Total beer biz had a great week thru Sunday of Labor Day weekend in IRI multi-outlet + convenience nationwide.  $$ sales up $57 mil, 7.1% for one week thru Sep 1.  And avg prices up 87 cents per case, 3.6% to $24.62.  But most of that growth came from FMBs, which grew an astounding $38 mil, 55%.   Imports also gained $12.8 mil, 7.9%.  And superpremiums grew $9.1 mil, 13%.  Other segments far more subdued.  But interesting that subpremium biz grew $$ 2.4% for week, with volume down 0.5%.  Getting some good price realization at the lower end of beer mkt. Non-alc beers jumped 27% on very small base.   Meanwhile, spirits biz yet again stayed strong in spite of seltzer onslaught.  Up $12 mil, 8.1% in IRI MULC. That included biggest segment, vodka, up just 3%.  But tequila up 14.6%.  Even wine up $10.9 mil, 4.9% for the week. 

Nielsen also provided data for week ending Saturday Aug 31^st that showed slightly less robust growth overall, but same general trends.  Also shared latest on hard seltzers, “which continue to grow triple digits” (175.1%).  That’s even faster than 147% growth over July 4, on a bigger base.   

In Natty Light Seltzer’s quest to disrupt hard seltzer category, AB pulled publicity stunt converting comedian Trevor Wallace (who made White Claw video that went viral earlier this summer) to Natty Seltzer team while landing a helicopter on the Catalina Wine Mixer yacht party, co announced. Recall, one of Natty Seltzer’s brands is called “Catalina Lime Mixer,” a reference to Step Brothers movie with Will Ferrell and John C Reilly (the yacht party name also “inspired” by said movie). Following Trevor’s video, Mike’s Hard Lemonade Co/White Claw sent Trevor Wallace a cease and desist when he began selling t-shirts with catch phrase “ain’t no laws when you’re drinking claws” (see Aug 22 issue). And just a few weeks later, AB/Natty Seltzer “sent him a deal…and a f***ing helicopter,” co gloats in press release. So to sum it up: a beer brand sponsored a wine event with a hard seltzer product and comedian previously associated with another hard seltzer product. What a world.

Tho 34 new seltzer brands launched in 2018 & 2019, the top 5 Seltzer brands still account for 97% of seltzer share, IRI multioutlet + convenience data yr-to-date thru 8/17 shows in analysis shared by IRI’s Patrick Livingston.  In 2019, 22 new seltzer brands launched, said Patrick, but they “only represent 1.1% of  2019 hard seltzer dollars.”  More broadly, “underlying the continued explosive growth” of seltzer, “57% of 2019 dollars… driven by items that were launched prior to 2017, only 8% of 2019 sales are coming from 2019 innovation.”  Leading pack is Truly Tropical Variety pack (which of course would count as an innovation, but not as a new brand.) And “71% of White Claw’s 2019 sales are driven by the original White Claw products that were launched in 2016,” added Patrick.  “2019 innovation has continued to underperform 2018” with total new product contribution 43% less than in it was for 2018. Last yr, new products got 2.3 share of $$, this yr just 1.3 share as consultant Bump Williams separately suggested in his Sep letter to clients.  Stay tuned as more and more folks coming in and with bigger bets, including Natty Seltzer (see below), Corona Seltzer (which everyone knows about and must become official someday soon) and who knows what else.  

MillerCoors keeping up a steady stream of new product news in recent weeks. Now it will sell wine nationwide, expanding its line of Movo Spritzers in Mar 2020.  Movo had “successful” test in 3 mkts this yr and “this is going to be a very big bet for MillerCoors in 2020,” said innovations veep Sofia Colucci, incluing a natl media campaign, MC sez. MC will also launch test on Coors Edge (see Sep 6 issue) and “relaunch” Miller 64 (Sep 4 issue). Last mo, MC announced it would take Saint Archers Gold natl next yr.  And this mo, MC also debuting its hard cold brew coffee “teaming up” with  La Colombe in 5 test mkts: Boston, Tampa, Ft. Myers, Treasure Coast, FL and Denver, according to piece in Yahoo.   Slogan: “Rally like a grown up.”  

“Over the past year or so, we’ve really transformed our innovation approach,” said Sofia, “and the theme is ‘more.’” In next 6-12 mos, “you can expect even more, especially in the above premium space.”  Cape Line “has been nothing short of a hit,” sez MC on its Behind the Beer blog, noting that Cape Line a top 10 growth brand in Nielsen for last 12 weeks.  It’s at 0.1 share of $$ nationwide.  And Sol Chelada, sez MC, is #4 “new brand across the total beer category despite selling in only… a 24 oz can.”  Despite these efforts, MC still losing 0.8 share of above premium cases yr-to-date thru Aug 24 in Nielsen all-outlet.   And its overall biz continues down  3.3% YTD in Nielsen, lending some urgency to its uptick in innovation. 

