Not a déjà vu that industry necessarily loves to see, but not a big surprise perhaps.  Spot-check of advertised prices from same stores/cities we spot-checked for Memorial Day 5 years ago shows remarkably little change, especially for mainstream brands, in many places.  A little more movement among top imports and crafts, but not everywhere.

In 3 NY cities, Buffalo, Syracuse and White Plains (NYC suburb), prices basically the same, or even lower.  In Buffalo Tops mkt, Bud and MC 30pks are goin’ for $12.99 after $7 rebate this weekend.  In 2012, same 30pks were $14.99 after $4 rebate.  You can also get a Sam Adams/Twisted Tea 12pk for $10.99 after $4 rebate.  Other top crafts (Sierra, Blue Moon) $1-$2 higher per 12pk this yr at $14.99-$15.99.  Syracuse Price Chopper’s offering Bud Light and Coors Light 30pks for $18.99, a buck less than 2012.  A bunch of top craft brands goin’ for $14.99 per twelver, same as in 2012.  In White Plains Shop Rite, mainstream 18-pks going for same $11.99 as in 2012, crafts in similar range too: $13.99-$16.99 for 12pks.  Go to Atlanta and prices up, slightly.  Mainstream suitcases are $17.99, up a buck vs 2012 in Atlanta Publix.  Kroger prices up a bit too.  SweetWater in both Atlanta ads, $13.99 per twelver in Publix, $14.99 in Kroger.  Publix has local GA craft 6pks for $8.99.  Binny’s chain in Chi has mainstream suitcases for same $15.99 as 5 yrs ago, a ton of craft for same $8.99 per 6pk and some for $7.99.  Source sent ad from Chi Target with floor display of Stella 12 pks for $9.99, significantly less than we’ve seen in flyers where $13.99-$14.99 more typical.  

Movin’ west, mainstream 30pks goin’ for $18.99 in San Fran Safeway (we don’t have 2012 price).  Sam Adams, Firestone 805 and Kona goin’ for $12.88 per 12pk there, a dime cheaper than top crafts 5 yrs ago.  And Lagunitas IPA priced at $13.99 for a twelver, basically a buck cheaper than $7.49 6pks in 2012. Corona/ Heineken 12pks are $12.88, a buck higher than in 2012, but a buck or two lower than most other stores we checked.  Deal for mainstream 18pks in Seattle Safeway puts net price for a pair 50 cents lower than 5 yrs back. Suitcases are a buck more at $18.49.  Top import prices up $2 per twelver to $14.99. Several local crafts (Iron Horse, Bale Breaker) goin’ for $7.99 a sixer in Seattle Safeway.  Mainstream suitcases and top craft twelver prices also up a buck in Portland Fred Meyer, $17.99 for former, $13.99 for latter.  While virtually every ad we saw had Corona, Heineken and Stella 12pks for same price, Mich Ultra in far fewer ads and never with prices same as Bud/Bud Light.  But lotsa stores and lotsa different, and some crazy, prices out there no doubt.  Question is whether they’ll drive real volume push to kick off summer.    

Tho Vermont was poised to be first state to legalize pot via state legislature, Gov Phil Scott vetoed the bill earlier this week, saying “I think we need to move a little bit slower.”  Bill would have allowed possession of up to 1 oz of flower and adults to grow up to 6 plants for personal use.  Also set up study commission to develop sales/regulatory system. Bill had broad support in state and NY Times editorialized in favor as another way for states to experiment with legalization.  Yet Gov put on brakes, though he “offered a path forward for the legislation if state lawmakers make a handful of changes to the bill,” reports Huffington Post.  And those changes could be made as soon as special session this summer.  Gov reportedly concerned about penalties for sales to minors and more time for commission to study regulation scheme.  Advocates disappointed but hopeful this “just amounts to a short delay” and tweaks can be made in short order.

Meanwhile, Huff Post also ran article (originally from The Fresh Toast) touting job-creation oppys for legal pot.  In Colo, “somewhere around 18,000 new jobs have been created” since recreational pot legalized, article claims, with avg wages $15-20/hour and some specialized positions with earnings between $75K and $100K per year.  New Frontier Data group suggests widespread pot legalization could create “more jobs (nearly a quarter of a million) within the next few years than the combined offering of the manufacturing and government sectors.”  They may be smokin’ something to get to that number, but no doubt there is a real jobs oppy.  

