This surprising and innovative development shows Diageo committing (conditionally) to significant additional resources invested in US beer.  Diageo will build “a US version of Dublin’s popular Guinness Open Gate Brewery in Baltimore County, Maryland,” co announced this morn.  Brewery would be built on site of its Calvert Distillery in Relay.  Plans include “a mid-sized” Guinness brewery (Diageo hoping to start with more than a 100-hectolitre system), and a “Guinness visitor experience with an innovation microbrewery.”  Combo of brewery, tasting room, retail store, packaging and warehouse “would bring the company’s investment in Relay to approximately $50 million.”  That’s no small potatoes, even for Diageo.  Natch, new brewery will not brew “iconic Guinness stouts,” which will continue to be brewed in Ireland.  Rather, it “would be a home for new Guinness beers.”  Guinness Blonde will eventually be brewed there, tho timing uncertain.  And it also plans to experiment a lot with barrel-aged beers (“a big focus”), in its spirits barrels.  

Before project can even begin, Diageo needs a law change. It needs MD law to allow it to build tasting room, retail experience it needs in MD, where current law limits sales for on site consumption to 500 bbls for breweries producing over 22,500 bbls per yr.   “Finalization of these plans are still contingent on reaching agreement on several considerations,” sez release without specifying tasting room or other additional considerations.  But brewery will bring a lot of new jobs, about 40 in brewing, warehousing and packaging as well as 30 for Guinness visitor experience, sez release.  Diageo has modeled 250-300,000 visitors could go through this facility in 1st year.  

Politicians get excited when a big global co talks new jobs and a boost to tourism and this is no exception.  “Today’s announcement is an exciting development for Maryland’s thriving tourism industry,” said state comptroller Peter Franchot in release.  “The Guinness facility will be a strong boost for our economy,” he added. “I am optimistic that all stakeholders will come together and work collaboratively with the General Assembly to ensure that this innovative project moves forward.”   Diageo said it “hopes to receive approvals and begin construction this spring. Goal is to get ‘er done in time for Guinness’s 200th anniversary this fall.

This move demonstrates largest distiller Diageo becoming more ambitious in US beer.  Also raises questions. Here is yet another example of a giant supplier looking to have more presence as a retailer.  Will distribs embrace?  How do local craft brewers feel about emergence of giant new competitor?  Beyond that, will it work?  Without core Guinness brands, how will Diageo build enough volume to justify its substantial investment?  How much of its ROI is dependent on its retail establishment? Remains to be seen whether this happens on Diageo’s timetable and according to its program, but move represents one of first real twists in 2017. It also suggests a stepped up sense of purpose for Diageo Beer Co USA, which just announced organic revs up 3% in fiscal 1st half thru Dec.  

“You don’t look like you’re from around here.”  That’s the only line of dialog included in 15-second teaser that AB released of 60-second Bud ad planned for Super Bowl LI.  Line spoken to young man who walks into dark bar in St Louis circa 1857.   Adweek got sneak peek of rough cut and ran lengthy article on ad’s creation in Louisiana.  Ad’s called “Born the Hard Way,” and tells story of AB co-founder Adolphus Busch arriving in US.  By the end of the ad, Adolphus meets with Eberhard Anheuser: “We then see the words appear: ‘When nothing will stop your dream, this is the beer you’ll drink.’  We end with the Budweiser logo and ‘This Bud’s for You,’” Anomaly ad agency strategy director told Adweek.  

Key is “driving commercial performance, setting us up for the long term and making sure that we have an impact in the short term in terms of sales, brand health and buzz around the brand,” Bud veep Ricardo Marques said.  Interestingly, while AB tried to exploit 2016 Presidential election with Bud Light Party Campaign last yr, this yr’s Bud ad sharply focused on another extremely hot topic, especially this weekend: immigration.  “It’s a story that’s super relevant today,” Ricardo said, tho AB not intending a political message. Adweek really likes what it saw in rough cut: “The beautiful short film serves as a salute to all who have come here to fulfill their dreams in the face of adversity.... It will undoubtedly go down as one of the most epic, moving and memorable ads in Budweiser’s long and storied history of Super Bowl spots.”  Expect a final version of ad to sneak out before game itself.    

