mports are the growth segment in US beer, but really just about all of that growth comes from Mexican imports.  While total imports up $217.5 mil, 8.4% yr-to-date thru Jun 11 in IRI multioutlet + convenience, Mexican imports jumped $212.2 mil, 12.3% YTD.  Grew 2.4 share to 69.1 share of import $$ YTD.  At 72 for last 4 weeks.  

Constellation Well Over 80% of Segment; Up 14%; Widespread Portfolio Health Continues Overwhelming majority of Mexican import biz from one co: Constellation Brands.  And they are getting almost all the growth in Mexican imports this yr too.  Total Constellation $$ sales up $207 mil, 14% yr-to-date (includes Ballast Point, down in recent mos, see below).  Modelo Especial $$ sales up  $106.1 mil, 21.6%, Corona up $61.9 mil, 8.7%.  Pacifico up $9.2 mil, 24%, Modelo Chelada up $7.3 mil, 22.3%.  Other Constellation brands up solidly too. After Constellation, Mexican imports far more of a mixed bag, with some brands faring poorly.

Top 4 HUSA Mexican Brands, 14% of Segment, Up 4%  At #2 Mexican import player, HUSA, Dos Equis Lager $$ sales up $8.4 mil, 5.5%.  Tecate Light up $8.9 mil, 27.6%.  But Tecate down $5.9 mil, 9.4%.  Dos Equis Ambar Lager down $1.1 mil, 7.6%.  Those 4 brands got $275.5 mil in sales, about 14% of Mexican import $$.  And collectively they were up $10.2 mil, 3.7%.  But brand Heineken improved; up $7 mil, 2%.  

Sol Down Double Digits; 0.2 Share of Segment $$; Priced Way Below Corona  Sol brand looks like it will be a challenge for MillerCoors, even as it will be a welcome entry point into what remains hottest segment.  Its $$ sales down $675K, 16.6% in IRI MULC YTD thru Jun.  And with $3.4 mil in sales so far, it’s less than 0.2 share of Mexican import $$.  What’s more, its avg case price of $27.35 is $5 per case less than Corona.  Better news for MC; Peroni brand up $860K, 13.3%.     

AB Mexican Imports Down Double Digits; 0.5 Share of Segment  AB efforts to play in this segment so far not panning out. Its first foray, Montejo, down $5 mil, 68%.   Its 2d effort, Estrella Jalisco, still up 69% yr-to-date.  But part of that is still incremental.  Like Montejo, Estrella having trouble lapping strong intro #s; down 25% last 4 weeks.  The 2 brands together down 12% yr-to-date, more in most recent periods.  And collectively, they’ve got just 0.5 share of Mexican import segment YTD.   AB still has Stella, up $21 mil, 15.5%.  

Speaking of China, Budweiser’s new ad campaign in China for summer is anchored by 4 ½ minute ad using “electronic dance music and a sci-fi film set in a dystopian future where a bottle of Bud can set you free,” reported Ad Age, noting Bud’s campaigns “often have a different feel in China,” compared to other markets.  China was first place AB used EDM in its mkting and Bud “took a risk with that,” since style of music was “little-known” in China, but is now “a big part of its strategy there,” added mag. “A brand shouldn’t always just see what consumers like. We should be taking them with us, beyond expectations,” said Matt Che, Bud’s North Asia-Pacific market VP.  Beyond hopefully connecting with viewers thru EDM, this lengthy commercial is continuation of Bud’s “experimenting with storytelling lately in China, where long branded videos can take off on social sites,” wrote Ad Age. Bud has climbed to #5 brand in China and grown share from 1.4% to 3.6% over past 5 yrs, per Euromonitor Int’l.

This is one of those issues that may seem obscure, but has the potential to seriously impact the US beer biz. At first, Dept of Commerce’s several-hour long Section 232 Hearing this morn on “national security implications of aluminum imports,” seemed like a stacked deck. Witness after witness from the US aluminum industry testified to Chinese overcapacity, “collapsing” prices and unfair competition causing US aluminum producers  to go out of biz, and even in “danger of completely disappearing.”  US smelters went from 23 down to 5 since 2000.  Virtually all called for US govt tariff on imported Chinese aluminum and other measures.  But several later witnesses countered and warned of unintended consequences of Chinese aluminum tariffs.  These included leading bev can manufacturer Ball Corp, Beer Institute prexy Jim McGreevy and more.  

