From the department of “lawsuits can drag on for years,” another decision just dropped in long-running dispute between Pabst and MD distrib Winner (a division of Chesapeake Bev).  Recall, Pabst terminated Winner back in 2015 after Eugene Kashper purchased the brewer, claiming it had right to move brands to half-dozen other MD distribs as a “successor brewer” under MD law; Winner had right to fair mkt value for brands.  Winner sued, claiming termination not legit under MD law.  Pabst won first round, but Court of Special Appeals allowed Winner to amend complaint.  Last week, Baltimore County Circuit Court ruled in Pabst’s favor again. Blue Ribbon LLC, “which is controlled by Eugene Kashper, is a successor beer manufacturer under the statute, because it replaced the Old Pabst Brewing Company,” judge ruled.  As such, the not-for cause termination was “proper.”  So, no breach of Winner’s contract. 

What’s more, tho Winner “could be entitled to the fair market value” for the brands, specified time frame for negotiations, mediation, etc ran out back in August 2015, judge further ruled, and Winner “waited until January 21, 2016 to formally file for fair market value.”  As a result, Winner’s “eligibility for relief” under MD law “is time-barred.”  Pabst was 27% of Winner’s annual volume back then, 14% of revs (22 Pabst brands generated over $1 mil/per mo in gross sales) and 17% of GP, according to court documents.  Pabst pointed out that while Winner claimed loss of Pabst would be “catastrophic,” these figures didn’t include Chesapeake’s huge AB, Constellation, Guinness volume at the time.  Winner will appeal again to the Court of Special Appeals.

That memorable headline, “Coke vs Claw” appears in Law 360 article about trademark dispute pitting Coca Cola Co against Mark Anthony Brands. “It appears there are in fact laws − specifically trademark laws − even when you’re drinking Claws,” began article.  Claim stemmed “over an application to register the name ‘White Claw Hard Seltzer Surge’ as a trademark.”  Recall that’s higher ABV White Claw variant intro’d at Mike’s distrib conference this yr.  But “White Claw doesn’t currently sell a product under that name,” wrote Law 360.  “The problem: Back in 2015, Coca Cola revived its own ‘Surge’ brand of citrus soda, after a decade of dormancy.”  In Coke’s filing, it said “the use of the name on another beverage would confuse consumers” into thinking “they were connected,” wrote Law 360. This isn’t White Claw’s first dispute. Back in Jan, White Claw tried to register White Claw Ultra “but abandoned the effort after Anheuser Busch… took action at the TTAB.”

Total US shipments down 2.7 mil bbls, 1.6% in state data thru Oct, released by Beer Inst on Friday. That’s somewhat steeper than US domestic taxpaids + imports would suggest (-1.2%).  A few of biggest states drag trends down.  CA shipments down 709,000 bbls, 3.5%, Illinois down 306,000 bbls, 4.3% and NY down 269K bbls, 3%.  Those 3 states alone down 1.284 mil bbls. Among top 10 states, MI and OH also down 3% or more; OH down 216K bbls, 3.4% and MI down 197K bbls, 3.9%.  Most East North Central states have it pretty rough in 2019 (WI also down -3.7%).  Doing better: big TX and FL.  TX shipments actually up 0.5% for 10 mos and FL flat.

After US Dist Ct judge re-issued his injunctions in corngate case last mo, AB returned to US Appeals Ct to get injunction that it had to change its secondary packaging – to remove the “no corn syrup” language/icon –  reversed. Why?  We’ll boil down AB’s 74-page brief.  Judge erred in several ways, AB insists. First, MC can’t show AB’s packaging claims imply a false message about MC products (in connection with corn syrup ads) because “since 2014, MillerCoors has listed corn syrup as an ingredient in Miller Lite and Coors Light in multiple locations on its website. MillerCoors did so without any claim that corn syrup is not in the final product.”  What’s more, corn syrup is in the final product, AB continues to insist, putting it in plainer language, that “a collection of sugars, non-fermentable sugars and non-sugars” remain.  (Separately, MC insists this AB claim, that “simple residual sugars allegedly resulting from the fermentation of corn syrup constitute corn syrup,” is wrong.)  US Dist Ct “declined to consider AB evidence” on this issue, AB sez.  Third, MC has “offered no evidence” of: 1) any consumer confusion regarding AB packaging; 2) “consumer understandings of the ‘campaign’ as a whole” or that consumers connect it to the packaging; 3) the packaging affecting a “reasonable consumers’ decisions.”  AB sums up: “Truthful and non-misleading commercials cannot render truthful packaging false or misleading.”  Finally, fed ct judge erred by not requiring MC to show it’s been harmed. And, MC “has no evidence of harm.”   