 Only one side of this story told so far, but it’s a wild one.  French owners of Seattle Cider and Two Beers Brewing Co (Agrial) sued founder Joel VandenBrink in fed ct in Washington state. Agrial charges VandenBrink “developed a secret plan to game the numbers” in 2018 to boost that yr’s sales and EBITDA so he could get higher price for selling the co. Alleged “secret plan” involved over-shipping product to Seattle’s biggest distrib, unnamed, but has to be Columbia Dist, which sells over half of Seattle volume.  As result, Agrial sez it paid $6.8 mil more than it should have.  And it wants the money back.  Editor’s Note: No charges filed against distrib.  And distribs often accept extra inventory from suppliers looking to hit numbers.  

When Agrial bought Seattle Cider and Two Beers in Aug 2016, it agreed to pay $12.375 mil at closing, plus two “guaranteed minimum payments” of $2 mil at end of 2018 fiscal yr and $6 mil at end of 2020, according to lawsuit.  So guaranteed minimum price was $20.375 mil, for company that had less than $1.9 mil EBITDA at end of 2017.  (VandenBrink projected much higher goin’ forward.)  But Agrial also agreed to much higher payouts if EBITDA exceeded $3 mil - $4 mil targets.  Payout could reach up to $14.625 mil, in fact, for max sale price of $27 mil.  Formula: if 2018 EBITDA hit $3+ mil, payout would be “.23 of ten times the actual EBITDA.”  So, if Seattle hit $3 mil in 2018, payment would be $6.9 mil, then additional $230K for each $100K of EBITDA over $3 mil.  VandenBrink owned 70% of the co when he sold it.

“By May of 2018,” lawsuit claims, “it was becoming apparent to VandenBrink that Seattle Cider was not going to meet” the EBITDA target of $3 mil; it was trending to $2.5 mil EBITDA on sales of under $10 mil.  So, VandenBrink, who stayed on as CEO after sale, cooked up “secret side deal” with its largest distrib, again unnamed but has to be Columbia, to “accept huge shipments at the end of 2018, roughly triple the normal shipments, so that Seattle Cider could book the sales during the 2018 fiscal year.”  At same time, VandenBrink was telling Agrial sales were goin’ great.  He also guaranteed distrib that Seattle would bear any additional costs for the extra shipments. This deal inflated Seattle’s EBITDA, suit alleges, by $800K to $3.3 mil “which generated a 2018 earn-out payment of over $8.8 mil,” less adjustments, instead of $2 mil.  Agrial wired $8.4 mil May 15, 2019.  

But, by April 2019, distrib refused further shipments.  Suit quotes distrib employee who wrote VandenBrink, reminding that he had 9 mos inventory in Feb, before Seattle sent “ten more loads in March and one in April.  We have 493 days of supply of semi-sweet.  This is far beyond the agreement we made.  When we spoke about this last October, we agreed to take up to four months of inventory to help you hit your number and get your paycheck.”  Distrib employee wanted resolution immediately as his boss “absolutely beside himself on this issue.”  VandenBrink wrote back promising resolution.  Sales dropped in Apr; VandenBrink blamed production issues.  After Agrial made payment in mid-May, “the bottom fell out,” suit sez.  Two days after VandenBrink got paid, distrib returned two trucks of cider, at a cost to Seattle of $133K and “it destroyed another $34,000 worth of product.”  Tho VandenBrink told Agrial May sales would be $1.3 mil, actual sales were $347K, “the worst performance of any month since Agrial had purchased Seattle Cider,” and 2019 EBITDA has “plummeted.”  On top of making higher pay out, Agrial sez it lost out on deal to sell Seattle in early 2019.  Charges vs VandenBrink include breach of contract, breach of fiduciary duty, unjust enrichment and more.  VandenBrink is no longer CEO and has not responded to suit yet, but his atty told Seattle Times VandenBrink “looks forward very much to having his say about the matter in court.”    

Despite ongoing challenges and continued net losses for largest public cannabis cos, legal cannabis sales in US are chuggin’ along at state level in at least two recreational mkts this yr. Nevada legal cannabis sales grew 20.6% to $639 mil in its 2d full fiscal year from Jul 2018 thru Jun 2019, NV dept of taxation stats show. NV raked in $99.1 mil in excise tax revenue as well. Growth remained relatively consistent thruout fiscal yr, ranging anywhere from +15% to +29% from mo-to-mo, including top growth % comin’ more recently in May. NV currently on pace to nearly reach $700 mil in calendar 2019. 

Then too, after slowing to low-single-digit growth in calendar 2018, CO cannabis sales are pickin’ up pace. Total sales grew 10% to $817.7 mil for 6 mos thru Jun, according to CO dept of revenue stats. One reason for improving sales: medical cannabis sales returned to growth in recent mos. Medical sales in CO declined in 2017 and 2018 including steep double-digit drops last yr, as more than 3/4 of the mkt shifted to recreational retail sales by end of last yr. But medical sales grew each of the last 3 mos, now back to flattish for full year. At same time, CO recreational retail sales growth picked up in recent mos too. Now up 13% YTD thru Jun.

