Cans picked up another 0.8 share of total US beer biz to 56.2 last yr, according to data prepared by Beer Inst economist Michael Uhrich.  While overall beer volume edged up 0.3%, can biz +1.8%.  Bottle biz dipped 1.9% and bottle share slipped to 33.4.  That was 5th straight yr cans took share from bottles.  If you go back to 2008, cans had just over half the biz, so up 6 share since then.  Meanwhile, bottles slipped from 40.2 share in 2008 to one-third.  Draft volume steady in 2016, Mike estimates, and picked up a point since 2008, at 10.4 share of US biz last yr.  But draft up only 0.3 share since 2011 despite explosion of taprooms.

Big difference still in domestic vs import packaging splits.  Cans fully 62 share of domestic brewers’ volume, up from 55.7 in 2008.  Bottles slipped to 27.2 share from 34.7. Draft is just shy of 11 share of domestic volume, up a little over 1 point since 2008.  Bottles still reign in imports: nearly 2/3 share of import volume in glass, tho that’s down from over 3/4 in 2008.  Cans had just 26.4 share of imports last yr, tho up from 15.5 share 2008.  Import draft last yr about same volume as in 2008, so draft share of imports down from 9 to 7.7.

A busy time for alc bev biz in courts.  Coupla new developments this week.  US Appeals Ct for 9th Circuit, taking a break from reviewing the Trump Admin’s proposed immigration ban, took a drink, or two. A 3-judge panel, including one who’s been widely quoted on the immigration matter, upheld lower ct decision and ruled that “no reasonable consumer would be deceived by the label on the carton into thinking that Bud Light Lime-a-Rita...is a low-calorie beverage or that it contains fewer calories or carbohydrates than a regular beer.  It is clear from the label that the beverage is not a normal beer,” judges wrote, since label calls bev a “Margarita With a Twist” and pictures a margarita. Proper comparison is Budweiser Lime-a-Rita or a real margarita, both of which would have as many or more calories and carbs, they added.  Gotta note tho: decision was not unanimous.  One of 3 judges dissented. “Most natural comparison,” in this judge’s judgment,  ain’t a Bud Lime-A-Rita (which doesn’t exist) or a margarita (which has tequila and is “decidedly not a malt beverage”), but Bud Light Lime, which has “far fewer” calories/carbs than a Rita.  Consumers “could be misled,” this judge believed, by the word “light” since calorie/carbs in small print on labels and not visible on cartons. So Rita won a squeaker here.

Spuds Trademark Owner Barks In US Dist Ct  Spuds Ventures LLC, a co that revives dead brands, sued AB, claiming brewer’s Super Bowl ad infringed trademarks he’s gotten for Spuds Mackenzie, at least for some products.  AB’s Spuds trademarks are dead, suit sez.  SV LLC has had trademark for selling pet products, t-shirts and the like for yrs.  Last summer co filed new application with “bona fide intent” to use mark for bar, beer garden and other services.  AB asked for delay to oppose that application in Feb this yr.  Plaintiff claims AB put out “infringing” press release and ran “infringing” ad.  Seeks injunctions, reparative ads and, of course, money.  You might think Spuds Ventures would love free publicity for its products (which include pet deodorizers, natch) that Super Bowl ad provided.  You’d be wrong.  

Plaintiff claims “reverse confusion,” which “occurs when more powerful companies” like AB “use the trademark of a smaller, less powerful senior company,” like Spuds Ventures, which is now “hampered in developing its own senior trademarks as consumers will assume it is he who is the infringer, not vice versa.”  AB’s calling dog*&$!: “Anheuser-Busch created the Spuds MacKenzie character and used it in Bud Light commercials and promotions.  The plaintiff's only trademark registration for ‘Spuds MacKenzie’ covers pet dietary supplements and grooming supplies.  We believe the lawsuit is without merit and intend to vigorously defend against it.”       

Fed Ct Tosses All Charges in Wild Liquor Distrib Spat  Believe it or not, wheels of justice sometimes do move quickly.  US Dist Ct already dismissed case filed just last Sep.  Recall, NY liquor distrib Empire Merchants filed broad racketeering, conspiracy and other charges vs another liquor distrib (Reliable Churchill/Breakthru Bevs), Empire’s own part owner (Charles Merinoff) and a bunch of MD retailers for bootlegging liquor to NYC retailers, evading taxes and stealing Empire’s sales.  Oddly, no one denies a serious amount of liquor was bootlegged from MD to NYC during time period here (at least 2008-2014).  Empire claimed damages of over $100 mil and that NY lost tax revs in tens of mils.  Indeed, feds have indicted some of the actors here.  Fun fact: in one yr, MD retailers charged in bootlegging scheme did biz in county of 78,000 population but “purchased the highest quantity of Johnnie Walker Black of any county in the US,” judge noted.  

