the company’s growth story, mainly in China.”  Bud APAC also did lots better than other recent IPOs that “flopped” early on, including Uber, Peleton and SmileDirectClub, reports CNN.  Tho ongoing protests in Hong Kong a cause of concern for many bizzes, “we are very confident in the strong foundation here and we are very optimistic for the bright future of Hong Kong as one of the most important financial centers in Asia,” Bud APAC chief Jan Craps commented.

Bernstein’s Trevor Stirling also optimistic about Bud APAC.  He sees target price bumping up from original listing at $27 to just over $30 over next 12 mos.  “We view Bud APAC as a compelling investment for quality focused investors willing to hold on for the compounding effects of growth over time.”  Trevor sees Bud APAC CAGR of 7.3% in revs, 10.8% in EBITDA (constant currency) thru 2021, driven mainly by China.  Upside possible if ABI “localizes production of Corona for China” and/or Bud, other brands in Korea.  Downside risk from potential trade war impact in China, fiercer competition in Korea.   

Just as Aug taxpaid shipments by domestic brewer tumbled 7.3% (see Sep 26 Express), state totals off 1.1 mil bbls, 5.6%, estimates Beer Inst economist Michael Uhrich.  That included double-digit declines in a number of Southern states, i.e. AL, FL, GA, KY, LA, MS and SC.  California shipments down near 5% in Aug.  For 8 mos, only 11 states up, Michael figures.  That includes anemic gains of 0.1% in FL, 0.2% Tex.  Where biz is better: +1.3% in CO, 0.9% in NJ, 3.5% in OK, 2% in WA.  Also up yr-to-date: AL, AK, MA, NC and WY.  States takin’ tuff hits yr-to-date, where shipments down 4% or more: DC, IL, LA, MI, NM, NY, OH, OR and RI. 

Just one year and 3 mos after Constellation terminated Markstein in San Marcos, AB agreed to acquire “key assets of Markstein Beverage Co in San Marcos, California,” co announced late last Friday. Deal involves roughly 2 mil cases of AB. Another ~150K cases of Sierra Nevada will move, likely to Reyes, as deal is finalized in the coming weeks. Tho uncertain where handful of other smaller non-AB suppliers – Hangar 24, Drake’s, Speakeasy and Black Market – will end up at presstime.

Simply put, “the economics of our business were just no longer viable after the unexpected loss of the Constellation brands last year,” Markstein prexy Travis Markstein stated in release. Constellation’s decision in Jun 2018 to move its then ~2 mil cases from Markstein in San Marcos to Reyes started chain reaction of terminations in SoCal. Constellation claimed it saw “significant business risk” in San Diego “because of AB relationship” and decided to be “proactive rather than reactive” to “mitigate our long term risk.” But gotta wonder if this would have ever happened had Constellation stuck with Markstein.

“We are happy, however, that Anheuser-Busch expressed an interest in our remaining business and have agreed to acquire it,” said Travis. And Markstein’s existing Sacramento distribution territory is unaffected by this deal. Up north, Markstein recently got brand rights to several brewers and non-alc bevs moving from Reyes following its mega deal to acquire DBI (see Sep 16 Express). Drake’s, plus Russian River in part of its territory, Brooklyn, Funkwerks, Avery and more already signed on with Markstein among other Bud network distribs. 21st Amendment expected to follow. And Jarritos, Talking Rain and Essentia moved to Bud network in NorCal as well. With threat of further Constellation terminations loomin’ large, Markstein’s latest moves to add brands suggest the Markstein family is looking to stay in biz in NorCal regardless, and find other ways to ensure the economics continue to work.

Spanish brewer Mahou San Miguel, which owns majority stakes in Founders and Avery Brewing, entered into separate “long term” agreement with ABI to brew and sell several of ABI’s global brands in Spain (excluding the Canaries) starting Jan 2020, cos announced and FoodBev Media and Just-Drinks reported. Budweiser, Corona, Stella Artois, Modelo, Pacifico, Negra Modelo, Leffe, Hoegaarden, Jupiler, Franziskaner, and Cubanisto will all be brewed and sold by Mahou in Spain. Indeed, the global beer scene is chock full of these types of ties between competitors for various countries and mkts. Mahou has had similar relationship for yrs with Carlsberg too, for instance. This is a “long-term” agreement that “comes at a very relevant moment for our business in the country, which is growing double digits in the food channel, driven by global brands such as Corona and Budweiser,” said Benoit Bronckart, prexy of ABI South Europe.

