Constellation

stock up about $6, almost 4% today, after 4% drop last week. Stock volatile lately in part because of what RBC

Capital Market’s Nik Modi calls “The Trump Effect.” With “Trump’s hard line stance on foreign trade

(especially Mexico), it is understandable that investors are a bit concerned. We expect the next few days will be

volatile for STZ depending on poll results.” If Trump wins and STZ “shares sell off,” sez Nick, “we would

encourage aggressive buying on any dips as we believe fundamentals are unlikely to change as renegotiating

NAFTA (if at all) will likely take some time.” Elsewhere, Nik also points out that Trump “would likely push

for some sort of excise tax on Mexican exports to the U.S.—or in some way penalize US companies with

manufacturing facilities in Mexico.” In one very interesting chart, Nik shows that as Trump poll numbers went

up over last 2 mos, STZ shares went down and vice versa. “Over the past two months, STZ share performance

has been largely correlated with Donald Trump polling results and increasingly so as we near the election.”

Legal challenges just expanded again for Craft Brewers Guild, one distrib arm of Sheehan Family Cos in MA.

As it still battles state over $2.6 mil fine levied for “pay-to- play” accusations, CBG now faces lawsuit from

importer Shelton Brothers that folds pay-to- play charges into its allegations. Shelton Bros seeks $1.7 mil in lost

sales, reports Boston Globe’s Dan Adams, sales lost in part because CBG paid accounts to carry other brands,

Shelton sez. Importer also filed notice with state alc bev control commission (ABCC) that it “intends to stop

selling beer to Craft Brewers Guild,” based on law that allows termination if there’s “unfair preferment in sales

effort[s]” or failure to exercise best efforts, Globe reports. CBG sez claims “meritless” and it will “prevail.” It

can challenge Shelton before ABCC.

Pay-to- play to favor non-Shelton brands just one of its allegations. It also alleges: 1) CBG priced stronger

selling brands more competitively and gave them more focus while others stuck in CBG warehouse; 2) CBG

urged retailers to buy from St Killian, a Sheehan-owned import co, while raising prices on competing Shelton

brands; 3) CBG reassigned sales people supposed to focus on Shelton and paid bars to carry other brands.

“Each dedicated tap line or cash kickback to secure placements of products from…preferred suppliers

eliminated a sales opportunity for other suppliers, including Shelton Brothers,” importer charges. So Shelton,

which has participated in other industry lawsuits, joins craft brewers in attacking Mass distribs generally for

limiting access, controlling the mkt, sitting on brands and not allowing them to move. “They’re limiting access

and choice to line their own pockets at the expense of brewers…and consumers. We’re hoping this lawsuit will

free our products from being held hostage,” Shelton further charges. Shelton started with CBG in 2009. Sales

fell sharply in 2011 and flat since, importer sez. Shelton tried to sell brands thru another distrib in 2011 but

backed off, Globe reports, after “campaign of harassment and intimidation,” by CBG vs competing distrib,

according to Shelton.

In its letter to Mass ABCC, Shelton claims CBG’s “pay-to- play” admissions are “prima facie evidence of good

cause to discontinue” their relationship. (There is no written agreement.) What’s more, CBG “continues to use

predatory pricing” that advantages other suppliers. For example, CBG “underprices Wurzburger Hofbrau”

(from St Killian) by “more than $30” compared to Shelton’s Kulmbacher brands, which are brewed by same

German brewer and “cost approximately the same amount.” That tactic, plus CBG’s “unreasonable margins”

News, Numbers, Info, and More 200+X a year published by Beer Marketer's INSIGHTS, Inc.

hurts other suppliers, Shelton sez. CBG also prefers other suppliers via a “Craft Barrel Accumulations”

program that provides discounts up to $25 per keg with a mix and match program limited to “preferred

suppliers,” Shelton alleges. It also details that CBG purchased $692K of beer from Shelton in 2010. That

dropped to $404K in 2011, bounced back to $479K in 2012 and stayed about the same thru 2015. Purchases are

down so far this yr, Shelton sez. As other proof of CBG not using best efforts, Shelton sez CBG “fails to

regularly purchase any products,” and buys tiny amounts of many brands. Finally, CBG “has been delinquent

paying invoices more than 30 times over” last 2 years.