Legal cannabis sector is taking its lumps in stock market this yr as top cos continue to lose many millions of $$ and legal infrastructure in Canada taking longer than expected to set up smoothly. “With all the puts and takes…it is no surprise that cannabis trading multiples have retrenched this year, and are down 43% on a market-cap weighted basis since April 1,” Cowen’s Vivien Azer wrote in latest report dubbed “Resetting on the Canadian Cannabis Landscape.” Report largely focuses on ongoing “challenges” in Canada and looks at the largest public Canadian-based cos. But US mkt taking longer to legalize than initially expected. That also factors in.

Canada rollout “still hampered by inadequate retail infrastructure, supply shortages and a lack of novel form factors,” leading to “80% price gap to the illicit market” as many cos incur “mounting EBITDA losses,” Vivien points out. Cowen has made “fairly notable negative revisions” to valuations of top cannabis cos it covers in the process. Recall, Constellation Brands expects to record $55-mil loss on Canopy Growth (STZ owns 40%) in latest qtr after Canopy reported lower than expected revs coupled with $92 mil Canadian loss in EBITDA loss in its Q2. But Vivien is still lookin’ at cannabis with her pipe half full. “Most of the challenges in place today have a path to remedy,” and “we have been encouraged by the steady sequential growth” in Canada monthly data. Even while revising valuations and price targets downward, Vivien and co maintain “outperform” ratings on 4 of 5 cos it covers – Canopy, Aurora, Tilray, Greenlane – while remaining “on the sideline” with Cronos.

MC will throw its hat into the ring of new NA beers, launching Coors Edge non-alc brew in US starting this Nov, replacing Coors Non-Alcoholic brew, co announced and MC blog wrote today.  Coors Edge first launched in Canada last yr, clocking in at 41 calories, 8g of carbs. Notably, non-alc beer sales in US picking up in scans, with $$ up 18.6% and volume up 8% in Nielsen All Outlet + convenience data thru Aug 24, MC notes.  (Heineken 0.0 driving vast majority of that growth.)  But MC views space as “another step in modernizing its portfolio of lower-octane beverages,” per blog. Recall, MC just announced revamped Miller64 packaging and new marketing campaign (see Sep 4 issue). And co invested in Clearly Kombucha late last yr, blog reminded.

One of the odder beer industry lawsuits pending just got new life from 7th Circuit US Court of Appeals.  Recall, small Wisc brewer Mountain Crest (aka Minhas, about 250K bbls) filed antitrust charges vs AB InBev and Molson Coors in US fed court for allegedly monopolizing beer sales in Canada.  Bare-bones: ABI and Molson Coors agreed with Ontario govt in 2000 and again in 2015 to provisions that allowed them to exclude Mountain Crest’s economy-priced Boxer Lager 12- and 24-packs from both govt stores and the (ABI/Molson Coors-owned) “Brewers Retail” stores.  Agreements, even tho made in foreign country, violated US antitrust law (Sherman Act), Mountain Crest alleged.  It sought injunction and treble damages from sales it lost over decade+.  US Dist Ct dismissed suit, citing “state doctrine” that US courts can’t interfere with agreements made by foreign govts.  US Appeals Ct just agreed to toss charges about agreement over “6 pack rule” made between ABI/Molson Coors and Ontario govt that excluded Mountain Crest’s 12- and 24-packs, citing state doctrine.  US Court can’t invalidate other countries’ laws.  BUT.

Mountain Crest’s complaint, court noted, also alleged AB and Molson Coors “violated the same provisions of the Sherman Act by conspiring to bring about the Ontario government’s approval of the six-pack rule.  These allegations do not implicate the act of state doctrine.”  Key precedent established that US Sup Ct “did not bar an antitrust complaint where defendants took ‘deliberate acts’ to ‘bring about forbidden results,’” just because a foreign govt was involved.  If jury/judge accepted Mountain Crest allegations about AB/Molson Coors “concerted action to bring about the Ontario legislation,” they could be on the hook.  Holding AB and Molson Coors “liable for their [prior] actions and allegedly deliberate acts to bring about the six-pack rule and requiring them to pay damages to Mountain Crest would not, on its face, invalidate Ontario’s chosen regulatory scheme.”  Besides, Mountain Crest alleged other “marketing and distribution practices that it claims manipulated The Beer Store’s internal sales approach to disfavor American products” that come under Sherman Act scrutiny.  So, US Appeals Ct sent case back to US Dist Ct to review these claims.  ABI and Molson Coors claim to be pleased with this outcome, reports Law360; they believe remaining “ancillary charges” will also be dismissed.

Just one day after judge ruled in favor of MC that AB had to remove offending Corngate language from its packaging by Mar 2020, AB said it has filed appeal (not available at presstime).  “MillerCoors’s position defies logic − it has publicly acknowledged that Miller Lite and Coors Light are both brewed with corn syrup. We publicly acknowledge that Bud Light is brewed with no corn syrup.  These are simply the facts on which everyone agrees,” said AB spokesperson.  “Not only are we appealing this decision, we will continue providing consumers with the transparency they demand, including by informing beer drinkers that Bud Light is brewed with no corn syrup.”