Following Dutch brewer

Bavaria’s acquisition of the majority of Palm Belgian Craft Brewers earlier this yr, its just-announced

acquisition of US arm Latis Imports has to be viewed as a logical “next step” as cos say. Latis founder David

van Wees sold his stake, but staying on as managing director. Interestingly Latis brands will continue to be sold

thru Radeberger USA, which also sells Schofferhofer and other brands.

Meanwhile, David will also now run co’s Bavaria Importing arm. So far that’s mainly the Hollandia brand, a

low priced European lager that does the bulk of its biz in heavily Hispanic Miami metro area. Distrib Gold

Coast sells about 300K case of this brand that often sells for as low as $9.99 per 12 pack, David noted. Expect

Hollandia to expand to other urban mkts with high Hispanic populations such as NY and Chi.

Bavaria is a 7 th generation Dutch brewer, which sells about 5 mil bbls in toto globally in 120 countries

(including major recent investment in Ethiopia) and has goal to double over next 5 yrs, thru m&a, organic

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growth and partnerships. More recently co has “looked to move more aggressively behind its borders.” While

its US biz is small, David pointed to “young, aggressive” mgt group that is “debt-free” with “incredibly low

cost structure,” “willing to work at low margins.” Twenty eight family members currently work at co and there

are over 100 shareholders.

Why is David selling now? “It makes more sense for a brewery to own its route-to- market” among imports

now in US. Mkt for smaller imports is “challenging place,” “congested” at distrib and retail level, with

“oversupply.” As an owner, Bavaria will be “more commercially focused,” “open to new ideas” with “more

resources” than Palm previously had. He pointed to upcoming Rodenbach launch of Fruitage, a 4.2% ABV

Flanders Red Ale that Latis will launch in 8.5 oz cans in 4-packs with a suggested retail price of $6.99. This

“refreshing” and “highly accessible” liquid will serve as a more affordable entry point to Rodenbach.

Mass distrib Craft Brewers Guild fighting back hard against Shelton Brothers lawsuit filed against it earlier this

mo, seeking $1.7 mil in allegedly lost sales from CBG (see Nov 7 Express). First, CBG filed motion to dismiss

suit. Second, it got favorable ruling from Mass ABCC, ordering Shelton to continue to ship beer. Third, CBG

issued its own statement with blistering quotes against Shelton Brothers.

“Given Shelton Brothers’ history of nuisance and cut and paste litigation,” wrote CBG, “it is more likely that

Shelton Brothers brought this spurious litigation to drive its personal agenda.” Like what? Several components

according to CBG: “To attempt to capitalize on the ABCC’s February 2016 decision concerning CBG [over

pay-to-play allegations], to denigrate CBG’s reputation in the market place and industry wide, to create a false

narrative in a legislative battle to attack existing alcohol beverage laws and to extort CBG to release its rights to

continue to purchase beer from Shelton.” That’s quite a mouthful.

CBG stays on offense: “Shelton Brothers’ claim that it is ‘lacking in resources to engage in a legal battle’ is an

excuse that better fits Shelton Brothers’ fictional narrative and increases the chances that Shelton Brothers’

story will get the attention of reporters who might publish articles about an otherwise patently frivolous

lawsuit.” CBG points out that Shelton Brothers “is extremely litigious and has sued or been sued by many

wholesalers on numerous occasions.” Indeed, “many of their lawsuits contain the same claims as brought in

this current litigation,” according to CBG, which also provides list of 8 other Shelton Brothers legal actions.

CBG concludes: “We look forward to both the Hampshire Superior Court granting our Motion to Dismiss in its

entirety and the MABCC granting our application for relief.”

Beer biz up 2.7% again for 4

weeks thru Nov 19 in Nielsen all outlet, continuing streak of recently improved sales. Now up 0.7% YTD (it

was 0.5% thru 10/29). Beer biz doing so much better that even economy brands inched up, with a little help

from some price cuts. Total economy segment up 0.3% for 4 weeks, compared to 2% drop YTD as avg prices

down almost 1%. Lost slightly less share. Lotsa lower priced brands showing noticeable improvement in trend,

especially Busch Light up 5.7% last 4 weeks and Miller High Life up 5.6%, compared to 0.7% gain and 0.5%

drop respectively YTD. Of course, each brand reduced price, Busch Light avg prices down 1.6% and HL down

1% for last 4 weeks. Hamm’s has also seen a short-term reversal in trend with sharply lower prices. Up 4% for

4 weeks, down 5% YTD as avg prices down 37 cents, 2.8% to $12.70 a case in latest period. But even with

improved sales, economy segment still lost 0.6 share of volume for 4 weeks, just 0.1 better than YTD and lost

0.9 share of $$ in both periods. Meanwhile, trading up continues, if at slightly slower pace. All above premium

segments gained 1.8 share of $$ for 4 weeks, 2.2 YTD.

