Big brewers are getting more leery of pricey stadium sponsorship agreements and Constellation stepping in with smaller deals to become import sponsor.   Constellation inked 3-yr 7-figure deal with Chicago White Sox for Modelo Especial, reported Chi Tribune. (INSIGHTS hears it’s $1.5 mil per yr.)  That’s after MC and White Sox couldn’t come to agreement on renewing sponsorship, which Crain’s pegged at $7-10 mil per yr.  (INSIGHTS heard $8 mil for old deal; White Sox wanted more this time).  Way this played out seems similar to what happened at Barclay’s in NY, where AB reportedly walked away from full bore deal, and Constellation became import and craft sponsor there. 

Miller Brewing had sponsorship deal with White Sox for 30 yrs. “Gone will be the prevalent Miller Lite signage that has dotted the ballpark for decades, replaced by the gold and blue imagery associated with Modelo,” wrote Crain’s.  Constellation will also have a Casa Modelo bar on the left field concourse.  Modelo Especial is #2 beer brand in Chicago IRI.

MillerCoors is #1 brewer in Chicago, and Miller Lite the #1 brand.   But now “its only official stake” in hometown Chi sports teams will be with Chicago Bears, notes Crain’s. MC clearly choosing to spend its mktg $$ elsewhere.  MC reportedly bids less aggressively when sponsorships come up, plugged in source told us awhile ago.  Recall, it also lost sponsorship of Washington Nationals.  Yet MC still sponsors 13 sports teams nationwide and sez it would welcome doing biz again with White Sox in future.  White Sox deal announced at Constellation’s Gold Network Summit without detail (INSIGHTS reported then), but Chi media all over it now. 

Super soft start for grocery biz (-3.4% for 4 wks, -2.9% YTD) still draggin’ down Nielsen all-outlet scans.  Total volume off 0.3% for both 4 wks and yr-to-date thru Mar 4, as c-store biz still much healthier, +0.8% for 4 wks.  Meanwhile, $$ sales up just shy of 1% all-in off-premise.  AB and MC each very slightly better for 4 wks than YTD, but still combined for full share loss thru Mar 4.  And Constellation still pickin’ up almost all of Top-2 share loss.    

Imports and superpremiums drivin’ above-premium gain, while craft flat yr-to-date, FMBs -4%, cider still down double-digits. Heineken USA, Pabst and Boston each down, but Diageo Beer, Mike’s and NAB each up. Yuengling still solid in scans too.  Coors Light and Miller Lite continue to gain premium light share from Bud Light.  Coors Light and Miller Lite held even in overall share, while Bud Light shed 0.6 yr-to-date.  Michelob Ultra gained 0.7 share same period.  Top 6 import brands each up yr-to-date, tho Dos Equis slipped into the red for 4 wks.   Five of top 10 economy brands still up yr-to-date: Busch Light (+3.3%), Busch (+1.5%), Miller High Life (+4.9%), Bud Ice (+7.2%) and Steel Reserve (+0.9%).

States with legal cannabis markets want more info about how the new administration and particularly attorney general Jeff Sessions will treat those states and those markets. At same time, some fed lawmakers already intro’d bills to change how US govt views marijuana, including one that clearly takes cues from laws regulating alcohol. After comments from White House press secy Sean Spicer to expect “greater enforcement” of fed pot laws (see Feb 27 Express), 11 Senators penned letter to AG Sessions asking him to “clarify DOJ’s policy regarding state marijuana laws.” Top ask from these lawmakers is for DOJ to uphold policy outlined in 2013’s Cole Memorandum. That guidance allowed “states to implement marijuana laws as they deem appropriate,” Senators reminded. It “provides a strong framework for effectively utilizing the DOJ’s resources and balancing the law enforcement roles of the federal government and the states,” while allowing state regulators and bizzes to continue operating, in their view. “Immediate assurance” that Sessions “will respect the ability of the states to enforce thoughtful, sensible drug policies in ways that do not threaten the public’s health and safety” is “essential” and “critical” to these states. Upholding Cole Memorandum is best way to do that, these lawmakers argue. They also ask that state reps and regulators “be afforded an opportunity to comment on any shift in policy” from DOJ. Among 11 Senators that signed letter, 10 are Democrats, including 5 from states with existing recreational cannabis markets and 3 more from states that voted to legalize recreational sales last year.

