Each craft deal that MC did this summer “comes with an integration effort,” MillerCoors ceo Gavin Hattersley told Crain’s Chicago Business. “I would be OK if we digested those for a while and did nothing more.”  Now that Molson Coors owns 100% of MillerCoors, it could bring several US brands to Canada, ceo Mark Hunter told CBC News in Canada, including Leinenkugel, Miller High Life and Sharp’s.  Molson Coors could also bring its Canadian craft brands Creemore and Granville Island to US. “It’s potentially going to be a 2 way street,” Mark said. “We’re doing all of our planning right now for 2017, so you’d expect to see some of these emerge in our portfolio once we get probably into the spring of 2017 so they’re there for peak-selling time.”

Now that Molson Coors sold off its old plant in Vancouver and is building a new one in British Columbia (expected to open by the end of 2018), expect it to move towards a “more integrated North American network” partly by “using its Canadian facilities… to brew and sell beers into the US,” said Canada’s CBC News.  But Mark said no changes will really emerge until late 2017, early 2018 (expect too a modernization plan in Montreal facility).  “As we look at the footprint for that (B.C.) facility, we want to make sure that it meets the needs of Canada and potentially some of the US market, if required,” he told CBC News.  “Tax savings could come from optimizing brewery footprint,” including Vancouver servicing the PAC NW and Montreal “could potentially serve Northeast,” said Evercore ISI’s Robert Ottenstein, in note this morn dubbed “Miller Time,” naming TAP as his top pick in bevs.  

C-stores long an impregnable fortress for AB.  For many yrs, it had over 60 share of volume in largest channel.  But now c-stores are big key to Constellation’s outsized growth.  It’s making major inroads in this channel, at least in part because it’s disproportionately frequented by core demo, Hispanic male millennials.   Constellation $$ sales are up 19% and it gained 1.45 of $$ share in c-store channel yr-to-date thru Oct 2 in IRI multioutlet + convenience data.  Most of that gain coming right outta AB’s hide.  AB $$ down 0.4% in channel and it lost 1.56 share there to 50.3 YTD,  tho MC down 0.8 share of $$ in c-stores too.  For 12 weeks, Constellation share gains even stronger.  Up 1.6 share to 11.4, while AB down 1.44 (slightly improved) to just under 50 share and under 55 share of volume now too. 

Mexican imports are over 75% of imports in c-stores YTD. Up 2.2 share of import segment.  Constellation represented 87% of Mexican import sales in c-stores, but 96% of the growth.  And Mexican imports were 93% of import growth in all channels.  Imports remain fastest growing segment overall with $$ sales up 9.5% in IRI MULC.  Overall, imports gained 1 full share of $$ to 17.8 in IRI MULC. 

News broke overnight in Japan that Kirin will take a minority stake in Brooklyn Brewery.  Wall St Jnl called stake 24.5%; Bloomberg labeled it “about 25%.”  Either way, Brooklyn will remain a BA-defined craft brewer. Tho large Japanese brewers looked at other US craft brewers (New Belgium), this “is one of the first investments by a Japanese company in a US craft brewer,” said Wall St Jnl.  (Editor’s note: Sapporo owns Sleeman in Canada.) 

Brooklyn, which sold 277,000 bbls last yr, is largest brewer that has announced a deal to sell stake in 2016 in an environment where craft slowing down.  Rumblings of Brooklyn’s interest in selling minority stake first surfaced over a yr ago in a Reuters article.  Since then, it’s had talks with Pabst, AB, and Carlsberg (at least) about different transactions, before arriving at this deal with Kirin.  

No number officially released, but Nikkei Asian Review reported that Kirin’s “acquisition, which will make the U.S. craft beer maker Kirin's equity-method affiliate, will be made through a third-party allotment amounting to several billion yen.”  That implies stake worth $30-40 mil; that’s likely lower than actual valuation.  

