Kroger is #2 in grocery (behind Walmart)  but also in top 2 or 3 customers for many major beer suppliers. So it’s of more than passing interest that it’s getting clobbered in stock mkt and in press lately.  It’s viewed as possible collateral damage in escalating war between Amazon and Walmart.   Kroger itself is massive co, with revs of $115 bil in fiscal yr ending 1/28/17, oper income $3.5 bil.  But Kroger reported weak results, with same store sales declining for 2d straight qtr, and it warned on profits just last Thursday.  Stock tumbled 19% in 1 day.   

Then things got worse.   Amazon deal for Whole Foods announced the very next day.  Stock dropped another 9% Friday.  It has lost 28%, $7 bil in stock mkt capitalization in 1 week.  Kroger’s woes likely bad news for beer, as it means brewers, who have become “too dependent” on some big chains, according to one supplier, have huge customer under big pressure.  Recall, Kroger last yr attempted ill-fated plan to make Southern Wine and Spirits its category captain (thru 3d party co).  But TTB warned that such a scheme would run afoul of tied house regs, so plan got the heave ho.  

“Kroger has been struggling, battered by a record bout of food deflation,” wrote Bloomberg. “It has spent several years lowering prices and focusing on fresh produce in a bid to thwart” Walmart.  Now “question is how it will fare having to fend off not only” Walmart (“world’s largest brick and mortar chain”) but Amazon (“undisputed king of internet retailing”).   More tuff stuff on Kroger’s and US grocery biz from Bloomberg: “The price of groceries has dropped for 17 straight months, the longest streak in more than 60 years. Lower food prices, while a boon to consumers, have brought headaches to supermarkets.”  Walmart and others “offer steeper discounts to boost customer traffic.  The resulting price war has weighed on profit margins.”  

Needham Dist in Stillwater, MN has deal to sell its approx 250,000 cases to Bernick’s.  Deal announced to employees and suppliers, expected to close by end of Jul. Lead brands are Summit and Grain Belt.  Recall, Needham sued Summit for terminating it, with intent to move brands to J.J. Taylor (see Craft Brew News vol 8, #36).  Presumably, that suit will go away now that Needham has deal to sell to Bernick’s.

Concerned yet about soft volume so far this yr in scanned off-premise channels?  Latest Nielsen all outlet data shows volume -1.9% for 4 weeks thru Jun 10.  That’s quite a bit softer than for 4 wks thru Saturday of Memorial Day weekend (5/27) when volume -1.1%, YTD was -0.6%.  Premium segment slipped 5.2% this most recent period, with Bud Light and Bud down alarming 6.7% and 8% respectively.  Coors Light and Miller Lite softened too, to -3.9% and 1.9% respectively for 4 wks.  Economy brands down 2% for 4 wks, with Busch Light, Busch and High Life goin’ from up YTD to down in recent period.  Key Light, Bud Ice and Rolling Rock up strong tho and Hamm’s doublin’.  (Those 4 brands among top growth brands for 4 wks.)  Craft off slightly

(-1.4%) for 4 wks, up just 0.2% yr-to-date.  Brewer trends about the same, with AB and MC each off about 2.5% YTD (softer for 4 wks).  Constellation, Yuengling, Diageo Beer and Mike’s still the gainers.     

With all the talk in recent days about Amazon as threat to big grocers, they already have big beer woes. Beer volume -3.3% for 4 wks thru Jun 10 in grocery, Nielsen scans show, with YTD -2.6%.  AB volume off 5% YTD in grocery, double MC’s dropoff rate.  Craft down 1.2% in channel YTD.  Even imports up just 1.6%.

C-store biz healthier in Nielsen scans: volume down “just” 1.5% for 4 wks, -0.7% YTD.  AB slightly outperforming MC in channel YTD; AB volume off 2.4% vs MC trend of -2.9%.       

