FMBs are up 9.6% yr-to-date thru July 30 in Nielsen all-outlet data and gained 0.4 share of scan volume to 5.3. But in this incredibly volatile segment, many brands way up and many brands way down. While cos typically claim these brands disproportionately attract spirits drinkers, they also further erode traditional beer. (Latest entrants, alc bev seltzers, are even less like beer.) Meanwhile, spirits continues to outperform beer this yr. But by now, FMBs have become a sizable chunk of malt bevs, especially in $$.

FMBs up 0.6 share of $$ and captured 7.7 share YTD. For 4 weeks, FMBs grabbed fully 8.4 share of $$. But only up 0.2. That includes lots of incremental hard soda sales. Hard sodas have already leveled off in recent periods at around 1 share. But they're still way above 1 yr ago when NYFRB had game all to itself. Hard sodas are this yr's model. Fickle FMBs get steady stream of innovations and flavors. They fuel growth and excitement; consumers crave new, sweet and fruity. But by now it's well established: constant churn also creates problems like: what do you do for an encore?

NYF Franchise Way Down in Latest Data Look no further than last yr's darling, Not Your Father's Root Beer. Not Your Father's franchise is still up 204% yr-to-date in Nielsen. Gained 0.3 share of $$. And franchise accounted for 3.6% of total FMB volume, 4.9% of $$. But NYF franchise dropped 34% in supers for 4 wks thru Jul 30 and 18% for 4 wks in all channels. Lost 0.1 share of total Nielsen $$ last 4 weeks. Not Your Father's franchise will likely be down in 2016. It was holding at 31-32 share of hard soda, Small Town Brewery prexy Greig DeBow recently told INSIGHTS. But seemingly fell further since then.

Boom/Splat Cycle That boom/splat cycle is just what happened to the Ritas and countless others. Ritas took the category by storm a few yrs ago. They are still biggest franchise in FMBs, according to Nielsen. But Ritas franchise down another 15% this yr, on top of big drops in 2014-2015 too. Mike's remains most resilient player in segment. Mike's Hard franchise up 4%, but Mike's Harder franchise up 11.6% YTD. Meanwhile, another one of the segment's former champs, Smirnoff Ice franchise, up 0.8%. And Smirnoff now has 8% Spiked versions in mkt and Electric Berry a top 5 FMB innovation for last 52 wks, even tho it's only been in mkt for 12 weeks, DBCUSA prexy Tom Day told INSIGHTS.

MillerCoors A Major Player in FMBs MC placed big bets on FMBs, about 6.4% of MC $$ sales from them in Nielsen. It's now got 20.8 share of FMB volume, 19.3 share of $$. Can MillerCoors avoid the fate faced by Smirnoff, the Ritas, NYF? Redd's trends already suggest the challenge. Redd's base franchise drove a lot of growth for MillerCoors in recent yrs, but now it's falling at double-digit pace too. Down 13% YTD. Redd's Wicked franchise still up 31% YTD, but only 19% for 4 weeks. Meanwhile, Henry's Hard Soda all incremental, almost as big as NYF in volume yr-to-date, and way bigger in last 4 weeks. One of segment's few steady performers is Boston Beer's Twisted Tea. It's up at same pace as segment, 9.7%. But MC now coming after it with its latest FMB launch, Easy Tea Co.  

"We know where we want to play," MillerCoors ceo Gavin Hattersley told INSIGHTS about MillerCoors' recent craft m&a moves, just prior to MC's deal with Revolver. MillerCoors bought majority of 3 craft brewers in last mo: Revolver in TX, Hop Valley in OR and Terrapin in GA, in addition to last year's St Archer (in CA) acquisition. MC looking for "local craft" with the "ability to scale," added Gavin, across diverse geographies. Typically, they've focused on hoppy beers, because that's "been a gap in our portfolio," added Gavin. Editor's note: IPAs are 28 share of craft $$ and still growing $$ sales at 30% clip even as craft slows down. So no wonder MC focusing there.

