This reportedly in works for awhile, but announced at same time as particularly tuff qtr for TAP.  Molson Coors ceo Mark Hunter will step down as prexy/ceo on Sep 28 after 30 yrs in beer biz and 4+ yrs as ceo. Taking his place, MillerCoors ceo Gavin Hattersley.  So once again, Molson Coors board goes for continuity.  Recall at this yr’s natl sales conference, Gavin embarked on MC strategy to “take more risks, move faster and connect better with consumers,” which Mark applauded.  No replacement named for Gavin.  But as MC spokesperson said:  “When Mark was announced to succeed Peter Swinburn as CEO, the company did not initially name Mark’s backfill, so this is consistent with our practice. Gavin will be spending the next few months focused on future plans for the company, and he will consider all options to maximize the potential of the business and create additional firepower to put behind our brands and innovate. This will certainly be part of that effort.”

Mark already stayed past his initial commitment; he and his family intended to return to UK.  Mark “indicated his desire to retire from his position… in order to spend more time with his wife Fiona and two children,” Molson Coors board chairman Andrew Molson said.  In this case, that bromide likely has more truth than usual, tho we are not privy to inside workings of Molson Coors board.   Each of Mark and Gavin are 56 yrs old.

Look at Gavin’s package filed with SEC: 1) base salary of $1.1 mil (up from $959,400 in 2018); 2) possible bonus of 150% of base salary, so $1.65 mil (Gavin got bonus of $19K in 2018); 3) long-term incentive “award targeted at a grant date fair value of $4.5 million”; 4) if board approves, a one-time equity award worth approx $1 mil comprised of stock units and options.  Add in vakay, life insurance, financial planning bennies and more and it may be lonely at the top, but well compensated, to be sure. 

Mark became ceo in 2015.  Under Mark, Molson Coors bought the 58% of MillerCoors that it did not own for $12 billion in Sep 2016 when ABI bought SABMiller. With that acquisition, Molson Coors profits increased by more than 50%, although down in 2018 and so far in 2019.  Many now agree that Molson Coors overpaid for rest of MC. Since that acquisition, it has been saddled with too much debt, which influenced a lot of how it conducted its business (including cutting marketing).  Molson Coors volume remains challenged.  Its stock price cut in half since its peak, down 9% so far today with conference call coming right up.

An upbeat Nuno Teles, prexy of Diageo Beer Co USA, told INSIGHTS co doubled its growth rate from 5% to 10.3% in latest fiscal yr ended Jun 30, compared to previous one.  DBC doing even better than that in most recent scan data.  Its $$ sales up 19% and it gained 0.2 share to 1.7 in Nielsen all outlet for  4 weeks thru Jul 20.  That compared to 13.6% growth yr-to-date.

In fiscal yr thru Jun, beer did “significantly better” than prior yr, said Nuno and Smirnoff “doing incredibly well.”  Guinness growth ramped up to 7% depletions in latest mo, 6% for 3 mos, compared to 3% for 52 weeks, with both Extra Stout and Draught in a can up double digits in last mo.  To keep this going, DBC will put “more support behind our brand,” including 25% increase in mktg investment on Guinness from end of summer  thru St Patrick’s day.  Smirnoff brand “doing well” in core, and on top of it, Smirnoff Seltzer now #3 seltzer for last 4 weeks in Nielsen foodstores, Smash up 85% and increasing its share of single serve by 6x, and Red White & Berry at its “highest velocity since we started.” Source is “better for you” play.  So DBC now has “complete portfolio approach.”

And then there’s Open Gate brewery in MD, which just celebrated its 1 yr anniversary.  Brewery got 400K visitors in 1^st yr; DBC projected 300K.  Now DBC will be “expanding territories” said Nuno where its US brewery’s beers will be sold.  Previously available in MD and VA, brands will expand from NJ to Boston.   Going forward, DBC looks to generate “growth at a good pace” that is “sustainable” and “profitable.”  

Brutal qtr for MillerCoors and its parent co Molson Coors.  MillerCoors shipments dropped 6.7%, an estimated 950K bbls, and that doesn’t even include export drop.  For 6 mos, MC shipments down 4.9%, estimated 1.25 mil bbls. Sales-to-retailers down 4.8% in Q2, following 3.8% drop in Q1, implying 4.3-4.4% drop for half, compared to AB STRs down 3%.  So MC shipments now down slightly more than depletions.   At least, rev per bbl up 3.7% in qtr.  Still and not surprisingly, earnings also got whacked.  MillerCoors underlying EBITDA down over $100 mil in qtr, almost 14%.  Molson Coors broadly missed analyst estimates. After drifting up slightly in recent days, stock down 7% so far in pre-mkt trading.