Add PRESS to the running tally of hard seltzer brands expecting to more than double sales next yr while in process of more than doubling sales this yr too. PRESS sales up 150% YTD and co expects to finish the yr at 375K cases, co announced and spokesperson Megan Sutton told INSIGHTS. And PRESS “forecasts” 1 mil cases in 2020, which would be an even faster growth rate than 2019 (up ~167%). It also continues march toward natl distribution, adding 9 new states – TX, NC, MO, NM, WV, ID, MT, SD, WY – plus new distrib partners in 4 existing mkts, bringing it to 41 states total, per release. PRESS is “well on our way to meeting our goal of distribution across all lower 48 states by the end of 2020,” sez founder Amy Walberg. Only DE, LA, MS, NV, OR, VA, WA to go. So, PRESS still lookin’ to gain ground next yr amid influx of new hard seltzers and expected triple-digit growth from leading White Claw and Truly. PRESS a top-10 hard seltzer brand family as defined by IRI, growing at a faster clip than all channel; $$ up 182% to $6.07 mil YTD thru Nov 3 in IRI multi-outlet + convenience. It’s slightly ahead of FIFCO USA’s Pura Still (also $6.07 mil). PRESS variety pk ($3.5 mil) is larger than Oskar Blues’ Wild Basin variety pk ($2.9 mil).  But total PRESS just 0.5 share of seltzer $$.

Thru a series of moves in last few mos, it’s become increasingly clear that AB is focusing less attention on its largest brand Bud Light, more on Bud Light line extensions (Platinum this fall, Seltzer in 2020) and more on Mich Ultra of course.  One could make argument that line extensions all part of Bud Light franchise.  But Bud Light itself is still about 1/3 of AB volume, so fact that AB less focused on it is significant as AB tries to pivot more quickly, with some success, to an above premium future.

The shift became more pronounced this summer.  Recall, AB showed far fewer Bud Light ads this summer, distribs said.  Then it placed Bud Light Platinum on Thursday night football instead of Bud Light. Platinum, a small, declining but above premium brand, reversed course, started to grow, while Bud Light trends didn’t get worse.  Last week, AB said it aimed to make Mich Ultra #1 in Share of Voice (SOV) next year, a role long held by Bud Light.   And this week, it emerged that AB will spend over $55 mil on Bud Light seltzer, which will get 100% of Bud Light spend early in yr.  Total Bud Light spend including Bud Light seltzer will be flat.  That’s 4 significant moves that all point in same direction.

Is it working?  Depends how you look at it.  Recall, total AB sales-to-retailers down 3% for 9 mos and Bud Light volume down 6-7% in scan data (accounting for big % of AB volume loss). But $$ more important.  And total AB revs flat, EBITDA up slightly.  Tho Brito said Anheuser Busch InBev “not satisfied” with 3d qtr results, INSIGHTS keeps hearing that in US, AB sees itself as improving.  Quite a few distribs do not agree and concerned, among other things, that Bud Light seltzer will further cannibalize Bud Light. (At a higher margin, AB would say, undoubtedly, even if it agreed on cannibalization).

Tho AB’s big share losses continue, one can see signs of that improvement in IRI multi-outlet + convenience data.  AB total $$ sales up $145 mil, 1.1% to $12.8 bil yr-to-date thru Nov 3 in IRI MULC.  But it has lost 1.53 share of $$.  Bud Light brand down $217 mil, 4.8% and it alone lost 1.4 share of $$.  But Mich Ultra gaining more $$ than Bud Light losing, if not share.  Mich Ultra up $271.5 mil, 16.7% and it gained 0.6 share.  What’s more, total Mich Ultra family up $362 mil, more than 20%.   And it’s nearly 17% of AB $$ in IRI, while Bud Light down to less than 34%.   

AB at 64.4 share of all light beers, cmo Marcel Marcondes showed at Beer Insights Seminar. That’s its all-time high. Up 0.8 share this yr, following 0.6 share gain last yr.   And that’s even as Bud Light losing 1.9 share of light beer, as Marcel showed.  Howzzat?  Well, Mich Ultra is gaining 1.67 share of light beer, Busch Light gaining 0.28 share, Natural Light 0.14 and others another almost 0.6 share.   So AB’s light beer share gainers are cleaning up even more than Bud Light is losing. 

Hard seltzer volume will nearly triple this year from 27-28 mil cases in 2018, to 80 million cases, Mike’s reportedly estimates.  Mike’s would probably have the best handle on this since it’s over half the segment.  Boston estimate somewhat lower last we knew. But with seltzers tracking up 278% for last 12 weeks thru Nov 3 in IRI multi-outlet + convenience, let’s say seltzers likely to be at least 75 mil cases.  That 48-mil-case growth amounts to at least 3.4 mil bbls.  In its 3d full year.  That’s already more bbls than craft ever grew in 1 year.  Craft’s record growth yr was 2014, when it grew 3 mil bbls, INSIGHTS estimates.  And even imports never grew more than 3.55 mil bbls (that was in 2006).  If seltzer indeed hits 80 mil cases, that’s 3.8 mil bbls, which is more than imports ever grew in any one year.