Then too, these craft brewers haven't "penetrated chain in a meaningful way," Gavin said and so MC can bring that to table. These brewers each have "the potential to expand out of its core market," Gavin told INSIGHTS. In each case, MC buys a "meaningful majority," but also "leaves a real incentive" for founders to "stay and turn" these brewers into the "success we think they can be." Each deal is individual and "there is no formula," Gavin added. But deals have to be "win-win," as "paying too big a multiple makes it difficult to get a decent return." And "valuations are coming down." Already, MC "well-positioned" in craft, sez Gavin. While he wouldn't say whether MC will buy more craft brewers, he did acknowledge MC's craft strategy more of a "work-in-progress" than a finished product.

Craft brewers that MC acquired majority of totaled 155,000 bbls or so in 2015. Some growing rapidly so far in 2016. With these acquisitions alone, MC will become a significant player, in top 25 or so. INSIGHTS doesn't include its Blue Moon and Leinenkugel brands in craft segment. Both struggled recently but collectively they shipped 3.2 mil bbls in 2015. Especially considering MC got in craft m&a game relatively late, with this recent flurry of moves, MillerCoors has already changed its position in craft in a significant way.  

MillerCoors had tough qtr from shipments, pricing and profit perspective, including softness in above premium (down low singles) and below premium (down mid-singles). Yet MillerCoors emphasized progress; bright spots on premium lights, hard sodas, craft M&A, and somewhat better STR trend overall. In fact, MC ceo Gavin Hattersley said on conference call: "I have never been more optimistic" about MC's prospects of getting to growth by 2019 and MC "laser focused" on that "strategy." Gavin made case for MC's progress amidst "tremendous amount of change" in his 1 yr as ceo, including: its top premium lights both flat or up for 2d qtr in a row, MC ranked as #1 supplier in Tamarron distrib survey, MC did 3 craft deals in 3 wks, etc. "For the first time in many years, we are in line with our volume expectations for the first half of the year," said Gavin. What will happen after Molson Coors acquires rest of MC? Both Molson Coors ceo Mark Hunter and Gavin said same thing, regarding pending changes; mood "not one of apprehension but excitement."

MillerCoors revs dropped $76 mil, 3.5% in 2d qtr as shipments fell 4.4%. But recall, sales-to-retailers much better than shipments in Q2. Down 1.7%. Shipments and STRs down in 1.5-2% range for half. MC STRs down 2.5-2.8% each of last 3 yrs. So some improvement. Yet MC STRs down mid-singles again thru Jul 23, "partly affected" by timing of July 4, cfo Tracey Joubert said on call. Then too, rev per bbl up just 0.7% (while AB's up 1.8%). Asked why MC rev per bbl up so much less than AB's, Gavin noted MC funds 70% of price promotions, while AB funds 50%. Plus "more price promotions" in Q2 as AB "went deep" in high MC share mkts like Chi and WI. With 4.4% shipments drop, little price realization, and $39 mil hit on special charges related to closing Eden, no wonder MC also took double digit hit in qtr on operating and net income. Each down about $57 mil.

MC's total above premium biz down low single digits, even with "continued growth" from Henry's Hard Soda. MC above premium STRs down 4 of the last 6 qtrs, noted Cowen's Vivien Azer. That's a sobering stat in industry's best growth sectors. Blue Moon, Leinie's and Redd's each declined in qtr. Then too, MC's subpremium biz continued to be a trouble spot, down mid-single digits. Mil's Best down high singles, Keystone and Miller High Life down mid-singles. Icehouse up low single digits.  

A couple more data points support our estimate last issue that US beer volume up about 1% for the 1^st half. Domestic brewers' taxpaid shipments dipped 30K bbls, 0.2% in Jun, estimates Beer Inst economist Michael Uhrich. And imports up 7% in Jun (see details above). So while domestic brewers eked out just a 61K-bbl, 0.1% gain for 6 mos, imports tacked on over 1.2 mil bbls. Even with cider decline, looks like US biz +1.1 mil bbls, 1% for 6 mos. What are the comps in 2d half? Not too tuff. Taxpaids off 200K bbls Jul-Dec last yr, imports up 634K bbls, 4.4%, which was slowdown. Cider comp gets easier too.

