Red Bull North America terminated several Mass beer distribs, including Burke, Atlas (MC) and Williams (AB) in order to pursue self-distribution off premise (our Beverage Business INSIGHTS broke story earlier this week).   Burke, an approx. 7-mil case distrib, “expects to eliminate 72 positions, starting in June,” according to Boston Business Journal.  “Due to unforeseen circumstances arising out of the termination of a major business contract, Burke… will be conducting a mass layoff,” prexy Bill Burke said in state regulatory filing, reported Jnl.  As of last yr, it had 320 employees.  Recall, distribs get essentially no compensation when Red Bull departs, making it an even more bitter pill to swallow.

Red Bull told BBI that it “continues to focus on providing the most effective and efficient route to market in every geography.  We are committed to the three-tier distribution model, optimizing all elements of the value chain and continuing to elevate the entire network’s capability.  Route-to-market changes in recent years have included awarding territory to independently owned third-party distributors in some markets and launching RBDC in others,” referring to company-owned Red Bull distribution cos.   

While increased beer and cannabis focus, together with sale of big chunk of its wine biz, have overshadowed Constellation’s TBA (Total Beverage Alcohol) approach a bit, it hasn’t disappeared.  Constellation continues to tuck in top-flight spirits makers.  The latest: a majority stake in Tenn distiller Green Brier.  Constellation Ventures bought minority stake in Green Brier in 2016; now it will be “fully integrated” in STZ biz, reports The Spirits Business.  Purchase follows fast on heels of Constellation’s minority stakes in LA-based mezcal maker and upstate-NY distiller earlier this yr.  “Whiskey is a red-hot category, and Tennessee whiskey fills a white space for us,” said CEO Bill Newlands.  A shot and a beer.  There’s an idea.  Bill added: “Once integrated into our wine and spirits division and benefitting from our market research, distributor partnerships and consumer insights, we see Nelson’s Green Brier scaling even further in the next few years.”

Elsewhere, Heineken acquired minority stake in Biela Ecuador, based in that South American country’s largest city, Guayaquil.  Ecuador is small mkt, about 5 mil bbls, but lotsa potential, according to Heineken statement.  Earlier this week, Heineken closed its deal with China’s largest brewer China Resources Enterprise (CRE).  Recall, Heineken will invest approximately $3.1 billion to become a minority partner in CRE’s beer co.  Companies will also sign trademark/license agreement to “leverage Heineken’s global distribution to support” international growth of CRB’s Snow brand.  “Our long-term strategic partnership will help Heineken to significantly expand the availability of the Heineken brand, and will strengthen CR Beer’s offering in the rapidly growing premium beer segment in China,” Heineken ceo Jean-Francois van Boxmeer said when the deal was announced. 

 Following Bev Forum conference in Chi earlier this week, Wall St analysts picked up on those key themes of disruption and innovation, especially in non-alc bevs (like Body Armor and Bang), but also with White Claw.  “Disruption Is the Norm,” headlined Macquarie’s Caroline Levy, noting “emerging smaller brands disrupting long-time dominant share leaders.”  She cited what Body Armor is doing in sports drinks, Bang and C4 in energy.  Goldman Sachs’ Judy Hong also noted “accelerated pace of disruptions facing the beverage industry and stepped up focus on innovations from both incumbents and small brands alike.”  But she also expects “the cost to achieve growth to continue to rise.”  Tho focus on NAs, same lessons apply in beer, especially with hard seltzers currently.  These themes somewhat of a prelude to our upcoming Spring Conference.

Well, Bill Hackett may be retired from Constellation Brands but he ain’t exactly going gentle into that good night.  Speaking at Bev Forum, he teed off on AB’s controversial Corngate campaign, with a pointed critique.  It happened at end of an interview when he was talking about problems of beer biz megabrands, which he said “keep changing their campaigns” and “don’t stand for anything.” Then he launched into a rant: “It’s exacerbated by this whole corngate bull***t.  It’s unconscionable that the leader in the industry did that.  Because it strikes at the heart of what the industry is all about.”

“I sit on the BI [Beer Institute] board,”  Bill noted, quipping “I may not after this,” to laughs. “We’ve been working on building beer and industry health… in collaboration with NBWA, BA and Beer Institute….  Everybody involved in beer has been talking about beer health, figuring out how we can help promote and engage consumers with beer again. Then, AB does this on Super Bowl?” he asked somewhat incredulously. He added: “It’s crazy.”

Then Bill said Constellation has “never promoted our beers and will never promote our products by denigrating somebody else.  To say that they’re doing anything less than that is duplicitous at best.  It’s a shame that that’s the way they’re approaching the business. But it tells you the challenge that they have…. I hope they get their act together and figure that out.  That is not the beer business. That is not the way a leader should act.  I’ve been in the business over 40 years and it’s just a shame that’s where we are. Craft beer has been magical in terms of how it’s engaged consumers. Consumers don’t want to hear the crap that’s going on, in terms of do you use corn syrup. And by the way they use it too.”  Tell us what you really think Bill.  Bill will appear with other past industry leaders, Tom Long and Dave Peacock at Beer INSIGHTS Spring Conference in 2 weeks (see below). 

