David Colletti, former MillerCoors vp, who pled guilty to wire fraud in 2016 and cooperated against 7 other defendants, was sentenced to 3 ½ years in prison and another 2 yrs “of supervised release,” reported Law 360.  Recall, Colletti was charged with billing MC for “hundreds of false invoices he signed off on” from 2003 to 2013 for mktg events that either didn’t take place or costs were highly inflated. Colletti and co-defendants are on hook for “more than $8 million in restitution,” as well, per plea deal. “He had done much right in his life,” said Judge Jorge Alonso, but ultimately, “There’s no other way to put it: he gave in to greed.” MC sales prexy Kevin Doyle, Colletti’s former boss told court that Coletti only cooperated with gov’t after he was caught by MC. CFO Greg Tierney recalled “the plummeting of morale after Colletti’s breach of trust,” and cited cost of investigation, co’s moves to “adopt safeguards,” and also shared “the company’s belief that his scheme went beyond what the government could prosecute,” per Law 360. “There’s no way I could possibly make anybody understand the absolute remorse I feel,” Colletti told Judge.

 Lawsuit filed by MC against AB over “misleading, disparaging and deceptive” corn syrup ads is moving along, following latest hearing yesterday, and decision is expected “sometime next week,” reported Courthouse News. Recall, MC charges (among other things) that AB ads misled consumers to associate corn syrup with high-fructose corn syrup.   And “if this were a case about intent, you would probably win,” US District Judge William Conley in Madison, WI told MC counsel Donald Schott during hearing. But “protections against intent claims in Seventh Circuit precedent may not prove to be enough for the case to survive on those merits alone,” paper paraphrased. MC atty argued that “true statements that give a false impression are actionable under the Lanham Act,” and “you don’t have to say the bad thing in order to draw the impression of the bad thing.” Judge wondered “if it was enough for relief ‘without some more disparagement’ for Anheuser-Busch to state something that is technically accurate…in a way that may intentionally mislead consumers, or at least not correct an existing misconception.” But AB atty James Bennett argued Coors Light and Miller Lite’s use of corn syrup is “only a literally true statement.” Sticking to party line, AB sez ads “only intended to point out the difference between the more natural ingredients.” Judge specifically called out AB billboard ads stating “100% less corn syrup” than Coors Light/Miller Lite for being “misleading in the extreme.” Those billboards “have been discontinued and taken down, or are at least in the process of being taken down,” according to AB atty. But otherwise, AB ads only used “terminology that MillerCoors itself uses such as ‘brewed with,’ ‘made with,’ and ‘use,’ and that the light-hearted tone of the campaign does not have any outright negative statements or non-verbal cues.”

There may not be any big-budget, coordinated, industry-wide category health campaign comin’ down the pike anytime soon.  But comments from top execs at Beer Insights Spring Conference show that building beer still on minds of many in various ways.  MC’s cmo Michelle St Jacques talked about a “ruthless focus on recruiting new drinkers” and “bringing people back to beer” (and MC brands, natch), as among her main charges.  She echoed other industry leaders in stressing that biz has to “go after occasions” lost to wine and spirits, establishing “clear points of difference” between beer and those bevs, building “relevant brands” and targeting new users, i.e. women.  

AB chief sales officer Brendan Whitworth, while focused mostly on AB’s “portfolio play,” also made comments about “leveraging the portfolio to recruit new drinkers,” how e-commerce can “create space” for beer at brick and mortar stores, “new conversations” with retailers about bringing more consumers to the category, specific brands that bring consumers back to beer from spirits (i.e. Naturdays) and “incrementality” that “benefits the category” as opposed to just “trading volume between brands.” 

Meanwhile, hard seltzers are almost entirely incremental to FMB and source 35% of volume from wine and spirits, according to Mike’s Hard Lemonade Co’s svp of mktg Sanjiv Gajiwala. But rest is comin’ from light lager (24%) and mix of high end segments such as craft, imports, superpremium. Broader “beyond beer” volume, defined by Nielsen as hard seltzer, tea, kombucha, and beer/malt-based cocktails, is largely incremental to beer category, according to separate Nielsen data presented by Danelle Kosmal and Kelly Nielsen. Beyond Beer brands source 65% of their volume from “expansion” of retailers’ current alcohol set, compared to 31% from “shifting” among existing alcohol brands and 5% from new alc bev buyers.