Meanwhile, Michael's estimates for individual state shipments show similar 0.9% gain for 6 mos. Good gains in TX and much of southeast offset dropoffs in parts of Midwest and CA. Texas posted 170K-bbl, 1.7% gain in 1^st half, FL +216K bbls, 3.2% and GA and AZ up similar 3.3%-3.5%, about 100K bbls each. NC scored big 174K-bbl, near 6% gain. Those 5 states represented over 80% of total Jan-Jun gain. Shipments to biggest mkt CA down 0.4%, estimates Beer Inst. And IL, MI, OH and WI combined for 200K-bbl, 1.4% decline as IL and WI down, MI and OH flattish. But trends in West North Central states generally better. Good trends out of AL, LA, MS, SC and TE. In other big mkts, NY and PA up 1.2-1.3% each. So are CO and IN. But MA, NJ, VA and WA each off slightly. So, a mixed bag, and trends can change, but more ups than downs and a 1% gain all in.  

  Imports grabbed over 16 share of US biz in 1^st half. Gained 1.25 mil bbls, 7.7%, reports Beer Inst economist Michael Uhrich from Commerce Dept data. That was just below gain pace estimated for craft Jan-Jun by BA economist Bart Watson. Craft up 800-900K bbls. That means top 2 high-end segments booked another 2+ mil-bbl gain in 1^st half. Grabbed over 27 share of total US biz, we estimate. For 12 mos, imports up 1.9 mil bbls, 6%, gained 0.8 share of US biz vs previous period. If these trends hold, with pick up in import trend and slowdown in craft, combo of import/craft gain would be just shy of calendar 2015 trends when imports + craft up 4.4 mil bbls, 9% and gained 2 full share. Such healthy gains in high end bode well for overall industry gain this yr too.

But Jan-Jun import trends very uneven country by country. Mexican beers dominated segment all yr. Thru Jun, Mexican shipments up 1.8 mil bbls, 18%. Constellation killin' it even more than usual: up 1.4 mil bbls, 18%, including Ballast Point. HUSA's Mexican portfolio up mid-single digits, about 100,000 bbls. ABI adding incremental Estrella Jalisco (tho Montejo now declining). That means all other countries combined for 550K-bbl, 9% loss so far this yr. In fact, only one other major import source country posted shipments gain for 6 mos: Irish shipments up 68,000 bbls, 16%. Shipments from Netherlands, Canada, Germany, UK, Italy and even Belgium all down for 6 mos. Belgian number is oddity given continued strength of Stella Artois, but that's what Commerce Dept reports.

Mexican shipments rose to fully 2/3 of total imports and, at nearly 12 mil bbls, 11 share of total US biz for 6 mos. That dwarfs Dutch shipments, 2d largest source. Dutch biz about 2.45 mil bbls, 14 share of imports, just 2.3 share of total US biz for 6 mos. Just 5 yrs ago, Mexican shipments were 14 mil bbls for full year, 52 share of imports, 7 share of US biz. (Craft was 12.4 mil bbls, 6 share back in 2011.)

Some country declines Jan-Jun pretty ugly. Belgian shipments off 197K bbls, 18%. Canadian shipments tanked 258K bbls, 26% and UK shipments down 79K bbls, 31%. Dutch shipments off 3.6%, 91K bbls. German, Italian and Polish shipments off 2-3% each. As good a time as it is for Mexican imports, (most) Euro imports face big challenges.

Top Half-Dozen Brands Are 3/4 of Imports in Scans Lookin' at IRI multi-outlet + c-store scans for similar period, yr-to-date thru Jul 10, shows import volume up 7 mil cases, +7.1%, at 13.4 share. Dollar sales up 9.5% to over $3.1 bil and at 17.5 share. So, while imports still 10 pts below subpremiums' volume share of 23.7, they edged past subpremiums' 16.6 $$ share to be 2d largest $$ share segment yr-to-date off premise. Brand-wise, you know the tune: Modelo Especial jumped 3.8 mil cases, 22.5% thru Jul 10, lagging only Michelob Ultra's case gain. Especial accounted for over half of total import gain this period. Corona Extra tacked on 1.8 mil cases, almost 7%. Heineken dipped 53K cases, 0.4% in IRI. Stella Artois +16%, which makes Belgian shipments number that much more mysterious. (But reminds of a coupla yrs ago when some Belgian-brewed Stella shipped to US from Germany.) Dos Equis +5%, Corona Light +6%. Those top 6 import brands are nearly 3/4 of all IRI-tracked import volume. Goin' deeper, Tecate -6%, but Tecate Light +29% for net 217K-case, 4% gain. (Recall, HUSA reported 10% Tecate franchise gain in 1^st half.) Pacifico +10%, Modelo Especial Chelada +38% and Labatt Blue/Blue Light each in the black at +3-4%. Guinness Draught even in IRI thru Jul 10. But newly-named Diageo Beer Co USA reports that all in, Guinness family volume +8.2% in Nielsen thru mid-Jul and gaining share off-premise 11 of last 12 periods with Guinness Nitro IPA drivin' growth. Guinness also gained share on-premise in recent 4 and 12-wk periods, according to GuestMetrics, tho still down.