Preliminary state-by-state shipments data from Beer Inst economist Michael Uhrich ‒ he’ll tweak the numbers throughout 2017 – suggests slightly higher 0.4% increase than we estimate for total US shipments. Of 800K-bbl total gain Michael estimated, 132K bbls in NY, 220K bbls in FL and 463K bbls in TX.  All in, 22 states up or even, 28 states and DC down.  In Northeast, New Eng shipments off near 2%, but Mid-Atlantic up 140K bbls, 0.6%.  In 3 Southern regions, shipments up 1.1 mil bbls, 1.4%.  In Midwest, shipments off about 200K bbls, 0.4%.  In West, shipments off 50K bbls, 0.1%, as biggest US mkt CA down near 200K bbls, 0.8% in Michael’s early look.

Northeast Highlights: NY and PA Fine, Down Elsewhere  In two biggest northeast mkts, NY and PA, shipments up 1.2% and 0.5% respectively.  But every other state down.  That included almost 1% drop in NJ and 2% hit in MA.  Every other state in New Eng off 1-3% each.  That 6-state region shed 175K bbls, 1.8%, Michael’s estimates show.

FL, NC, GA and TX Gains Solidify South  Four largest southern mkts each recorded gains in 2016: 1.6% in FL, 3.3% in GA 2.8% in NC and 2.3% in TX.  They combined for over 1-mil-bbl gain between ’em.  So just a modest gain collectively in remaining dozen states plus DC.  For now, gains in DE, Carolinas, AL, KY and TN offset dropoffs elsewhere in region, including 3 of 4 West South Central states.

Midwest Softness Continues  Beer biz remains lackluster at best in Midwest.  Off slightly in 2016, following flat 2015 trend and declines in 2013 and 2014.  In five big East North Central states, WI eked out tiniest of gains in preliminary data (0.1%), IN and OH each down a tiny bit (-0.1%), IL and MI each off about a half-percent.  Three small gains in 3 small West North Central states – IA, NE and SD – offset by losses in bigger MO and MN mkts, and declines in KS and ND too.  

Bounce Back in Mtn States; CA Drags Pac Trend  Solid gains in 2 biggest Mtn mkts – AZ and CO – pulled region into black in 2016 following down yrs in both of those states and region in 2015.  AZ up 2.3%, CO gain just shy of 2%.  Shipments also up in ID and UT, even in NV.  But down in MT, NM and WY, Michael estimates.  In Pac states, current -0.8% estimate for CA, and drops in AK and WA offset gains in HI and OR.  CA volume dipped back to 2014 level.  WA drop follows strong gains in 2 previous yrs.  

Spirits gets more attention as winning competitive battle vs beer for alc bev occasions, but wine has generally outperformed beer in recent yrs too.  Gotta note, less consensus on wine totals; different sources report different trends.  But some wine numbers already out there.  Looks like wine volume up about 2%, maybe more, last yr.  Veteran wine analyst Rob McMillan used 2% number in recent, annual deep dive for Silicon Valley Bank.  Another source, consulting firm BW 166, put out +2.8% recently, cited by Santa Rosa Press Democrat.  We’ll get better view of spirits trend last yr when Distilled Spirits Council provides its analysis in a coupla weeks.  But recall volume trended up 2-3% in control states for most of last yr.  So likely that beer lost another half-share of absolute alcohol consumption in 2016, despite eking out tiny volume gain.  Reviewing his predictions for 2016, McMillan noted one of his misses was an expectation of a decline in wine per capita consumption, due to millennials gravitating to craft spirits and craft beer.  But unexpected growth from lower-priced wines ($3-6/bottle) added sales and wine per capita consumption rose slightly.  He attributed that to “good marketing” by leading vintners (Constellation, Delicato and Gallo) in 3-liter boxes and Tetra Packs. So still possible to goose mainstream brands.  

