Beer biz got tuffer last couple of mos, according to many sources.  But economy brands actually losing a little less share tho still down 2% last 4 weeks thru Oct 8 in Nielsen all-outlet.  They lost 0.5 share of volume, compared to 0.7 YTD.  Why?  Perhaps it’s price. Down an average 7 cents per case, almost half a % last 4 weeks.  That includes lower avg prices on most leading economy brands like Busch and Busch Light, Miller High Life and Keystone Light.  Only Natty Light avg prices up among top 5 subpremiums, but avg Busch prices down almost 2%.  Avg Miller High Life prices down a penny.  MillerCoors took steeper price cut on smaller brand Hamms, down 45 cents a case. Hamm’s avg prices down 3.4% to $12.76 per case, cheapest avg price of any brand listed.  And the trend: up 5% for 4 weeks, compared to down 5% YTD. 

Consumer price index for beer increased 1.6% in Sep vs Sep 2015, matching its increase for previous month. CPI for all items was up 1.5%, biggest bump of year so far.  Spirits prices flat in Sep vs yr ago while CPI for wine up 0.6%.  YTD thru Q3, CPI for beer +1.9% vs 1.1% gain for all items; spirits and wine prices edged up only 0.3% and 0.1% respectively. 

Recall that fed ct judge in Ohio put Boston Beer and Southern Glazer’s on “standstill” until Oct 14 over Boston’s attempt to terminate and SG’s lawsuit to stop it while they tried to settle.  On Friday, attys for both sides filed report that “settlement discussions...have not been successful and…the parties currently appear to be at an impasse.” They plan to talk to judge today and move ahead on SG’s motion for temporary restraining order.  Recall, SG got TRO to stop Great Lakes from terminating it. Gotta figure SG confident it can go 2-for-2. 

In Connecticut, state liquor control comm seeks to dismiss lawsuit brought by retailer Connecticut Fine Wine & Spirits (aka Total Wine) to toss state’s minimum price and post-and-hold requirements, plus CT’s bans of volume discounts/price discrimination (see Aug 24 Express).  These laws, state argues, are “unilateral restraints imposed by the state” and thus not preempted by fed antitrust laws.   Laws work together to assure there is “no favoritism, i.e. no discrimination in the liquor industry in Connecticut.”  Producers and wholesalers must sell to every retailer at same price, without volume discounts.  That’s “deliberate choice” made by CT legislature and protected by court precedent, CT sez.  Laws are simply “mechanistic exercise of government power” that do not require any communication, collusion or agreement among competitors.  System works like gas stations publicly posting prices to consumers, state argues, which allows competitors to match prices, or not.  Finally, Total’s lawsuit, state also argues, doesn’t allege “sufficient facts to plausibly suggest any actual agreement among and between manufacturers, wholesalers and/or retailers.”  CT acknowledges other post-and-hold “regimes” (in MD/WA) have been tossed by fed cts, but cites other decisions it believes support the scheme.

Meanwhile, Conn Beer Wholesalers Assn (CBWA), Conn Restaurant Assn and Wine & Spirits Wholesalers of Conn all filed requests to intervene to defend CT laws.  As CBWA argued, the laws are “fundamental to wholesalers’ economic transactions with suppliers and retailers” and their interest is “present, direct and substantial.”  CBWA’s members, they continue, “have built businesses and developed and invested in their operations based on the economics of Connecticut’s existing pricing rules.”  If Total’s challenge succeeds, distribs’ economic interest “will be significantly and adversely impacted.”   Then too, CBWA wants to “specifically” defend members against Total’s allegation that they “have engaged in unlawful price fixing.”  This case shapin’ up to be next big alc bev biz antitrust showdown.    

