Many tuff, even disconcerting, messages in ABI’s 3d qtr results, reported this morn: US beer biz very soft in Q3, AB even softer and its global results well behind expectations (see below).  That’s for starters.  AB’s selling-day adjusted sales-to-retailers were down 3.8% in Q3. That’s its softest quarterly STR trend since 4^th qtr 2011.  Shipments down about 650,000 bbls, 2.5% for qtr.  AB STRs down 1.9% for 9 mos, shipments down 800,000 bbls, 1.1%.  That suggests some inventory build, over a half mil bbls.  As usual, shipments will come in line with depletions by yrend, ABI said, meaning q4 shipments not likely to be very good.

Meanwhile, total US beer biz STRs down estimated 2.6% in Q3, according to AB.  Since shipments flat Jul-Aug, means Sep stank, as INSIGHTS has reported (unless there was really huge load-in).  Beer Inst’s Sep domestic taxpaid # not out there yet.  AB gave several reasons for industry (and AB softness) in Q3, including “timing of the July 4^th holiday,” “craft slowdown” and “slightly earlier timing of our price adjustments compared to 3Q15.”  Total industry STRs down 0.7% for 9 mos, sez AB.  This Q3 also has implications for MillerCoors.  Since AB doing better than MillerCoors in scan data, suggests that MC’s 3d qtr trend could be down even more than AB’s. 

Bud and Bud Light Down Mid-Singles in Q3; AB Will “Transition” From Bud Light Party AB’s 2 lead horses, Bud and Bud Light, each dropped at mid-single digit pace in Q3. “We are now transitioning from the Bud Light Party Campaign,” AB said.  Sounds like AB will move on from this campaign, which didn’t improve Bud Light trends. AB wholesalers will shed not a tear.  In short term, AB “will leverage our partnership with NFL to help improve the brand’s volume and share trends and close out the year with momentum.”  In last 4 weeks thru Oct 15, Bud Light down 3.7% in Nielsen all-outlet, compared to 2.9% YTD.  While Bud declined mid-single digits in qtr, “impacted by industry weakness,” ABI praised “successful ‘America’ packaging initiative.  Bud trends down low single digits yr-to-date. 

Ultra Up 20%+ for 9 Mos; Stella and Goose Up Double Digits; Rev Per Bbl Up 2.3% in Q3Even in lousy qtr, AB still did well with several of its high end horses.  Ultra “volumes up high teens” in Q3 and “over 20% year-to-date.”  Stella and Goose “also continue to show good growth, up double digits in 9M 16,” said ABI.  Total ABI high-end portfolio up just low singles in Q3 “and mid-single digits year-to-date.”  But despite industry softness, and what MC’s ceo Gavin Hattersley has oft-characterized as AB’s “aggressive discounting,” AB rev per bbl up 2.3% in Q3 and 1.8% for 9 mos, partly mix-shift, partly earlier price hikes. Importantly, no price war.  And even with soft volume, solid pricing meant AB revs almost even in qtr, down 0.3%, and EBITDA up $11 mil, 0.9% to $1.519 bil.  For 9 mos, AB’s normalized US EBITDA up $81 mil, 2.6%, even as North American marketing and sales costs up an $264 mil, 15.5% organically to a whoppin’ $2 bil.  And AB results stayed soft even with huge incremental mktg and sales investment. 

ABI Missed Estimates, Reduced Guidance, Stock Down In its last qtr before integrating SABMiller and becoming Megabrew, ABI missed analyst estimates, reduced guidance on rev per bbl (now “in line with inflation”) and stock took 4% hit.  Bernstein said it was ABI’s “weakest set of results it could remember,” according to Reuters.  “Some of these items will reverse, but this is more than just a temporary issue,” said Bernstein’s Trevor Stirling.  ABI posted “weak set of results,” seconded Redburn’s Chris Pitcher, “led by a very poor performance in Brazil” while Mexico and US were “also light of our expectations.”  Brazil volume down about same as US (4%), but pricing actually down slightly there.  Led to 7% rev decline in qtr there. And Mexico volume up 10%, with rev per hecto up 2% but “strong top line result, partly offset by incremental sales and marketing investments.”  So EBITDA up 5%.   Total ABI “own beer volumes” down 0.2% in Q3, while Heineken up 2% and SABMiller, in its last qtr as independent co, down 2%.  ABI “own beer volumes” down 0.7% for 9 mos.  