 Bud Light has 79 SKUs in IRI and is responsible for 31% of total beer $$ decline (aggregating all brands that declined), while White Claw has just 14 SKUs but is responsible for 36% of total beer $$ growth, Mike’s showed at its recent distrib meeting.  Is it any wonder that Mike’s would be arguing that Bud Light has too much space and White Claw too little?     

John P O’Sullivan Dist in Flint, Mich has deal to buy contiguous Gerry’s Dist in Port Huron, pending supplier approval. Deal expected to close Nov 1.  John P O’Sullivan is about 2.5 mil cases; will add approx 800K from Gerry’s.  This is 2d deal announced in last couple of weeks in MI (Paw Paw Dist in Kalamazoo also selling).  And it is the 17^th INSIGHTS has tracked so far thru Sep 2019.  That’s about a typical pace. 

Lots More Deals Cookin’; Will They Be Consummated in 2019?  In most yrs, INSIGHTS tracks 20-25 distrib deals, 10-12 in each of AB/MC systems (we probably miss a couple of them too).  Interestingly, Gerry’s is 9^th MillerCoors deal we’ve reported on so far in 2019, compared to just 6 in AB system and 2 All Others.  Most are smaller transactions, tho recent DBI deal to RBD (Reyes) in CA a biggie for sure.  INSIGHTS knows of many more deals that are percolating and if enuf of them come to fruition before yr end, this could be an above-average year for consolidation.  What’s more, if sellers and buyers get more aligned on valuation, lots more could happen, especially in AB system, several sources told INSIGHTS. 

Trio of state stories emerged in recent weeks.  Runnin’ into some OK distribs at NBWA convention reminded that Oct 1 is 1-year anniversary of big alc bev reform there.  Recall, OK state constitution had to be amended to change some key alc bev laws.  Biggest beer change: strong beer (over 3.2 ABW) cleared for sale in grocery and c-stores. Previously, strong beer only sold in liquor stores, which could buy from any distrib in state. So, it was tuff to monitor old beer.  With expansion of strong beer, 3.2 gone and distribs got territorial integrity for strong beer.  Not only that, but they filled shelves with lotsa brands not available before, since they weren’t produced in 3.2 versions.  That sparked great numbers over last 12 mos, like up double-digits, and created “new baseline,” as one distrib told us.  One downside: an extremely difficult Oct ’19 comp.  Outside of beer, wine biz roiled as grocery stores got wine for first time and it’s been a big hit.  So, liquor stores hurtin’.  Then too, a single wine/spirits distrib spent a ton of money lobbying to get law passed by legislature, signed by gov that forces distillers to sell each of top 25 liquor brands in state to every wholesaler in state, not just their chosen ones.  That created furor, of course, and a lawsuit, now in court.  Meanwhile, UT will add stronger beer in grocery stores come Nov 1, tho ABV cap lower than many craft brewers sought.  Utah distribs recently cleared to pre-stage the beer, so they wouldn’t have to fill all the shelves all at once at 12:01 on first day.  But will still be a challenge, one distrib told INSIGHTS. 

In WA, NBWA filed brief in lawsuit on behalf of distrib that lost Monster coupla yrs ago.  Like many others, distrib unhappy with payout (1X GP in most cases), sued for more under WA’s general franchise law.  Distrib lost that bid, and also put on hook by arbitrator and US Dist Ct for $3 mil in atty fees.  At NBWA convention, distrib-advocate Mike Madigan said arbitrator based decision on a CT law and a NY precedent.  (These are the pitfalls of arbitration.)  But legal issue arose around whether arbitrator failed to disclose certain info and whether arbitrator “manifestly disregarded the law such that the award must be overturned,” NBWA sez.  Case before 9^th Circuit court of Appeals. 

In KY, distillers large and small pushing bill (for passage next yr) that would allow direct shipments from distillers to “any consumers where it’s legal,” we’re told.  Prospect has both KY retailers and distribs preparing to resist.  Distillers have lotsa clout in KY and we understand just one of the big ones is opposed.  This could be important round in expansion of retail rights for distillers, so far way behind what vintners and brewers enjoy.  Stay tuned.

