BMI Archives Entry
This was yr of true landmark transaction in global beer history, MegaBrew, as ABI bought
SABMiller for over $100 bil, and Molson Coors then bought 58% of MillerCoors for $12 bil.
Many changes undoubtedly still to come, spinning off from that huge deal. What’s next is
extremely important consideration for all in the biz. Analysts already busy speculating,
natch. Many believe ABI’s next big move will be beyond beer. Most frequent speculation
surrounds Coke. “Global brewing and soft drinks are likely to converge in a post SAB-ABI
world,” reiterated HSBC’s Carlos Laboy, seeing Coke as “more likely” target for ABI than
Pepsi. “Looking out to 2020...industry and investors must consider a world where global
brewing is consolidated to the point where ABI can no longer expand in beer.” (At a
recent dinner of financial types, question asked what will be AB’s next target, and Coke
only answer that got any raised hands). Carlos argued tie-ups with Heineken or Diageo
likely not happening or not sufficient to save Coke from ABI’s clutches.
What about Molson Coors? Its next move will be to tie-up with Heineken, analyst reports
already speculate. Stifel’s Mark Swartzberg sez it would create conservatively $500 mil
in synergies. This move would make combo a 15 share of global beer, up from Heineken’s 10
share. Evercore ISI’s Robert Ottenstein also has stated for mos that there is 50/50
chance that Heineken and Molson Coors will do a deal by 2020 (same % chance as he used to
say for ABI/SABMiller deal).
Meanwhile, craft M&A continues apace. INSIGHTS has tracked 25 deals or so in 2016,
following very similar number last yr. And there will be similar number again next yr,
First Bev’s Bill Anderson told Calif Beer and Bev Distribs convention in mid-Nov. Most
deals are smaller, and valuations are coming down (tho still 15-20x EBITDA), but pool of
interested buyers is still plentiful, including many international brewers and private
equity cos. AB and MC may have just about had their fill, at least for now.
Correction: Constellation expects to be #1 GP provider in 40%+ of its distributors’
volume, not in 40% of its distribs, within 1 or 2 yrs. Our headline implied otherwise,
tho text was accurate… Next issue in early 2017, unless big news breaks.
Beer, wine and spirits bizzes haven’t suffered many losses in recent US alcohol policy
battles. Tax hikes and restrictions on sales, availability and mktg have been few and
far between, especially on state and federal levels. What’s more, industry leaders think
a fed excise tax cut has a shot. But a coupla recent developments make you wonder how
long alc bevs can avoid deeper scrutiny, sharper criticism and/or actual policy setbacks.
First: smashing success of soda taxes in handful of cities. Three Calif cities, Boulder,
CO and Cook County, IL recently passed tax hikes, following Berkeley, CA and Philly. And
these hikes substantial: at least a penny per ounce in each, as NY Times front-paged Nov
27. Back in the day, anti-alcohol activists thought a nickel-a- drink was significant.
That proved unattainable. Soda hikes passed even while American Bev Assn (soft drink
trade group) alone spent “$38 million opposing the fall ballot proposals, though it lost
every one,” as NY Times noted. Tax supporters told Times, natch, soda taxes have
momentum and will spread. Soda taxes have “benefit” of raising funds to fight obesity,
other health issues and/or help cash-starved communities. Will same combo of raising $$
and promoting health be used to increase pressure on alc bev taxes, always in sights of
advocates? One source suggests soda being uniquely targeted because: 1) children can and
do consume it (in large quantities) and 2) obesity issue. Then too, it may just be soft
drinks “turn” to be in the sights of public health, just as beer has been for decades.
Surgeon General Shows Tobacco Card Soda tax supporters “taking inspiration from the
fight against tobacco,” wrote NYT, and adopted phrase of public health (who targeted “Big
Tobacco”) to battle “Big Soda.” They targeted “Big Alcohol” long ago. But that phrase
never got enough traction for advocates to win similar policy changes, certainly nothing
like a penny/oz tax. Language could be revived tho in wake of recent US Surgeon
General’s report on Alcohol, Drugs and Health. Lengthy report fully endorses tax hikes
and restrictions on availability (number of outlets, hours of sale, etc). And SG Dr.
Vivek Murthy specifically cited 1964 Surgeon General’s report on smoking as model for
current effort. That report kicked off decades of anti-tobacco advocacy, tax hikes and
policy changes.