While Nielsen’s new on-premise database showed Lagunitas down for latest 12 weeks thru mid-Aug, Lagunitas on-premise depletions jumped 9% in Sep, noted founder Tony Magee, who cautioned INSIGHTS on the incompleteness of on-premise reporting services so far.  Meanwhile, even as craft slows dramatically, Lagunitas still truckin’ in IRI; up 24% for 4 weeks thru Oct 2 in IRI multi-outlet + convenience.  This past weekend, it held its annual Lagunitas Beer Circus in home town of Petaluma, which drew 5500 people, sold out 2 weeks in advance and featured 22 guest brewers from Sonoma and Marin, according to Santa Rosa Press Democrat. 

One deal in a day won’t do. Constellation announced several deals this morn.  It has deal to sell its Canadian wine biz to the Ontario Teachers’ Pension Plan for about $780 mil or about 12x EBITDA (projecting full fiscal 2017 earnings), expected to close by year end.  Constellation “further evolves its wine and spirits portfolio to focus on high margin, high growth brands,” trumpeted its release.  So if it’s selling lower margin, slower growing brands, of course it’s buying higher margin, higher growth brands.  Less than 2 weeks ago, it bought High West Distillery for $170 mil.  Today, it bought Charles Smith Wines for about $120 mil, including several hot, high priced brands like Kung Fu Girl Riesling (up 45% over last yr, sez STZ) and Boom Boom Syrah (up over 50%).  That will close in Oct. Constellation also recently bought a minority stake in Bardstown Bourbon Company, “the largest new whiskey distillery in the US.”  The extra funds that Constellation gets from selling Canadian wine biz may fuel even more hi-end purchases as its debt levels already quite manageable.  Stock down slightly today.  But Stifel’s Mark Swartzberg views selling Canadian biz as “positive in that it casts a light on the larger, higher margin, faster growing US wine and spirits business.”  Collectively, these “transactions also evidence Constellation’s growing commitment to being a growing total beverage alcohol company focused on the US. We expect additional spirits transactions to be bolt-ons, along with more bolt-ons in U.S. wine.”  

Mitchell deal to buy Rex Dist in Biloxi, MS closed on Friday.  Unsurprisingly, Yuengling didn’t consent to transfer of its brands to Mitchell.  Recall, Mitchell previously rejected Yuengling at 11^th hour and AB’s match-and-redirect from Adams to Mitchell was a key part of Yuengling’s comments to DOJ.  So Yuengling brands will be sold by local MC distrib FEB (owned by Bertucci family, including current NBWA chairman Paul).  Yuengling brands were valued at $3.1 mil in this deal, Yuengling’s Dave Casinelli said in DOJ comments.  One can presume that Mitchell didn’t pay that money, since they didn’t get brands.  Yuengling terminated Rex, since it “could no longer service our brands.”  So Rex will likely attempt to recover those funds.  Indeed, Yuengling already “threatened” with a lawsuit, coo Dave Casinelli told INSIGHTS.  In meantime, Rex “has also withheld the release and transfer of our inventory and POS,” added Dave.  “These are the disruptions that happen when AB gets to direct deals,” Dave said. That’s the “penalty” Yuengling has to “pay” as its business is “collateral damage” and gets “disrupted” by the deal going a different way.    

More of Nielsen’s CPG on-premise data coming into view as Goldman Sachs analyst Judy Hong and colleagues provided “deep-dive” into data available thru Aug 13.  Overall, tiny improvement in most recent 12-wk period, with $$ sales -1.7%, volume -2.9% for beer/cider category.  But basically volume trend hovering in -3% range in Nielsen numbers since Q1 2015.  Craft still up slightly, +1.3% for 12 wks and cider much stronger on-premise than off, +4.1  FMBs down near 10% but it’s very small segment on-premise.