(Editor’s note: this article originally appeared in our newsletter Beverage Business INSIGHTS last week, a

space, particularly in organic and natural bevs, where triple bottom line companies are more prevalent. It

seemed especially appropriate on the day before Thanksgiving.)

It wasn’t really what his board of directors wanted to hear in depths of 2008 recession, but FIFCO ceo Ramon

Mendiola pressed his case: the time had come, he argued, to merge the co’s business practices with

sustainability and become a triple-bottom- line co that is as concerned with its impact on people and the

environment as with profitability. That would mean decisive changes in governance, such as shifting

employees’ compensation from a 100% tie to business performance to blend of 60% economic goals, 30%

social goals and 10% environmental goals. “I had a tough time even with the board of directors in the midst of

the financial crisis,” Mendiola allowed to audience at Beer INSIGHTS Seminar in NY last week. And while

millennial-age staffers embraced program – “you can see the sparkle in their eyes,” he said – more senior execs

were different story. “I had a tougher issue with my direct reports and second line of executives,” he recalled.

So began odyssey that resulted in the Costa Rican beer and soft drink co being named a Sustainability

Champion at World Economic Forum in Davos, Switzerland. Tho its operations had long been focused on

Central America, FIFCO (the name stands for Florida Ice & Farm Co) took on visible role in US 3 years ago via

acquisition of North American Breweries, which brought into the mix such familiar brands as Genesee and

Labatt. FIFCO is 25%-owned by Heineken and also is a Pepsi bottler in Central America, as well as marketing

its own array of NA brands such as Tropical. Tho many of its social activities initially were related to curbing

alcohol misuse, sugar now is looming large as issue on non-alcoholic front, with Mendiola telling BMI audience

he’d even sought to nudge along supplier PepsiCo into reformulating brands a few years ago, tho soda giant

wasn’t ready to move yet. (It recently announced plan to slash sugar across its portfolio.) “We did it 5 years

ago” with FIFCO’s own brands, including Tropical, tho co waited 2 years to communicate moves to consumers

because it’s sensitive issue. “We couldn’t do it with our PepsiCo brands because they wouldn’t allow me until

this year,” he claimed.

As for sugar issue, Mendiola doesn’t minimize magnitude of challenge, at time childhood obesity is crisis in

both Latin America and US. It’s “something the industry failed to recognize in time,” he asserted. “We need to

get much better . . . The big players need to do much much better than what they’re doing up to date.”

So is triple bottom line (3BL) a naively idealistic approach? Not quite. Even as FIFCO has continued to ratchet

up its social and environmental commitments, its profits have more than quadrupled over past decade. So

FIFCO seems to be doing well by doing good. After first committing to become zero-waste by 2011, water-

neutral by 2012 and carbon-neutral by 2017, this year the co resolved to move into positive territory in terms of

water, emissions and waste by 2020, via such means as bringing potable water to in-need communities and

protecting rainforest. Among its social missions has been to reduce alcohol abuse, tho curbing sugar intake via

its NAs now has become a key priority, as noted.

Effort began with deep dive in 08 to glean “what society expects of us,” Ramon said. That meant interviews

and qualitative and quantitative research with all stakeholders including suppliers, regulators, non-gov’t orgs

(NGOs). “Some of that feedback was not nice at all, especially from those opposing the alcohol industry.”

Tops, by far, was dealing with harmful use of alcohol, tho also serious concerns were environmental impact of

co’s water use, PET bottles entering waste stream and carbon emissions. FIFCO “decided to respond with

public commitments to society.” Those 3 initial commitments on attaining neutrality on water, emissions and

waste were announced. Meanwhile, analysis of alc consumption patterns revealed that main issue was not

frequency of consumption – Costa Rican adults averaged just 1.7 sessions per week – but binging when they did

drink, avg 5 drinks per session, leading to intoxication. (By contrast Canadians indulge 4.5X per week, but only

drink 2.7 beers when they do.) So FIFCO devised tailor-made programs to address that and related issues.