But fed judge dismissed RICO and other fed charges with prejudice.  Net-net: Empire could not show that acts to bootleg liquor were “proximate cause” of any injury to it.  Fed law pretty specific here, and Empire’s charges came up short, judge concluded.  Conspiracy charges aimed at Reliable, Breakthru and Merinoff also dismissed with prejudice as they’re being settled.  Judge also dismissed charges under NY state law, tho Empire could ostensibly sue there.  

Craft Brew Alliance shipments off 4.9%, almost 39K bbls to 749K bbls in 2016, it reported yesterday.   Reminder of tuff sign o’ the times: 3 of top 5 craft brewers – Boston, Sierra Nevada and CBA ‒ down about 5% or more last yr.  And tho CBA eked out operating income of $375K, after averaging $4.7 mil previous 4 yrs, net income swung to loss.  Shipments hit particularly hard in Q4, -13%, as distrib inventories reduced 15%.  But CBA depletions only down 3% in Q4, flat for yr. And CBA thinks it could turn volume around this yr. Guided 2017 shipments to between -1% and +4%, depletions from flat to +6%, wider than usual ranges, just like Boston’s, another sign o’ the times.  Kona volume up 13%, +45K bbls to just below 400K, well over half of CBA’s own biz now. And Kona depletions up even faster, +17% for the yr.  Widmer shipments down almost 16% to just below 150K bbls.  And Redhook declined at twice that pace, slipping to just 127K bbls. In 2014, both brands were just over 200K bbls. Omission off 16.7% too. Other CBA brands, owned and non-owned, up 50%, but still less than 5% of CBA volume.

Even while total shipments, including contract biz, down mid-single digits, CBA net sales off just 1%.  Gross profits down 4%, but selling, genl and admin expenses up about 2%. So operating income slipped to just $375K and operating margin narrowed to tiny 0.2.  CBA’s net loss of $320K followed net income of $1.9 mil or more each of previous 5 yrs.  Lookin’ ahead, CBA stickin’ to Kona Plus strategy and “aggressively evolving our cost structure” as it realigns footprint and transitions volume through new contract brewing agreement with AB.  Jan-Feb depletions +1%, CBA sez.  

Interesting insight into AB InBev’s approach to innovation provided by global director Innovation Community Tina Wung at tech conference in Australia, reported by diginomica.com.  Tina told how ABI built innovation track, first with Beer Garage innovation lab in Palo Alto, CA. Then came: 1) Budlabs in IL (for “advanced data analytics, predictive modeling, statistical regressions, artificial intelligence and machine learning”; 2) Zx Ventures to fund startups; 3) Analytics center in Bangalore.  Key to driving innovation culture: combo of buy in from sr mgmt and “ground up” development, plus communication not only across AB InBev, but also partners, including suppliers, distribs and retailers.  

Another critical issue: defining innovation.  “For AB InBev,” diginomica sez, “encouraging new thinking in marketing campaigns is one way of getting a more innovative mindset into the business along with the idea of encouraging failures with the lean startup mindset of understanding why an idea failed.”  Here’s Wung: “70% of the campaign should be bread and butter, the tried and true tactics you know drive distribution, perceptions and brand health, 20% are incremental changes on top of that which you can test and 10% are just wild ideas that you want to try and that’s institutionalized.”  Gotta be “smart about the failure rate…but if your target is actual failure then you’re going to jump that much higher and test the boundaries of what your teams can do,” said Wung.  Last point: “set realistic KPIs” (key performance indicators).  In some early, small tests, ABI applied standard revenue, perception and even mkt share KPIs that were “really unrealistic and it creates no-go decisions for the innovation roadmap.”  Wung didn’t detail, or diginomica didn’t report, actual failures, successes or specific learnings, tho AB distribs could probably provide some examples of the failures.  Yet, very clear how seriously ABI thinking about and acting on digital strategy, disruption and new ideas.

This yr’s version of March madness in beer biz broke this week in key Chi grocery chain Jewel Osco.  For just 3 days over Saint Patrick’s Day weekend, you can get cases of Bud Light, Miller Lite and Coors Light for $9.99.  A suitcase for under $10!  Not something you see every day, thankfully.  But this deal is loss leader by chain, not funded by brewers and distribs, INSIGHTS hears, as Jewel Osco looking to build traffic for this holiday.  Yet it’s still a somewhat distressing indicator of price one key chain perceives as necessary to move the needle.