So far, media response to Surgeon General’s report fairly modest, perhaps given context
of Nov election. SG Murthy far less visible than some of his predecessors (Koop,
Novello), and tax increases/biz restrictions not in wheelhouse of incoming Administration
or Congress. Then again, states need money, President-elect doesn’t drink and targeted
taxes have traction on tobacco, and now soda. Meanwhile pot advocates continue to voice
mantra that pot “safer than alcohol.” Industry suppliers’ response to SG report
expressed disappointment with its policy lean but mostly muted; behind the scenes
supplier execs acknowledge surprise and that industry took such a hit. On-premise
retailer assn (ABI) took typically more aggressive stance than producers, calling SG
proposals “an anti-alcohol activist Christmas wish list.” Will soda tax “victories” and
SG report be used by public health forces to shoot down bill to reduce fed tax? Gotta
figure they’ll come up.
ABI Tobacco Tie and Trifecta Target Here’s another potential point of vulnerability.
Public health advocates, in US and abroad, have no bigger target than tobacco industry.
Indeed, they’ve played tobacco card vs. alcohol for yrs, unfairly comparing them. Now,
biggest global tobacco company (Altria) has a partial ownership stake in biggest global
(and US) brewer, AB InBev. True, Altria held even larger stake in 2d-largest global
brewer (SABMiller). But that didn’t seem to draw prominent attention in ongoing alcohol
policy debates. Indeed, SABMiller and other global brewers achieved “stakeholder” role
in some intl alcohol policy discussions, including at World Health Organization (WHO).
But WHO recently adopted specific policy that bars any “engagement with the tobacco
industry or [non-governmental] actors that work to further the interests of the tobacco
industry.” SABMiller firmly resisted that policy, we understand, but it happened. And,
depending how interpreted, might stymie ABI participation in global alcohol policy
discussions. To wrap it all up, gotta note too that ABI is big soft drink bottler in
Latin America. That creates potential trifecta as big alcohol, big tobacco and big soda,
a trifecta public health advocates will likely target.
Last mo, we highlighted tuff trends for almost all big suppliers for 3, 9 and 12 mos thru
Sep. Table below shows IRI multi-outlet + convenience volume trends yr-to- date thru Oct
30 for top 10-selling mainstream domestic brands (premium/economy) and top 10 craft
brands (our definition, excluding Blue Moon, Shock Top, Leinie). Rank is based on $$
sales YTD. Not quite as many minus signs as for top suppliers. But only 2 of top 10
mainstream brands up this yr and only 4 top craft brands up. And two of those craft
gainers up less than 2%. Collectively, top 10 mainstream brands actually outperforming
top 10 craft, trendwise. Big mainstream brands down over 11 mil cases collectively;
trend is -1.5%. Top 10 crafts off more like 700K cases, but decline steeper at -3.6%.
Every top 10 mainstream brand is AB or MC product. Coors Light and Miller Lite, each
down very slightly YTD, clearly outperformed Bud Light this yr and thus gained share of
premium light. Bud slowed in recent mos and off near 4%. AB’s got 2 below premium
gainers (Busch Light and Bud Ice) and Busch near even. So while MC outperforming in
premium light, AB outperforming below premium (above premium too). Driving top-10 craft
trends: 3 of 4 Sam brands in group down double digits. Top 2 Sierra Nevada bands down 5-
6%. Shiner Bock and New Belgium Fat Tire eked out small gains. Lagunitas IPA not as hot
as previous yrs, but still runnin’ up near 20%. Star of the group: Goose Island IPA,
nearly doubling YTD.
Lotsa changes already at both MillerCoors and parent co Molson Coors in less than 2 mos
since Molson Coors closed acquisition of 58% of MC it didn’t own. As Molson Coors cfo
left suddenly after 6 mos (see below), one of MC’s best execs, cfo Tracey Joubert, moved
up to take cfo role at parent co. Meanwhile, some modest cost-cutting moves recently.
Recall, media buying will be done jointly for parent co and subsidiary. Then too, Blue
Moon and Leinie sales forces/mktg will be moved from Tenth and Blake to MC, with some
headcount reduction (may not be result of merger, still a cost cut). And several others
with overlapping roles let go, including purchasing veep, media director, and more.
Expected headcount reduction from MC redundancies likely less than 50, INSIGHTS hears.