Concerned yet about soft volume so far this yr in scanned off-premise channels?  Latest Nielsen all outlet data shows volume -1.9% for 4 weeks thru Jun 10.  That’s quite a bit softer than for 4 wks thru Saturday of Memorial Day weekend (5/27) when volume -1.1%, YTD was -0.6%.  Premium segment slipped 5.2% this most recent period, with Bud Light and Bud down alarming 6.7% and 8% respectively.  Coors Light and Miller Lite softened too, to -3.9% and 1.9% respectively for 4 wks.  Economy brands down 2% for 4 wks, with Busch Light, Busch and High Life goin’ from up YTD to down in recent period.  Key Light, Bud Ice and Rolling Rock up strong tho and Hamm’s doublin’.  (Those 4 brands among top growth brands for 4 wks.)  Craft off slightly

(-1.4%) for 4 wks, up just 0.2% yr-to-date.  Brewer trends about the same, with AB and MC each off about 2.5% YTD (softer for 4 wks).  Constellation, Yuengling, Diageo Beer and Mike’s still the gainers.     

With all the talk in recent days about Amazon as threat to big grocers, they already have big beer woes. Beer volume -3.3% for 4 wks thru Jun 10 in grocery, Nielsen scans show, with YTD -2.6%.  AB volume off 5% YTD in grocery, double MC’s dropoff rate.  Craft down 1.2% in channel YTD.  Even imports up just 1.6%.

C-store biz healthier in Nielsen scans: volume down “just” 1.5% for 4 wks, -0.7% YTD.  AB slightly outperforming MC in channel YTD; AB volume off 2.4% vs MC trend of -2.9%.       

A total of 241 distribs representing 47% of industry volume responded to Tamarron’s extensive 2017 survey, where distribs answer many, many questions, rank suppliers.  These distribs averaged 5.8 mil cases, “indicating a large percentage of mega distributors responding this year.”  These distribs avg 1249 SKUs per distrib (ranging from 20 to 7,500).  That’s up 4.6x since 2005.  Number of suppliers avg distrib represents tripled from 13 to 39 in same period.  No wonder distribs see “SKU proliferation/ Complexity” as one of “biggest challenges facing the beer industry.” In open ended question, 59 called that biggest challenge.  That was 2d most frequent answer, behind only “3-tier erosion/threats (Brewpubs, Direct Ship, Amazon),” which 92 said was “biggest challenge.”  Third on list and a watch out for sure: “Revenue/Margin/Cost Pressures.”  57 respondents and seemingly on the rise.  Think about it: three tier threats, SKU proliferation, and financial pressures are 3 “biggest challenges,” according to distribs. That sounds right.

Constellation and MC Tied for Top Supplier in Survey  Only 3 of top 12 suppliers improved their performance scores in Tamarron’s survey this yr.  Last yr’s winner for first time, MillerCoors, went backwards this yr as did Constellation.  But STZ lost less.  So Constellation and MC now tied for #1 spot in survey.  This metric still strikes INSIGHTS as somewhat strange.  Each of Constellation and MillerCoors got 3.4 score, with former perennial champ Boston Beer (7 yrs running) dropping to 3.33.  A score of 3.0 suggests supplier “met expectations.” Only 1 other supplier got that: Mike’s Hard Lemonade Co.  Bottom rated cos included ABI, Pabst and Craft Brew Alliance. Only about half the # of AB distribs responded (92) as MC distribs (187), and some of those may have select AB import brands only.   

After the bell on Friday, Constellation bought yet another hi-end vintner, this one even smaller and more exclusive than last couple (Prisoner, Meomi).  Constellation bought Schrader Cellars, which makes cabs that sell for $225-$250 a bottle and are only available direct-to-consumer.  These cabs are some of few to get numerous 100 ratings from both Robert Parker and Wine Spectator.  This is small biz, about $11-12 mil retail sales, estimated Consumer Edge’s Brett Cooper.  “The business acquired should be very high margin given its direct to consumer business model and high return given what appears to be the lack of assets,” Brett added (i.e. no vineyards).  “This acquisition marks a step change in price point and business model (direct to consumer),” noted Brett. One other notable angle from Brett: “Bill Newland’s star continues to rise.” Bill joined STZ in 2015 as chief growth officer, promoted 2x since, mostly recently became Chief Operating Officer.  Bill “given credit for helping the acquisition” in release.  Bill and Carol Schrader had worked together before.  Noting that Rob Sands ceo since 2007 “and with a lack of family involvement,” concluded Brett, “we would not be surprised to see Bill Newlands taking more operational responsibility in the future.”   