In lawsuit, Shelton seeks damages, affirmation it can move brands and order that CBG can’t harass other

distribs that get Shelton brands, Globe reports. CBG told paper it “will vigorously defend itself against the

meritless allegations made by Shelton Brothers” and is “confident it will prevail.” Letter to ABCC concludes

that Shelton will discontinue sales to CBG “effective no later than 120 days from [CBG’s] receipt of this letter,”

dated Nov 3. Meanwhile, CBG’s suit vs ABCC movin’ slowly. Nothing expected before end of yr.

Constellation playing more in big leagues of sports sponsorship these days, that’s for sure. It announced

its “first major arena sponsorship in North America,” according to Sports Biz Jnl’s Terry Lefton, “signing on as

a top tier sponsor with Brooklyn’s Barclay’s Center and the Brooklyn Nets.” Constellation will sponsor 3 bars

inside Barclay’s Center as well as pro basketball’s Brooklyn Nets. Indeed, Barclay’s Center will feature 3

branded bars; Corona Extra Beach House Bar, Casa Modelo and Ballast Point Bar, which will open before end

of 2016. Constellation called this its “most comprehensive arena sponsorship” ever in release.

Constellation “replaces” AB as “preeminent sponsor at Barclay’s,” noted Sports Biz Jnl. AB had “broad

category rights since 2012.” Corona bar on main concourse will be “only place in New York City… where

Corona will be available on draft,” said Sports Biz Jnl. Corona Extra and Modelo Especial “will receive

marketing exposure during a wide variety of programming events at Barclays Center, including Brooklyn

Nets games, as well as through digital platforms and in-arena signage,” according to Constellation’s release.

“They’re going to activate the Nets and Barclays Center throughout the marketplace,” said Brooklyn Sports and

Entertainment ceo Brett Yormark, “so aside from a financial commitment, that’s what really got us excited

about this deal.” This is Constellation’s “second large sports deal in three months” as it also did deal with LA

Rams this summer. NY and LA are of course 2 of Constellation’s most important mkts. “We don’t do many of

these deals,” cmo Jim Sabia told Sports Biz Jnl, “so when we do them, we make sure we can activate at retail

and that it matches the cultural diversity of our consumers.”

We’ve always heard that the

deeper a sports team goes into playoffs, the better it is for sales in local area. Well then, the Cubs historic World

Series appearance and ultimate victory hadda be good for biz in tuff Chi mkt. Indeed, MillerCoors nearly

doubled last week in Chi on-premise, director Jon Stern told Mil Biz Jnl.

Top 2 global

beer ceos scored prominent positions on prestigious list of top global ceos recently published in November issue

of Harvard Business Review. ABI ceo Brito at #12, while Heineken ceo Jean Francois van Boxmeer at #22.

Constellation ceo Rob Sands also made the list at #89. Kinda cool that 3 of top 100, and what’s more 2 of top

25, come from “mature” beer biz. Not exactly a big growth industry.

As long as we’re doing accolades for industry execs, gotta note NBWA prexy Craig Purser and exec veep

Laurie Knight recognized as part of group of top DC lobbyists from associations in latest issue of the Hill.

General Dist in Salt Lake

City has deals to buy 3 other AB distribs in Utah, totaling 1.8 mil cases. The 3 distribs are Tooele Bev Co,

Bowtie Bev and Big Four Dist. AB only sells about 7 mil cases in state. General will now be vast majority of

its volume there. AB at 42 share in UT, down from 54 in 2008. Between lack of scale, loss of share (to lesser

or greater degree) and increased capital requirements to be a distrib nowadays, smaller AB distribs are most

frequent sellers these days. Then too, MC network already more consolidated. Bickers Consulting Group

worked with General on all 3 of these deals. INSIGHTS has tracked 11 AB distrib deals so far in 2016.