Meanwhile, McMillan sees mostly sunny skies for wine this yr.  He expects 2-3% volume growth, 4-6% $$ growth as gains in premium segment will be in 10-14% range.  Yet volume and prices will drop in lower-priced segments, he predicts.  In parallel to beer, McMillan sez “the lowest price generic segment that appealed to entry-level consumers of the 1960s has permanently lost its appeal.”  But unlike in beer, producers ain’t even payin’ attention to it.  A coupla key challenges to wine this year: “farm labor supply and costs will be a more dominant concern,” especially if deportation rhetoric becomes a reality.  Growing pot business, especially in Calif, could be concern too, as marijuana farmers pay labor more than vintners do, he told Fortune.  But he’s less concerned than some that consumers will substitute pot for wine.  Lower priced wines could take a hit, but fine wines, not so much.  “It’s too soon to call,” McMillan concludes, as others have.  “People don’t drink wine to get high, they smoke marijuana to get high.  I don’t think it will hurt demand.”  A final point: North American winery count now near 10K.  Wines & Vines mag put # at 9,872, with over 4,200 in Calif alone.  That’s pretty astonishing given that wine still only about 16 share of absolute alcohol consumption in US.  And  number of wineries oft-cited as reason to believe # of craft brewers (now over 5K) nowhere near its peak.       

As part of ongoing “Climb On” campaign by 72andSunny, MillerCoors new ads for Coors Light this summer will tout its environmental efforts, reported Advertising Age. The “Every One Can” spots debut next week, first highlighting that Coors Light “pioneered the recyclable can.” Ads also point out other MC sustainability initiatives, such as using solar power at one of its breweries, and urge consumers to recycle its cans. “Everything we do in our marketing has a lens of sustainability and where we can, we are going to make that happen,” said Elina Vives, sr mktg dir for Coors brands.  Ads with sustainability message tested well with consumers. “They saw it as positive new news for the brand. They saw it as a fresh approach, especially in the American light lager segment,” she added.  A majority (66%) of consumers say they would pay more for sustainable brands, per Nielsen Global Corp Sustainability report. Recent Unilever study found “there is an untapped” oppy of “around $1 trillion in sales globally” for sustainable goods, noted mag.

MC sustainability message will be woven all thru its mktg.  Coors Lights cooler bags will be made with vinyl from billboard ads that co stored up “rather than sending to landfills,” per AdAge. Metal from used kegs will be used to make bbq grills for retail displays, Coors Light tap handles made with recycled aluminum, coasters made with “90% recycled material,” and swapping out Neon signs for longer-lasting LED displays instead.  

Issue of 20% tariff on Mexican goods blew up big time late afternoon yesterday when it was floated by White House Press Secretary Sean Spicer.  “We can do $10 billion a year and easily pay for the wall just through that mechanism alone,” he said.  But hours later, he walked back the proposal as just one of the “options” under consideration.  Still, couldn’t have been good for Constellation folks to see headlines like the NY Post’s frontpager this morning: “Corona to Pay for the Wall.”  

Constellation Brands Beer Division “is caught in a whipsaw between Trump, conservatives in Congress and now the border wall politics,” said a source.   But it’s already apparent that idea of taxing Mexican goods will meet lotsa resistance, even from Republicans, as Wash Post showed. Three Republican Senators objected right away.  “Simply put, any policy proposal which drives up costs of Corona, tequila, or margaritas is a big time bad idea,” SC’s Lindsey Graham tweeted.  Earlier he said: “Border security yes, tariffs no.”  Senator Sasse (NE) said: “Tariffs are a tax on American families.”  And Senator McCain said he’s “deeply concerned.”  Even #2 Repub in Senate, John Cornyn of TX, tweeted: “Many unanswered questions about proposed ‘border adjustment’ tax.”   Since Repub Senate majority slim at 52, these early hints at skepticism or even resistance matter in terms of how politics play out, INSIGHTS hears.  In fact, “oddly enough,” said source, “this was a good day” for Constellation.  Constellation clearly ain’t sitting still, hiring several DC lobbying firms, including prominent Democratic lobbyist Heather Podesta + Partners, which has A-list of corporate clients, including Toyota, Pepsi, Red Bull, Home Depot for starters.  But now that idea of border tax out in open, “rushed out in order to retaliate,” wrote Post, it will take some time to figure out if that’s even what Trump administration pushes for, let alone if it can pass.  

Surprising no one, a coupla Michigan consumers, an Indiana retailer (with 15 stores in the state) and its wine mgr just sued Michigan’s gov, AG and chairperson of Liquor Control Comm in US District Ct.  They charge that recently signed law barring out-of-state retailers from shipping direct to Mich consumers violates Commerce Clause.  Also alleged: law unfairly denies wine mgr from “engaging in his occupation” on same terms as counterparts in Mich. That violates Privileges and Immunities Clause of Constitution, suit sez. They seek injunction declaring law unconstitutional and prohibiting its enforcement, plus requirement that Mich allow out-of-state retailers to ship to Mich consumers.  Their attys are long-time direct shipping advocates who have brought similar suits in MO and IL.  Recall, distrib advocates, and others, argue that 2005 US Sup Ct Granholm decision required equal treatment of in-state and out-of-state entities only for producers, that states could still apply different treatment of retailers.  Plaintiffs’ attys here would love to go back to Sup Ct and broaden (they’d say “clarify”) scope.  