Yet these moves collectively suggest MC has entered another period of some belt-
tightening.
MillerCoors started implementing its economy brand strategy this fall, ramping up efforts
on High Life and Hamm’s. Both brands showing mid-single digit growth, at lower prices in
most recent periods in Nielsen. Yet in toto MC still down 0.8 share of subpremium segment
for 4 wks thru Nov 19 in Nielsen all-outlet, while AB gained 0.7. MC lost more
subpremium share for most recent period than YTD (down 0.5). Brands that have already
been revamped are doing better, noted chief comm officer Pete Marino, while new plans on
other subpremiums like Keystone Light, Mil Best, have yet to kick in. Lower subpremium
pricing means total MC avg prices up less than 1% for 4 weeks. Any gains from pricing
could be short-lived if/when AB matches. Meanwhile, MillerCoors doesn’t participate in
fastest-growing segment, Mexican imports (11% of biz, +15%) but will address “absence” in
a “number of ways,” MC ceo Gavin Hattersley said at Beer Insights Seminar. MC has
presence now in acquired craft; Gavin “delighted that we did 4” craft deals in last yr.
Still, “it would be nice if we had a little break,” he said. Acquired brewers “might be
small companies...it takes effort and time to get them into our systems and processes.”
MC supply chain, systems and processes have already undergone massive change, but clearly
still “work-in- progress.” Numerous distribs tell INSIGHTS of a range of issues:
continued out-of- stocks, beer shipped long distances, reduced brewing schedules, reduced
inventories and more. At core of it, after Eden closed, MC moved a lot of beer around, 13
mil bbls, plus MC has far more complex portfolio. But MC has “created new capabilities,”
Gavin said, spent several hundred mil on cap ex and now “set up for a much better supply
chain.” MC still a ways from having one ordering system. It’s currently being “piloted”
in Shenandoah, with Golden next. This is “big project” and “last thing we want to do” is
create situation where distribs can’t order beer, “so we’re being very deliberate about
it.” Gavin offered “bold prediction”: “new ordering tool” in 18-24 mos. So MC will have
two ordering systems for its first decade of existence.
Amidst all these moves, one an outta left-field shocker. After just 6 mos as Molson
Coors cfo, Mauricio Restrepo resigned “effective immediately,” Nov 17 “because of matters
regarding personal conduct,” said Molson Coors. As Tracey Joubert takes Mauricio’s place.
Greg Tierney, MC’s veep of financial planning and controller, will take Tracey’s place as
MC cfo. Despite sudden departure, analysts thought move wouldn’t affect integration
plans, already well underway, which involve saving $550 mil over 3 yrs.
Lotsa changes already at both MillerCoors and parent co Molson Coors in less than 2 mos
since Molson Coors closed acquisition of 58% of MC it didn’t own. As Molson Coors cfo
left suddenly after 6 mos (see below), one of MC’s best execs, cfo Tracey Joubert, moved
up to take cfo role at parent co. Meanwhile, some modest cost-cutting moves recently.
Recall, media buying will be done jointly for parent co and subsidiary. Then too, Blue
Moon and Leinie sales forces/mktg will be moved from Tenth and Blake to MC, with some
headcount reduction (may not be result of merger, still a cost cut). And several others
with overlapping roles let go, including purchasing veep, media director, and more.
Expected headcount reduction from MC redundancies likely less than 50, INSIGHTS hears.
Yet these moves collectively suggest MC has entered another period of some belt-
tightening.
MillerCoors started implementing its economy brand strategy this fall, ramping up efforts
on High Life and Hamm’s. Both brands showing mid-single digit growth, at lower prices in
most recent periods in Nielsen. Yet in toto MC still down 0.8 share of subpremium segment
for 4 wks thru Nov 19 in Nielsen all-outlet, while AB gained 0.7. MC lost more
subpremium share for most recent period than YTD (down 0.5). Brands that have already
been revamped are doing better, noted chief comm officer Pete Marino, while new plans on
other subpremiums like Keystone Light, Mil Best, have yet to kick in. Lower subpremium
pricing means total MC avg prices up less than 1% for 4 weeks. Any gains from pricing
could be short-lived if/when AB matches. Meanwhile, MillerCoors doesn’t participate in
fastest-growing segment, Mexican imports (11% of biz, +15%) but will address “absence” in
a “number of ways,” MC ceo Gavin Hattersley said at Beer Insights Seminar. MC has
presence now in acquired craft; Gavin “delighted that we did 4” craft deals in last yr.