Join us for the 23d annual Beer Insights Seminar, at the Waldorf=Astoria in New York City. This year, we will feature another top-notch program at this premier event. It already includes some of the most prominent leaders in the US beer biz and a leading progressive global beer ceo (with a notable US presence). Speakers include: MillerCoors ceo Gavin Hattersley, Constellation Brands Beer Division president Paul Hetterich and FIFCO ceo Ramón Mendiola Sánchez (FIFCO owns North American Breweries). Beer Marketer's INSIGHTS president Benj Steinman will provide an industry overview. More speakers will be announced in coming weeks. Seating is limited. You won't want to miss this exciting event. Click here for more info. Click here to register.  

As part of its complaint vs ABI and SABMiller on the way to consent decree, Dept of Justice got and revealed combined AB/MC mkt share numbers in 58 MSAs (Metropolitan Statistical Areas) from IRI foodstores. They illustrate the diversity of the US mkt by geography and underscore an important truth. In most of the biggest metropolitan areas, AB and MC get among their lowest 2 firm concentrations. By and large, AB and MC have less share where there are more people. That's an important challenge going forward and a strong counter to those who overemphasize AB/MC "dominance" of mkt. And this data clearly shows it, though that wasn't DOJ's intent.

AB/MC peak share in Wichita, Kansas at 94%. Tulsa also at 90%. In 3 other midsized midwest mkts, AB and MC 80 or more combined in IRI foodstores, according to DOJ chart. Green Bay at 87%, Oklahoma City 83% and Peoria/Springfield at 80%. Seemingly, the power of premium lights still plays in Peoria. In more than 15 MSAs, AB and MC share over 70.

On the other hand, in 7 of top 10 metro areas, combined AB/MC mkt share is 55% or under. In LA, AB/MC at 49 share and NY 53 share. Those are the top 2. In Chi, #3, it's a little better for AB and MC. Two firm concentration at 63 share in IRI foodstores. But in Baltimore/DC (#6), it's 48 and Boston #10 it's 50. Also in top 10, Atlanta at 55 and Miami at 53. Lowest mkt listed (another in top 10) is Philly at 37 share. But gotta take that with a grain of salt; ain't many IRI foodstores in Philly. Recall, AB and MC at 68 share of total US beer shipments combined in 2015. That's down from 78 share in 2008. Besides Chi, only Houston and Dallas come close to natl avg, among top 10 metro areas. Houston at 66 share and Dallas at 65. On other hand, some other important Calif mkts well below 50: San Diego at 47, San Francisco/Oakland down to 41. Seattle and Portland each in low 50s. One final note: IRI foodstores is an imperfect proxy for total mkt, and one wonders why with all of its resources, DOJ could not come up with a better one. But data still paints fascinating pictures.  

Once again, face of craft marked by constant change as revolution, evolution, whatever the hell you wanna call this multi-faceted, complex biz, takes new and sharp turns. Over-riding story same all year: growth slowdown. Even with Brewers Assn saying craft tail still smokin', looks like the head and much of upper body got doused. Five of top 6 craft brewers flat or down in first half by our count and each of top 5 in BA count flat or down. That's because BA does not include fast-grower Lagunitas as craft brewer, and does include Yuengling. In any case, whether you're lookin' at estimated shipments or reported scan data, top craft players facing especially tuff challenges these days.