AB InBev ceo Brito told Bloomberg that Asian IPO set up to “mirror” ABI’s Latin America division with “local champion” Ambev (listed separately but owned by ABI).  It’s a “vehicle to talk and get to deals with local families in different countries” to expand ABI beer biz in region.  “Same magic could happen” now in Asia, Brito sez.  Globally, Brito sees “good environment” among consumers.  As a brewer (“we’re not economists”) that sources, brews and sells 95% of its biz locally, current intl trade issues/restrictions don’t have that much impact on ABI, Brito noted.  “If it’s good for the consumer, we’re happy.”  Brito also made familiar points that premiumization in beer has “a long way to go” in both emerging and mature markets, that ABI’s strong portfolio, with brands like Corona, Stella and Bud “travels well” and that ABI focuses mostly on organic growth and “from time to time,” inorganic growth (M&A). 

Asked about cannabis, Brito stressed that ABI’s JV with Tilray only in Canada and limited to R&D right now to “solve issues” around non-alc, mainly CBD-infused bevs.  “No decision yet to commercialize.”  Is legal cannabis having impact on beer consumption?  “Too early to tell,” said Brito, citing need for “more data points” on consumer needs and beer/cannabis interactions. 

House Passes SAFE Act  In US, cannabis biz and legalization advocates celebrating House passage of SAFE Act to open up banking and insurance services to cannabis bizzes, as long as they comply with state law.  Bill also “should let public REIT’s own cannabis-connected real estate,” Cowen analysts point out, but does not provide access to capital markets for cannabis bizzes.  Most important, cannabis bizzes no longer cash-only, which created big security and business issues (access to checking accounts, loans, etc).  Next step: Senate Banking Committee, then full Senate vote.  Cowen expects Committee to pass bill this fall, full Senate before 2020 election.  Prospects for broader legalization bills that would remove cannabis as Schedule 1 drug still remote.

After shedding 1.3 mil bbls, 4% Jun-Jul, US brewers’ taxpaid shipments gave up another 1.1 mil bbls, 7.3% in Aug, estimates Beer Inst economist Michael Uhrich.  And that’s while Mike’s gained in neighborhood of 300K bbls.  That implies: 1) all other US brewers down dangerously close to 10% collectively for the mo; 2) AB and/or MC suffered the lion’s share of that loss.  All adds up to a stinky summer selling season, at least in shipments for domestic brewers: -2.4 mil bbls, -5.1% Jun-Aug.  Yr-to-date, taxpaid shipments -2.9 mil bbls,

-2.5%, Michael estimates.  Import gain thru Jul offset about 700K bbls of that.  So known YTD shipments -2.2 mil bbls, -1.6%. That’s way behind Nielsen all-outlet trend of +0.2% thru end of Aug and IRI’s even better 1.4% gain thru mid-Aug.  Data disconnects aside, did someone say industry may need a concerted growth initiative?

 Growing 4% in 2018, the economic impact of small and independent US craft brewers, as defined by the Brewers Assn, contributed $79.1 bil to US economy in 2018, org announced today. That’s equivalent of about 0.4% of total US GDP. BA’s economic impact study based on surveys of members reporting revenue, employment and other metrics as well as annual production surveys. So growth in direct impact and total output unsurprisingly tracks to volume gains. Same goes for states that see most economic output in absolute terms. Impact of craft totaled whopping $9 bil CA in 2018, followed by $6.3 bil in PA (where both of 2 largest BA-defined craft brewers produce much of their volume and employ many), $5.1 bil in TX, $4.1 bil in NY and $3.6 bil in FL. But on a per capita basis, figures look a lot more like the BA’s brewery per capita figures, with craft’s most developed states largely taking over the top-5. Purely focused on the 21+ population, small and indie craft contributed $780 per capita in CO last yr for a total of $3.3 bil, just ahead of VT at $756/capita ($362 mil), OR at $674/capita ($2.1 bil), PA at $657/capita and ME at $631/capita ($656 mil). 

Looking beyond breweries, the craft biz provides US economy with almost 560K jobs. Over a quarter of those, or 150K jobs found directly at breweries, which provided over $5 bil in direct wages and benefits.  Editor’s note: that suggests an average of just over $33,300/job. These figures also certainly skewed by part/full-time splits, growing number of brewpub/taproom employees and number of very small/young breweries with few employees beyond founders. That said, a number of observers have critiqued small brewer employment/ payment practices broadly. The BA offers numerous resources for HR professionals at member breweries.