“After a solid start in the first four months of the year,” said Molson Coors ceo Mark Hunter, “May and June were challenging reflecting unfavorable weather and weak industry demand across our major geographies, resulting in a disappointing volume performance in the quarter.”   But MillerCoors did once again gain share of premium lights “ahead of newly launched ‘Made to Chill’ advertising” for Coors Light. “We believe this creative platform is distinctive, disruptive and breakthrough.”

Despite its huge population and beer-friendly climate, India remains a small beer mkt – just $7 bil estimates IWSR – thanks to historic liquor preference and complex state-by-state regulation. Even so, global brewers compete hard there and betting on the come that never seems to come.  Now, AB InBev may have run into additional stumbling block toward building biz in important mkt there.  “India’s capital city has banned the world’s largest brewer…from selling its products in the key New Delhi market for 3 years for allegedly evading local taxes,” Reuters reported this morn.  According to govt officials, charges stem from 2016 investigation that suggests SABMiller evaded local excise taxes via duplicate barcode/labeling scheme.  ABI denied allegations, sez whatever happened didn’t happen on its watch and appealed order that barred AB InBev from New Delhi market “for all purposes” for 3 yrs.  If ban sticks, it’s meaningful, since “New Delhi remains an extremely critical market for any beer company...this is the country’s social capital, apart from Mumbai.  It’s a showcase market for the premium beer portfolio,” an ex-ABI exec told Reuters.  Meanwhile, ABI faces separate antitrust investigation in India over alleged price fixing, same article points out. 

Finally, ABI will intro no-alc Budweiser Prohibition Brew (apparently elsewhere) in India, several media resources reported yesterday.  “While the market for non-alcohol beers is still nascent in India,” ABI’s South Asia prexy Ben Verhaert said, “as a leading brewer we see an opportunity to grow in this segment.  The launch is in line with our Global Smart Drinking Goals to ensure that low and no alcohol beer make up at least 20% of our global volume by 2025.”            

Seltzer stats continue to be eye-popping to say the least.  And this just in.  White Claw and Truly grew 3.1 share to 5.7 share of $$ in Nielsen food channel last 4 weeks thru Jul 20.  Food channel by far the most developed for seltzers.  White Claw franchise at 3.6 share of $$ and Truly franchise at 2.1 last 4 weeks, up 2.1 share and 1.0 share respectively.  Each still more than doubling.  White Claw franchise bigger than Bud last 4 weeks!  Bud at 3.1 share of $$ in Nielsen food channel for 4 weeks.

Mike’s $$ sales up an insane 70.5% last 4 weeks thru Jul 14 in IRI multi-outlet +convenience and it gained 1.7 share to 4.45, while Boston $$ sales up 30% and it gained 0.7 share to 3.6.  Mike’s substantially bigger in sales than HUSA for 4 weeks: $152 mil to $132.5 mil.  Even Boston right on HUSA’s heels at $123 mil.   For 12 weeks, HUSA still ahead of Mike’s but not by much.  HUSA at $379 mil, down $10 mil, 2.6% while Mike’s sales $358 mil, up $136 mil, 61%.  That compared to Constellation’s $115 mil, 9% growth last 12 weeks.

MillerCoors launching new campaign for its largest brand Coors Light, staying consistent with its cold “DNA” but giving Millennial and Gen Z drinkers “a new reason to reach for Coors Light,” as per Ryan Reis, mktg veep for Coors family of brands. Three new ads debut this week along with full 360-degree campaign, declaring Coors Light as “official beer of being done wearing a bra,” “official beer of drinking in the shower” and “official beer of Saturday morning” (in English and Spanish). Ads take far more playful tone than we’re accustomed to from Coors Light’s other recent campaigns, avoiding aspirational outdoors and mountainous imagery altogether, adding new tagline “Made To Chill.”  

MC calls this campaign a “stark departure from past Coors Light campaigns, with each taking a slightly edgy – or even subversive – narrative approach and focus on individuals or small groups of friends in their 20s using Coors Light as the catalyst for a moment of stepping away,” via co’s Behind the Beer Blog. And MC goin’ big for launch. Expects to reach 90% of adults ages 21-34 thruout Aug with combo of online video content on streaming services like Hulu and YouTube, live TV ads during Shark Week and ESPN’s Baseball Tonight, sponsorship of Will Ferrell’s Ron Burgundy podcast, “breakthrough PR programs and social influencer partnerships,” plus “revamped social media look and feel” and “more than 500 out-of-home displays nationwide.”

Coors Light needs a refresh.  It is still over 30% of MC’s volume, but it went from flat in 2016 to down 4% in 2017, down 6% in 2018.   Coors Light brand lost 1.7 mil bbls, 10% of its volume last 2 yrs and accounted for 44% of MC’s total loss.   Coors Light still down 4.7% in Nielsen all-outlet yr-to-date thru Jul 14.  It’s growing share of struggling premium light segment lately, co points out, “but that’s not enough,” sez Ryan. “I don’t want for us to be considered just in the premium lights box, we want to set our sights higher.” Amid “more difficult” mkt environment, “we’ve learned that we’ve got to go even further to connect with” 21-34 yr-olds.