Meanwhile, a couple bills that would preclude any policy or guidance from DOJ already on the table in the House. Both amend the Controlled Substances Act. One simply adds clause that fed laws “shall not apply to any person acting in compliance with State laws” that legalize cannabis cultivation, distribution, sales, etc. The other, named “Ending Federal Marijuana Prohibition Act of 2017,” goes further, does exactly as promised. And tack it takes clearly modeled after laws that ended Prohibition of alcohol. That bill basically exempts cannabis from Controlled Substances Act, “except that it shall be unlawful to ship or transport” it in such a way that violates laws of involved states (or US-held territories, etc). In fact, its language is very similar to that of Webb-Kenyon Act, 1913 law largely deferring federal regulation of alc bevs to the states. Republicans intro’d both bills last month, with no action since committee referrals.

Impact of brewers’ burgeoning taproom biz – from craft brewers and big brewers – getting more attention.  TTB’s preliminary figure for “tax-determined/premises use” (a pretty good proxy for on-site sales) is 1.8 mil bbls in 2016, up nearly 600K bbls.  Final figure will be larger.  Number of taprooms keeps growing, as US passed 5,000 operating breweries, according to BA.  Crucially, many consumers now choose ’em over other options.  That TTB # still less than 1% of total US beer, but: 1) it was a substantial part of craft growth last yr; 2) total US volume would have been down without it; 3) top 4 suppliers each participate in these direct sales; 4) none of that beer ships thru distribs nor is sold at traditional retailers, who are becoming increasingly tetchy about all of the above.  (A lengthier version of this article appeared in Mar 10 edition of Craft Brew News.)   

Craig and John Call Out Competitive, 3-Tier Challenges  Last week, NBWA prexy Craig Purser asked  whether taprooms put consumer choice and brewer access at risk in a guest commentary for American Beverage Licensees, which represents on- and off-premise retailers.  Expansion of brewery-owned retailers has “upended” competitive landscape, Craig suggested, as brewers “aggressively expanding their retail privileges” beyond on-site facilities to “stand-alone, non-brewery taprooms or tasting rooms.  And these modern-day ‘tied houses’ are often exclusive outlets selling only alcohol products that they own.”  They’re also “increasingly serving as competitors to licensed, independent retailers.”  What’s more, mega-brewers now partaking.  AB Inbev, Craig sez, is “fastest growing taproom brewery,” via its acquisitions.  This “blurring” of brewer-retailer tiers “presents both a business and political challenge for” distribs and indie retailers, Craig warns.  Both are losing sales, while “suppliers see money in bypassing” those tiers, even at long-term risk to choice/access.  

Recall, ABL brought up this issue in comments to the Dept of Justice regarding the ABI-SAB deal.  ABI’s growing retail presence “could have future anticompetitive implications for America’s independent beverage retailers” the assn warned, adding that these “tied-house” outlets “limit consumer choice.”  

What’s the Beef?  Tied House Concerns “Hardly Implicated” by Taprooms, Sez BA Atty   Brewers Assn doesn’t like big brewers being in retail any more than distribs or indie retailers do.  But many BA  members either have thriving retail bizzes, survive on retail sales and/or and want to expand privileges.  Indeed, in recent post for BA’s consumer-facing website, CraftBeer.com, atty Marc Sorini took much more benign view of taproom sales.  In addition to self-distribution and on-site taprooms, more states now “permit brewers to also open a few remote retail tasting rooms,” he wrote.  These help “fuel the craft beer boom,” are “critical commercial” oppys for craft brewers, in Marc’s view, and natural evolution of 3-tier. But “original tied-house law concerns about local monopolies are hardly implicated by a few tasting rooms among tens of thousands of independent retailers,” he opined.  Recall, at Beer Marketer’s INSIGHTS’ mtg in NYC Marc acknowledged that vertical integration by industry giants would propose challenges.  But in a mkt with “tens of thousands of retailers,” he wondered, “what’s the beef?” Even a bunch of AB-owned brewpubs “shouldn’t matter.”  Gotta note at NABCA legal symposium today, issue of craft distillers’, expecially smallest ones’, desire for expanded retail options and for parity with beer and wine very much top of mind for American Craft Spirits Assn.

