Beer Insights 23d annual seminar is next Sunday eve and all-day Monday at the Waldorf Astoria in NYC. You won’t want to miss this premiere industry event.  A few seats remain.  Click here for agenda.  Click here to sign up. 

Tho mega-retailer Total Wine tried to exclude beer, wine and spirits distrib assns, plus retailer assns, from intervening in its suit challenging CT’s pricing laws (see Nov 1 Express), judge will allow them to intervene.  She ruled each assn has “sufficient interest” in case to defend laws that impact their sales/profits.  And while state itself and biz assns have “same objective” in defending laws, they don’t necessarily have “identical” interest.  That “may well incentivize some or all of them to raise different arguments” than state regulators make.  As far as beer distrib assn goes, Total claimed that it’s only challenging regs for wine and spirits.  But they’re the same regs and Total didn’t even ask Court to limit any ruling to solely wine and spirits.  So the beer distribs are in too.  Finally, judge will “take seriously” assns’ offer to work together to make their intervention “more efficient for all involved.”  Net-net: assns will be able to intervene, help state defend post-and-hold, minimum price and bans of below-cost selling and volume discounts, etc.  

Constellation stock down another $5, 3% today, even as mkt surging ahead.  Now down $19, more than 10% since election, even with such robust trends.  It lost over $3 bil in stock mkt capitalization.  Most analysts came out of yesterday’s investor meeting with thumbs up. There were lotsa positive reports this morn. What’s more, Constellation ceo Rob Sands spoke extensively about possible effects of a Trump presidency, saying they expect no “short-term impact” and effects down the line, if any, remain totally unclear. What’s more, “consumer demand for our beer is stronger than it’s ever been before,” Rob added. But mkt still very leery for now.   f

As part of its ambitious growth plans (beer revs up high singles in next 3 fiscal yrs), Constellation will step up its innovation in beer and launch an Ultra fighter, Corona Premier, which will test in 4 mkts, Paul Hetterich announced.  This will be Constellation’s “first test at consumer weight,” meaning that it will spend extensively “to see what we can drive,” while also closely monitoring cannibalization.  So Ultra will no longer have space to itself.  HUSA is going ahead with its Amstel XL test too we hear, but recall MC grounded its Goldwing test.  

Michelob Fighters of the Past  Many Michelob fighters flooded mkt in early 80s as Michelob at 8 mil bbls back then and had superpremium biz to itself, one vet of beer industry mktg wars reminded.  Remember?  Schlitz had Erlanger, Pabst sold Andeker, Coors intro’d Herman Joseph and Stroh sold Signature.  None of ’em made much more than a ripple in marketplace, our source reminded. Or are around anymore.  Only Miller’s Lowenbrau sold for awhile, but Miller spent a ton of money advertising and lowered price after changing it from import to domestic; none of that proved sustainable.  Sometimes, a brand is part of a segment, but sometimes it is something unto itself, sui generis, as our source noted.  Then it becomes that much more difficult to compete against.  Perhaps such thinking is one of factors that weighed on MC, as Goldwing will no longer take flight.  But STZ will still be “stretching” Corona to Premier.   

While Corona Extra depletions at 117 mil cases, +10% last fiscal yr and getting “more innovation than in any one year” next yr, said Paul, its Casa Modelo at 79 mil cases, +18% (including Negra Modelo and Chelada) and has all kinds of growth potential.  Indeed, Constellation just moved goalposts on its Casa Modelo franchise, which will be well over 90 mil cases in 2016.  Whereas previous goal was to get Modelo Especial to 100 mil cases, now it sez Casa Modelo can get to 150 mil cases, almost double last yr.  Wow! 