Then too, there’s pot tourism, just like craft beer, craft distilling and wine tourism.  Indeed, Cannabis Growers of Canada “have called for the country to support small ‘craft’ growers that would draw visitors similar to winery or brewery tourists,” reports The Times & Transcript.  Article points to Colo experience, natch.  State officials downplay pot tourism, but “the industry begs to differ.”  Colorado Cannabis Tours cites all-time high hotel occupancy rates in Denver, claims $1.8 mil in gross sales in 2016 for its biz and expects to be up 66% this yr.  And that’s without explicit promotion by the state, unlike efforts to promote craft beer and wine bizzes. Like virtually all pro-pot media, this article took its shot at alcohol too.  Quotes pot columnist who founded Denver Post’s Cannabist website on issue of state promotion of pot vs beer/wine: “When you see [the govt] promoting a substance that’s killing 90,000 people a year in America and you see them doing everything they can to not promote a non-lethal substance…you do have to call that into question.”  And then, of course, there’s the anecdote.  Times & Transcript writer took a pot party bus and spoke to driver as “people dazedly shuffled off.”  Driver noted he also takes “rowdy drunk people” around town: “I’d take the stoners any day of the week.”   

Finally, another Canadian paper, Toronto Sun, cited new study that suggests legalized pot will “take a sip of less than 1% initially out of annual Canadian alcohol sales,” downplaying some other, much higher, estimates floating around Canada and US.  Molson Coors’ Frederic Landtmeters told paper: “I don’t think we can say we are worried.”  Head of Beer Canada cited aging population and high taxation as bigger threats to beer, noting beer “has a long history in Canada and is part of social occasions and celebrations that just aren’t tied to what marijuana is tied to.”  Regarding mixed signals in research so far, Spirits Canada prexy questioned accuracy of current projections and probably put it best: “We’re all anxious to know the answer to” what pot’s impact on alc bevs will be, but “the fact is, nobody really knows.”              

Tuff start to 2017 continued with release of Apr domestic taxpaid shipments estimate today.  Domestic brewers’ taxpaid shipments down another 610K bbls, 4.1% in Apr, estimates Beer Inst economist Michael Uhrich. For 4 mos, taxpaids down 2 mil bbls, 3.6%.  Bad news: last time US brewers started yr with 2-mil-bbl decline (2013), taxpaid total for yr closed down 1.3%.  Good news: that yr, the 2-mil-bbl hole was dug thru Jun, not Apr.  This yr, brewers have 2 additional mos to offset the drop.  With Q1 import gain, total US shipments YTD trend picks up almost a point, but still down 1.76 mil bbls, 2.8%.

Meanwhile, consensus seems to be that “US spirits growth has slowed,” as Consumer Edge’s Brett Cooper wrote this morn.  But liquor volume still runnin’ up about 2.5% and $$ up about 4.5%, he figures. That’s a pretty modest slowdown, while beer’s gotten softer.  What’s the problem?  At Beer INSIGHTS Spring Conference, Sazerac prexy Mark Brown attributed spirits outperformance vs beer over last decade to “convergence of unrelated events.”  Those events include “sophomoric” mktg by big brewers, commoditizing beer and comin’ late to craft.  That’s while big spirits co’s benefitted greatly from flavor and pkg technology and didn’t leave “white space” for smaller (craft) co’s to fill in.  Perhaps different “convergence of unrelated events” explains US beer blahs this yr.  Like what?  Like high inventory hangover that hit Q1 numbers.  Like lousy weather in many parts of US.  Like loss of Leap Day.  Like worsening trends for each of top 4 brands in scans this yr.  

Lousy weather likely to continue in much of US this holiday weekend, which can’t help.  On inventory issue, we’re getting’ mixed signals.  Some AB distribs screamin’ about inventory at “epic levels,” as one put it, in range of 20-40% over same time last yr.  Others say inventory about same, tho one noted retailers now build their holiday inventories later than in past. Regardless of reasons, big brewers’ volume goals lookin’ increasingly challenged, at least for now.

Talk about rejection! In short note today, Bernstein analyst Trevor Stirling swats away speculation that Heineken should buy Molson Coors as “neither desirable (from the perspective of a Heineken shareholder) nor likely.”  Why is this not a match made in heaven?  First, Heineken would “still be a distant #2” to AB InBev globally.  Second, “Molson Coors would strongly dilute top-line growth,” since most of Molson Coors’ biz comes from being #2 player in low-growth mkts.  Third, Molson Coors would likely have to divest most of its Euro biz and US Dept of Justice clearance would be “touch and go.”  Fourth, cost synergies are limited. That ain’t all.  While Heineken-Molson Coors provides “improved strategic balance vs ABI,” Heineken’s already in balance with ABI in “many key markets,” Heineken doesn’t need “enhanced US” biz to compete with ABI, it has other M&A options and Coors family unlikely to give up control after it just got it back from SAB.  Oh yeah, and then there’s the “remarkably unattractive” deal economics, with minimal accretion and “low economic returns.”  Tell us what you really think, Trevor.  

