Lotsa upbeat mktg news on AB in last 24 hours or so that perhaps eased pain of recent soft results.  AB chief mktg officer Marcel Marcondes named one of 25 most innovative cmos by Business Insider, which interviewed him as well.  Interview conducted in Cannes, where AB got 11 Lion awards at world’s leading ad festival, 6^th most of any co.  Those 11 awards an “all time record for our company,” AB said and “nearly doubled last year’s win total.”  The Bud Super Bowl ad with “Blowin’ in the Wind” got a Gold Lion (top award). Meanwhile, Mich Ultra named Deutsch as its global ad agency and brand will expand internationally, reported AdAge. Besides its US success, it is already “among the fastest growing brands in Canada and has achieved remarkable growth in Mexico,” ABI told AdAge in a statement.    

AB Hosted Mass Meditation at South By Southwest  Marcel said his focus is on “innovation agenda” as much as on “driving the company’s marketing…. We want to go from being the industry leader to leading the industry,” he reiterated to Business Insider.  In Mar, article begins, AB hosted a “mass meditation session for frenzied festival goers” at South By Southwest music festival in Austin.  This was “stunt” to promote Mich Ultra Pure Gold.  “We have a very clear strategy to bring more brands into the game to address different consumer needs, demographics and price points,” added Marcel. “We are now playing a portfolio game.” 

“Streamlining the Process,” But Not Cutting Costs, Sez Marcel  AB also “rethinking” and changing game in its dealing with agencies, starting with in house agency Draftline.  Recall, AB works with more than 50 agencies. And it plans to trim that number.  “He said the goal isn’t to cut costs but work with fewer agencies that can make a big difference,” wrote Biz Insider. Marcel added: “Every year we’re streamlining the process, but we’re doing it in a meritocratic way, because that’s our culture. It’s based on the creative work that they put on the table and the results that they deliver.”  AB also “pushing for more accountability… with payments based on their results,” said BI.  AB already trying variable compensation tied to performance with a couple of agencies, but Marcel declined to specify.  “I don’t believe in a model where they just get their retainer fees, and it doesn’t matter what they deliver because the money’s going to be there anyway.  We need to be focused on driving results.” 

While beer biz sagged in May and early Jun scans so far, spirits trends not fazed by bad weather, tuff comps, you name it. Control state spirits volume +4.2% in May, going against +8% in May 2018, NABCA reports; $$ sales +7.1%.  Rolling 12-mo volume +3%, $$ +5.9%.  Then too, Nielsen reports spirits dollar sales +3.6% in its scans for 4 wks thru Jun 15, volume +1.2%, tho as analysts at Cowen note “we continue to find NABCA more reliable in evaluating spirits trends.”

Just ahead of biggest beer holiday (and biggest week in beer sales) of the yr, Brewers Assn launched latest ad campaign and activity in support of Independent Craft seal intro’d a couple yrs back. Trio of short videos, making rounds on social media starting today, take comedic tack, featuring storylines of folks who forgot key elements for July 4 celebrations, but not “of course, the independent craft beer,” according to release. “As you plan for this Fourth of July, think independent and drink independent,” and “make sure your beer run includes independent craft beer,” BA craft beer program director Julia Herz said. Indeed, the somewhat silly spots support ‘declaration’ of July 3 (next Weds) as “National Independent Beer Run Day,” as org encourages drinkers to “seek” its Indie seal on what should be a big beer-buying day ahead of holiday. Campaign also includes audio spots and sponsored playlists on Pandora and, amusingly, a live stream by BA of “a world record attempt at the longest cheers ever, toasting all 7,300 small and independent US craft breweries.”

Regardless of Sam Adams and Angry Orchard struggles this yr, Boston Beer sales are flyin’ and picking up pace in latest scans. And in the process, SAM stock surged another $12 yesterday to $361.19/share and whopping $4.17 bil market cap as mkts closed. It’s trading at all-time highs thruout the last couple mos and continues to grow in value.