Still, “it would be nice if we had a little break,” he said. Acquired brewers “might be
small companies...it takes effort and time to get them into our systems and processes.”
MC supply chain, systems and processes have already undergone massive change, but clearly
still “work-in- progress.” Numerous distribs tell INSIGHTS of a range of issues:
continued out-of- stocks, beer shipped long distances, reduced brewing schedules, reduced
inventories and more. At core of it, after Eden closed, MC moved a lot of beer around, 13
mil bbls, plus MC has far more complex portfolio. But MC has “created new capabilities,”
Gavin said, spent several hundred mil on cap ex and now “set up for a much better supply
chain.” MC still a ways from having one ordering system. It’s currently being “piloted”
in Shenandoah, with Golden next. This is “big project” and “last thing we want to do” is
create situation where distribs can’t order beer, “so we’re being very deliberate about
it.” Gavin offered “bold prediction”: “new ordering tool” in 18-24 mos. So MC will have
two ordering systems for its first decade of existence.
Amidst all these moves, one an outta left-field shocker. After just 6 mos as Molson
Coors cfo, Mauricio Restrepo resigned “effective immediately,” Nov 17 “because of matters
regarding personal conduct,” said Molson Coors. As Tracey Joubert takes Mauricio’s place.
Greg Tierney, MC’s veep of financial planning and controller, will take Tracey’s place as
MC cfo. Despite sudden departure, analysts thought move wouldn’t affect integration
plans, already well underway, which involve saving $550 mil over 3 yrs.
Lotsa changes already at both MillerCoors and parent co Molson Coors in less than 2 mos
since Molson Coors closed acquisition of 58% of MC it didn’t own. As Molson Coors cfo
left suddenly after 6 mos (see below), one of MC’s best execs, cfo Tracey Joubert, moved
up to take cfo role at parent co. Meanwhile, some modest cost-cutting moves recently.
Recall, media buying will be done jointly for parent co and subsidiary. Then too, Blue
Moon and Leinie sales forces/mktg will be moved from Tenth and Blake to MC, with some
headcount reduction (may not be result of merger, still a cost cut). And several others
with overlapping roles let go, including purchasing veep, media director, and more.
Expected headcount reduction from MC redundancies likely less than 50, INSIGHTS hears.
Yet these moves collectively suggest MC has entered another period of some belt-
tightening.
MillerCoors started implementing its economy brand strategy this fall, ramping up efforts
on High Life and Hamm’s. Both brands showing mid-single digit growth, at lower prices in
most recent periods in Nielsen. Yet in toto MC still down 0.8 share of subpremium segment
for 4 wks thru Nov 19 in Nielsen all-outlet, while AB gained 0.7. MC lost more
subpremium share for most recent period than YTD (down 0.5). Brands that have already
been revamped are doing better, noted chief comm officer Pete Marino, while new plans on
other subpremiums like Keystone Light, Mil Best, have yet to kick in. Lower subpremium
pricing means total MC avg prices up less than 1% for 4 weeks. Any gains from pricing
could be short-lived if/when AB matches. Meanwhile, MillerCoors doesn’t participate in
fastest-growing segment, Mexican imports (11% of biz, +15%) but will address “absence” in
a “number of ways,” MC ceo Gavin Hattersley said at Beer Insights Seminar. MC has
presence now in acquired craft; Gavin “delighted that we did 4” craft deals in last yr.
Still, “it would be nice if we had a little break,” he said. Acquired brewers “might be
small companies...it takes effort and time to get them into our systems and processes.”
MC supply chain, systems and processes have already undergone massive change, but clearly
still “work-in- progress.” Numerous distribs tell INSIGHTS of a range of issues:
continued out-of- stocks, beer shipped long distances, reduced brewing schedules, reduced
inventories and more. At core of it, after Eden closed, MC moved a lot of beer around, 13
mil bbls, plus MC has far more complex portfolio. But MC has “created new capabilities,”
Gavin said, spent several hundred mil on cap ex and now “set up for a much better supply
chain.” MC still a ways from having one ordering system. It’s currently being “piloted”
in Shenandoah, with Golden next. This is “big project” and “last thing we want to do” is
create situation where distribs can’t order beer, “so we’re being very deliberate about
it.” Gavin offered “bold prediction”: “new ordering tool” in 18-24 mos. So MC will have
two ordering systems for its first decade of existence.