First notable casualty of tougher period in craft announced late Friday: Speakeasy Ales & Lagers shuttered its San Francisco brewery “indefinitely.” Co’s “been forced to immediately cease brewing, packaging, and tap room operations,” it posted to website, due to combo of “difficulty securing capital investment and outstanding debt obligations.” Indeed, “the company is financially insolvent and requires new capital to move forward,” founder/CEO Forest Gray said in statement. Speakeasy built and opened much bigger facility in 2015, an expansion it originally planned to boost production to 90K bbls per yr. It reported a solid double-digit increase to volume sold in Calif to just over 32K bbls that yr. That represented most of total production. But last yr its brands down over 35% nationally in IRI multi-outlet + convenience data YTD thru Dec 25. Speakeasy had 40-50 employees at time of closure, according to Mercury News and SF Business Times reports. While small brewery closings have continued (and perhaps even accelerated a bit) this year, most of them are very small companies with fairly limited impact. But this is by far the largest craft co to announce even an “indefinite” shut-down since the segment’s overall growth started slowing considerably last year.

Latest view of total industry volumes concurs with pretty “meh” outlook, 2.5 months into 2017. Distrib orders overall still contracting, according to Beer Purchaser’s Index from NBWA’s Lester Jones. Feb BPI was 43.8. That’s better than Jan’s 42.2, but still under 50, indicating volume still shrinking compared to last yr. Recall, distribs tell Lester/NBWA if they’re buying more beer, less or about the same. So as a whole, middle tier buying less. “Overall, we can expect to see slower beer shipments in the first quarter,” Lester said. But index varies considerably across segments, natch. Figure for imports ticked up from 62.1 to 63.7. Only other segment where index increased? Below premium: 28.1 to 35.2, so still well below 50 but another indicator of increased interest in and prospects of economy brands, adding to better scan performance. Index for FMBs flipped from over 50 this time last yr to 35.8 for Feb 2017. Similar big drop for craft, from 75.8 to 60. That’s still over 50 and higher than all other segments save imports. But also clearly a big change from a yr ago and representative of new craft landscape. Anecdotal reports so far all over the place. Recall Jan shipments up, but scans not so much. So some mixed signals across 3 tiers of beer biz early in 2017.

Utah legislature passed law last night lowering legal BAC limit for driving from 0.08 to 0.05, reports AP.  Law goes to Gov Gary Herbert, who has expressed support.  Recall, National Transportation Safety Board and National Safety Council have advocated for 0.05, the standard in some European countries.  MADD does not support 0.05, however.  It has turned its attention and advocacy to ignition interlocks as technological solution to end drunk driving.  Supporters of Utah bill, and 0.05 in general, claim it will save lives and make argument that impairment “begins with the first drink.”  Opposition in Utah fears negative impact on tourism.  And most vocal industry group opposed to 0.05, restaurant assn American Beverage Inst, points out that over 3/4 of alcohol-related highway deaths, in UT and elsewhere, involve drivers with BACs of 0.15 and above.  BAC limit of 0.05, ABI also argues, punishes responsible drinkers, “entraps responsible citizens” and will “do almost nothing in the effort to reduce traffic fatalities,” as less than 1% of fatalities involve drivers between 0.05 and 0.08, ABI’s Rick Berman pointed out in op-ed published by Washington Times on Feb 28.   

But highway safety measures gettin’ more traction lately, as fatalities have increased in each of last 2 years, ending long string of success in reducing crash deaths.  Indeed, NYT op-ed writer David Leonhardt took up issue earlier this week.  He focused on need to ban texting and even hands-free phone use while driving.  While states have tried to address these issues in different ways, “not a single state has a sensible law,” Leonhardt believes.  A “better approach,” is his view: some companies have already banned “all smartphone use while driving.”  Leonhardt also made odd analogy involving alc bevs that plays into both equivalence message and notion that impairment begins with first drink, any drink: “Allowing hands-free talking and texting is akin to forbidding drivers from getting drunk on liquor yet letting them have a few beers before getting behind the wheel.”  Two other state legislatures ‒ Hawaii and Washington – are also considering 0.05 laws.