Boston Up 20+% for 4 Wks with Truly #1 Brand Family by Vol; 83% of Boston Sales Not “Beer” Boston Beer $$ sales grew 21%, volume up 24% for latest 4 wks thru Jun 15 in Nielsen All Outlet, compared to +15-16% YTD. And once again, Truly hard seltzers are stealing the show. In latest 4 wks, Truly (+188%) is Boston Beer’s #1 brand family by volume off-premise (!), and 2nd largest brand family by both volume and $$ yr-to-date. That’s right, Truly volume made up 34% of total Boston Beer sales for 4 wks thru Jun 15, larger than Twisted Tea franchise (32%) and essentially double the size of both Sam Adams and Angry Orchard volume (each at ~17% of total). Gotta note, 83% of Boston Beer’s volume in scans for 4 wks is not Sam Adams. Truly represents nearly 1/4 of total Boston volume YTD with 3.24 mil cases sold in tracked scans. Twisted Tea at 35% of Boston volume YTD, Angry Orchard at 21% and Sam Adams 20%.

This question on minds of many investors and industry observers, not to mention AB distribs.  No simple answer.  On one hand, AB’s Michelob Ultra franchise on a tear, with 3 brands in top 10 growth brands, gaining 1 full share of $$ to 6.5 share yr-to-date thru 6/15 in Nielsen all-outlet, up to 7.1 for 4 weeks.  And AB generally doing better in innovation and above premium.  It gained 0.4 share of all high-end segments yr-to-date  (tho down 0.4 last 4 weeks).  On the other hand, Bud Light and Bud still way, way off.  Bud Light volume down 7.6%, $$ down 6.5 yr-to-date.   That’s a point steeper than last yr, Bud Light’s worst volume loss on record.  And Bud volume down 6.7%.  The 2 brands lost 1.7 share of $$ yr-to-date. Tho AB said it only lost 10 basis points of industry share in Q1 all channel, it’s down 1.1 share of $$ yr-to-date in Nielsen and 0.9 of volume. 

Recent High Share Losses; High Inventory Blues; More Friction, New Wine and Spirits Brands; Technology AB share dropped even more lately.  Volume down 4.4% last 4 weeks and $$ down 2.3%.  So AB lost 1.4 share of volume and 1.6 share of $$ last 4 weeks thru Jun 15. And it has a lot to do with Bud Light Orange, INSIGHTS hears.  That brand clearly not cycling and creating a short term overhang.

Meanwhile, distribs in some parts of country are singing those “high inventory blues” again.  “AB just continues to pound us with inventory and defers all of our forecasts,” wrote one Western distrib to Express last night.  Distrib noted “some very upset AB wholesalers” in his region, and that inventories more than 40% above 2 yrs ago same period.   

Then there’s AB’s Pestalozzi Street agreement for wine and spirits brands, which remains source of friction with many AB distribs, as it does not give distribs rights (like “in perpetuity”) that they are used to with AB’s equity agreement.   Given this, some smaller wine and spirits suppliers seemingly see opportunity with AB distribs and are providing more beer-like agreements.  A number of AB wholesalers are already signing on with companies like Copa da Vino and Prestige Imports (with brands like Boone and Crockett). 

Finally, an ex-AB distrib contacted INSIGHTS about last week’s Beer Marketer’s INSIGHTS piece on Reyes Beer Division and its tech investments in tools like suggestive selling and predictive analytics.  AB network, including AB branches, running far behind in this observer’s view.  Do you agree?  Is AB getting better?  Send comments to This email address is being protected from spambots. You need JavaScript enabled to view it..

The 21^st Amendment “is not a license to impose all manner of protectionist restrictions on commerce” in alc bevs, Sup Ct Justice Alito wrote in his majority opinion (7-2) to toss Tennessee residency requirements for liquor retailers issued this morn.  Majority upheld  US Dist Ct and 6^th Circuit Ct of Appeals that Tenn law (requiring 2-yr residency to obtain retail liquor store license) violates Commerce Clause and thus “unconstitutional.”  The 21^st Amendment does give states “leeway in choosing the alcohol-related public health and safety measures that its citizens find desirable,” majority acknowledged, but not if sole reason for laws is to protect in-state economic interests.  Laws must address public health/safety goals, they conclude. 