Aluminum imports for cansheet manufacturing “do not threaten national security,” said Jim.  And “competitive challenges” US smelters face “are the result of factors unrelated to imports,” insisted Jim, including “aging facilities, high energy costs and a strong US dollar.” So Beer Institute (also speaking for Brewers Assn and American Bev Assn) “urge the Secretary not to impose any tariffs or restrictions on imported cansheet, primary aluminum or ingot.”  Such “tariffs or other measures limiting the importation of primary aluminum or cansheet will hurt the activities and jobs our industry supports.”   Indeed, “import restrictions” would lead to “higher costs and in turn lost sales.”  Instead, Jim asked for “further scrutiny of aluminum price irregularities and distortions,”  “policy changes focused on lowering energy costs for smelters” and finally “no restrictions on cansheets or its inputs.”  Stay tuned.   

While shipments improved in May, retail sales still unusually soft.  We knew the beer biz didn’t perform well over first major holiday in peak selling season.  But we didn’t know just how poorly. Until now.  

Beer volume down 4.6% for 2 weeks thru Jun 4 in IRI multi-outlet + convenience. And $$ sales down 3.3%, $51.8 mil for 2 weeks.  That’s right. Over $50 mil less in retail sales in 2-week period.  That’s as bad a major holiday as we’ve yet seen for beer biz.  Making it even worse: spirits and wine had strong increases in $$, volume or both.  Spirits volume up 7.3%, but $$ up 4.5%, $12.5 mil. Avg prices down almost 3%.  Meanwhile, wine volume not much better than flat. Up 0.3%. But with continued trade up, wine $$ sales up $10.9 mil, 2.6%.   

Making matters worse for AB and MC, drops are even steeper in premium and economy.  With barely any price realization.  OUCH.  Total premium beer $$ sales down $43.7 mil, 7.1%, with avg prices up just 0.4% per case. Volume down 7.4%.  Total subpremium sales down $10.4 mil, 4.4%, with avg prices up just 2 cents a case.    Volume down 4.6%.  In list of all segments in alc bevs, domestic premium and subpremium were by far the worst-performing, with the biggest losses in $$ sales.  FMBs were 3d, down 9%, $10 mil.  

At least, beer imports still best-performing.  Up $8.6 mil, 3%.  And superpremiums were 2d, up $6.7 mil, 6%.  The next 15 or so segments were all spirits and wine, tho premixed cocktails (up 43%), also include  hard seltzers.  Meanwhile, craft $$ sales flat, volume down 1.9%.  But it gained share with these weak results.  And don’t think hard seltzers are any kind of savior.  At least not so far. Their collective sales were  $740K for 2 weeks, while total beer at $1.5 bil.  

Following nasty 2.3-mil-bbl taxpaid shipments decline Feb-Apr, Beer Inst economist Michael Uhrich estimates domestic brewers’ May taxpaids +600K bbls, 3.8%.  That’s best single mo since last Aug.  For 5 mos, taxpaids still -1.4 mil bbls, -2%.  And with imports flattish thru Apr, means known yr-to-date US shipments also off 1.4 mil bbls, 1.7%.  Jun-Jul could be oppy for domestic brewers to pick up some lost ground.  Last yr, mid-summer shipments down over 700K bbls, 2.2%.     

Just as alc bev laws/regs differ state-by-state, so do enforcement priorities.  That came thru loud and clear during panel at Natl Conference of State Liq Admins last week.  Asked to ID current “hot topics” in enforcement, admins from 3 states named very different areas.  In Illinois, it’s “illegal importation,” given higher taxes there vs neighboring states that drive some retailers to IN, MO and IA to grab product that ends up on IL shelves.  Illinois also concerned with e-commerce and direct shipping.  Admin from Delaware said his state has $400 mil budget deficit and the “agency is feeling it.”  Indeed, Del Dems have proposed big excise tax hikes to close the gap.  Also, tho direct shipping banned in DE, “it’s not enforceable.”  In Indiana, number one priority “will always remain” drinking by minors and other public safety issues, tho admin tacked on trade practices too.  Here’s another big difference between states.  Illinois has 13 agents for 35K licensees, similar to Massachusetts’ 14 agents for 25K licensees.  Compare that to Washington, which has 140 agents and more for marijuana.        