First day of distrib council meetings “focused” on MC’s move to 50/50 on promotions. Surprise, surprise.  Council “shared feedback it had received from across the network and contextualized the magnitude of the concerns.”  In other words, distribs are pissed.  It was “a very candid conversation,” notes MC, “about the changes and why they were made.  MillerCoors leaders took the feedback and provided more context around their rationale and objectives,” including that it will “enable a smarter and more disciplined approach to promotion.”   MC still using the magic words “revenue neutral, point in time.”    

MC sez it has made “significant strides” towards “getting Coors Light and Miller Lite on sustained growth trajectory,” pointing to share gains in (declining) premium light segment.  Both brands “will be sharing very strong work” at next week’s convention.  “Early signs are encouraging” on MC’s economy strategy too, according to MC.  High Life “off to a strong start” and “top five growth brand according to Nielsen,” while Keystone Light “off to a good start as is Hamm’s.”  MC “shared plans to reenergize Redd’s” and tho hard sodas presently are in decline, MC “sees hard sodas as a long term opportunity and will continue to invest to support Henry’s with the intent to be the No 1 hard soda brand.”  

How high is up and how far can imports/craft ascend in their most advanced mkts?  Imports/Craft hit 70.4 share in SF/Oakland foodstores last yr, according to IRI.  Imports at 34 share and craft at 36 share there.  Craft alone bigger than AB (20.5) and MC (14.6) combined.  Constellation easily #2 player in mkt, closing in on AB.  

About 6 yrs ago, INSIGHTS wrote article about alarmingly high (for AB and MC) import/craft mkt shares in major west coast cities (San Diego, LA, SF, Portland, Seattle).  Since then, situation’s become more acute.  At that time, import/craft shares were 44-56 in those 5 cities.  Now import/craft shares range from low of 57 in Portland to high of 70 in SF.  AB $$ share down to 16 in Portland, while craft up to 45 share there.  Also over 41 in Seattle/Tacoma.  AB 22 share or below of $$ in 4 of these 5 cities, but it still held 28 of $$ and 33 of volume in biggest mkt LA.  MC got low of under 15 share of $$ in SF and high of 23 in Portland.  

In LA, imports at 43.6 share of $$.  Modelo Especial grew to become #1 brand there, easily passing Bud Light last yr in $$ sales, at 11.9 share compared to Bud Light’s 10.5.  Plus Modelo Especial’s $$ sales up 21%, compared to Bud Light down 9%.  In all 3 Calif cities, Constellation neck-and-neck with AB for #1 position in $$ share.  In LA, AB at 28.2, compared to Constellation at 26.2.  In SD, AB at 21.6, Constellation at 21.  And in SF, AB at 20.5, Constellation at 19.2.  At least 2 points swung in Constellation’s favor last yr in each city.  So if  trends continue, it could be #1 in all 3 mkts in supers in 2017.  While foodstores only cover part of mkt, chains are very important along West Coast, so this picture has gotta cause great concern for AB and MC. It also plays into vision of future that Constellation painted at its Gold Network Summit.   

Constellation shared some of its proprietary research from its insights and analytics team to illustrate that “high end brands are the next wave of growth in the beer business,” as Constellation chief commercial officer Bruce Jacobson phrased it at Gold Network Summit.  Of past 30 day drinkers surveyed for 12 mos thru last summer, 73% had consumed high end beers in last 30 days.  That was up from 60% 5 yrs earlier.  During same period, percentage who drank premium beers dipped from 66% to 60%.  Another good sign for high end: “More and more low end consumers are finding it perfectly acceptable to step up to high end brands.”  While 23% of drinkers drink low end beer exclusively, 36% of those “low end” drinkers are “perfectly comfortable” drinking both high end and low end (recall Constellation includes premium brands with “low end” in its nomenclature).  Meanwhile, 37% of drinkers are “loyal to the high end.”  

Young consumers are going high end in a hurry.  For drinkers 21-29, 52% of their (self-reported) consumption was high end 2 yrs ago. But now it’s 69%.  That’s a big jump.  For those 25-34, it went from 52% to 64%.  What’s more, every income group is increasing % of their servings in high end.  Those making over $100K jumped from 52% to 62%.  But 2d biggest gain among those making less than $35,000; hi end jumped from 33 to 41% of consumption.  Given these increasing preferences for high end beers across age and income demographics, high end beers will be “cornerstone of total beer industry growth,” concluded Bruce.