Another key initiative stemmed from “purpose quest” upon which FIFCO embarked in 2014 after string of 4

acquisitions including NAB had exploded size of co, causing execs to lose connection with most employees. At

gathering of 3,500 employees for 2014 “learning mission,” employee asked what was being done about

colleagues living in poverty conditions. Issue hadn’t come up on Mendiola’s radar, and “I was shocked,” he

recalled. In 5 months co had devised comprehensive plan, starting with the 3.6% of co’s Costa Rica employees

who were living in poverty conditions – not thru low wages, he emphasized, but thru poor decision-making,

such as misuse of credit cards. That led to program to eradicate poverty within FIFCO within 3 years,

expanding first to Central America, then to US. Within a year and a half, 42 employees had been eased out of

morass. There was unanticipated benefit, too: morale among rest of staffers. “I never realized the impact on the

other 97% of employees knowing what the company was doing to lift them from poverty,” Ramon said.

FIFCO continues to augment its ambitions, as it moves away from straight philanthropy to more strategically

targeted social investments directed at issues impinging on co’s own “footprints.” Before big shift in 2008,

FIFCO contributed less than 1% of its net profits to these social and environmental causes, about in line with

where most US and European cos are today. That’s been steadily increased to 3%, then 6% over past 4 years,

and this year will reach 8%. That’s about in line with most generous co in such contributions, Microsoft, at

8.5%.

By now, ethos permeates co. Even those higher-ranking execs who were initially leery of move came around as

it became clear that 3BL orientation would enhance, not hurt, co’s performance while offering broader meaning

to their work. “Now they’re all in,” Mendiola reported.

Have a great Thanksgiving holiday!!

AB’s latest promotion for Bud Light features limited-edition “Strike Gold”

packaging for Super Bowl, reported St Louis Post-Dispatch. AB will release just 37,000 Bud Light Super Bowl

51 cans in gold, and those who find them will be eligible for grand prize of Super Bowl tickets for life, or 51

years, whichever comes first.

Looks like Oct not so hot for

spirits biz either. Adjusted for selling days, spirits volume -0.4% in 17 control states, reports NABCA, with $$

sales up just 1.5%. That’s well below recent trends. Twelve-mo spirits trends still fine in these states tho, with

volume steady at +2.5%, $$ rollin’ along at +4.7%. How’s beer faring in these states? Yr-to- date volume thru

Sep in these control states up same 0.9% as natl trend, Beer Inst reports.

INSIGHTS had a chance to catch up with TTB’s director of Trade Investigations Division Bob Angelo and

spokesman Thomas Hogue about recent record $750,000 offer in compromise from Massachusetts distrib Craft

Brewers Guild. This was largest offer in compromise ever for pay-to- play. Bob characterized it as “progressive

discipline.” In a couple of earlier wine and spirits cases, TTB got $300K in Vegas and $50,000 in Chi. So

penalties keep going up as they’re finding more stuff. What’s more, Bob sez: “We want industry members to

realize we don’t want this to be considered cost of doing business.” And they should “take seriously” the

potential consequences, including prospect of TTB investigation, offers in compromise but also even potentially

suspension or revocation of their federal permits. The CBG fine intended to be large enough “where it gets the

industry members’ attention.”

“We are always looking at trade practice issues,” said Tom, challenging notion that it’s stepped up activity

recently. Instead, TTB “continuing down a path” for at least 10 yrs, since TTB separated from BATF. Reason

we’re “seeing more offers in compromise” in last 12 months or so are that cases are complex and “take a good

deal of time.” But trade practice investigations are “bread and butter” of TTB and “what we do.”

TTB absolutely “had our own independent investigation,” said Bob, in Massachusetts and wasn’t simply

piggybacking on Mass ABC investigation, but rather responding to various reports. “A lot of factors” go into

an “offer in compromise,” with “many components” in order to have a fine. TTB must also choose its battles

wisely; “where we spend our resources” is where TTB has best shot of “good, viable resolution,” said Tom.

Recall that each of US House and Senate Appropriations bills currently seek an additional $5+ mil for TTB

enforcement activities. But that’s not law yet.

“Brewers Bet Beer Drinkers Seek More Sober Suds,” headlines Wall St Journal today, detailing dreams of no-

alc beer boom at ABI, Heineken and Carlsberg.  As we noted last week, AB InBev ceo Brito talked up no-

alcohol beer’s potential and progress in places like Canada, Brazil and Germany at Beer INSIGHTS Seminar. 