Recall, two weeks ago Express covered consultants’ disagreement over whether beer distribs that lose brands suffer “irreparable harm.”  Similar topic came up in a Nevada judge’s decision yesterday over a product distribs don’t even have yet.  As we reported, NV distribs who got first dibs on legal pot distribution in NV said if state got its way and allowed dispensaries to get licenses and buy direct from growers/cultivators, their distrib licenses would be “useless.”  Judge apparently agreed and granted injunction that halts, at least for now, state from licensing current dispensaries for recreational sales.  His ruling “determined that the Independent Alcohol Distributors of Nevada would suffer irreparable harm if the Tax Department issues retail marijuana distributor licenses to other businesses,” reports Las Vegas Review Journal.  Judge also cited brief on behalf of distribs which “corroborated evidence that the businesses would be shut out of the marijuana distribution business entirely if the tax department issues licenses to non-alcohol distributors.”  Once licenses granted to dispensaries, he wrote, “it will be difficult if not impossible” to revoke ’em.  Initiative that passed in Nov that legalized recreational pot gave alc bev distribs 18-mo exclusive window for wholesaling pot.  State determined not enough distribs expressed interest, tho judge found 29 expressed interest back in Nov and 5 submitted applications.  State may appeal and process could delay recreational pot sales in NV beyond Jul 1 target.  But distribs still have shot at adding different kind of “golden cases.”      

While beer biz runnin’ into roadblocks this year – especially biggest brands ‒ and even off-premise scans showing small decline yr-to-date, spirits continue to gain.  Spirits volume +2% yr-to-date thru May in control states, NABCA reports, and $$ sales +3.9%.  That’s a bit off running 12-mo trends, +2.6% and +4.5% respectively, as analysts have noted spirits “slowdown.”  But beer hasn’t had a +2% yr in a decade (2006).  Meanwhile, wine volume +1.5% for 12 mos in 6 control jurisdictions that are sole distribs of wine.   

Mike’s Hard Lemonade Co prexy Phil Rosse sent mid-year review to distribs this afternoon, pointing to Mike’s widening lead as #1 FMB co.  Depletions up 14% yr-to-date, consumption $$ up 14% and it has gained 3.6 share of FMB $$, Phil figures.  One big driver of growth: Mike’s Harder 24 oz can.  Up 59% YTD, while Harder 16 oz cans still up 10%.  Cayman Jack $$ up 25%.   White Claw Seltzer is “share leader” and “has the highest repeat purchase rate of any hard seltzer.”  Mike’s upped total company A&P (advertising and promotion) 20% for 2017, reminded Phil.   Ads for Mike’s Hard Lemonade will be on tv all summer long and Mike’s will invest $10 mil in White Claw mktg this summer.  

Mike’s Hard Lemonade Co remains 2d biggest industry gainer in scan data.  Volume up 13.6% and $$ sales up 14.7% yr-to-date thru Jun 10 in Nielsen all outlet.  It has gained 0.2 share of volume and 0.2 share of $$ YTD. But for last 4 weeks, Mike’s $$ sales continued up 14% in tuff environment and it gained 0.3 share of $$.  Avg price for a case of Mike’s at $33.87, up 49 cents, 1.5%.  

Push comin’ to shove on who will distribute pot in Nevada, with target of legal retail sales to begin Jul 1.  Recall that while initiative gave first dibs to alc bev distribs, state opened up licensing to others, claiming not enuf interest among those distribs.  State, and others, suggested distribs feared losing licenses given pot still illegal under fed law.  But small group of distribs started new assn (Independent Alcohol Distributors of Nevada), and sued state to stay at head of line.  At hearing yesterday, Kurt Brown of Capital Bevs (AB, Carson City) “said he has the ability to distribute recreational marijuana to every retail establishment in Nevada,” reported Las Vegas Review-Journal.  Capital has set up separate co to distribute pot.  Boutique wine distrib from Vegas, Allan Nassau of Red Rock Wines, testified “he could do the distribution work ‘in my sleep,’” paper also reported.  Atty for new assn said 5 Nevada distribs applied for licenses.  Judge due to decide today whether state can issue distribution licenses to dispensaries already selling medical marijuana.  If that happens and dispensaries can “cut out the middleman,” would make licenses for alc bev distribs “worthless,” as dispensaries “will have no need for a third party,” atty for assn said,  according to AP.