Constellation believes it has permission to play in wide variety of possible extensions in Casa Modelo; it “could go to heavily hopped” or “ABA style products,” said Paul.  Constellation  itching to get into FMBs, which it calls ABA (alternative beverage alcohol).  Paul made several references to STZ possibilities in this space, including leveraging off existing wine and spirits equities, or Modelo name, tho no announcement. At same time, Constellation looks like it may have another hit brand: Pacifico.  Its 24 oz can is #1 new item in c-stores.  Last yr, Pacifico  at 7 mil cases and grew 5%, but this yr its IRI growth greater than 20%.  And STZ intro’d stretch goal of 25 mil cases for Pacifico, including going national and getting much more media investment.  

In an impressive and comprehensive 90-minute presentation yesterday for Constellation’s Investor’s Day, Beer Division prexy/corporate evp  Paul Hetterich made compelling case for STZ’s growing prominence in beer’s high end and how that should make it more of “thought leader” and “insights provider” for retailers.  Here’s some key components of his highly detailed rap (Paul speaks at Beer Insights Seminar next Monday).

This summer, Constellation took over #1 $$ share in high end (all above premium) from AB, said Paul.  It got 25 share of the high end, compared to AB’s 24 nationwide in IRI multioutlet + convenience for 12 weeks thru Sep 4. Heineken at 11 share, MillerCoors at 8 and Boston Beer at 5.  So those 5 big cos are 73% of high end $$ sales.   But both MC and Boston lost share of high end in this period.  Constellation gaining share of high end and widening gap with AB.  It’s been the category growth leader for last 3 yrs, Paul showed, getting 30% of all $$ sales growth in beer last 3 yrs. 

While high end beer is about 33% of total volume, it’s 47% of consumer $$ spend, 48% of retailer gross profit and 49% of distrib gross profit, estimates Constellation  And it’s more than 100% of growth.  All in, high end beer has grown nearly 6% a yr for last 10 yrs, Paul showed, while all other beer down 1.5% per yr. And Constellation expects high end to grow 5-6% a year over the next 3 yrs, with its own growth exceeding that.

Importantly, Constellation is 100% high end. Meanwhile, AB is 23% (including Ultra), and MC 15%.  In other words, Constellation is totally focused on high end beer, while AB and MC have got to “try and keep their low end shored up,” meaning both premium and subpremium.  And yet “most of the set work is done by AB” and MC “does a fair amount” too. So far, there is “no clear high end advocacy in the category.”  As the #1 high end player, providing the biggest growth, exclusively focused on high end, Paul maintained that Constellation should take leadership to “be advocate” for high end, “influence set flow” and “provide guidance.”  STZ’s goal is to become “preferred consumer insights provider” for retailers on high end.  Constellation will invest in people and having the right insights to make that happen, Paul said. 

Beer Insights 23d annual seminar is next Sunday eve and all-day Monday at the Waldorf Astoria in NYC. You won’t want to miss this premiere industry event.  A few seats remain.  Click here for agenda.  Click here to sign up. 

Recall, Constellation stock rallied Monday following Wall St’s expectation of a Clinton win, but took big hit initially today after Donald Trump elected.  It was down 8% or so to start the day, down almost that much at presstime. But mkt also started down big, now up.  STZ investors perhaps concerned about potential excise tax on goods imported from Mexico under a Trump presidency.  Today, Constellation has scheduled an afternoon with investors, which should be fascinating.   

While govt nannyism took heavy blow yesterday with passage of pot measures, a number of communities went other way by adopting soda taxes. Soda taxes headed to passage by wide margins in San Fran, Oakland and Albany, CA and Boulder, CO.  In Calif cities, penny per ounce taxes will be imposed at distrib level but expected to be passed onto consumers and raise price on 2-liter bottles by around 67 cents and add $1.44 to 6-pk cost, per NY Times. Boulder tax is double that at 2 cents per ounce.  Soda taxes cut both ways.  On one hand, they may deflect advocates’ and legislators’ attention away from hiking beer and other alc bev taxes.  On the other hand, they could simply create more momentum, acceptance of tax as health policy tool and/or revenue raiser.