Campaign will also be closely watched because it is MC’s first big marketing move under new cmo Michelle St Jacques.  MC switched agencies to Leo Burnett for its lead brand back in May and this is first work from them as well.

State shipments estimates from Beer Inst economist Michael Uhrich suggest US biz off about 1% Jan-Jun, similar to trend we reported for available taxpaids + imports measure last week.  More precisely, state estimates show 1.1-mil-bbl, -1.1% decline.  Gotta note, 1^st half was relatively easy comp.  Jan-Jun shipments were -2% last yr.

In top 10 markets, 4 modest gains in South in 1^st half: Tex +46K bbls, 0.5%, Fla +21K bbls, 0.3%, GA +29K bbls, 1% and NC +34K bbls, 1.1%.  But all of that gain and much more wiped out by losses in Calif and big midwest/northeast states.  Calif sufferin’ lousy weather (“Biblically awful” early this yr, one distrib told us) and off 280K bbls, -2.4% thru Jun.  Trio of heartland states – Ill, Mich and Oh – combined for 272K-bbl, 2.5% drop.  In big northeast markets, NY shed 168K bbls, -3.3% and Pennsy dropped 70K bbls, -1.7%.  So, net loss of 660K bbls among top 10 markets.  In next batch of states, each between 2.1 mil and 2.4 mil bbls for 6 mos, mixed bag: NJ +1.3% and Wash +3.1%.  But Ariz -2.6%, VA -1.2% and Wisc -2.6%.  That’s a net loss of 52K bbls in those 5 states.

Heineken USA volume dropped mid-singles in first half 2019, Heineken reported this morn.  Unstated, but that’s improvement from 8% drop last yr.  And Heineken brand franchise “volumes were flat including the benefit from the introduction of Heineken 0.0,” co added.  Meanwhile, Dos Equis trends also “improving, particularly in the on-premise.”  Asked on conference call about progress of US turnaround, cfo Laurence Debroux said she sees “anecdotal encouraging signs.  It is too early.  This team is in place for less than a year,” she added.  “They have taken strong initiative to make the portfolio and the innovation and the whole commercial policy more relevant on a local regional basis.” But Heineken brand “still decreasing” outside of Heineken 0.0 and asked about brand health, she said: “We don’t see it significantly mov[ing] at this stage.”

HUSA volume down 4.7% in IRI multi-outlet +convenience yr-to-date thru July 14.  Brand Heineken down just 0.6%, not including all incremental 0.0 (or drop in Heineken Light).  Dos Equis Lager also down just 0.9%.  Those 2 brands alone are 71% of HUSA volume in IRI.  So what’s dragging HUSA trends down?  Just about everything else.  Its only other brands in IRI’s top 100, Tecate and Tecate Light, down mid-to-high teens, still represent 17% of volume.  Strongbow and Newcastle continue to decline steep double digits in US as well.    

Globally, Volume Up 3%, Profit Miss; Stock Takes Beating; US Profit Pressures Heineken global revs up 5.6% as rev per hectoliter up 3% and volume up 3% (2% in Q2).  What’s more, Heineken operating profit BEIA (before exceptional items and amortization) just flat in first half.  Heineken guidance unchanged for mid-single profit growth in all of 2019, suggesting strong 2d half.  But stock punished following profit and margin miss in first half.  Down 5.5% at presstime.  “Surprisingly large miss on margins,” headlined Bernstein’s Trevor Stirling.  Heineken operating margin at 15.9, down 47 basis points, 100 bps behind “consensus and our estimates,” added Trevor.  Heineken margin also less than half ABI’s or Constellation’s.  Then too, Heineken profit down 1.7% in Americas.  Growth in Brazil, Mexico “offset by the US, due to lower volumes and phasing of marketing spend,” said ceo Jean-Francois van Boxmeer.

Heineken Brand Up 7% Globally, 0.0 in 51 Countries, Craft and Cider Up Slightly; Debt Heineken brand up 6.9% globally and its leading intl brands collectively up high single digits, with Tiger and Amstel up double digits. Heineken also is biggest cider player globally and its cider biz up 2%.  Craft and variety up low singles, it said, and Lagunitas now in 25 countries.   And LONO (low and no-alcohol) also up high singles, Heineken 0.0 “a key driver of this growth” and now available in 51 countries.  It’s “doing well” in US, said Jean-Francois, but “way too early to say where that will land.”  LONO over 6% of Heineken volume in 1^st half.   

Finally, Heineken has $16 bil in debt, at 2.9x debt to EBITDA, co said.  Went up because of CRE deal in China, but cfo Laurence reiterated commitment to getting to 2.5x.  “We expect to get back there in 2 years.”  Doesn’t sound like a major deal coming anytime soon.