Constellation may not have gotten the “yes” it wanted from Brown Forman yesterday, but it may have gotten the “no” it really needed from Congress and the Trump admin.  “After months on life support, the border adjustment tax looks as if it’s finally dead,” NY Times reports today.  Story cites negative comments at House Ways and Means Committee hearing yesterday, rejection by some House Repubs, no public support from a Repub Senator and comment from Treasury Secy Steven Mnuchin at conference.  He said border adjustment tax “doesn’t create a level playing field” and “has the potential to pass on significant costs to the consumer.”  Then there’s the “fierce resistance from retailers, energy companies and small businesses” noted by the Times, which kicked off “a frenzy of lobbying activity” against the bill.  Indeed, “retail lobby and advocacy groups financed by the billionaire Koch brothers” spent “millions in an effort to kill the tax.”  Democrats, concerned about impact on consumers, were no big fans either.  That’s a lotta opposition, tho House Speaker and Ways and Means Comm chairman apparently still support tax.  In any case, Constellation’s gotta be happy with way that wind currently blowing.

Wow did the wires go wild when CNBC reported yesterday that Constellation made bid to buy big distiller Brown Forman, a bid reportedly rejected, tho neither company commented.   Lookin’ over 9 different analyst reports this morn, consensus is that tho deal would make Constellation bigger, stronger alc bev player (especially internationally) and has “strategic merit,” deal “unlikely” as: 1) Brown Forman controlled by family that has no intention, willingness or need to sell; 2) “very big” cultural differences;  3) not a lotta synergies; 4) price would be high; 5) Diageo and Pernod could offer more as they would get significant synergies. Several analysts said they had hard time making the math work.  Others noted bid contradicted ongoing and very recent statements by Constellation brass that they’re focused on smallish, “tuck-in” spirits acquisitions, not a “transformational” deal like Brown Forman would be.  But bid suggests otherwise, as Bonnie Herzog at Wells Fargo wrote: “It’s now clear that STZ is actively seeking not just bolt-on but potentially large-scale M&A.”  

A few other comments caught our attention. Bid also suggested to Consumer Edge’s Brett Cooper that Constellation seeks to be “meaningfully larger in spirits,” expand its high-end liquor biz and intl scope and that the company “and the Sands family have significant aspirations for what Constellation can become.”  Bloomberg’s Tara Lachapelle speculated about “one other mega-deal candidate” for STZ: Boston Beer.  That’s even while SAM also controlled by family owner.  Several analysts raised possibility that STZ shareholders might not embrace a bid for Brown Forman, especially since, as RBC Capital Markets’ Nik Modi noted: “Constellation Brands is already in the penalty box due to the acquisition of Ballast Point (given the $1 BN price tag and recent deterioration of trends) where investors have expressed concerns over a potential write-down.”  Investors also remember, Nik noted, some big wine deals that STZ made in past which didn’t pan out.  

Essentia Water chief strategy officer Neil Kimberley laid out some guidelines for beer distribs who wish to play effectively in non-alcoholic brands at our conference in Chi last wk.  He also offered a tip on potential source of brands to pick up: bigger bevcos that have come to realize they’re not well equipped to nurture emerging brands and are looking for alternative routes to retail. Neil spoke from 25 years’ experience working both sides of aisle, managing beer distrib networks for brands like Snapple and Essentia but also vetting emerging brands for potential pickup by Cadbury Schweppes Americas Beverages (predecessor of Dr Pepper Snapple Group).

Neil disabused listeners of notion that NAs are proverbial “golden cases” ‒ add-on to core biz – that is, extra sales obtained with no real expenditure of time/resources. “It’s something that needs to get focused on,” he stressed. Beer houses need to look at themselves more broadly as a bev co and base decisions on product portfolio and operating structure from that. Neil pointed to promising new categories like value-added waters like Essentia – it’s up triple digits this yr, moving mainly thru beer houses – to cold-brewed coffee, energy drinks and RTD teas. With many conference speakers noting struggle for growth on alc side, this is obvious source of potential growth. In fast-changing category it can pay to return phone calls of folks who approach you with new product: “You’ve no idea what the next big idea is – make sure you give it the time of day,” Neil said.