Legal back and forth between OH distrib Southern Glazer’s (SG), Boston Beer and Great Lakes continues. Southern Glazer’s responded sharply to Boston’s arguments that settlement talks proved any damage to SG could be compensated by money and that SG using process to “extort” more $$ from Boston.  First argument, sez SG, would “chill discussions here and in any future disputes” if distribs thought even having such talks would undermine their ability to get injunctions if talks failed.  Second, Boston “mischaracterized” the talks, SG sez.  SG “never stated that it was willing to sell the brands for any amount of money, and maintains that the loss of the brands without others to replace them would deal an irreparable blow to its business.”  Boston’s arguments about negotiations, SG argues, are “unfounded and improper and do not in any way counter the Court’s prior findings on the issue of irreparable harm.” 

Recall, in giving SG a TRO to stop Great Lakes’ termination, judge agreed SG could be irreparably harmed.  Harm from losing Boston even greater, since it’s double the revs for SG, it notes.  These arguments part of SG’s bid to have court enter TRO to stop Boston termination and dismiss counterclaims made by Boston and Great Lakes for fraudulent inducement, tortious interference and conspiracy.  Those claims all “fail as a pure matter of law” and are all “illogical,” sez SG.  Only “real issue” at stake here is whether there’s conflict between written contracts and OH law, and thus whether Boston/Great Lakes can terminate SG or not.  All claims hinge on that and “only that issue – which can be decided with little or no additional discovery – should proceed,” SG concludes.  The case, including discovery, will proceed.  Judge set schedule, including May 15, 2017 trial date.        

Hard to believe that granting a beer retailer the right to sell 6-pks, singles and growlers is news.  But it is in Pennsylvania.  State took bold step earlier this yr to allow home d distribs there to sell 12-pks to consumers, after limiting them to selling cases-only for generations.  But as legislative session ended, Senate and House passed bill that allows other pkgs, as well as clearing bars to serve beer on Sunday mornings without needing to sell food too, mixed drinks at sports venues and direct shipping of beer to consumers.  Bill on Gov’s desk. 

Along with expanding wine sales to grocery and c-stores, looks like Pennsy takin’ step-by-step approach to privatization of biggest control state that’s eluded change for yrs, even as state keepin’ control of liquor sales so far.  One other new move has distillers’ reps in a tizzy.  Slipped into reform bill earlier this yr was provision that allows state “flexible pricing” for spirits and wine in state stores.  Previously, state locked into strict formula of distiller price, plus specific fees, markup and tax.  New provision allows state to price top 150 wine and spirits brands as it chooses.  That move, plus state projections of increasing profits by $65 mil annually, signaled to producers that prices heading up.  Distilled Spirits Council economist David Ozgo got op-ed critical of flexible pricing placed in papers across state.  He pointed out that profit projections “can only come from consumers” as state raises prices.  Rhetoric from state politicians about “modernization” is actually “a step backward” with this pricing scheme, he wrote.  Interesting stat from David: “Since 2005, the number of outlets selling spirits has increased by around 50% nationwide.”  Increased competition drove prices down for consumers, “outside of Pennsylvania, of course.”  He called for repeal of flexible pricing. 

Gotta note, these moves in Pennsy, expanding wine and beer, but keeping liquor in state stores and possibly jacking prices, along with reforms in Okla, Colo and elsewhere, represent rare losses for liquor lobby in 2016.  That lobby has been on a roll for a decade or so, and in part responsible for that 50% outlet expansion which helped fuel liquor sales increase.   

Also in Pennsy, a quote heard ‘round the state from a beer guy earlier this week: “Our guys are behind your father. We need him in there.”  So said Dick Yuengling to Eric Trump during brewery tour Eric took in Pottsville Monday. Dick also joked that Donald might “build a hotel in Pottsville, or, serve Yuengling in his hotels,” reports Reading Eagle.  Eric praised Yuengling as “amazing success story” and said “we need more of these,” promising a Trump admin would “make it a lot easier for a business to function.”  Not clear whether Eric aware of the 4,000+ other small brewers that have sprung up in US despite heavy burden of regulation they faced. Dick’s support for the Donald not a surprise.  But Phillyvoice.com played up negative twitter response to Dick’s comments, including from coupla Pennsy pols/consumers vowing not to drink Yuengling.