First peek at Nielsen’s brewer data shows, no surprise, that Constellation only gainer among major players on-premise.  Volume +3.6% for 12 wks thru Aug 13, a bit of slowdown from 2 previous 12-wk periods.  At same time, on-premise providing just 1-2 pts of Constellation’s total 13% off- and on-premise growth in Nielsen scans.  Meanwhile, ABI down near 8% on-premise in most recent period, slight improvement vs 2 previous periods and same periods last yr.  MC -5.3% for 12 wks thru Aug 13, a coupla pts softer than same periods last yr.  Boston significantly softer this yr: -9% in most recent period.  That’s better than earlier 2016 trends but more than double Boston’s decline same periods last yr.  HUSA off about 3%, but that tracks channel trend and a coupla pts better than last yr.  So, in terms of “relative drag,” AB and Boston takin’ bigger hits on-premise than MC and HUSA.  AB off 2-3% in combined scans, with 1.5-2 pts of that from on-premise.  And 4-6 pts of Boston’s 6-8% dropoff is on-premise.  On-premise “more balanced driver” of MC 2-3% decline, HUSA’s flatness, Judy points out.  Very interesting differences in off- and on-premise splits in Nielsen data.  AB has just 14% of its total scan volume on-premise, GS analysis shows, and MC about 19%.  At NAB, STZ and HUSA, moves up to 20%, 22% and 24% respectively.  But near 40% of Yuengling scan biz on-premise, sez Goldman, and fully 42% of Boston’s biz measured by Nielsen is on-premise. 

Brand Data: Bud Family Drives AB Losses, Modelo Especial STZ’s Gains; Most Top Craft Brands Down

Bud/Bud Light “by far the biggest driver” of AB’s on-premise declines, Judy notes.  Bud family down 9.3% in most recent period “but has averaged -11.9% thus far in 2016.”  Stella Artois is “next biggest drag.”  But Blue Point +5.8%, Shock Top “flattish.”  At MC, Miller family -4.8% in most recent period, Coors family -6%, an improvement vs earlier this yr for Miller brands, a slip for Coors brands vs previous periods.  Modelo Especial flyin’ on premise too, +19% for 12 wks thru mid-Aug.  Ballast Point up 8%.  Corona slipped to -2-3% “lapping growth” in previous periods.  “Healthy” Dos Equis (+5%) and Strongbow (+20%) gains offsetting Heineken and Tecate declines at HUSA.  “Both the Samuel Adams and Angry Orchard brands declining ~8-9% volume,” Judy notes. Then too, “most of top 30” craft brewers “actually seeing volume declines” in most recent period, including Lagunitas, Sierra Nevada, Widmer, Sweetwater, Allagash and New Belgium.  Goose Island and Blue Moon drops were -4% and -2% respectively.  Craft gainers on-premise include: Dogfish Head, Stone, Victory, Deschutes, Left Hand, Magic Hat and Abita.    

Evolution of craft continues to take sharp twists and sound more negative notes.  Craft volume up just 0.6% for 4 wks thru Oct 2 in IRI MULC data, +1.4% for 12 wks.  That’s only 0.1 share gain these periods, vs +5% volume gain, 0.3 share gain yr-to-date.  Craft trend about same on-premise: +1.3% for 12 wks thru mid-Aug, reports Nielsen (see below).  But craft share trend better in that channel as mainstream brands sufferin’ more on-premise.  Big craft brand woes continue: 8 of top 10 craft brands down for last 4- and 12-wks in IRI; 21 of 30 top craft brand families lost volume on-premise in most recent period, sez Nielsen. 

Meanwhile very rare craft layoff announced yesterday at Stone, one of better performers in scan this yr (+18% in IRI MULC yr-to-date).  Stone laid off about 5% of staff, approx 60 positions, citing “unforeseen slowdown in our consistent growth and changes in the craft beer landscape.”  What changes?  Specifically: “the onset of greater pressures from Big Beer as a result of their acquisition strategies, and the further proliferation of small, hyper-local breweries has slowed growth.”  Ironically, Stone layoffs come even as it opened 2 new breweries this yr.  They also follow layoffs last week at CBA’s Wash brewery as contract volume from Pabst (Rainier) ain’t what they expected.  Next: Brooklyn Beer’s US biz will be down for 2d straight yr in 2016, ceo Eric Ottoway told Express, tho its intl biz still flyin’ (+20-25%).  Intl volume will be near half of Brooklyn’s volume this yr, Eric acknowledged.  Stone’s German foray and Brooklyn’s deals with Carlsberg, Kirin and others overseas, not to mention Lagunitas and Founders’ hookups with Heineken and Mahou, signal increasingly global ambitions for American craft, even while tiny and local provide increasing cachet within US and intl markets.  Just today, growth of small brewers in South America, including presence of about 250 breweries in Chile alone, highlighted by BBC News.  Meanwhile, as we reported yesterday, ABI disrupted craft anew with investment in largest US homebrew supplier Northern Brewer.  Can’t get much smaller or local than homebrew.  Let the evolution continue!  