In Neil’s view, NA mgmt must have clout within distributorship – if it’s farmed out to junior people or leaders with no real clout, NAs will inevitably be an afterthought. Separate pre-sales force to insure focus, he advised. Avoid temptation to cap salespeople on NA sales, which vaporizes their incentive once they reach their sales goal (perhaps just as brand ignites). Figure out a way to reach accounts like schools and hospitals, where beer trucks aren’t welcome.  Tho NA contracts vary greatly, Neil offered some of Essentia’s ground rules. It requests minimal carve outs to DSD coverage, only in places like Whole Foods that are inhospitable to DSD, and has been flipping brand as quickly as it can to DSD at grocers like Publix in Fla, Kroger in heartland. Neil doubts we’ll ever see perpetuity deals again. He demurred on question about suitable buyout multiple. As for why beer houses accustomed to solid franchise protection should invest in NA brands that could flee to another system, Neil simply argued that “a lot of growth is happening” in NAs and beer houses should get their share.  Tho there’s rich base of startup brands seeking distribution these days, Neil pointed to another source of portfolio additions that beer wholesalers may not yet have on their radar: the big bevcos themselves. “It’s increasingly evident that the big beverage companies cannot incubate,” he said. “They’re actually interested in alternative routes to market as well.... They understand that they’ve been unsuccessful and are looking for a different way to approach this.”  (As recently reported in sibling newsletter Beverage Business Insights, Coca-Cola has recently moved its Illy RTD coffee line out of its own system to indie beer and other houses.)

While regional craft brewers as defined by Brewers Assn (15K bbls/yr or more) collectively had slowest growth of all groups (up just 0.9%, 150K bbls), turns out about 2/3 of them grew in 2016. Of 165 regional craft cos, just 50 declined, vs 109 that grew and 6 that were flat, according to BA stats and estimates in latest May/June edition of New Brewer mag.  (Editor’s note: handful of regional brewers do not report stats to BA and therefore are not included in this count.)  Many of those declines came from larger brewers – 26 of top-50 were either flat or down, compared to 43 of top-100 regional craft cos and 56 of top-165. Indeed, there’s clearly more growth as you get further down the list to smaller regional cos.  

Then too, 22 craft brewers crossed 15K-bbl-mark in 2016, newly classified as “regional” by BA.  Collectively they grew 110K bbls to almost 370K bbls. So new regionals accounted for almost 3/4 of total estimated net-growth for regional craft.  Perhaps no surprise that AB acquired largest new regional brewer in 2016. Wicked Weed shot up 12K bbls, 120% to 22K bbls, and plans to hit 40K bbls in 2017.  Only MA’s Lord Hobo Brewing gained more total bbls in this group, jumping 400% plus, 12,400 bbls to 15,400 in just its 2d year.  

After Beer Biz Daily reported yesterday that AB’s Colo branch American Eagle also tagged for trade practice violations, we tracked down details.  In Mar, AB and Liquor Enforcement Div of Colo Dept of Rev agreed to resolve alleged violation of law that bars consignment sales.  State sez American Eagle invoiced event promoter for $51K worth of beer for Aug 2016 bike rally.  Branch accepted return of about $27K of kegs and cases that did not “fall within the permitted commercial reasons for lawful product returns,” state sez.  To “resolve all issues,” AB agreed to 14-day suspension, 5 days at end of Mar 2017 and 9 days “held in abeyance.”  But state decided “public welfare and morals would not be impaired by” allowing branch to operate during suspension and payment of a fine “will achieve the desired disciplinary purpose.”  Fine determined as 20% of 5 days gross revs during Sep 2016, with minimum of $200, max of $5K.  Exact amount redacted from doc, but hadda be the $5K. Upon payment, suspension “permanently stayed.” Turns out too that Colo regulators also tagged American Eagle for $1K last fall to resolve allegations branch sold 4% ABV Bud Splash to 65 liquor stores unlicensed to sell product of that strength.  Branch also paid $500 for separate unlawful return of a coupla kegs.

Losing run-up week to Easter put a hurt on volume in Nielsen’s all-outlet scans for 4 wks thru May 13.  Volume down 1.3% and dollars flat for 4 wks.  Yr-to-date, volume dipped 0.6% and $$ up just 0.7%.  Constellation actually picked up its pace with strong Cinco: volume up 13% YTD, gaining full share of volume, 1.3 share of $$.  Other volume gainers YTD: Mike’s +14%, Yuengling up mid-singles and Diageo Beer Co +3.7%.  Otherwise a sea of red: AB and MC each off 2.2% thru mid-May, HUSA, Pabst and NAB each off 1-1.6%.  Boston still down 7%.  Top 4 brands still down and losing share, with YTD volume trends: Bud Light -4.4%, Coors Light -1.8%, Miller Lite -0.9% and Bud -6%.  Among top growth brands in most recent period: 5 imports (Corona, Modelo Especial, Stella, Pacifico and Tecate Light), 1 superpremium Michelob Ultra, 1 premium, Yuengling and 3 economy brands (Busch Light, Bud Ice and Key Light).  Craft softened, up just 0.3% YTD.  FMBs still down 4%, cider -8.3%, premium biz off 3-4%.  Below premium off 0.9% YTD, losing 0.1 share compared to premiums’ 1.2 share loss.