New Belgium ceo Christine Perich resigned yesterday, co announced in press release.  This is yet another example of turmoil in craft land, especially since she took role just 1 yr ago.  Christine spent 16 yrs at NBB with steadily rising responsibility: hired as financial controller in 2000, became cfo in 2004, added coo title in 2008, oversaw transition to full ESOP in Dec 2012 and became prexy/ceo last Oct.  She worked hand-in-hand with co-founder Kim Jordan for many yrs.  What’s more, her first year as ceo seemingly going quite well, with a return to solid growth (up 7% as of Aug), the opening of Asheville, and the addition of 120 employees to 780, according to the Coloradoan. So what gives?  Company sez Christine will spend more time with her family and “pursue new opportunities.”  But one has to wonder.  Christine’s departure follows that of head of sales Joe Menetre and top mktg exec Josh Holmstrom in last yr or so.  Then too, NBB went thru process with banker Lazard this yr, exploring strategic options, including sale, before deciding to continue as 100% employee owned. 

Executive chair and co founder Kim Jordan “will return to the office full time and work with eight members of New Belgium’s leadership team to cover the CEO duties in the short term,” wrote the Coloradoan.  “The group will start discussions on hiring a successor next week.” 

Cider segment declines getting steeper as the year progresses in scans.  Volume down 14%, $$ down 11% YTD thru Oct 15 in Nielsen All Outlet data.  Four of top-6 brand families continue to decline at steep double-digit clips for the yr, including Boston Beer’s Angry Orchard franchise ($$ -12.5%), MC’s Smith & Forge (-24.5%) and Crispin (-19%), and C&C’s Woodchuck (-32%). And while Heineken’s Strongbow franchise (+13%) and AB’s Stella Cidre (+45%) are growin’, Strongbow down low singles in latest periods and Stella Cidre volume trend cut in half in latest 4 wks as avg price down $0.66/case.  These 6 brand families make up the vast majority of the cider category.  So despite strong growth from several cos thruout longer tail of smaller brands, cider category as whole remains in rough shape.  Even as handful of alc soda brands quickly tapering off in latest periods.       

C&C Group’s North America volume, primarily consisting of VT Hard Cider brands, took another nosedive thru first half of co’s fiscal yr ending Feb 28.  Down 34% to approx 78K bbls Mar-Aug, “reflecting the overall declines in the US cider market and the inevitable disruption from bringing the two distribution networks together [via Pabst agreement],” co reported.  Revs took an even tuffer hit, down 47% to $13.16 mil, tho majority of the drop was due to “accounting treatment impact” from partnership with Pabst.        

Enthusiastic About “Long-Term Prospects”Again, C&C attributed rise of alc sodas and other “new adjacent spaces of flavored malt beverages and fruit beer,” to cider category’s overall struggles in US.   Cider volume down 11.6% in same period, sez co, but “past experience suggests that once the category is through these short-term cyclical challenges, it will resume its long term growth trend.”  Admittedly, Pabst partnership “progress has been slightly slower than anticipated, but now we have the platform in place and detailed marketing, promotional and sales plans for our cider brands within the wider Pabst portfolio.”  So “focus now switches to delivering some modest improvement” in 2d half “and securing national account listings for the important Spring ‘sets.’”  “Both parties are cautiously optimistic that the plans in place can deliver some market share recovery” in next fiscal yr.  And “collectively, there is no loss of belief or enthusiasm for the long-term prospects of cider in the US or in the quality of the Vermont assets.”

C&C Group’s North America volume, primarily consisting of VT Hard Cider brands, took another nosedive thru first half of co’s fiscal yr ending Feb 28.  Down 34% to approx 78K bbls Mar-Aug, “reflecting the overall declines in the US cider market and the inevitable disruption from bringing the two distribution networks together [via Pabst agreement],” co reported.  Revs took an even tuffer hit, down 47% to $13.16 mil, tho majority of the drop was due to “accounting treatment impact” from partnership with Pabst.        

Enthusiastic About “Long-Term Prospects”Again, C&C attributed rise of alc sodas and other “new adjacent spaces of flavored malt beverages and fruit beer,” to cider category’s overall struggles in US.   Cider volume down 11.6% in same period, sez co, but “past experience suggests that once the category is through these short-term cyclical challenges, it will resume its long term growth trend.”  Admittedly, Pabst partnership “progress has been slightly slower than anticipated, but now we have the platform in place and detailed marketing, promotional and sales plans for our cider brands within the wider Pabst portfolio.”  So “focus now switches to delivering some modest improvement” in 2d half “and securing national account listings for the important Spring ‘sets.’”  “Both parties are cautiously optimistic that the plans in place can deliver some market share recovery” in next fiscal yr.  And “collectively, there is no loss of belief or enthusiasm for the long-term prospects of cider in the US or in the quality of the Vermont assets.”v