A dive into all-channel depletions trends by Beverage Marketing Co “suggests on-trade consumption of imported beer weakened into the new year,” while at same time, spirits were “strengthening,” reported Stifel’s Mark Swartzberg. (Recall Stifel working with Beverage Marketing “to eliminate the blind spots” of solely relying on IRI data by “collecting two months of all-channel depletion growth” as well.)  BMC figures show Constellation growth for Dec/Jan at 10.4% vs 11.2% gain in IRI. That’s decelerated from BMC and IRI gains of 15.3% and 13.3% back in Sep/Oct.  Heineken trends improved to +1.4% in BMC data while down 2.6% in IRI in Dec/Jan.  Meanwhile, big spirits cos, Diageo, Pernod Ricard and Brown-Forman, each improved from slight declines in Sep/Oct to gains in range of 1.6%-3% in Dec/Jan, per BMC data.

Both BMC and IRI “show a slowdown in Corona Extra volumes from low-double and high-single digit growth rates” back in Sep/Oct to mid-single digit gain in Dec/Jan, noted Mark. BMC showed 11% growth for Corona Extra back in fall vs 5% gain this Dec/Jan.  Meanwhile, like IRI, BMC also shows continued double-digit growth for Modelo Especial (+20%) and Modelo Negra (+15%).  BMC put Pacifico Clara gain at 12.5%, considerably slower than IRI’s reported 24.2% gain.   On Corona Extra slowdown, “this could mean Corona Extra is losing shelf space to Modelo Negra and Pacifico Clara,” suggested Mark.  “More likely, in our opinion is that certain regions are seeing slowing velocity of Corona Extra (for the same amount of shelf space), that this is a function of increased scale in a given retailer, and that velocity for competing non-Constellation brands is still inferior, giving the retailer little incentive to yield Corona Extra space to Bud Light, for example,” he added.  

Consumer price index for beer increased 1.6% in Feb vs yr ago, per latest gov’t stats. That’s once again in-line with beer pricing over past several months, but CPI for beer fell further behind pricing for all items which posted solid 2.7% gain in Feb. CPI for beer has now lagged increases for all items in 4 of last 5 months. Still ahead of spirits and wine tho. CPI for spirits off 0.8% in Feb vs yr ago while wine fell 1.4%.  Over last 12 mos thru Feb, CPI for beer was up 1.8% vs 1.5% gain for all items, while spirits prices up 0.3%, wine off 0.3%.

“Growth by 2019 is not a rallying cry,” began MillerCoors ceo Gavin Hattersley at MC Distrib Convention in Vegas, “it’s our plan.” In addition to outlining plan and pointing to areas of growth, Gavin’s unusually wide-ranging speech touched on several hot button issues. He took “skeptics” head on, and responded to various criticisms.   

MC “absolutely” made progress “against the curve” of getting to growth last yr, but there were “misses” with Blue Moon, Leinenkugel, and Redd’s, Gavin acknowledged.  And MC “losing far too much economy volume to ABI and cheap wine and spirits.”  Gavin pointed to positives: Lite back to growth lately, Coors Light and Miller Lite “healthier than they’ve been in years,” High Life up at “mid-single digit rates” and “15 brand families growing volume across our portfolio.”  Those included Coors Banquet, Blue Moon Belgian White, Leinie Summer and grapefruit Shandies, Redd’s Wicked and many more.  MC plans to double its acquired craft brands in 2017, he said. 

Despite progress, there are “far too many people questioning our ability and hedging their bets,” according to Gavin.  In his concluding remarks, Gavin returned to this theme, noting he’s “perplexed” and “maybe even frustrated” when some distribs treat MC plans “like some sort of ‘menu,’ opting in and out of pieces of it.  We need you to drive every part of our strategy,” Gavin added.

50-50 Promo Split “Right Thing to Do for Our Collective Businesses”  Gavin dealt with recent brouhaha over 50-50 promotion split and Constellation’s case that distribs should focus more on high end.  “I know you were not really happy,” said Gavin, with recent switch to 50-50 split on promos.  But MC and distribs “need a longterm pricing strategy to compete in the years ahead.”  While “people can debate the course of action,” he said, “ultimately we believe that this is the right thing to do for our collective businesses” and these moves are “helping us stick to our pricing strategy.”   Some believe Molson Coors “forced us to take this action” to pay down debt etc, but “let me assure you that’s not the case.” Molson Coors “fully supported” the move,  but it was “our decision.” Sales prexy Kevin Doyle delved into more detail and tackled some more contentious aspects of MC’s decision in his remarks (see next Beer Marketer’s INSIGHTS).