Not everyone talked about building the category.  Asked about Constellation cfo David Klein’s statement last week that Corona Premier could reach 100 mil cases, ceo Bill Newlands said “I hope to hell he’s right.”  Added that he’s “thrilled” about brand’s runway which includes “900 mil cases of domestic lights out there for the taking.”  What if premium lights stage a comeback?  “We have strong franchises; we’re happy to compete and will continue to do it.… We’ll take our chances in the marketplace.”  Meanwhile, as Constellation has become even more of a beer company with pending sale of low-end wine, it has not abandoned TBA (total beverage alcohol) approach, but rather “we refined it.”  Bill pointed out again that “today’s consumers are doing things differently.” Among 21-29 yr olds, 25 yrs ago 70% of their consumption was beer and beer-only.  That’s now down to 40%, with a 30-30 split for wine and spirits.  Young people especially, Bill reminded, are drinking more broadly across occasions.   (Editor’s Note: and Constellation has big and small brands to offer for all of ’em.)

Then too, Matt Fraser, president of CANarchy, commented that he’d “much rather have somone drinking a craft beer than a domestic premium beer,” when talking about co’s foray into larger-format pack sizes. As one attendee asked INSIGHTS later: “he couldn’t have said ‘rather than a hard liquor drink?’” Matt’s comment reveals (again) that some within craft still see more oppy by converting mainstream beer drinkers than wine/spirits drinkers.

Michelle St Jacques, new MillerCoors cmo, started her gig day after Super Bowl as CornGate broke.  Within 6 hours, she’d already cleared first response ad and started on others as MC team was “hustling to defend our brands and ingredients.”  Ninety days in and takin’ a breath, Michelle spoke at Beer Insights Spring Conference yesterday putting some details to approach laid out by ceo Gavin Hattersley that MC aims to move more quickly, make big bets and take smart risks. In her words, MC thinking about brands and mktg as being “fast, messy and awesome,”  Entails puttin’ “more gas on what works” and stopping what doesn’t. Beer, and MC, face same challenges as other big CPG co’s: harder-to-reach audience, fragmentation, more brand options, disruption, etc.  That’s on top of beer losing young drinkers, mainstream woes, etc.  Going forward, MC strategy means:

·      “Ruthless focus on recruiting new drinkers” and “driving relevance.”  Old “push model no longer works,” she maintained.  MC and its brands gotta be authentic and be “where the consumers are.” May be Instagram, may be targeting women (Cape Line) or e-sports/games (Miller Lite). But all with goal of bringing people “back to beer.” MC will go after wine and cocktails, showcasing Cape Line’s fewer carbs/cals than glass of white wine (AB’s made same point), 75% less cal/sugar than mixed Margarita.    Cape Line drawing 60% of volume from canned cocktails.

·      Building brands “people want to hang out with.”   Seems obvious, but mktg need to clearly define brands and “why they exist.”  Miller Lite achieved 18 qtrs of segment share growth and now growing total share by (not changing liquid) but “way brand presented itself,” going “back to roots” and original story line as “original light beer,” which she called “the heartbeat of the brand.” Miller Lite a top 10 growth brand in Nielsen for latest 4 wks. More work to do on Coors Light and more coming, Michelle promised, but “no reason we can’t replicate” Lite’s success with Coors Light, which remains top priority. 

·      Being “bolder faster, and move at the speed of the culture.” Study of beer ads shows only 30% of consumers can remember theme, only 12% remember the brand. That’s classic challenge and oppy. 

