AB took moment to thank distribs for continued Mich Ultra growth in letter to AB network, touting position as 3d best-selling beer by $$ in the US (likely citing off-prem scan data). Indeed, Mich Ultra is growing “with more than 400 wholesalers in all 50 states,” while “tapping into the macro trends of health and wellness, premiumization, and purpose,” CMO Marcel Marcondes wrote. Plus, Mich Ultra Pure Gold and Infusions “furthered this position” as leader of “active lifestyle category in beer,” he added.

Mich Ultra sales surpassed Miller Lite earlier this yr to become 3d best-selling brand in IRI multi-outlet + convenience data. It’s up 16% YTD thru Jul 14, already closing in on Coors Light for #2 spot. In fact, Mich Ultra $$ sales ahead of Coors Light for 12 wks thru Jul 14 in IRI MULC. Then too, Mich Pure Gold (+183%) is #6 growth brand in natl scans, outgaining Corona Premier (+49%) YTD. And Mich Ultra Lime Cactus (+49%) is top-15 growth brand as well in IRI, keepin’ up consistent double-digit growth. All told, Mich Ultra brands continue to be main bright spot for AB. Yet AB all-channel STRs down more than 2% Jan-Jun as Bud Light and Bud declines proving tuff to make up for in toto.

In a stunning rebuke, a panel of 3 judges on US 5^th Circuit Court of Appeals unanimously ruled that district court judge “erred” in finding that TX had “discriminatory purpose” in its ban against public corporation holding liquor licenses.  So case, which began in Feb 2015, remanded back to to District Court for redo on several points.  Ban “facially neutral,” said Court of Appeals, since it also applied to TX public corporations. Then too, out of state cos could and did get liquor store permits, if not public. And so contrary to what district court judge ruled, and what Walmart argued, plaintiffs presented insufficient proof of “discriminatory purpose” against out-of-state public corps.  “The ban’s effect on all public corporations provides strong evidence that the legislature did not purposefully discriminate against out-of-state corporations,” wrote Appeals Court.  Appeals Court came down hard on lower court’s reasoning.  Indeed, the 27-pg decision again and again uses words and phrases like “erred,” “especially problematic,”  “errors are further compounded,” “highlights a general flaw” and “the district court committed several errors.”  Couldn’t have been judge’s (or Walmart’s) very best day. 

But it was a good day for distrib and state’s rights advocates.  Decision especially significant because it is the first important alc bev case since recent Sup Ct decision against Tenn residency requirement law, which opened door to broader potential challenges to state based regulation of alc bevs.  Appeals Court also ruled against world’s largest retailer.  But each case is different.  This bill about local “accountability.”  Drafter of bill testified to district court that “purpose of the bill was accountability…‘to have real human beings who are easily identifiable, who are close to the business and who ultimately bear personal responsibility.’” Even Dist Ct  ruled “ban is rationally related to the state’s legitimate purpose of reducing the availability and consumption of liquor” in TX. And Appeals Court agreed. “It is more than reasonable to assume the state believed that public corporations have the capital and scale to offer liquor well below current prices,” wrote Appreals Court.  So “we conclude that there is a rational basis for Texas’ decision to ban all public corporations from obtaining” liquor store permits.” One advocate told INSIGHTS: “It’s a reminder that the 21^st Amendment is not dead.”

Who needs to compete in world’s largest beer profit pool to build earnings?  Carlsberg, stubbornly resistant to charms of US beer biz, posted big, fat 17.7% increase in operating income Jan-Jun, thanks to strong trends in Asia and Western Europe.  That compared to near 9% EBITDA gain for AB InBev globally in 1st half, 0.3% increase for Heineken and 8.2% decline in underlying EBITDA for Molson Coors same period.  (Yes, global brewers report different measures.)  Interestingly, ABI, Heineken and Carlsberg had similar net revenue trends, +6%, +5.6% and +4.2% respectively.  Rev-per-bbl trends even more closely aligned: +4.2%, +3% and +3% respectively.  Heineken had best volume trend, +3.1%, ABI and Carlsberg similar at +1.7% and +1.4%.  Molson Coors’ global revs and volume each down Jan-Jun, tho rev/bbl up similar 3-4%.        