Kirin’s stake will “help Brooklyn as it gears up for a major expansion,” wrote WSJ.  Recall, it signed 40-yr lease for 75,000 sq feet in Brooklyn’s Navy Yard where it will have offices, beer garden and a small brewery.  Brooklyn has also announced plans to build new larger brewery in Staten Island.   

Brooklyn’s US sales were down about 7% last yr, including 6% drop in its home metro NYC mkt.  (Brooklyn up this yr in metro NYC.)  All of its 2015 growth (+25K bbls, 10%) came from intl biz: up 37K bbls, 42%.  Exports have grown to become huge chunk of its biz, about 45% in 2015. Brooklyn has partnered with Carlsberg in Europe, including a JV brewery in Stockholm.  Now it is partnering with Kirin in Asia and Brazil.  Kirin will make push on selling Brooklyn in Japan, forming a JV to rollout the Brooklyn brand there in Jan 2017, sez Bloomberg.  In Japan, beer biz has declined by more than 25% in last generation and craft beers still only have small share but are growing.  Here’s more info from Brooklyn’s blog.

“We haven’t changed our discounting policy, brand positioning, or pricing strategy,” Ballast Point prexy Marty Birkel told INSIGHTS this morn.  Basically, Ballast Point sold at very high prices, without discounting. Those low, low prices reported in Express yesterday apparently an aberration.  A couple of distribs got “long on product” and “backed up” on inventory, said Marty and so they initiated those prices to retailers to move product through.  But that’s not from Ballast Point.  Nationally, Ballast Point still up 80% for 12 weeks in IRI multioutlet thru Sep 4.  It got 1.7 share of craft $$, but 11.7% of craft growth, said Marty.  And its avg price per case at $58.61, up 22 cents, he added.   

Oodles of interesting global beer biz info/tidbits in new “Global Beer Handbook” from Goldman Sachs.   GS analysts Judy Hong and colleagues view global beer “glass half full as consolidation offsets weaker volumes.” Net-net: global beer volume to stay sluggish, but margins likely to improve via price/mix improvements.  Premium beer just 17% of global volume, GS figures, but 28% of revs.  Also, premium biz outgrowing economy segs and that’s likely to continue.  Interestingly, “as the owner of the largest global premium brand, we see Heineken as best-placed to benefit from growth in premium beer globally.”  But all eyes on AB InBev today and GS sees plenty of upside there, natch, especially with growth prospects in Africa and Latin America. 

ABI-SAB deal marks “step change in concentration” of global beer, sez GS.  AB InBev will have “largest global share of any listed staples company in any category” at 27-28 share of global beer.  ABI’s lead over #2 Heineken will be “an unprecedented 19” percentage points.  Compare to soft drinks where Coke under 25 share and about 13 pts ahead of Pepsi.  Higher share translates to greater pricing power, higher barriers to entry and higher margins, GS analysts say, tho that’s of course on average.  (Indeed, US a bit of a counter example.  ABI has 43+ share here and 19 share lead over MC.  But AB’s pricing power now challenged abit, barriers to entry are very low and its EBITDA margins have narrowed in recent yrs.)  Speaking of concentration, only global tobacco biz more concentrated than beer now, as Herfindahl Index, based on top players’ mkt shares, doubled over last 10 yrs.

Goldman Sees US Volumes Flat Going Forward; Beer Highly Affordable Here  Not a lotta specific comment about US biz in GS Handbook, but a coupla interesting points.  Going forward, Goldman sees US volume to be “broadly flat as population growth offsets lower per capita consumption.”   Interestingly, US profit pool by far largest in world even as beer more affordable here than virtually anywhere else.  Indeed, “Americans have to work only 5 minutes to afford a beer.”  It’s 10 minutes or less in most developed mkts, but in India, you gotta work over an hour and half for a pint.  Finally, GS report points out that fed tax in US as % of avg retail price is “the lowest rate in the world” at just 3%, and “well below the global average of ~32%.” 