Marketing doesn’t need to be big tv buy.  Could be as simple as well-planned, executed floor display to get people to pay attention, drive a sale.  Examples of some successes so far include huge response to corn syrup ads during March Madness that built Twitter response, Coors Light tap that lit up which drove 300 mil impressions, immediate piggyback on Amazon ceo Jeff Bezos’ “Blue Moon initiative” with Blue Moon “lunar landing kegs,” an example of “moving at the speed of the culture.”  MC’s brand plans for St Archer Gold, canned wine, hard coffee and others also examples of moving faster/bolder to find new consumers.  Coming too, new Arnold Palmer brands in test: “Arnie’s Spiked” lemonade and iced tea.  AP Spiked sources 50% of volume from spirits, said Michelle.   

Again echoing Gavin, Michelle noted MC’s priorities are clear: 1) stabilizing premium lights, continuing Lite’s trajectory from segment to category share growth; 2) achieving same for Coors Light, which is seeing positive segment share shifts, tho “not enough” and “a lot of work to do”; 3) doubling down in above premium, with “big plans” in Q2 and Q3 for Blue Moon, and Leinie Shandy “taking back the summer.”   Michelle was asked several age-old questions about if/how MC can grow Coors Light without cannibalizing Miller Lite and challenge of growing two big brands at same time.  Like her predecessors, Michelle insisted that’s possible with strong, relevant, specific brand positioning for each. So, MC continues to talk differently about its lead brands than AB.  At Spring conference, while Michelle emphasized need to shore up Miller Lite and Coors Light,  AB sales chief Brendan Whitworth stressed current AB mantra of making broader “portfolio play.”

Rich panel that closed Beer Insights Spring Conference included just-retired Constellation Beer chairman Bill Hackett, ex-MC ceo Tom Long (now managing partner at Bridger Growth) and ex-AB prexy Dave Peacock (now prexy/coo of Schnuck Markets).  Here are brief highlights, in part riffing off Bill Newlands comments on CA and consolidation.  Bill Hackett also addressed SoCal situation.  “We all have tough decisions to make,” but Calif change was “done based on an evaluation of how [Constellation] would be best-positioned for the long-term….tough decisions have to be executed if you’re looking forward to [your] best positioning.”  Then too, SoCal move “made with great partners through the years.”  Ain’t easy, but these kinds of decisions are “what we are charged with.”

ABI’s “Transactional” Nature Led to Trust Issues with Distribs, Sez Dave  Bill Hackett remarks resonated on same panel where ex-AB prexy Dave Peacock reflected on changes after AB bought by InBev back in 2008.  Dave acknowledged “loss of trust” between distribs and ABI and subsequent effort to build it back.  Some of that loss “inevitable,” Dave noted, since most distribs felt August Busch III had “given them the keys to the kingdom.” So, any new leadership would be “destabilizing.”  Then too, “some things were done that exacerbated” tensions.  Rebuilding that trust “critical,” Dave offered, and efforts to do so “need more consistency.”  Also: beer biz is “relational business,” Dave noted.  As an organization, AB InBev “lost our eye too heavily on the transactional,” which “contributed to trust issues with distributors.”  More broadly, brewers need to respect work wholesalers do, Dave said, and “acknowledge that value.” 

Almost “All the Good Ideas” Come from Distribs, Sez Tom; “Chaos” Coming  On same panel, ex-MillerCoors prexy Tom Long said “all the  really good ideas…come from distributors, almost all,” since they’re closer to street, “see interactions between brands faster, and learn faster.”  Important for brewers “to listen really carefully to distributors,” then “go back and turn that into something that works on a bigger scale…. That’s easy to say, hard to do.”  Tom also gave warning that 3-tier system is going to “get more chaotic” because “lots of the 7500 undisciplined players” (craft brewers) seek to “break down industry [structure] for short-term gain.”  Leaders at  NBWA/Beer Inst, Tom advises, “need to think about the structure and how to protect it.”