What About Light Beer?   Hard seltzers should double in 2020, believe both Mike’s and Boston, who are presently 82% of segment in IRI with White Claw and Truly.  Seltzer’s still low household penetration, huge out-of-stocks and the massive competitive spend coming next year, all suggest big growth, tho one never knows.  But if seltzers do double off a base of 75-80 mil cases, that will be at least 5.5 mil bbls of growth.  Did light beer ever grow that many bbls in one year?  Turns out they did. Twice.  In 1982, light beers grew 5.6 mil bbls, almost all premium lights as Bud Light made its first big splash.  That was off a base of 24 mil bbls.  So over 20% growth. And in 1990, light beers grew 6.4 mil bbls, but 4.1 mil bbls of that growth in subpremium lights.  So if seltzers do double, they will already be in neighborhood of light beer’s best growth yrs!

Scan trends continue to look a lot better than shipments trends in US. And it’s getting kinda late for them to align by end of year.  While scan trends especially strong in Sep-Oct (+2-3%), October taxpaid shipments by domestic brewers turned down (hard) again: -583K bbls, -4.3%, estimates Beer Inst economist Michael Uhrich.  (Recall, AB shipments about 600K bbls ahead of depletions thru Sep.)  But there’s a silver lining: Michael increased his estimate of Jan-Sep taxpaids by 565K bbls since he put out the Sep estimate.  So, YTD shipments picture actually improved slightly, albeit still soft: -2.6 mil bbls, -1.8% for 10 mos.  Toss in modest Jan-Sep import gain and yr-to-date US shipments -2.1 mil bbls, -1.2%.  That’s while Nielsen scans for all outlet +0.7% YTD thru Nov 2 and IRI MULC +2.1% YTD thru Nov 3.  Off-premise chain biz is only channel showing gains, Michael points out.  But usually gap not so wide.  For example, in calendar 2018, Nielsen scans showed 0.9% volume decline while US shipments -1.1%.  So far this yr, that 0.2 gap closer to 2.0.  That’s a lotta bbls.  Go figure, ’cause we can’t.

House Judiciary Committee passed MORE Act yesterday by 24-10 vote.  The Marijuana Opportunity Reinvestment and Expungement Act removes cannabis from Controlled Substances Act and requires fed cts to expunge criminal records or conduct re-hearings.  Also authorizes 5% fed tax to fund services, loans to assist small entrepreneurs to enter mkt and minimize license barriers, reports Marijuana Biz Daily and The Spirits Business.  Exec director of Drug Policy Alliance said mark-up means US coming “one step closer to ending the devastating harms of marijuana prohibition…. Now it’s up to Congress to do the right thing and swiftly pass the bill to ensure justice is not delayed a moment longer.”  But swift action clearly ain’t in the cards.  First, bill “isn’t likely to make it to full House for consideration until 2020, at the earliest,” MJ Biz Daily explains.  Second, “even if the measure passes the full House, the Republican-controlled Senate currently is seen as a formidable and unlikely barrier to cross before the 2020 elections.”  Some say Congress should focus more on SAFE Act that already passed by full House; it reforms banking, protects state legalization programs and has more support.  But committee refused to include SAFE with MORE, which separately allows states to regulate commercial activity.  Other hurdles: 7 committees have jurisdiction over various aspects of legalization and disagreements over how any tax funds should be allocated. 

Yet Another Ballot Initiative to Fix California’s Fumble?  Meanwhile, California lookin’ more and more like the poster child for how not to legalize recreational cannabis sale/use. Separate reports on recent conference in Long Beach show that even top state regulator Lori Ajax continues to acknowledge ongoing major snafus: “These challenges just keep coming at us and to the industry,” she said.  What challenges?  Lack of licenses, barriers to moving bizzes from illegal to legal sales, 2/3 of CA local govts still ban the biz, high taxes and more, according to reports from AP and MJ Biz Daily.  As result, CA legal cannabis sales now estimated at $3 bil, tho a big mkt, still dwarfed by illegal sales, estimated at $9 bil.  Reading between lines, looks like legalization may have actually boosted illegal mkt in CA, tho no one knows, natch.  While Lori’s Bureau of Cannabis Control seeks to streamline licensing program and make other changes, some advocates want to go back to public to adopt reforms.  “I definitely think we need a ballot initiative,” one cannabis retailer and city councilman said at mtg, to lower taxes, ease transition to legal side of biz and remove current “de facto caps” on retail licenses.  Any such ballot measure would need another fund-raise from supporters and wouldn’t happen before Election Day 2020. Meanwhile, Lori offered a bit of a stoner moment in her comments at conference: “We don’t want to confuse you, but I guess, we’re confused too. We’ve got to un-confuse things.”  Perhaps Lori should follow Bob Marley’s advice: “When you smoke the herb, it reveals you to yourself.”