The 23d annual Beer Insights Seminar, at the Waldorf Astoria in New York City is coming right up.  We’ve got a reception Sunday eve November 13th and a jam-packed day Monday November 14^th, with one of our best and widest-ranging programs ever.  The lineup includes the top exec at the world’s largest brewer, ABI ceo Carlos Brito, plus the top beer execs at the #2 US brewer MillerCoors ceo Gavin Hattersley and #3 US supplier Constellation Brands Beer Division president Paul Hetterich.  We will also feature global thought-leader FIFCO ceo Ramón Mendiola Sánchez (owners of North American Breweries), plus two generations of leaders at independent craft Bell’s Brewery, founder Larry Bell and his daughter and vp Laura Bell.  Consultant Bump Williams will discuss the fast-changing retail landscape and more.  An expert panel of 3 top-notch alc bev attys will probe provocative 3-tier, trade practice and other legal issues: Marc Sorini, Mike Moses and Michael Halfacre.   Beer Marketer’s INSIGHTS president Benj Steinman will provide an industry overview.  You won’t want to miss this premiere industry event.  Sign up now . Seating is limited.   Click here for more info.  Click here to register.  Discounted room block available until Oct 28.

Closely-watched FMB segment declined 1% by volume and 2% in $$ sales for last 4 weeks thru 10/15 in Nielsen all-outlet.  Avg prices down 33 cents per case or 1% in period. Yet FMB $$ sales still up 8% yr-to-date.  What’s changed as year went on? Not Your Father’s Root Beer and Coney Island Hard Root Beer went into near freefall late in summer.  NYFRB again declined by 65% last 4 weeks.  And it lost 0.5 share of $$.  Still up 36% YTD, but YTD growth shrinking fast, with such big short-term declines.  Meanwhile, other new hard soda brands already selling less than they were.  Both Henry’s Hard Orange and Best Damned Root Beer at 0.1 share of $$ last 4 weeks, compared to 0.2 share YTD.  Each of Ritas and Redd’s base brands down double digits last 4 weeks and yr-to-date.  Even Redd’s Wicked has slowed markedly.  Up just 3.9% for 4 weeks, while Steel Alloy series slipped into the red; down 7.6% for 4 weeks.  But Twisted Tea still growing at a double digit rate. And Mike’s volume up 10% for 4 weeks, 8% yr-to-date. 

 Two AB distrib deals came to light in one day.  Golden Eagle of Hannibal, Missouri has struck deal to buy A. Gaudio & Sons in Jacksonville, IL.  Gaudio totals about 550,000 cases.  With this purchase, Golden Eagle (Riesenbeck family) will own smaller distribs in 3 states. Home state of MO, Iowa and now IL.  This deal expected to close Nov 18, according to cos.  Meanwhile, word came to us of another deal.  Capital Bev Sales in Minneapolis (Morrissey family) will buy approximately 3-mil-case Thorpe of Rogers MN (Jack Reis), pending supplier approval.  Presuming deal goes thru, Capital will be (estimated) over 6 mil cases, predominantly AB.  Editor’s note:  AB does almost 20 mil cases in Minn, which is over 50-mil-case state.  In last 5 yrs, AB lost 6 share there as All Others (primarily local craft) took off and gained 10 share.  MC also lost over 3 share there since 2010. 

Heineken posted another very solid volume qtr, up 2% organically, which ceo Jean Francois van Boxmeer characterized as “robust despite strong comparatives in Americas and Europe.”  For 9 mos, Heineken global volumes up 3.3% on organic basis, far faster than its much larger global competitor ABI (which reports Friday).  Heineken volume up 4% in Americas for 9 mos to 36.6 mil bbls, 3% in Q3. But in US,  “volume slightly declined with volume growth of the Mexican brands, particularly Tecate, offset by lower Heineken.” That’s entirety of Heineken’s comments on its 3d qtr US biz in trading statement.  Volume in Mexico grew mid single digits and in Vietnam volume grew double digits “in line with the strong momentum seen year-to-date.”  

Heineken Results “Better Than Expected,” Sez FT; Jean Francois van Boxmeer for 4 More Yrs  Heineken “toasts better than expected” Q3, headlined Financial Times, but FT noted that Heineken “warned that its full year operating profit could be hit” to tune of $234 mil “if foreign exchange markets remains as volatile as at present.”  Meanwhile, Heineken “faces a fresh competitive assault following” ABI’s takeover of SAB to “make a global brewing behemoth.”  Current term of ceo Jean Francois van Boxmeer set to expire at end of its annual meeting April 20, 2017. “The Supervisory Board will submit a non-binding nomination for his reappointment” for 4 more yrs, “and subject to this has reappointed” Jean Francois, said Heineken in statement.  That’s “a positive,” wrote Jeffries analysts. “We welcome the news.”