New Constellation ceo Bill Newlands focused comments on biz plans and oppys, highlighting vast growth runways for Corona Premier and Modelo Especial, in remarks at Beer Insights Spring Conference yesterday.  But gorilla in room was expectation that Constellation will make more distrib moves, especially in Northern Calif, after transition of brands to Reyes in SoCal last year.  There’s “been a fair amount” of consolidation at a lot of levels in beer, Bill acknowledged.  But Constellation has “no grand scheme.”  Rather,  co is “focused on investing more and working with our Gold Network partners, to build stronger businesses and franchises for all.”  Asked directly about Constellation’s plans in NorCal, Bill responded bluntly: “We don’t have plans for distributor changes” there.  (There are however distrib deals being discussed in CA, that involve Constellation Brands.)  Asked same question a 3d time, Bill noted SoCal was “unique scenario” where there was oppy to “increase investment in acritical market,” stating again, “there’s no grand scheme around consolidation.” 

There’s lots going on, and lots going well for Boston Beer these days, yet Goldman Sachs remains “somewhat cautious” on SAM ability to hit growth targets in 2019, Goldman Sachs’ Judy Hong wrote following Goldman Sachs Global Staples Forum fireside chat with chairman Jim Koch and meeting with Boston management team. Despite Dogfish merger and “potential opportunity” for Truly, “we remain somewhat cautious on SAM’s ability to hit its 2019 depletions growth target of 10-15%.” But Truly is “the big wildcard” and could “offset the softness in Angry Orchard and persistent declines in its beer business,” sez Judy.

Indeed, “Truly is SAM’s number one priority in 2019” and “the main driver of that increased optimism” from Boston, still more than tripling in latest scan data, Judy noted. In fact, Truly now over 1/4 of total Boston volume in tracked Nielsen data for latest 4 wks thru May 4, well ahead of both Angry Orchard (20% of total) and Sam Adams (18% of total) for period, as those brand families each declined double-digits. And Truly volume surpassed Sam Adams YTD in scans. Yet Boston expects Truly to “roughly double volumes” for full year, which “does imply deceleration over the balance of the year,” sez Judy. Co ensured some extra capacity to account for another summer of potential exceeded expectations on Truly, yet “they are approaching a limit, and SAM will begin to face tougher comps based in part on the seasonality of the brand.” Plus, outsized growth of Truly will likely present margin headwinds in short-term, as co still utilizing co-packers, and manually sorted variety pks (“should ease over time” as Boston implements automated variety pkg line). Long-term goal is to “take the #1 share position from White Claw” tho execs acknowledged White Claw’s “first-mover advantage” in c-stores in particular. (White Claw pulling away as #1 in grocery as well.)

Meanwhile, Dogfish deal provides “unique opportunity, representing portfolio and cultural synergies.” Dogfish’s high-priced IPAs and sours combined with Sam Adams’ “lager-centric” brands, plus Boston’s ability to ramp up distribution in chains and on-premise and potential for innovation again touted by team. Boston Beer execs reiterated plans to avoid “straightforward cost synergies” such as job cuts.  Plan is to combine salesforces and “increase” sales team over time. Yet there will be some incremental 1x costs from the deal, including distribution footprint alignment (~60% volume overlaps currently).

Twisted Tea also expected to continue driving growth, as management “struck a positive tone” on its trajectory this yr.  Twisted is losing a bit of velocity in scans and brand proposition is “not as on-trend” as other FMBs with lower sugar, alcohol, calories and carbs, noted Judy. But Twisted franchise accelerating lately and still up low-double-digits off sizable base, representing co’s largest brand in scans by far currently (36% of total Boston volume in Nielsen All Outlet YTD thru May 4). Angry Orchard slipping this yr, down 10% in latest 4 wks, lapping large Rosé launch. Boston expects to grow cider biz in 2019, with help from new lower-calorie AO spritz and “less sweet unfiltered” launches later this summer. Yet Judy and co “remain nonetheless skeptical, given the acceleration of Rosé cider in the back half of 2018 and the absence of growth for the portfolio ex-Rosé.” Longer-term, Boston also “remains confident in the cider category as a whole, and believe that it could become a consistent single-digit grower.”