Justice Alito’s 36-page analysis repeats numerous times that 21^st Amendment grant of states’ rights to regulate alc bevs was not intended to “give States a free hand to restrict the importation of alcohol for purely protectionist purposes.”   The Court has “repeatedly declined” to treat 21^st Amendment as “allowing the States to violate the ‘nondiscrimination principle’ that was a central feature of the regulatory regime that the provision was meant to constitutionalize,” Alito points out.  TN residency laws discriminate on their face against out-of- state interests, he and 6 other Justices determined, noting that state had other ways far short of adopting residency requirements to regulate in-state liquor stores.     

Granholm Not Limited to Producers/Products, Majority Declares  What about the Tenn retailers’ argument (shared by wholesaler advocates) that Granholm decision barred discrimination solely against out-of-state producers and products, but a “different rule applies to state laws that regulate in-state alcohol distribution,” i.e. the wholesale and retail tier?  Alito: “There is no sound basis for this distinction.”  Granholm focused on products and producers because that was the case at hand, the majority notes.  Granholm “never said that its reading of history or its Commerce Clause analysis was limited to discrimination against products and producers.  On the contrary, the Court stated that the Clause prohibits state discrimination against all ‘out of state economic interests.’”  Net-net: current thinking on the US Sup Ct (again, 7 Justices) is that 21^st Amendment does give states’ “leeway” to enact laws that citizens believe “address the public health and safety effects of alcohol use and to serve other legitimate interests, but it does not license the States to adopt protectionist measures with no demonstrable connection to those interests.” 

Tenn retailers never provided evidence that TN laws had strong public health or safety intentions or results. (Recall, on-premise licensees were not required to be TN residents.)   Since Tenn retailers argued all along that law was “not subject to a Commerce Clause challenge,” majority points out, they never focused on the public safety/health argument.  Indeed, “record is devoid of any ‘concrete evidence’ that the 2-year residency requirement actually promotes public health or safety.”  Nor did the retailers provide evidence that some nondiscriminatory alternatives would have been “insufficient” to further those interests.  Claim that retailers made at Sup Ct that in-state residents “more amenable” to regulation, is “implausible on its face,” Alito wrote. And in any case, same objective easily obtained by having in-state agents of the owner and/or agreeing to in-state jurisdiction. State can “thoroughly investigate” out-of-state applicants for their “fitness” to sell alc bevs, Alito adds, without requiring residency.  Nor is 2-year residency “needed to enable the State to maintain oversight over liquor store operators,” especially since the stores are located within the state.  Majority also tosses notion that a resident-operator would “lead to responsible sales practices,” declaring “no evidence has been offered that durational residency-requirements actually foster such sales practices.” Among “obvious alternatives” to achieve responsible sales practices: limit the number of licenses and/or amount of alcohol that can be sold to an individual, mandate training, have state monitor actual sales practices. 

In the end, “predominant effect of the 2-year residency requirement is simply to protect the Association’s members from out-of-state competition.  That requirement violates Commerce Clause “and is not saved by the 21^st Amendment.”  Majority opinion does not mention “the next case”: retailers who seek to ship across state lines.  (Dissent does, see below.)  But the majority’s sweeping away of the notion that Granholm limited to producers and products likely gives those retailers and their advocates a stronger hand.  In any case, surely looks like those seeking to halt such shipments will have to make public health/safety arguments. 

Veteran alc bev atty Richard Blau shared his first impression: “While Granholm tipped the scales in favor of the dormant Commerce Clause doctrine relative to the 21st Amendment and state alcohol regulation, Tennessee Wine & Spirits Retailers Assn all but takes those scales off the table.  The majority decision declares the dormant Commerce Clause doctrine – a judicially-created concept limiting the legislative power of states that does not expressly appear in the Constitution – to be ‘its own force’ for restricting state protectionism....   The majority found the 21^st Amendment’s efficacy limited to Section 2’s ‘core powers,’ and those will be relevant only in situations where local laws are found by competent, admissible evidence to be ‘appropriate to address the public health and safety effects of alcohol use and to serve other legitimate interests, but . . .  not license the States to adopt protectionist measures with no demonstrable connection to those interests.’  It’s a new, arguably higher standard of review, and defenders of state alcohol laws will have to do a better job of marshalling data and expert testimony in defense of their regulations, if they want to prevail in this brave new world.”  We’ll publish other industry attys’ responses going forward.