Just 2 weeks after AB’s communications veep Gemma Hart left comes word that 15+ yr govt affairs vet Doug Bailey is moving on at end of this week.  Doug ran AB’s DC office since 2014 as veep of US industry affairs, state affairs and govt affairs.  Among key responsibilities, Doug managed: AB’s team of 25 lobbyists and DC office which had $6 mil annual operating budget, AB’s $1-mil PAC, its tax reform strategy, Congressional strategy when SABMiller merger before Justice Dept, and more.  No word on where Doug headed or who his replacement is. AB had short statement: “Doug Bailey recently informed us of his decision to resign from Anheuser-Busch.  We thank him for his contributions to A-B and wish him all the best in his next endeavor.”

White Claw jumped 9.3 share to 55.1 in seltzers over last 12 weeks thru April 7 in IRI data shared by Macquarie’s Caroline Levy at Bev Mktg Forum.  White Claw growth at 332% last 12 weeks, even better than the extraordinary 259% pace at which segment grew.  Segment got $127 mil in $$ sales last 12 weeks, while White Claw at $70.1 mil.  That’s almost 2x as much as Truly at $36.6 mil in sales.  Boston lost 2.9 share of seltzers to 28.8.  Its Truly brand “only” grew 227% last 12 weeks.  But biggest share donor was AB as Bon & Viv fell over 5 share to 8.5 last 12 wks (compared to a yr ago), even as it still more than doubled.  Bon & Viv up 125%.  And Smirnoff Spiked also lost over 3 share to 4.4 as it too doubled.  Up 110.5% last 12 weeks. 

Diageo will be “launching giant media campaign similar to size of Smirnoff Ice launch,” said Caroline. Henry’s up 500% and grew to a 2 share. Also growing very rapidly and gaining share of segment (albeit on a very small base), Press, up 1127% and a half-share of seltzer segment.  Crook and Marker, which doesn’t consider itself a seltzer, but is nevertheless listed there, only got $258K in sales for 0.2 share of segment last 12 weeks.  Svedka Seltzer got just 0.1.

Investors and analysts reacted negatively to TAP’s Q1.  Stock price dropped 7.5% yesterday.  Morgan Stanley’s Dara Mohsenian, Goldman Sachs’ Judy Hong and Consumer Edge’s Brett Cooper all used words “weak” and “challenging” to describe Molson Coors’ results and fundamentals, especially in US.  (Zacks’ even tuffer, calling qtr “dismal.”)  Volume’s gotta get better in US, Brett observed, and get better in high end specifically.  Both Brett and Dara noted Q1 rev/bbl “boosted by freight/fuel surcharge to distributors” (Dara) to tune of 70 basis points (Brett).  Even excluding that, 2.9% pricing is “a very good number and required to offset” cost of goods sold pressure, Brett wrote.  Each expects the “freight benefit” to continue thru the yr.

MC rev per bbl rose at 3.7% clip in Q1 and that surprised many.  Scan data from IRI and Nielsen suggested just a 1% avg price increase for MC off-premise.  Then too, on Molson Coors conference call yesterday, MC CEO Gavin Hattersley said that MC had negative mix impact of 0.3%, due to package mix, not brand mix.  So, MC’s actual front-line price increase was 4%.  Asked about discrepancy, Gavin simply said a lot of different factors impact retail price; Molson Coors CEO Mark Hunter added that what MC realizes in price, “doesn’t necessarily then get reflected in terms of what’s showing up [in] the retail data,” adding too that “clearly our retailers themselves chose to invest in price activities.”  (Largest retailer WalMart did deep discounting to drive traffic.)  Mark noted also that Spring price hikes “seem to be much more patchy and sporadic than maybe industry commentators had speculated.”  Gavin added there was no “material” pre-buying in advance of those hikes.    

On rollout of single ordering system across MC breweries, Gavin said challenges continue but last 3 rollouts “meaningfully better” than Golden early last yr, that issues in Milwaukee limited to local orbit, not the “fairly national” impact Golden glitches had.  MC did decide to reschedule rollout of Albany, GA plant to after summer selling season in “abundance of caution,” said Gavin. 

Key Innos Comin’ in Q2  While shipments down 2.7%, depletions -3.8% in Q1, in-line with recent yrs, much better than Q4 2018, Mark and Gavin pointed out.  They stressed Miller Lite building share in premium light and holding share overall, plus “improved” Coors Light trend and back to gaining segment share.  (Corngate not mentioned on call by execs or analysts.)  Then too, handful of above premium offerings up double-digits or better: Peroni, Sol, Henrys Hard Sparkling and Arnold Palmer.  Plus, key innovations – Cape Line, St Archer Gold, Sol Chelada – hit in Q2.  MC expecting 180K retail placements for new and year-2 products in US.  And big mktg push for Blue Moon, with MC doubling support, hits in Q2/Q3. 