With Sep beginning and ending soft (volume -0.7% for 4 wks thru Oct 1), Jan-Sep Nielsen all outlet + convenience scans show volume up only 0.4% yr-to-date thru Oct 1.  Dollar sales trend hanging in at +2.9%.  Recall, thru Jun, volume up 0.8% in same scans, $$ + 3.4%.  What changed?  Craft, premium lights and especially FMBs softened.    Thru Jun 25, FMB volume rockin’ at +13%.  That’s down to +7% YTD thru Oct 1, and both volume and $$ down in Sep.  Craft trend slowed almost full point from +3.8 to +3% YTD.  And premium light trend slowed from -1.6% thru Jun to -2.1% thru Sep.   Import and superpremium trends hung in at virtually same +7.5% and +8.3% both periods respectively.  Economy biz continued to run down about 2.4%.  Cider -13/14% both periods. 

Supplier-wise, key trends held for both periods: AB dipped 0.7 share YTD, MC off 0.6 share and Constellation gained 0.9 share.    No one else moved needle more than 0.1 yr-to-date.  Mike’s currently only other gainer, at +0.1.  While most of biggest suppliers softer in Sep than yr-to-date, HUSA, DBCUSA, NAB and Mike’s did a little better in Sep.  Collectively, “remaining domestic brewers,” (in effect, craft sans Boston) gained 0.4 share yr-to-date vs +0.6 thru Jun.  Three of top 4 megabrands slowed Jul-Sep: Bud Light -2.9% YTD vs -2.3% in 1^st half.  Lite trend slipped from -0.1% to -0.9%.  Bud slowed from -1.8 to -2.1%.  Coors Light hung in at +0.3/0.4%.  Big winners maintained momentum (YTD): Michelob Ultra (+22%), Modelo Especial (+24%), Corona Extra (+7%) and Stella Artois (+15%).  Hurtin’ cowboys, down double-digits YTD: Shock Top and Rita franchises, Bud Lt Lime/Platinum, plus Redd’s base, Angry Orchard and several other ciders.    

Taking a backseat to the giant ABI-SABMiller combo globally but more significant here in US, Molson Coors completed its purchase of SABMiller’s 58% stake in MillerCoors.  Molson Coors “becomes world’s 3d largest brewer by enterprise value,” noted Molson Coors release. “We know the business well and have been working to ensure that today represents a seamless transition for our customers, partners, distributors and employees,” said Molson Coors ceo Mark Hunter in statement.  “We’re rarin’ to go,” Mark told INSIGHTS in brief conversation this morn. Recently, Molson Coors busy “stress-testing” its integration plans, which are about to be “kicked into gear” so that Molson Coors can realize “the promise of the combined business,” he added.  With its 100% ownership of MillerCoors, the co is now “fully independent,” instead of “joined at the hip” with 1 of its largest competitors.  That gives it “more freedom to make choices,” noted Mark.  MillerCoors intro’d “lots of strategies” and “lots of plans” at its fall meeting with distribs, which were “well-received,” said MillerCoors ceo Gavin Hattersley. Now MC busy working with distribs to implement them.   Asked about some of the expanded synergy and savings targets suggested by Goldman Sachs and other financial analysts, Mark noted “reasonably broad spread” in analyst views and reminded that Molson Coors will “update on aggregate synergy & cost savings,” as well as other financial metrics on Nov 1, when it releases Q3 results.  

Like clockwork, ABI worked thru all the necessary hurdles to make the deal with SABMiller happen on timetable it laid out this summer.  Late yesterday it announced “completion of combination” followed by a string of other announcements.  Today, ABI also completed sale of some European assets, including Peroni, Grolsch and Meantime for about $2.8 bil,  plus SABMiller’s interest in Chinese brewer Snow to China Resources Beer (Holdings) Company Limited, which already owned majority.  And most importantly for US biz, Molson Coors completed its acquisition of MillerCoors (for $12 bil), it announced today (see below).