Minority Wonders “What’s Left” of 21^st Amendment  Tho writing for a very small minority, Justice Gorsuch dissented from today’s decision with strongly worded support of the 21st Amendments as “the people...wrote and originally understood it.” Indeed, after today’s decision, “it’s hard not to wonder what’s left” of laws that led to the 21st Amendment and the amendment itself, Gorsuch writes. The majority “badly misreads” Granholm, in his view, joined by Justice Thomas (who wrote dissenting opinion in Granholm). By assuming the decision in that case “just happened to talk a lot about products,” the majority ignores that such focus was a crucial distinction. “It was precisely how Granholm sought to reconcile its result with the longstanding tradition of state residency requirements,” Gorsuch argues. To him, that decision’s much-recited “unquestionabl[e] legitima[cy]” of laws requiring in-state wholesalers proves that point. “I would have thought that restatement of the law more than enough to resolve today’s case,” he quips. But what should lower cts consider a “public health benefit” now, Gorsuch asks. “Does reducing competition in the liquor market, raising prices, and thus reducing demand still count?” And are laws requiring licensee “presence” the next to go?

While Molson Coors faces class action lawsuits launched earlier this yr over misreporting of revenue, plaintiffs’ bar smells blood (er, money) in AB InBev’s 38% stock drop last yr.  At least 3 law firms announced class action suits on behalf of investors who bought ABI shares between Mar 1, 2018 and Oct 24, 2018 to recover unspecified damages. Suit filed in NY charges top ABI execs, including ceo Brito, cfo Felipe Dutra and genl counsel John Blood, “made false and/or misleading statements and/or failed to disclose” that: ABI cost-cutting had tapped out; emerging mkt currency issues negatively impacting revs/profits; ABI growth not up to snuff;   dividend was threatened; credit rating at risk and more.  These comments made in press releases and during conference calls, suit alleges, and amounted to a “scheme to deceive the market and a course of conduct that artificially inflated” ABI stock price.  When “truth about the company was revealed to the market,” and dividend reduced, that caused “real economic loss to investors” who purchased stock during that period.  Suit does not mention ABI share price rebound of 38% so far this yr, natch.

Brewers and other aluminum users keepin’ up the pressure in DC to get more oversight into aluminum pricing via Midwest Premium.  Senators Tammy Baldwin (WI) and Cory Gardner (CO) intro’d Aluminum Pricing Examination Act (APEX), companion to House bill intro’d earlier this yr.  Recall, APEX grants Commodities Futures Trading Comm (CFTC) more authority to “investigate price setting and reporting entities” in aluminum mkt, broadens Dept of Justice authority to consult with CFTC on potential antitrust issues and allows US Atty Gen to get in on the action if CFTC makes a move.

Meanwhile, mega-retailer Total Wine & More “got a total win in Wisconsin on Monday,” reports madison.com.  It’s got 3 stores in state with class B retail licenses.  Those licenses usually held by bars/restaurants, but some off-premise stores have ’em, so they can run bigger in-store tastings and classroom-like experiences than smaller competitors.  But, up to now, class Bs limited to selling 4 liters of liquor per transaction.  Now, sky’s the limit, just as it is for beer and wine, after governor signed bill allowing unlimited sales.  Over last coupla yrs, Total “spent more than $270,000 lobbying the Legislature, primarily” to get this bill passed, per madison.com.

A happy change for HUSA and one of more interesting growth stories of late – Heineken franchise back in growth mode and accelerating in off-prem scans, with strong pricing gains to boot. Dollar sales grew 6% and volume up 3.4% for latest 4 wks thru Jun 15 in Nielsen All Outlet data. Heineken franchise $$ now up 3.7% for 12 wks and improved to -1.6% for latest 52 wks, according to additional Nielsen data cited by Morgan Stanley’s Dara Mohsenian. Avg price gains accelerated too, up 2.6% for 4 wks vs +2% for 12 wks and +1.4% for 52 wks.