Brito was addressing ABI’ stated goal of having low/no-alc malt bev products be 20% of its global volume in

by 2025.  That would be up from 6% now (see Nov 15 Express).  Since AB announced that goal last yr, it

seemed like quite a stretch, given that no-alc less than a half-share of total US volume (had gotten to 1 share in

early 90s) and of AB’s volume here.  (Spoiler alert: amid lotsa optimism and comments from brewers about

potential, growth rates and improved quality, WSJ reports “despite brewers’ efforts, the volume of nonalcoholic

brews as a proportion of global beer has stayed roughly flat at around 0.7% for the past decade, according to

beverage industry research firm Canadean.”  Share of low-alc beer unknown.)  Regional shares range from

0.3% in North America to 1% in Eastern Europe and 5.2% in Middle East/N Africa, dominated by Muslim

culture.  And yet.  Not only does ABI have ambitious goal, but its global competitors also “investing in new

technology, marketing and distribution for nonalcoholic beer,” according to WSJ. 

Heineken and Carlsberg link non-alc beer to active lifestyles; Brito agreed, noting lotsa Germans drink no-alc

beer after marathons.  Brewmasters say they’ve cracked the code to maintain flavor via new

recipes/technology.  WSJ found a “virtual reality developer” who did some research on no-alc beer for

Heineken.  He lays out the challenge: “It’s kind of like nonbeneficial exercise – why would people use this if

the main benefit doesn’t exist?”  He found that core drinkers of no-alcs are same folks as they ever were: “older

people whose doctors had advised them to cut back on alcohol.”   Two benefits of no-alc beers, at least for

producers: they can be viewed as response to consumers’ health concerns and profits tend to be high as prices

premium and taxes nil.  Will no-alcs spread to younger, active populations seeking, as Brito said, brewed

products with known ingredients, marketed as “water plus, plus plus” rather than “beer without this, this this?”

 We’ll see.  Interestingly, WSJ feature follows article last wk about struggles distillers face in keeping the flavor

game going in spirits, given “choppy” nature of sales and risks to brand equity.  Brewers going down similar

road with flavored malt bevs (viewed by some as way to get spirits occasions back), hard sodas and low/no-alc

beers. All this in pursuit of volume not being provided by core products right now. Do these efforts make sense

or are they exercises in virtual reality that won’t translate to real volume?

Starting today, 2 new 15-second ads will reprise Miller High Life’s classic

“If you’ve got the time, we’ve got the beer,” slogan for first time since late 70’s.  “Stabilizing the economy

segment is critical to achieving growth by 2019 and Miller High Life is a cornerstone of our economy

portfolio,” cmo David Kroll wrote distribs yesterday to announce new ads and new packaging coming in

March.  High Life “offers ‘quality for the everyman’ in a way that is unfortunately rare in today’s world,” he

added.  MC is “investing significantly in Miller High Life and we’re already seeing results,” added David. 

High Life on uptick as of late, up 5.8% in Nielsen data for 4 wks thru Nov 12.  Spending on High Life will

more than double (+135%) in Dec vs yr ago, Ryan Marek, dir of economy brands told Ad Age. MC spent total

of $10.7 mil on brand for all of 2015, per Kantar. 

Rich No More  “If you’ve got the time,” spots replace “I am Rich” campaign, which sought a “hipster feel,” but

in end, ads “may have tried just a little too hard to look cool,” wrote Ad Age.  “You need not act like a

millennial to appeal to a millennial. This is a lesson a lot of brands are learning within beer and across a lot of

other categories as well,” noted Ryan. “You have to be authentic. You have to be true to yourself. Because

people sniff through the bullshit,” he added. So with Miller High Life history, “it’s a really easy job to do.”

Evercore ISI’s Robert Ottenstein and investors met with Molson Coors ceo Mark Hunter and investor relations

team on Friday.  Robert headlined his report “steady as she goes” and TAP stock remains his top pick because

of $550 mil in synergies and savings it should achieve in next 3 yrs following deal to buy rest of MillerCoors. 

But one news nugget could mean MillerCoors will fall behind in mktg spending arms race.  

Robert “not expecting step change in marketing investment,”  he wrote.  Molson Coors is “not underinvesting in

the brands” with spending near $1 bil.  Molson Coors will “be opportunistic, but focus on sweating current

spending level, not adding more money,” Robert added.  “Opportunities for increased marketing programs are

$5-10 million order of magnitude, not $50 million, and more for market insights/tactics/tools than media

spend,” Robert emphasized.  Constellation and ABI have ramped up spending big time in recent yrs and

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outperformed overall (tho MC has gained share of premium lights). If they continue to keep spending pressure

on, will MC trends suffer if it doesn’t step up too?  

Meanwhile, Mark and team “confidently fielded investor questions and allayed concerns over its sudden CFO

departure announced the previous day.”  Incoming cfo Tracey Joubert  was “first choice,” and there will be “no

impact on integration, timing, targets” as “work streams well underway,” according to Robert’s report.  Mark

“highly confident in delivering at least $550 million” in synergies and cost savings, concluded Robert.