Amidst all these moves, one an outta left-field shocker. After just 6 mos as Molson
Coors cfo, Mauricio Restrepo resigned “effective immediately,” Nov 17 “because of matters
regarding personal conduct,” said Molson Coors. As Tracey Joubert takes Mauricio’s place.
Greg Tierney, MC’s veep of financial planning and controller, will take Tracey’s place as
MC cfo. Despite sudden departure, analysts thought move wouldn’t affect integration
plans, already well underway, which involve saving $550 mil over 3 yrs.
Just last mo, looked like modest shipments gain for 2016 a pretty good bet. Even with
soft Sep, US volume up about 0.5% yr-to- date and runnin’ at same pace for 12 mos. Then
came ugly Oct taxpaid domestic shipments number: down 1 mil bbls, 7.3%, estimated Beer
Inst economist Michael Uhrich. Ouch. That one number more than doubled yr-to- date
taxpaids dropoff to 1.7 mil bbls, -1.2%. Also offset almost every bbl of Jan-Sep import
gain. So beer shipments flatter than a pancake in known yr-to-date reports (Oct imports
comin’ this week). And biz down slightly if you include cider loss.
Contributing factors to Oct shock: high inventories at end of Q3, according to Michael,
and continued consumer beer prices ahead of wine/spirits. AB and MC 9-mo shipments ahead
of STRs to tune of, coincidentally, 1 mil bbls, we figure. Nov-Dec taxpaid comp kinda
easy, -1.5% last yr. Still a mystery whether TTB will “add” bbls to last yr’s figures for
final mos. And imports up whoppin’ 890K bbls, 20% Nov-Dec last yr. That’s a tuff hurdle
to match, much less beat. Recall, most reports had 2015 US volume down very slightly,
tho final figures from TTB (and our estimate) actually suggest very slight gain. Given
crazy shipments pattern all yr, looks like 2016 final trend will go down to the wire.
Won’t be clear for many moons.
While shipments picture got uglier in Oct, scan data points to better Nov. It’s yet
another example of crazy up-and- down trends this yr. Indeed, some big distribs talkin’ of
double-digit Nov gains (with 1 more selling day), compared to big drops in Oct. Volume
up 2.7% for 4 wks thru Nov 19, Nielsen all-outlet scans show, with yr-to-date +0.7%. Yr-
to-date $$ trend +3%.
Predictably, panel of 3 veteran industry attys produced panoply of perspectives on
current legal issues at Beer INSIGHTS Seminar. Marc Sorini (mostly a supplier advocate),
Mike Moses (represents Reyes, but also chain retailers and small brewers) and Mike
Halfacre (ex-NJ regulator, now head of NJ beer wholesales assn) agreed there should be
more enforcement of tied house/trade practice laws and caps on retail, self-distrib
rights. But each offered different takes and tweaks. Here are some highlights.
Brewers’ Retail Rights: Elephants, Trucks and Toads With 10s of thousands of retailers
in mkt, fact that AB owns 10 Barrel and other retail outlets “shouldn’t matter,” said
Marc. Even when it was independently owned, it wasn’t “viable option” for competing
brewers/ brands. “Why do we really care?” Marc asked. If we get to point when one co
owns 20K brewpubs “we will see that coming from a mile away and react accordingly,” tho
he thinks that’s unlikely. Retail rights have been around for decades, Marc reminded,
and that remains issue of evolution. But Mike Halfacre cautioned against creation of
exceptions especially because evolution “becomes revolution when a major supplier can
drive a truck through the exceptions.” Indeed, 10 Barrel is a “bad precedent” to Mike
because “guess what’s a mile away? AB’s in retail.”
Beer biz has different caps for lotsa reasons, but “we have a tied house system as much
as we have a 3-tier system.” Whether it’s craft or AB, “that’s tied house. Why are we
not talking about the elephant in the corner of the room?” Mike H does not want to
“squelch craft,” but question is: “when is craft not craft? AB’s not craft.” Mike Moses
said flatly, “no supplier should be in retail.” And while craft brewers great for
sampling, as alternative to major brewers and consumer choice, “at some point there’s a
line and it’s up to the industry to determine that,” i.e. an appropriate cap. He agrees
with Mike H that big brewers should not be in retail, nor own branches. His metaphor for
danger of exceptions: the toads in the warm pot. “Before you realize it’s boiling,
they’re dead.”