Supporters of recreational pot among the biggest winners in yesterday’s elections.  Voters in 4 more states -- California, Maine, Massachusetts and Nevada -- ok’d recreational use.  Legalization failed in only 1 state: Arizona.  Three other states cleared medical marijuana.  Outcome could add $7-$8 bil in annual marijuana sales, estimates Marijuana Biz Daily.  Importantly, over 20% of US population now lives in states where recreational pot legal, including entire west coast.  Will fed stance change with President Trump?  No one knows. 

While legal pot spreads quickly over next few years, 3.2 beer could disappear. That’s likely outcome of Oklahomans passing measure to modernize that state’s alc bev laws.  Most important, Question 792, which goes into effect Oct 1, 2018, clears grocery and c-stores to sell full-strength beer.  Those outlets currently limited to selling 3.2 beer; strong beer only sold in liquor stores.  Measure has other features and legislature has slew of laws to pass since alc bev law now out of state Constitution. Importantly, OK accounts for 56% of all 3.2 beer sold in US, calculates Utah Beer Wholesalers Assn. Another 29% of 3.2 beer sold in Utah.  With 3.2 likely going away in OK and Colorado too in coupla yrs, that would cut 3.2’s share of US beer to well under 1% and possibly doom the product or severely restrict offerings.  (That’s even while AB InBev and other producers talk about broadly expanding lower-alc products in US and globally.)  Indeed, Utah policymakers already concerned about fate of 3.2.  Utah has same set up as OK: 3.2 sold in grocery stores, high-strength only in state liquor stores.  Utah “merchants say they cannot handle the high demand and keep up their stock if grocery stores and convenience stores aren’t helping with the demand,” Fox News reports.       

States “Legalizing Weed Wrong,” Declares Policy Expert; Pros and Cons of Alcohol Model  No one’s thought more about marijuana legalization than Mark Kleiman, public policy prof who has advised several states and written extensively on issue over the years.  His deep dive for Slate just before Election Day concluded that most efforts so far have failed to minimize key harms associated with pot, specifically issues around pot abuse, youth use, pricing policy and more.  He also draws some positive and negative parallels to alcohol policy.  Tho lotsa legalization advocates have used phrase “regulate cannabis like alcohol,” that’s “ugly policy,” sez Kleiman, since “current alcohol laws fail spectacularly to control the harm alcohol does to drinkers and the harm drinkers do to others.”  Key problems with alcohol regulation, in Kleiman’s view: they allow for profit motive and marketing, both of which he sez are “at odds with public health.”  Interestingly, he echoes authors of famous Toward Liquor Control blueprint for alcohol policy here.  In another echo, Kleiman sez state control of pot sales might be “best solution,” tho that clearly can’t happen with continued federal Prohibition.  Profits mean lobbying muscle, Kleiman argues, and: “You don’t want the people who sell cannabis for a living writing the cannabis laws any more than you want Exxon Mobil guiding fossil fuel policy.”  Private enterprise also means 1^st amendment commercial speech rights, Kleiman adds;  mktg will only expand use, he believes. 

One place where Kleiman sez current alc policy should be a guide: “tax according to THC content, just as distilled liquor is taxed according to alcohol content.”  Price is another important concern for Kleiman.  Currently, he calculates cost of an “intoxicated hour” at just 50 cents for pot, “already a far more cost-effective recreational drug than beer.”  And that cost only going down.  Another uncomfortable parallel to alcohol: heavy pot users represent vast majority of consumption, he sez.  No one knows, or is saying, how to prevent casual users from moving on up, but “pricing matters; so does marketing,” Kleiman insists.  All in, state ballots are “lousy way to legislate,” he concludes, since they offer “far less scope than the normal legislative process for careful policy design and for taking into account multiple competing interests.”  This is same point made yesterday in Express about one-off piecemeal privatization of alc bevs with “unintended consequences,” vs “cogent, comprehensive” reform.