 Largest Canadian cannabis co Canopy Growth Corp reported disappointing results again and stock down another 15% today.  Stock mkt capitalization now under $10 bil. It’s basically cut in half from peak, chopping billions and billions in value.  Recall, Constellation Brands owns near 40% of co, with path to control, having paid about $4 bil to get big chunk last summer.   Revs came in at $90.5 mil Canadian, lower than last qtr, and 17% less than analysts expected in terms of qtr over qtr growth, according to Motley Fool.  That’s still 250% higher than $26 mil it reported last yr, but investors expected more.  Then too,  Canopy Growth had loss of $92 mil in EBITDA, 4x higher than last yr.  So it lost $1 for every $1 it brought in.  But on top of that, Canopy Growth reported a $1.3 bil Canadian loss (almost $1 bil US), on “extinguishment of warrants” from Constellation, basically an accounting charge, but added to bad optics. Indeed, that charge a subject of many headlines, but not a focus for analyst comments we’ve seen.  Still, any way you slice it, this was a tuff qtr and that’s why stock got pounded.

White Claw depletions hit 5.5 mil cases in Jul, up 248%, prexy Phil Rosse told INSIGHTS. But some states up much, much faster.  CA up 784%, NV up 508%, FL up 421% and TX up 409%.   Slowest growth rate among all 50 states, 125%.  Just unreal how much White Claw still seems to be picking up steam.  No wonder it now (again) has some out-of-stocks.  No one could see growth like this coming.  But White Claw still getting enuf product out there to keep growing its share of segment.   It passed 60 share of segment for first time in latest week thru Aug 4 in IRI data, said Phil. That’s up from 46 a yr ago, with a 313% growth rate for the week and 283% for 4 weeks.  Not slowing down.

As White Claw continues to climb, it’s hitting new milestones regularly. Nationally it’s about 3 share of total beer $$ in a 5 share hard seltzer category.  But in some markets and some channels, it’s doing way better than that.  For example, White Claw jumped all the way to 9.6 share of $$ in Boise in latest period in grocery channel, 9.1 share in Milwaukee and 8.1 in Columbus, OH.   Total seltzers hit 14 share of $$ in Boise and Milwaukee for 4 weeks, bigger than imports.  And in 18 of 46 IRI mkts, Phil said, seltzer got 10 or more share in last 4 weeks.  Are there any signs that this is losing steam?  Phil ain’t seeing any so far.  More details on seltzer and Mike’s in tomorrow’s Beer Marketer’s INSIGHTS.  

Glazer’s Beer and Bev has “conditional agreement” to buy GLI distrib in San Antonio, “substantially all of the assets,” it announced this afternoon.  “Upon closing, the acquisition of GLI’s brands would add approximately 15% to GBB’s total case volume.”  GLI sells several mil cases, led by Shiner, Dos Equis, Pabst, plus Boston Beer and Diageo.  Glazer’s calls GLI “a craft and import focused malt beverage” distrib. “The closing of the GLI acquisition,” said Glazer’s “remains subject to various pre-closing conditions, including third party rights, regulatory approvals and other closing conditions.” If those conditions satisfied or waived, deal “expected to close within 90 days.”   

Now this deal official, after news of it percolated for last week or so.  San Antonio one of rare remaining examples where until this deal gets done, there’s 3d viable mainstream distrib without AB or MC.  GLI owner John Gillis said he started 37 yrs ago.  Glazer’s bought into San Antonio way back in 2011, purchasing Halo Dist that Keg One had also sought. It must have always hoped that it could one day purchase GLI.  Vertical integrations are harder to come by these days.  The original Halo deal put Glazer’s more firmly in big league of distribs, over 25 mil cases. Glazer’s has operations in 6 states (AR, OK, LA, KS, IA, in addition to TX).   