Boston Beer growing double-digits for 2d yr in a row in 2019 with accelerating trends on wings of Truly  (especially), ongoing double-digit growth for Twisted Tea and now acquisition of Dogfish Head. Boston Beer depletions jumped 17% in Q2, 15% in 1^st half and now up 17% yr-to-date thru week 28.  Shipments up 462,000 bbls, 23% in 1^st half to 2.45 mil bbls. Boston Beer raised full yr guidance for growth to between 17-23%, including 3-4 points from Dogfish Head (figure approx 150K bbls in 2d half).  At bottom end of range (17%), Boston will be just shy of 5 mil bbls.  At top end of range, Boston will be up just about 1 mil bbls in 2019 alone. Wow!  It’s almost hard to believe that Boston declined 6% in each of 2016-2017.  Now it’s once again a growth company with a lot of levers to pull, as its conference call made clear. 

Truly Is A “Tiger by the Tail,” Sez Dave; “Hovering Around Tripling”; Next Yr, Triple-Digit Growth? With Truly, “we have got the tiger by the tail,” said Boston Beer ceo Dave Burwick on conference call. “And we are not going to let go.”  Dave continued: “We are hovering around tripling the business. Maybe not totally that much across all channels, but yes. And we are preparing next year for triple-digit growth as well.”  And that requires tons of investment.  Next week, Boston starts “high profile ad campaign” for Truly with comedian Keegan-Michael Key and it is also launching Truly draft nationally.  But operational investments even greater and “a lot of it is just adding more capacity,” said Jim.

Growth Is Expensive, Continued; “At the Margin, It’s Kind of Ugly,” Sez Jim “We are adding two more can lines or at least we are projecting that and they are expensive,” noted Jim. “You can talk anywhere from $20 million to $50 million times two…just to be able to make more can product.”  And hard seltzers are 75-80% variety pack, very cost intensive, especially if you have to use 3d parties. "What you are seeing now is our response to volume that we didn't fully anticipate,” said Jim.  “At the margin, it's kind of ugly.  Because at the margin, we are buying cans from Arizona, shipping them to Pennsylvania or to a contract packer, who then sends them to a variety packer and then they come back into our Pennsylvania warehouse where we have as many as 300 temps packing stuff.”  Boston didn't yet “put all the capital in there to do that efficiently and the lead times to do that can be up to a year.” But longer term “all of this can be brought in-house or automated and done very efficiently.”  And far more profitably. 

Boston Gives Some Deets on Dogfish Head Plans: Increase Distribution on Key Brands Now that Dogfish Head part of Boston Beer, Boston will integrate it financially and focus on consolidating distribution network in near-term.  But Jim also gave clues about where Boston headed with Dogfish Head portfolio he views as complementary, strong in IPAs and sours while Boston strong with lager and seasonals.  Dogfish Head “under-distributed,” sez Jim with “three strong assets”: flagship 60 and 90 Minute IPA, Sea Quench (#1 sour) and Slightly Mighty (lo-cal IPA). Boston sees “significant distribution opportunities” off-premise for SeaQuench and “especially” Slightly Mighty, which Jim called “unique.” Meanwhile, “we think there is significant run room for 60 minute IPA on-premise. So that's where we are going to be focusing on.” Boston “missed generating a successful IPA,” acknowledged Jim, and Dogfish Head “much stronger in IPAs…. We are expecting that our combined craft portfolio will be much healthier together”  

“Growth of Seltzer Casting a Very Long Shadow” Boston also talked up new plans for Angry Orchard, natl rollout of Unfiltered brand with “less sweet, fresh apple taste” and better recent performance of Sam Adams Seasonals.  Totally unmentioned on call, other Boston new products like 26.2 (gose), Tura (hard kombucha) and Wild Leaf Hard Tea, talked up on last couple of calls.  But hard to devote too much attention to those when you’ve got a “tiger by the tail.”  As Dave said in different context (talking about entire industry): “The growth of seltzer is casting a very long shadow over the entire business.”

Boston Earnings Way Up Too; Volume Up 32% Last 4 Weeks in IRI  Boston also blew thru consensus analyst earnings estimates. Boston Beer revs up $106.5 mil, 23% in 1^st half.  Oper income jumped $27 mil to $67 mil.  Stock on a major tear, but some analysts are wrestling with valuation.  While Boston’s growth “Truly Amazing,” wrote RBS’s Nik Modi, “we struggle with valuation for the stock, which we believe is discounting a perfect scenario for Truly and leaving very little room for error.” In the meantime, Boston Beer on a helluva ride and still pickin’ up steam, with total volume up 27% last 12 weeks thru Jul 14 in IRI multi-outlet + convenience, 32% for 4 weeks.