Asked whether being a “brewer-only” can get Molson Coors to where it wants to be in 3-5 yrs, Mark pointed out that Molson clearly focused on brewing/beer, but already “building out” the “stretch and breadth” of its portfolio to “adjacencies” including cider, kombucha, RTDs, non-alcs and cannabis bevs (in Canada).  Molson Coors “on track” to be “one of the first movers” when cannabis bevs go legal in Canada on Oct 17, Canadian CEO Frederick Landmeters assured.  Finally, tho total Canadian beer volume dipped 5% in Q1 (Molson Coors down 6%), Fred said Molson Coors sees “no correlation between sales of cannabis and beer” there, for the industry or the company.  Mark seconded that vis a vis legalization in US states: “no real connection between legalization and beer performance.” 

Fitting that at a Bev Mktg Forum conference that focused heavily on disruption and innovation, especially on non-alc side, Mike’s founder Anthony von Mandl keynoted and said: “My life’s work has been all about innovation,” including “searching for unexpected niches and challenging the norms.”  Mike’s “thrives in this new world” of “exponential” and “very rapid change.”  Mike’s has cultivated culture that “thinks and behaves differently” and its offices “feels more like a fast moving tech company than a CPG company,” according to Anthony.  Mike’s depletions up more than 50% so far this yr, reiterated prexy Phil Rosse on stage with Anthony, and up to “55 share of exploding seltzer category” (see below for latest IRI stats).   “We are committed to staying over 50” and “are pushing to get to 60 and beyond.”  Mike’s still has 99 share of hard lemonade, Phil added, and Boston Beer has over 90 share of hard tea.  Mike’s objective is to “drive the share as high as possible while continuing to build the category.”

Mike’s Has “Very Substantial Funds”; Anthony Respects “Titans” But “Not Their Debt” Mike’s will have plenty of resources at its disposal as it pushes to go further. Mike’s parent co Mark Anthony “never had much debt,” said Anthony, but is now a co “with very substantial funds.” Recall, it sold its Canadian biz to ABI for $350 mil.  “We are looking at other opportunities,” said Anthony, “we do not have a bank loan” and “finance all our capital expenditures.”  Anthony “really respects titans” of the industry, but “not their debt…. Look at our growth trends and scale. Look at our industry and the indebtedness of the major players.” And now “we become expensive for them to buy.”  Besides “we’re having so much fun, so much growth” that Anthony “would rather be doing nothing other than this.” He added: “We’re not done yet. There is much, much more to come.”  

Editor’s Notes: Coulda Woulda Shoulda?  Back in 2015, Mike’s for sale for $1 bil. MC looked at it (as came out in Tom Long’s Pabst trial testimony, tho with code name) as did Constellation. Imagine if Constellation bought Mike’s instead of Ballast Point.  Wow!  That is a mind-boggling thought.  Meanwhile, since Mike’s has such substantial funds, wonders distrib, why is it asking distribs to fund its on-premise efforts instead of building out its own on-premise capabilities? That’s in contrast to Boston with Truly. Of course, Boston already has dedicated on-premise sales force.  One partial reason may be gleaned from Anthony’s comment above; it funds its own cap ex, including very expensive canning line coming onstream this yr at one of its contract plants.

Anthony’s Insight  A significant factor in Anthony’s success all along seemingly comes from the same insight.  Back when he started Mike’s in 1999, Anthony had realized that “beer in general is an acquired taste” and “a significant number of males didn’t like the taste of beer.” But in social settings men “didn’t have permission to drink anything besides beer.”  Along came Mike’s.  In Anthony’s view, light beer “grew so much” because it “didn’t taste as much like beer” and when you put “lime in Corona” then “it tastes even less like beer.” But social norms have changed and the “new generation can do whatever they like.”  Hence, White Claw.

Alcohol advertising bans haven’t been hot topic in recent yrs.  But back on radar with announcement yesterday that NYC will ban alc bev ads from most city-owned property, i.e. bus shelters, newsstands, recycling bins, etc.  (Ads in subways/buses and stations had been banned earlier.)   NYC joins Philly, LA and San Fran with ban, NY Times reports.  City-owned properties where alcohol allowed, like Citi Field and restaurants, will be exempted.  Then too, alcohol ad revs a modest $2.7 mil and long-term contracts will keep some ads in view for years.  Still, not a good precedent/example.  Then too, public health official claimed: “The major studies show that exposure to alcohol advertising influences drinking, particularly in youth,” NYT noted.  Distilled Spirits Council VP countered that ads aimed to influence brand choice and that parents are largest influence on underage drinking.  Meanwhile, NY state legislature considering another controversial alc policy: reducing legal limit for driving from 0.08 to 0.05 BAC.