Appropriate caps also apply to self-distribution, two Mikes agreed. Self-distribution
may be a “great beginning,” Mike M allowed. But “to expand into other markets they need
resources” distribs provide. As one craft brewer told him: “The first time I got a flat
tire on my delivery truck, I decided I needed a wholesaler.” Mike H echoed that craft
brewers generally “want to make good beer.” They don’t want to own fleets, deal with
union contracts and workers comp. Net-net: “You need a distributor to grow your
business.”
Consensus: Gotta Beef Up Enforcement on Pay to Play States need to “get their hands
around” trade practice issues and spend “resources to prevent pay to play,” Mike M
stressed. His clients “don’t engage in it, but they’re faced with it every day.” He
also “applauded” Mass ABCC investigation and publicity surrounding pay to play there.
That includes original investigation, distrib Craft Brewers Guild paying $2.6 mil fine
(tho it’s contesting in court) and presumably TTB accepting $750K offer in compromise
from CBG for same Boston actions (announced 2 days after our panel). Mike M likened MA
pay-to-play response to “hanging the pirate in the harbor” to make an example. After
Mass actions, Mike heard from clients across US which suggested “a lull in some of the
shenanigans that were going on” as industry players suspected other states would follow.
Mike H agreed: “Anecdotally speaking, New Jersey was a much quieter summer after what
happened” in MA. Pay to play is 2-way street (at least), Mike M reminded. “Retailers
become greedy bastards,” and demand more and more: “They’ll take.” Just as for distribs
and/or suppliers, “penalty has got to happen with retail too. Just one or two. Put the
pirates up there.”
Will feds forge ahead as TTB has promised (see above)? Marc said “it would be great if
there were real enforcement that works.” Pirate not really hung in Mass, in Marc’s view,
but rather “given a haircut.” Given ongoing lawsuit there, and other factors, Marc
remains “a skeptic” about big fed push. He reminded that feds have no jurisdiction over
retailers and that in tagging distribs/brewers it faces high hurdles of proving competing
brands excluded from outlets. Also gotta prove “willingness.” If feds move, they “have
to be very careful about the cases they choose or face difficult challenges” in courts.
Beware Amazon, Hang Together to Protect 3-Tier, Consumers and Competition Asked whether
Amazon threatens 3-tier, Marc suggested Amazon might simply be 3-tier with “an online
component” if product goes thru distribs, and especially if Amazon opens bricks and
mortar. But Mike H noted Amazon located in NJ and “just a matter of time” before it gets
alc bev license. He warned that Amazon “doesn’t want to cut a deal with one of my small
New Jersey distributors” but rather “deal directly with St Louis or Chicago.” It’s
already in distrib biz, has massive warehouses and likely to “demand shipments” to those
warehouses and re-ship. “That’s their business model.”
Finally, any advice on shoring up 3-tier system? Up to states, “at behest of industry,”
said Mike M, to expand resources to enforce existing laws and convince governors, others
that state ABCs are “something other than DMVs” (department of motor vehicles). Mike H
quoted Ben Franklin that all three tiers need to “hang together” or they’ll “hang
separately.” Each tier doin’ fine right now, he added. Only folks it’s not working for
are those outside the system. They have to join it “on our terms and not change the
system just to make it easier for them.” He’s optimistic that 3-tier “here to stay. But
we can’t be complacent.” Marc advises to “focus on policy outcomes” and not be “rigid”
or “inflexible.” An evolving system that continues to protect consumers and competition
should be “guidepost for policy over the next decade.”
Fallout continues from Mass ABC pay-to- play investigation and $2.6 mil fine levied
against distrib Craft Beer Guild earlier this yr. TTB just accepted $750K offer in
compromise from CBG over same allegations involving Boston bars. What’s more, “you’re
going to see further investigations in this area. I don’t want industry members to
consider getting caught the cost of doing business.” So said TTB’s investigations
director Robert Angelo to Boston Globe. He also promised “hard stand” against pay to
play, which will be “getting a lot more emphasis now.” That ain’t all. Shelton Bros, an
importer that also has craft brands, hopped aboard same train. It sued CBG, seeking $1.7
mil in lost sales, plus damages. Claims pay to play, among other actions, hurt Shelton
brands and provided good cause to terminate CBG. Like ABCC fine, CBG promises to fight
charges, and prevail.