After slowing

slightly Jul-Aug, import shipments back on fast track in Sep. Up 336K bbls, 13.7%, reports Beer Inst

economist Michael Uhrich based on Commerce Dept data. That pushed yr-to- date gain back to 7.5%, +1.8 mil

bbls. Big shipments boost from Mexico drove gain, natch. Mexican imports surged nearly 350K bbls, 24%.

That put yr-to- date gain for Mexican shipments just over 15%, +2.3 mil bbls. So, collective shipments from all

other countries still down a half-mil bbls, 5%. Irish and German shipments remain up about 20% for 9 mos.

But Dutch shipments down 5%, Belgian shipments down 7%, Canadian shipments down 20% and UK

shipments down 27%. Ouch! Looks like AB InBev may be shipping some Stella thru Germany again. Big Sep

import gain makes US figures for Q3 look a bit better, tho still down. And yr-to- date trend for total US

shipments hangin’ in near 0.5%.

Two other tidbits from Michael’s report. First, exports continued to soften; off 15% in Sep, -4% for 9 mos.

Import cider shipments really soured in Sep, -28%. For 9 mos, import cider shipments -13%.

After slowing

slightly Jul-Aug, import shipments back on fast track in Sep. Up 336K bbls, 13.7%, reports Beer Inst

economist Michael Uhrich based on Commerce Dept data. That pushed yr-to- date gain back to 7.5%, +1.8 mil

bbls. Big shipments boost from Mexico drove gain, natch. Mexican imports surged nearly 350K bbls, 24%.

That put yr-to- date gain for Mexican shipments just over 15%, +2.3 mil bbls. So, collective shipments from all

other countries still down a half-mil bbls, 5%. Irish and German shipments remain up about 20% for 9 mos.

But Dutch shipments down 5%, Belgian shipments down 7%, Canadian shipments down 20% and UK

shipments down 27%. Ouch! Looks like AB InBev may be shipping some Stella thru Germany again. Big Sep

import gain makes US figures for Q3 look a bit better, tho still down. And yr-to- date trend for total US

shipments hangin’ in near 0.5%.

Two other tidbits from Michael’s report. First, exports continued to soften; off 15% in Sep, -4% for 9 mos.

Import cider shipments really soured in Sep, -28%. For 9 mos, import cider shipments -13%.

The 3 biggest

beer states all solidly plus in Beer Institute’s state-by- state shipments thru Sep. Calif shipments up 207,000

bbls, 1.1%, Tex up 141,000 bbls, 0.9% and Fla up 193,000 bbls, 1.9%. Collectively, those 3 states up 543,000

bbls. Those 3 states got 39% of growth so far, tho only 27.5% of volume. Add in Georgia, which was up

118,000 bbls, 2.7%, and 4 states got nearly half of growth. Beer shipments in 50 states up 1.33 mil bbls, 0.9%

thru Sep, sez Beer Inst. But recall, AB and MillerCoors shipments trends much better than depletions. So

likely lots more beer shipped than depleted. Still, AB’s estimate of industry sales-to- retailers down 0.7% thru

Sep implies over 1.5% trend difference with BI’s shipment numbers in 50 states. Difficult to figure.

Turns out a number of distribs on AB’s wholesaler panel met with AB and ad agency Weiden & Kennedy last

week in NYC for what was labeled a Bud Light “immersion meeting” as AB communicated to distribs. Bud

Light’s “current creative was discussed in great detail. More importantly, W+K explained how the transition

from the Bud Light Party campaign to the NFL campaign will lead Bud Light into an exciting, new, bold

approach for 2017, recapturing what the brand is about, capitalizing off its true nature of sociability and

sessionability.” This meeting was just prior to changes becoming public, including ending the Bud Light party

a few weeks early and new AB mktg veep. Several panel members quoted by AB that they were “impressed,”

“encouraged” and new approach will “reenergize our network.” Stay tuned.