Brand Heineken Up 3% for 4 Wks; Heineken 0.0 “Unsung Hero” What’s causing this recent spurt?  Flagship Heineken brand improved to $$ up 3.4% for 4 wks, up nearly 1% YTD, while Heineken Light (-12%) declining at less steep pace.  But Heineken 0.0 is “unsung hero,” cmo Jonnie Cahill told INSIGHTS. It’s “exceeding our expectations” on sales and “retrial rates,” while providing positive “impact on the mother brand.” Core Heineken “is definitely getting some benefit from that halo” and “early signs are positive.” Plus, “it’s only been in material distribution since March,” he pointed out. Now there are “6-figure caseloads going out every month” of Heineken 0.0 and there’s “no reason that’s going to stop.”  On top of 0.0 halo, Heineken brand gaining share in “more and more states,” according to the company.  Customized US ads are “resonating” more lately as HUSA “increased media weight.” And there’s “more consistency” and focus on big campaigns and in-store initiatives. Perhaps too, new mgt team which came together in last yr or so, including prexy Maggie Timoney, chief sales officer Jim Sloan and cmo Jonnie are making an impact.

HUSA -1% for 4 Wks; Dos “In Good Shape” with On-Trade Growth; “Very Challenging” Tecate and Others

“Things are certainly improving” but it’s “not fixed” and still “a long journey” ahead for both brand Heineken and total HUSA, Jonnie acknowledged.  Total HUSA trends improving lately as well, tho still down 1% for 4 wks thru Jun 15 and -2% yr-to-date. Volume still down about 4% both for 4 wks and YTD, as total HUSA avg prices up nearly 4% in latest 4 wks. Remaining portfolio mostly soft in scans. Dos Equis franchise still down 1% for last 4 and 12 wks. And Tecate (-12%), Strongbow (-33%) and Newcastle (-39%) declines steepened in latest 4 wks. Indeed, HUSA’s been “very transparent” with distribs: “the job to be done on HUSA is to strengthen the portfolio across the board,” said Jonnie. Dos Equis “is actually in good shape” including on-premise growth. It’s now “3rd-fastest tap handle in the on-trade” and  “#1 tap handle in Dallas,” he shared. Mexican Pale also “beginning to get some traction” in TX, and overall HUSA’s “happy with Dos…seeing it going in the right direction.”  But Tecate franchise “is very challenging.” Half of Tecate volume is in CA, which provides “structural challenges” that’re “disproportionately impacting trends.” But HUSA is “realistic” about Tecate: it’s in “tough space.”

Notably, Tecate “will get a full overhaul later this year,” including new packaging, brand positioning and more, he hinted. But “as a smaller player,” HUSA has to address portfolio issues “in sequence” rather than “all at once.” “We’ve got to focus on Heineken first” and “unlocking Dos.” New Heineken cans coming soon and there’s “lots of exciting stuff in the pipeline.”

Long-running, multi-faceted efforts by Monarch Bev in Indiana to add liquor to its distribution biz now in US Court of Appeals for 7^th Circuit, reports NBWA’s Alcohol Law Review.  Monarch argues that Fed Aviation Admin Act (FAAA) preempts state alcohol law that bars beer distribs from also selling spirits. Monarch also owns trucking co E.F. Transit that wants to move liquor.  So far, lower courts have upheld state law.  Before US Appeals Ct, state just filed brief insisting that the “prohibited-interest statutes regulate the alcoholic beverage industry and represent an exercise of the State’s core power under the 21^st Amendment to structure and regulate its distribution system.”  State cites earlier decision in same Circuit that found same FAAA does not preempt state laws that “directly regulate the distribution of alcohol through the three-tier system.” 

Seconding the state, a joint brief filed by the Wine & Spirits Distribs of IN, Wine & Spirits Distribs of IL, WSWA, the Indiana Bev Alliance (another beer distrib assn) and Associated Beer Distribs of IL points to “grave implications” of Monarch’s bid “for the sustainability of the three-tier system” in IN and “throughout the country.”  NBWA-affiliated Center for Alcohol Policy also chipped in to argue against NBWA’s former chairman, Phil Terry, and Monarch CEO.  So did the International Municipal Lawyers Assn, which asked 7^th Circuit to “explicitly confirm the district court’s recognition that under preemption analysis, where the state’s core power under the 21^st Amendment is at issue, the state regulation is afforded a strong presumption of validity, therefore, specific evidence of stated goals is not required.”