Wide-ranging, frank talk with AB InBev ceo Brito at Beer INSIGHTS Seminar revealed that
remarkable breadth of globe’s largest brewer (by far) encompasses even seemingly
contradictory strategies. For example, Brito said ABI “takes a conservative view of what
can go wrong” in any given deal or decision and “we tend to be conservative.” ABI will
“study a lot,” use “metrics” and stay “disciplined” about both new investments and its
approach to “opening and closing gaps.” Process often entails learning and copying
“shelf ready” solutions from other bizzes, then re-applying them to AB InBev. (He cited
examples from AB deal, Starbucks and venture capital.) At same time, ABI has unique
“chief disruptive growth officer” with independent team tasked to explore small
developments that could lead to “exponential growth.” Dedicated team has “freedom to
challenge us in the market” and be “incubators.” That “creates a lot of conflicts”
within ABI since “the machine sometimes resists [new] ideas.” But this approach has been
“very, very good” for ABI, Brito insisted. Indeed, via Zx Ventures (private equity arm
of ABI), ABI has invested in everything from home brew biz to kombucha to tea.
Disruptors say: “If we don’t do it, someone else will. So let’s look at it with the right
set of eyes.” Then too, while AB clearly very invested in traditional routes-to- mkt
around world, including 3-tier in US, it’s also doing more and more in e-commerce
(especially outside US where regulations looser). That involves selling not only beer
itself (in some mkts Corona only sold via e-commerce), but high-end items associated with
beer, i.e. Stella chalice programs. AB also increased its brewpub/taproom biz in US, tho
Brito did not address that.
“So Much to Do” in Beer; Learnings from Spirits; Bud Light In another sign of ABI’s
conservatism perhaps, it has not shown any propensity to expand into wine or spirits, tho
alt-malt bevs very much in its plans. That includes no-alc/low- alc malt bevs, which ABI
targets as 20% of its total volume by 2025, up from 6% now. “We like beer,” and there’s
“still so much to do in beer,” Brito said. Like what? Like expanding occasions/consumer
base and premiumization. Indeed, learnings from wine and spirits’ success include “trend
to more sophistication,” and “co-ed positioning of brands,” as beer has remained “male
oriented.” Then too, ABI research “mapped occasions where beer is under-represented.”
So ABI seeking out “pockets of volume and profitability...where beer was not playing.”
That’s led to expansion of High End and ABI investing in craft partners, including 9 in
US whose volume now growing 20%, more than double segment trend.
Even while above premium growth, with craft, import biz and Michelob Ultra, help AB get
closer to share stabilization, Brito acknowledged “some fixing to do” on Bud Light in US.
Bud Light Party campaign “moved some indicators,” but not sales trend. Bud Light’s
leading 18+ share is “amazing feat” in fragmented mkt, said Brito. But “like all big
brands” it’s being “chipped away at” and “challenged from all sides.” Being too big
often seen as “not necessarily the best” by consumers, but “we’re going to prove big can
be good,” Brito vowed. Bud Light “part of everybody’s life.... Everyone has a Bud Light
inside him or her.” AB’s task: “connect all those precious moments back” and “make that
something that gets people excited, impassioned, and that’s something that only Bud Light
can do.”
Pain Points and More Just as ABI seeks out gaps and tries to fill ’em, also seeks out
“pain points” and tries to solve ’em. Brito cited example of consumer out on Friday
night seeking a Bud Light but has “five layers” between him and the bar. Sometimes he
“gives up,” which is bad for him and retailer. Disruptive growth unit focused on solving
that pain point, perhaps thru technology. Issue “may seem small,” but solution could
“unleash” something large and “customers will value our partnership even more”....
Addressing apparent conflict between ABI’s rhetoric about supporting “people” and its
synergy-driven workforce reductions, Brito said deals create “redundancies, duplications”
which inevitably result in job losses. ABI tries to “treat people fairly” and deal with
that “the best way possible.” Decisions tough but necessary and ABI aims to keep
remaining 95% of company healthy. “Nobody likes to shrink,” Brito said, but ABI, now in
neighborhood of 200K employees, is a “net hire when you look globally.”