Gavin also countered Constellation’s recent comments on high-end focus.   “According to Constellation, distributors should focus exclusively on the high end.”  That’s not “just a risk to our brands” but to “the whole beer category…. You can’t focus on the high end at the detriment of strong players in the premium and economy segments.  That ‘high end or nothing else’ strategy simply doesn’t work.  And frankly a more irresponsible and damaging comment to the future of the entire beer industry is hard to imagine. The wine and spirits guys must be dancing in the aisles as they plan for all the millennial drinkers they’ll recruit from beer.” Editor’s note: Constellation asked for more focus on growing “high end,” less on declining “low end,” not for exclusive focus.

MC Will “Get to Growth,” Gavin Assures; “Stick with Us”  MC spends near $1 bil on marketing, Gavin reminded.  MC upped spending 20% per bbl in recent yrs.  Gavin defended recent decision not to renew sponsorship with Chi White Sox (Modelo Especial became import sponsor): “Instead of investing in overpriced assets like the Chicago White Sox,” MillerCoors will “reinvest those dollars directly back into the Chicago marketplace in more relevant ways.”  He contrasted MC’s heavy investment with others, asking what they are “bringing to the table…. How much is New Belgium spending? How about Mike’s?”  Those “with the winds at their backs today might not have the winds at their backs forever,” Gavin pointed out, citing Boston’s current trends following period of great growth, adding that even Corona has had its ups and downs.  Gavin brought these examples up, he said, “not to disparage” but to “provide caution.”  MillerCoors was “your best supplier in the past” and “we want to make sure we are your best supplier in the future…. We will get to growth,” Gavin concluded, “stay with us.”

Several reminders this morn at NABCA legal symposium just how dizzying the array of alc bev law challenges and attempts of reform can be.  State regulators from PA, VA and KY detailed processes by which their states revisited alc bev codes in recent years, re-jiggered laws and left interpretation and implementation to alc bev commissions.  Inevitably, even after new laws passed there are “unintended consequences” and “clean-up” bills that follow to address them, and where industry members try to advance their interests.  Sometimes process is multi-yr effort led by ABC itself, as in KY.  Sometimes, it’s an unexpected bill passed by legislature outta the blue, as in PA last summer.  Then too, there’s constant stream of new bills.  In VA already this yr, legislators considered revised retail practices, alcohol in Air BnBs, golf course regs, public consumption at sprawling shopping centers, “foodie tours” vs bar crawls, live venues issues, channel pricing and more, COO for VA ABC pointed out.  Once again, notion of “model” or “uniform” alcohol code that could be adopted across states floated by supplier atty.  Each regulator acknowledged simplicity, uniformity would benefit regulators and industry alike, but each also stressed “diversity” of states and determined it’s a “difficult sell” and “tall order” at best.   

Plenty more hot topics too.  On earlier panels, NBWA genl counsel Paul Pisano led discussion of growing 1st Amendment issues that implicate, sometimes threaten, alc bev regulation.  Think Retail Digital case in Calif where 3d party providers seek to upend law and allow suppliers/distribs to pay for ads in retail stores.  Gotta address this as biz regulation, Paul reminded, not speech regulation.  Another panel detailed growing illegal sale of alcohol over internet on sites like Craigslist.  And ain’t just single bottles of limited edition, expensive bourbon by the way.  There’s mainstream tequila and other liquor on sale online for $20 bucks a bottle, noted Sazerac’s compliance officer, likely aimed at underage buyers.  More from conference in next Beer Marketer’s INSIGHTS.

Constellation Beer Brands Division officially launched new Modelo Chelada Tamarindo Picante nationwide, a blend of “tomato, salt, lime, tamarind and chipotle peppers,” co announced.  Tamarindo Picante is 3.3% abv and will be available in 24oz cans with suggested retail price of $2.99.  Chelada has been another mini-growth engine within CBBD’s portfolio. With just one sku and only 3 yrs after launch, Modelo Chelada reached 4 mil cases in 2016, co said at its mtg.

So co lookin’ for an additional boost from Picante launch, not that it needs the help.  While Chelada category grew 7% last yr, Modelo Chelada accounted for over 90% of that growth, per release.  And it’s still growin’ 39% YTD thru Feb 19 in IRI multi-outlet + convenience data. AB’s Bud and Bud Light Cheladas also growin’ in 2017, collectively up 5% YTD in scans.