While Boston Beer CMO Lesya Lysyj was hired in late Mar 2019, both new Sam Adams campaigns that debuted this summer (for Sam 76 and Sam Summer Ale) “were just before her time,” Boston senior comm specialist Meaghan Quinn told INSIGHTS. So Truly hard seltzer’s new ad campaign is Boston CMO Lesya Lysyj’s “first major campaign” with the company.

Efforts to extend or make permanent fed excise tax break given to alc bev producers in 2017 tax bill (now set to expire at end of this yr) took another step forward with task force report from Senate Finance Committee yesterday.  Every member of Task force is co-sponsor of Craft Bev Modernization and Tax Reform Act, report noted.  Plus: “The Task Force would like to not only have this provision extended, but furthermore see the CBMTRA enacted on a permanent basis.”   Meanwhile, Beer Inst reminds that last mo House Ways & Means Committee “passed a one-year extension to federal excise tax relief, which is now awaiting consideration in the full US House of Representatives.  That bill would then move to the Senate, and today’s Task Force report will hopefully ease the pathway for the Senate to pass tax relief.”  BI prexy Jim McGreevy and BA prexy Bob Pease welcomed the development, natch.  Reasons to be optimistic: “We are up to 272 House cosponsors and 68 Senate cosponsors,” Bob pointed out. At same time, “America’s small craft brewers are doing exactly what we said they would do with this extra capital: expanding their breweries, hiring more workers and providing current workers with better benefits.”  BA survey of small, indie breweries shows that over last 20 mos:

·      73% purchasing new equipment, upgrading tasting rooms/breweries, moving to new buildings, etc.

·      53% hiring new employees

·      39% increasing employee benefits by raising pay, offering insurance and expanding vacation time

·      21% increasing their charitable contributions

·      58% doing two or more of the above-mentioned actions

 Finally, “If the current FET rates are made permanent, 86 percent of small, craft breweries have said they would be more likely to make capital investments and hire new people,” Bob concluded.

While AB Inbev has said proceeds from sale of its Aussie biz will go to pay down debt, “history, recent commentary and actions would all point to AB InBev looking to do further M&A with a focus on Asia beer but also with other diversification moves.”  So wrote Brett Cooper of Consumer Edge Research this morn.  What prompted this observation?  “Coincidence” of ABI selling its Aussie biz and an affiliate of 3G Capital (key ABI investors) selling off piece of Restaurant Brands Intl.  Brett did some “straightforward” math and “we net out at the potential to make a $20b…deal with cash and stock.”  The numbers: “$5.7b from an insider rights offering, $3.7b from equity issues to a target and $11.3b from the Australia deal, all reduced for taxes/fees associated with these deals.”  Then too, numbers “could be enhanced by creativity” at ABI and don’t include any leverage from potential target’s EBITDA or further asset sales.  Net-net: Brett’s “confident that ABI will continue M&A activity that has helped to create the business that it has today.” 

In a somewhat less positive observation, Brett calls MC’s planned natl rollout of Saint Archer Gold next yr “better late than never” and sees a “slow build” since consumers not familiar with brand.  Once again, Brett hammers theme that “more innovation in the market is necessary” for Molson Coors “to have any hope” for improved performance in US.

For the first time in its history Sierra Nevada will sell a product beyond beer, it revealed at natl sales conference.  Sierra Nevada will launch an as yet unnamed hard kombucha on draft nationally on Jan 1, with packaging coming in Mar. And it will not be branded as Sierra Nevada.  That’s one of 3 big outside-the-box initiatives Sierra announced.  Sierra will also launch its 2d brand in newly defined “Little Thing” brand franchise, following on heels of  Hazy Little Thing.  Wild Little Thing, a sessionable sour, will launch nationally in Mar.   And Sierra will be taking Sufferfest, its first-ever acquisition, natl this fall, “blazing the trail in functional beer,” per founder Caitlin Landesberg. (Longer version of this article appeared in Craft Brew News.)  