Hits just keep on comin’.  Tons of ink spilled on seemingly immense potential ramifications of the historic deal for Amazon to buy Whole Foods Market.  INSIGHTS will just tease a couple additional themes today, with more to follow.  “Amazon ceo Jeff Bezos may be single handedly killing inflation,” headlined CNBC late this afternoon.  “Analysts expect Amazon to rein in the famously high prices of the upscale grocery chain… which then could have a ripple effect.” Amazon will “reshape” $800-bil food retailing industry and this is “highly deflationary,” said Gluskin Sheff sr economist David Rosenberg.  And that’s in an industry already having difficulty raising prices. This sets up a “supermarket war of historic proportions.”  Food makes up about 15% of the consumer price index.  If this turns out tobe the case, won’t be good for beer industry pricing either.   

Amazon is “driven by a relentless desire to conquer literally everything in its path,” wrote New Republic, arguing that it is “changing the whole concept of monopoly.”  This was one of several articles we saw that argued along the lines that Amazon must be stopped.  Speaking on CNBC, Harvard B School prof and antitrust expert Leonard Schlesinger countered that under any traditional antitrust analysis, there’s nothing anticompetitive about Amazon’s acquisition as it’s a “pimple on the face” of food retailing, since Whole Foods at less than a 2 share.  That’s especially true since Amazon forays into mkts often lead to lower prices for consumers.  That also harken back to Robert Bork’s “influential” 1978 book, The Antitrust Paradox, which argued that “harm to consumers is the only plausible harm,” according to New Republic.  “As long as Amazon keeps prices low,” under such analysis, “it’s safe from scrutiny.  But with its move into physical retail, the necessity for rethinking antitrust law has never been greater.”  

Seven weeks after Apr 30 lockout, “more than 100 employees” of MC Jersey distrib Shore Point returned to work today, after agreement reached on Friday, said NJ.com.  Shore Point continued to deliver, but “union received plenty of support,” noted Asbury Park Press, pointing to Republican Lt Gov, who “stopped by the picket line” and Belmar Mayor who banned Shore Point from operating a beer tent at Seafood Festival.  While co had proposed a wage freeze, in end it agreed to modest annual increases for the next 3 yrs.  Meanwhile, other big strike in Northeast, at Long Island AB distrib Clare Rose, continues.  Latest news on that: Anthony’s Coal Fired Pizza (a 68-unit chain, with 8 on Long Island) is boycotting Clare Rose and AB products on Long Island, Teamsters said.  

Lots goin’ on in New Jersey last Friday.  Strike at MC distrib Shore Point finally settled (see below).  Same day, Warren North closed on deal to sell to several NJ distribs, including Shore Point.  Earlier this yr in NJ, Warren South and Hub City, totaling 6.5 mil cases, sold to Kramer.  Now Warren North, another 1.5-2 mil cases, sold too.  (All 3 operations previously owned by Chip Banko.)  Warren North’s volume split between Shore Point (most of it), and several hundred thousand cases sold to each of Peerless and Kohler. Following this deal, Shore Point close to 10 mil cases.  Meanwhile, Diageo Beer Co USA volume went to High Grade.  Also last Friday, Hunterdon traded Ballast Point with NJ MC distribs for St Killian brands (see Jun 16 Express).  Just a couple of weeks earlier, Hunterdon agreed to pay $1.75 mil to NJ AG.  Things are jumpin’ in Jersey.