Consumer price index for beer increased 1.5% in Apr vs Apr 2018, per latest gov’t stats. After spiking to +2.6% gain in Feb, CPI for beer now below 2% gain for Mar and Apr. Beer lagged CPI gain for All Items (+2%) and spirits (+1.9%) in Apr but was ahead of wine which eked out a 0.1% gain.  So, yr-to-date Jan-Apr, CPI for beer rose 2.1%, still ahead of 1.7% for All Items but lower than 2.3% increase for spirits. CPI for wine up 0.9%. 

BPI Stays Solid  Meanwhile, NBWA’s monthly Beer Purchasers’ Index, measuring distribs’ buying intentions, stayed in expansion territory for 4^th straight month in Apr, NBWA’s economist Lester Jones reports.  BPI was just below 60 in Apr, up from 53.5 in Apr ’18, and 53.8 in Mar ’19.  (Anything over 50 indicates expansion; below 50 suggests contraction.)  Three of four above-premium segments indexed over 50, including record- setting 78.6 for FMBs and craft at 58.9, just below imports’ 61.4.  Premium light, premium regular and economy indexes each a little higher compared to last Apr, but each also below 50.  So was cider, at 46.8, tho up vs 40.9 last Apr.  Less positive: “at risk” inventory measure slightly higher than last Apr too, which “continues a trend of slightly higher readings for each month in 2019,” Lester wrote.  So, distribs say they intend to buy more even while they say inventories “at risk” of being out of code expanding slightly.

Democratic Senator from Hawaii, Mazie Hirono, became 52nd Senate cosponsor of Craft Beverage Modernization and Tax Reform Act, Beer Inst and Brewers Assn shared today. Recall, bill seeks to permanently lower federal excise taxes on brewers and beer suppliers of all sizes, extending temporary provisions passed at end of 2017 and expiring at end of this yr. List of cosponsors shared by BI features clear bipartisan support from Senators in 35 states, including from both Senators in 17 states. Among bill’s 52 Senate co-sponsors, 29 are Democrats, 22 Republicans and 1 Independent. House version of the bill currently at 156 co-sponsors.

Better trends continued in latest all outlet scan data from Nielsen.  Volume +2% for 4 wks thru May 5, $$

+4.1%, following +2.4% volume pop in previous 4 wks, thanks in part to Easter lift.  So, volume even yr-to-date, $$ + 2.1.  Lotsa signs of improvement.  Every major supplier had better 4-wk than yr-to-date trend, as did most segments and lotsa brands.  At the top, AB held volume for 4 wks, MC down just 1.1%.  AB $$ +1.4%, MC dipped 0.6%.  Constellation, Mike’s, Diageo and Boston all accelerated in most recent period.  Boston volume jumped 20.3%, vs +13.9% YTD.  Diageo tacked 5 pts on to its gain pace, Mike’s, nearly 10 (!).  Then too, HUSA reduced dropoff rate from -3.9% yr-to-date to just -0.5% for 4 wks.  FIFCO went positive, eking out 0.1% gain for 4 wks.  Pabst still trending down 10% or so.  “Remaining domestic brewers,” pretty good proxy for non-big brewer craft, +2.7% for 4 wks, up from +0.9% yr-to-date. 

Short-term trends for Bud Light and Coors Light better than YTD, but still off mid- and low-singles respectively for 4 wks.  Miller Lite up 3.5% and a top growth brand for 4 wks again.  Above premium segment scored double-digit growth in most recent 4 wks; 9 of top-10 above premium brands up.  In addition to usual suspects (Michelob Ultra and Modelo Especial each up 20%+), Corona Extra, Heineken and Dos Equis each up vs small declines yr-to-date. Ditto Blue Moon, up 4.7% for 4 wks vs 2% YTD decline.  Stella revved up to +10.6%.  White Claw Assorted now 8^th-largest above premium brand, still soaring at 200%+.  Among top premium brands, 8 of 10 still running in the red, tho Coors Banquet went positive in most recent period.  In economy, Natty Light and Natty Ice up for 4 wks and YTD, otherwise negative signs across the board.