Sierra Up Double Digits in Jul, Up 1% YTD; Hazy Litte Thing Up 85%  Sierra Nevada volume getting back on track, a “significant turnaround,” noted sales veep Nick Lundquist.  With a 12.6% gain in July 2019, Sierra Nevada now up 1% yr-to-date and 2% for 12 mos.  Sierra Nevada eked out a gain in 2018 and it expects to grow again in 2019.   Hazy Little Thing is the reason why.   Hazy Little Thing total STRs up 85% yr-to-date.  One astonishing stat: 60% of Hazy consumers are new to Sierra Nevada brand family.

“Creating Little Thing Franchise”; “Wild”; Sufferfest: “Reimagining Beer”   With Wild Little Thing, Sierra looks to “leverage the excitement around Hazy” and create “Little Thing” franchise to “protect and buffer” Hazy. Wild Little Thing will “demystify sour beer by making the first session sour to attract sour beer and non-craft beer drinkers” alike, he sez.  Sufferfest founder Caitlin talked about her “mission,” “vision” and plans.  Sufferfest is “beer reimagined,” said Caitlin, as co is “blazing the trail in functional beer…. Our mission is to be the go-to-beer for the fit consumer. Our vision is to be at every finish line.” Sufferfest is a “very aspirational beer,” she said and this “industry is ripe for disruption.”  Her target: domestic premium light beers.  Sufferfest is a “woman founded B Corp” (B Corps “balance purpose and profit”) with a “focus on females, active & healthy, 25-39, principled and informed” and it’s “inspired by athletes.”  It’s also been “dubbed the craft alternative to Mich Ultra,” Caitlin reiterated.  All its beers will be between 3.5-4.5% ABV.  Sufferfest looks to “build a national brand” in 2020.  Sufferfest may be small in volume, but it has big ambitions.

Hard Kombucha Is Coming; Striking San Diego Stats Sierra seemingly has tinkered with hard kombucha for some time, but it’s now a go for Jan 1, tho product does not yet have a name or even a final formulation. Kombucha is a “craft beverage and nobody does craft better than us,” said creative project manager Valerie Murphy. Non-alc kombucha is a half billion category in Nielsen that’s still growing double digits.  “We think the same thing is going to happen with hard kombucha.”  Hard kombucha is doing exceptionally well in a few CA mkts, especially San Diego.  Boochcraft is a top 3 FMB there, with $1.7 mil in grocery sales, not much behind White Claw, but ahead of Truly and Smirnoff, Valerie showed. And 3 of top 10 FMBs in San Diego now are kombucha.  Boochcraft is also already in top 10 FMBs in LA and SF.  So Sierra thinks with its “strong distributor network,” and “two production facilities” and “a national sales team,” it could have a natl top 10 FMB brand.  It’s still a “work in progress.”

The Meaning of This Meeting  “This meeting, this week, this year is the most important and pivotal since I joined the company,” said CEO Jeff White.  This is “probably the biggest change you’re ever going to see,” agreed chief commercial officer Joe Whitney.  Sierra Nevada will “start to sell something other than craft beer.”  So Sierra will be “turning into a portfolio selling company,” added Joe. Jeff has become a change agent in co.  Acquisition of Sufferfest was the “beginning of our change journey,” he said.  And “we continue to evaluate and look at other opportunities.”  But key to Jeff is that Sierra must adapt and evolve to meet the needs of changing consumers, who “cross, blur or completely erase lines.” Jeff maintained: “We can change what we make and sell without changing who we are, what we believe in [and] what we stand for.”  His aim is for Sierra to be “an enduring company” a multigenerational family biz that is “flexible adaptive, resilient, dedicated, curious,” etc.   Recall, he took over CEO role from founder Ken Grossman less than 1 yr ago.  But Ken still a very active chairman, his daughter Sierra and son Brian very involved and co proudly proclaims: “family owned, operated and argued over.”