Among the many announcements, Altria said it has a 9.6% stake in ABI.  So the former 100% owner of the #2 US brewer at the time (Miller) now owns 10% of ABI.  Over the long haul, beer has worked out pretty well for the #1 tobacco co.   Altria gets $5.3 bil in pre-tax cash from the SABMiller deal and expects to report pre tax gain of $13.7 bil in its 4^th qtr, noted Market Watch.  

Coca Cola Wants to Buy ABI Out in South Africa Then too, Coca Cola exercised its “call option to acquire” ABI’s stake in Coca Cola Beverages Africa (SABMiller owned majority) “because it intends to implement its longterm strategic plan in these markets with other partners,” said Coke.    KO “respects ABI’s capabilities” but has “a number of existing partners who are highly qualified and interested in these bottling territories,” Coke added.  Terms will be negotiated in coming months, with estimated valuations of ABI stake at $3-4 bil.  Coca Cola’s decision is “another small dent in the value creation of the SAB transaction,” wrote Redburn’s Chris Pitcher.  That “raises the stated synergy target of” $1.4 bil to “12% of the acquired SAB sales, now approaching the levels achieved with the AB and Modelo deals,” sez Chris.  By 2018, ABI will reach $60 bil in revs and very near $25 bil in EBITDA, Chris estimates. 

Attys for Boston Beer and its Ohio distrib Southern Glazer’s filed brief “report” with US Dist Ct Fri that “the settlement discussions” ordered by the ct “remain ongoing” and they requested judge’s “standstill” order maintaining status quo be held until this Fri (Oct 14) “at which time the parties may be ordered to file a further report.”  In Tex, cases brought by McLane and Wal-Mart challenging 3-tier/tied house laws/interpretations by state ABC that have so far prevented them from getting distrib and retail licenses respectively, continue.  US Dist Ct just refused to dismiss McLane’s case and set order for summary judgment motions for early next yr.  Meanwhile, US Appeals Ct for 5^th Circuit just allowed state package store assn to intervene and argue vs Wal-Mart’s challenge to state ABC refusing its license to sell liquor.

As ABI-SAB deal closes, Intl Brotherhood of Teamsters made public its comments to DOJ asking for court review of its proposed final judgment.  Like Yuengling (see Oct 4 Express), Teamsters want a federal court to deny approval of settlement and/or have further restrictions placed on the deal.  Specifically, Teamsters renewed their call for a required “divestiture of [MC’s recently closed] Eden and/or another large and efficient brewery.”  Such a “structural remedy” would increase competition and “enable a competitor to disrupt and prevent the recurrence of tacit [price] collusion”  that’s been occurring between ABI and MillerCoors since 2008, Teamsters allege. Divestiture “would allow independent brewers, such as Pabst, to have significant expansion capability” and again, provide more competition to ABI and MC.  DOJ’s failure to require divestiture, along with restrictions on ABI behavior vis a vis distribs, in Teamsters’ view, “plainly inadequate and not in the public interest.” 

Much of Teamster argument rests on its insistence (backed by new economic study, it claims) that there’s been lotsa “coordinated pricing” in US beer biz since ABI and MillerCoors formed in 2008.  Then too, “there is no indication…that such anti-competitive activity has ceased and will not recur.”  In fact, Teamsters cite language from DOJ itself to suggest it may be easier for ABI and Molson Coors to coordinate prices going forward.  Teamsters argue again that MC’s decision to close Eden, rather than sell it, plus timing of its announcement to Pabst last yr that MC would no longer have capacity to brew Pabst several yrs down the road, should have been “red flags” to DOJ.  “There were (and likely still are) interested purchasers who would operate the brewery if it is ordered divested,” Teamsters insist. “Indeed, MillerCoors’ decision not to sell the brewery to a competitor shows that it is a competitively significant asset.”  Teamsters don’t name a potential buyer.  Recall, Pabst reportedly did express interest last yr; MC sez it made lo-ball offer.  In any case, given Pabst’s current trends and industry-wide capacity, you gotta wonder who would pony up for a 9-mil-bbl brewery in US today.