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. 

Part of recently passed law in Pennsy to allow home D distribs to sell 6-packs creates headache for some in rural and other mkts, reports Morning Call. Also points to perils of piecemeal privatization vs thoughtful, comprehensive approach.  Turns out, wholesalers have territory protections in PA.  And home D distrib/retailers have to buy beer from distrib in their territory.  But home Ds can and do ship to bars/restaurants located nearby, sometimes located in another PA wholesaler’s territory.  New law effectively shuts down cross-border sales by adding penalties for both home Ds and retailer.   

Different folks have very different reactions to provision.  Morning Call focused on home D in rural county who sez he’ll lose half his biz, which now goes into next county, covered by different wholesaler than who he buys from.  He’s extremely unhappy.  Prexy of home D assn sez “this was not the intent of the bill,” and wants a fix.  State Senator who sponsored bill doubts it will be issue for majority of home Ds, and accused home D who’s complaining of “crossing territory in a predatory way to steal business from people in another county that can’t compete.”  Home D calls cherry-picking charge “completely false.”  What about the wholesalers?  They support provision.  Indeed, they lobbied for it, according to paper.  Jay Wiederhold, prexy of Pennsy Beer Alliance, pointed out provision needed to strengthen system.  Why’s that?  “The problem we’ve had in Pennsylvania for a while,” said Jay, is “when we have a retail distributor taking from one area and driving it into another wholesaler’s area.  There’s no transparency, no ability to track that product.”   Brewers have same concern; they oppose transshipping.  Recall wild west days of NY when beer was shipped all over the state.

A fix is likely.  “The practical consequences for delivery distributors and their customers [in this provision] were not recognized by most, if not all parties,” Cris Hoel, atty for home Ds, told INSIGHTS.  “They recognize them now.   It seems likely that a correction can and will occur. No one targeted these businesses, they were collateral damage in an attempt to prohibit captive distributors.”  What are captive distribs?  Wholesalers are concerned that chain c-stores/grocery would obtain home D licenses and use them to ship beer to their stores all around the state.  But bid to get central warehousing ban didn’t pan out.   Language to fix issues could emerge in 60-day period before bill takes effect, assuming Gov signs or otherwise allows bill to pass.  (There’s remote possibility of veto.)  There may be attempts to fix other provisions in lengthy bill as well.  Gotta note too, while home Ds unhappy, taverns in general “furious” about bill that allows home Ds to sell 6-packs, which only taverns/other on-premise licensees can sell now.  For Brewers of Pennsy, assn that includes Yuengling, Boston Beer and state’s small craft brewers, situation illustrates “why we need cogent, comprehensive liquor code and franchise law revision as opposed to one-offs with unintended consequences,” BoP’s atty Ted Zeller told us. But one-offs appear to be, at least for now, the road Pennsy’s taking toward privatization.  

First round bids due today for a bunch of ABI’s Eastern European assets, including Pilsner Urquell.  And ABI got 6 of ’em, Reuters reported, expected to be in range of $5.5 bil. Asahi Holdings was the only brewer definitely in there; most bidders were investment firms. Czech investment firm PPF, plus private equity investors Bain Capital “joined forces” with Europe’s Advent and other intl investment firms.  A Hungarian “energy group” teamed up with a Polish juice maker and a Polish insurer in a “joint offer.”  Second round bids will be submitted next mo.  Once ABI sells off these assets and Coke in South Africa, it will have sold assets worth $25 bil or more, or about ¼ of deal. 

Sep was a very rough mo for beer and Oct had 1 less selling day.  But Oct wasn’t  horrible apples-to-apples we hear, and it shows in scans, according to latest Nielsen data.  Beer volume up 0.6% for 4 weeks thru Oct 29 in Nielsen all-outlet and 0.5% YTD.  Meanwhile, on-premise biz down 2.9% for 52 weeks thru mid-Sep, Nielsen also reported. So overall, beer biz ain’t in great shape, but it’s not falling apart either. 

Trading Up Slowed; Premium Lights Lost Less Share Key trends in recent mos continue: trading up has slowed somewhat overall as craft and FMBs flattened out.  Premium lights and subpremiums losing less share lately.  But avg price of subpremiums down.  Above premium segments gained 1.7 share of $$ for last 4 weeks, compared to 2.2 YTD.  FMBs down 0.3 share of $$ and cider down 0.2.  Craft up just 0.1.  So it’s a different high end, dominated by imports (up 1.4 share of $$), specifically Constellation.  Constellation up 1.4 share of $$ last 4 weeks all by itself, now up 1.3 YTD.  Premium lights lost 0.7 share of $$ for 4 weeks, 1 full share YTD.  Economy lost 0.8 share of $$ for 4 weeks, 0.9 YTD. But big improvement on volume share, down 0.7 share for 4 weeks vs 1.2 share YTD as avg economy prices down 14 cents, 0.9% last 4 weeks. 

Hot Getting Hotter; Ultra Gained 0.8 Share, Especial 0.7   Two brands, Michelob Ultra and Modelo Especial, gained almost as much share as the entire high end in the last 4 weeks.  Michelob Ultra $$ sales up 26% and it gained 0.8 share of $$ (0.7 YTD).  Modelo Especial $$ sales up 25.6% and it gained 0.7 share (0.6 YTD).  

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. 

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” 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.