Where there’s a will there’s a way.  Turns out AB not only has exclusive for beer ads on Super Bowl broadcast, it has exclusive for all alc bevs.  Liquor’s not an issue since NFL still bans it.  And wine “has not been aggressive on TV,” as Ad Age wrote earlier this week.  But there’s loophole for purchasing time on local stations, as MC exploited with Redd’s ads in some mkts a few yrs ago.  Turns out Yellow Tail, most popular Australian wine, really wanted to be on Super Bowl this yr.  It decided to go hard for local mkts, Ad Age and USA Today report, especially after AB failed to execute option it has for “right of first refusal with Fox-owned-and-operated local stations” back in Aug.  Yellow Tail snapped up enough local buys, including biggest metro mkts, to put its ad before 85% of Super Bowl audience.  And spent more than a natl ad would have cost, it sez.    

Turns out too that not only will Yellow Tail reach so many viewers, but will do it with traditional beer- and specifically Bud Light-type messages.  “We think that if we can bring the message that wine can be fun and that wine can be present in all of these occasions where you celebrate, we think we can make a big impact,” cmo for Yellow Tail’s importer told Ad Age.  Fun?  What kind of fun?  Yellow Tail’s ad features “Yellow Tail guy” in yellow suit, natch, accompanied by “comic kangaroo,” natch, reports USA Today.  “The spot shows them at a rooftop party, at a barbecue – and at the beach, where they run into Aussie-born supermodel Ellie Gonsalves in a white bikini.”  Guess what happens next.  Yellow Tail guy asks: “Want to pet my Roo?”  Ellie does so, affectionately. Then it’s off to a party scene.  Ring a bell?  Fun, cute animals, a little silly sexual innuendo.  (Wasn’t Spuds MacKenzie the original party animal?)  Who’da thunk?  And all this while Bud Light goes bro-sensitive.  A final twist: to support a “consumer-loved” brand, “we decided instead of investing in price [discounting] we are going to invest in the Super Bowl,” importer’s cmo told Ad Age.

Bill Newlands named exec veep/chief oper officer at Constellation yesterday, a new position at co.  He joined Constellation just 2 yrs ago as chief growth officer and is currently prexy of Wine & Spirits. Bill will “oversee” three divisions:  Beer, Wine & Spirits and Growth.  So Constellation Brands Beer Division prexy Paul Hetterich reports to Bill. Bill reports to Rob Sands.  New prexy of Wine & Spirits comes from beer division; Chris Stenzel most recently sr veep of finance in beer.  Then too, Mike McGrew named head of communications for all of Constellation, previously also at beer division.

Diageo Beer Company USA “organic volume” flat for 6 mos thru Dec 2016, but “reported” volume down 8% (presumably “reported” volume factors in the loss of Red Stripe last yr).  Organic net sales up 3%; ready-to-drink revs up 3% and “beer performance stabilizing.”  RTD growth “driven by the recent launch of Smirnoff Spiked Sparkling Seltzer and Smirnoff Electric, and the solid performance of Smirnoff Ice,” noted Diageo.  Guinness net sales “grew 1%,” while Smithwick’s and Harp “were weaker.”

North America biz, including spirits, represents 34% of Diageo’s global total.  It is Diageo’s most important business unit, tho DBCO only a small part of that.  Even if Diageo not gaining share in US spirits, it turned in solid performance with “organic volume” up 1.3% and net sales up 3.6%.   Meanwhile, Diageo global beer biz at 16% of revs and “performance was broadly flat,” while RTDs at 5% of global revs and declined 1%.   But Diageo remains essentially focused on spirits, as evidenced in its 65-pg deck for investors today, which includes not one slide based on beer, tho its beer biz mentioned 2x; once to say it’s flat, and the other time to note that Diageo will “widen participation” in beer in Africa and “leverage” that “to build a mainstream spirits platform.”