You won’t want to miss the 23d annual Beer Insights Seminar, at the Waldorf=Astoria in New York City, with a reception Sunday eve November 13th and a jam-packed day Monday November 14th. This is one of our widest-ranging programs ever.  Our exceptional 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 (FIFCO owns 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, with his trademark high energy style and hard-won knowledge.  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.  Seating is limited.   Click here for more info.  Click here to register.  

Beyond acquisitions that expand its core brewing biz, AB InBev recently “partnered” with Northern Brewer, one of top online homebrew supply retailers, via ABI’s global ZX Ventures “Disruptive Growth” group. Minnesota-based Northern Brewer is widely considered the largest online ingredient and equipment retailer for homebrewers across US.  This deal just one more piece of largely secretive plans and activities of ABI’s private equity subsidiary ZX Ventures. So far it invested in a number of cos with biz models tangential to brewing, including Owl’s Brew tea-based mixers and radlers and Kombrewcha low-alc kombucha brands.  (A more detailed version of this article appeared in today’s Craft Brew News.) 

ZX Ventures “is pleased to share we have partnered with Northern Brewer. The team there shares our passion for brewing and commitment to the best ingredients,” ZX’s Global VP of Homebrewing Cassiano Hissnauer told us.  “ZX Ventures is excited to enter the homebrew space to help Northern Brewer to grow,” he added, as 20-yr old homebrewing supply retailer “has built an extraordinary network and community of homebrewers.” Terms of “partnership” not disclosed.  In fact, very little about deal being talked about.  AB has favored 100% acquisitions in its small brewer purchases. But not much known about size or scale ZX’s investments made or its strategy other than “disruptive growth.”  Northern Brewer not sayin’ much either. It’s “still a family-owned local business,” its website sez, and isn’t commenting on “any potential business partnerships” when asked by numerous hobbyists on popular online forum. Unsurprisingly, reactions there vary from vitriolic conspiracy theories to shrugs and laughs: why would world’s largest brewer buy some Minny homebrew shop?

NB’s Close Contact with Homebrewers, E-Commerce Platform  As a leader in US sales of homebrew supplies, Northern Brewer buys and ships a lot of grain, hops and yeast as well as equipment ranging from plastic tubs to high-tech brewing, fermentation and draft systems. Also operates online forum for homebrewers to discuss recipes, troubleshooting and more, and runs extensive customer service platform. All in, that’s a lotta data on homebrewing community, often pointed to by craft brewers as a major source of innovation.  Then too, NB also runs a fairly significant e-commerce platform, taking, processing and shipping orders from all over US. E-commerce already a much-discussed topic in beer biz, from Amazon to Drizly and beyond with many wondering when large scale online beer sales may emerge and just how disruptive it will be.

Homebrewers tend to be among fiercest advocates for independence in beer biz. And judging by doomsday scenarios and jokes about assimilation (“resistance is futile”) already splattered across forum thread, many homebrewers won’t take kindly to news of ZX’s deal.  Even before confirmation, concerns echo those raised after AB’s buys of small brewers: access to raw materials and increased buying power of an industry leader or better-funded competitors that could dig deeper in targeted local mkts. Whether or not these concerns well-founded, this investment clearly a striking move that further embeds AB into the heart of craft.