BA sez craft in toto up about 8% in 1st half, vs +13% in calendar 2015, 18% in 2014. That was same as import trend Jan-May (Jun not reported yet), tho imports a larger segment. Both Nielsen and IRI, which use different measure of segment than BA, including Blue Moon, Shock Top and other brands not in BA number for example, report even slower category growth. But they're not capturing lotsa taproom and other biz that BA has better access to from members. In any case, looks like string of 6 straight yrs of double-digit growth will come to end in 2016, as Boston Beer's Jim Koch predicted in May. Inevitable perhaps, but still a big story.

Even tuffer challenges faced by several top brewer's craft brands. Of half-dozen biggest yr-to-date volume declines in IRI MULC scans thru Jul 10, 3 are Sam Adams brands: Sam Seasonal, Lager and Rebel IPA down a combined 650K cases, 16%. Sierra Nevada Pale Ale down 124K cases, 6%. New Belgium Ranger IPA down 86K cases. Only 1 AB/MC brand among these big declines; Blue Moon Seasonals off 310K cases. Weirder twist: among top half-dozen gaining brands, only 2 come under BA definition of craft and one of 'em arguably an FMB: Firestone Walker's 805 up 251K cases and Coney Island Hard Root Beer up 312K cases. Other big gainers not in BA numbers: Goose Island IPA +298K cases, Founders All Day IPA +262K cases, Leinie Grapefruit Shandy +201K cases and Lagunitas IPA +186K cases. Net-net: definitions wreaking havoc in different ways with the numbers these days and big players really makin' their mark in segment.

As we reported last issue, pace of craft deals also slowed last few mos, at least for bizzes over 50K bbls. News popped in interim: MC finally expanded stake in Terrapin from 25% to majority. And another deal imminent at press time. But valuations and largesse of buyers clearly bein' tested. Potential restriction on future AB purchases remains in air after DOJ settlement, which was silent on subject. Lotsa attention paid to condition that DOJ will review all AB craft purchases over $7.5 mil in revs (and over $3.5 mil for craft-brand distrib rights). But that's just continuation of current review policy, not new. Meanwhile, over at fastest growing major craft brewer, Ballast Point, 3 top execs, Earl Kight, Jim Buechler and Yuseff Cherney, abruptly left to pursue other interests in alc bevs. Constellation brought in beer/wine vet Marty Birkel to run Ballast Point. Ballast Point will maintain momentum and independence, Constellation insists, but Earl, Jim and Yuseff key to culture. Like we said, sharp turns still comin' from craft, left and right.  

Once again, face of craft marked by constant change as revolution, evolution, whatever the hell you wanna call this multi-faceted, complex biz, takes new and sharp turns. Over-riding story same all year: growth slowdown. Even with Brewers Assn saying craft tail still smokin', looks like the head and much of upper body got doused. Five of top 6 craft brewers flat or down in first half by our count and each of top 5 in BA count flat or down. That's because BA does not include fast-grower Lagunitas as craft brewer, and does include Yuengling. In any case, whether you're lookin' at estimated shipments or reported scan data, top craft players facing especially tuff challenges these days.

BA sez craft in toto up about 8% in 1st half, vs +13% in calendar 2015, 18% in 2014. That was same as import trend Jan-May (Jun not reported yet), tho imports a larger segment. Both Nielsen and IRI, which use different measure of segment than BA, including Blue Moon, Shock Top and other brands not in BA number for example, report even slower category growth. But they're not capturing lotsa taproom and other biz that BA has better access to from members. In any case, looks like string of 6 straight yrs of double-digit growth will come to end in 2016, as Boston Beer's Jim Koch predicted in May. Inevitable perhaps, but still a big story.

Even tuffer challenges faced by several top brewer's craft brands. Of half-dozen biggest yr-to-date volume declines in IRI MULC scans thru Jul 10, 3 are Sam Adams brands: Sam Seasonal, Lager and Rebel IPA down a combined 650K cases, 16%. Sierra Nevada Pale Ale down 124K cases, 6%. New Belgium Ranger IPA down 86K cases. Only 1 AB/MC brand among these big declines; Blue Moon Seasonals off 310K cases. Weirder twist: among top half-dozen gaining brands, only 2 come under BA definition of craft and one of 'em arguably an FMB: Firestone Walker's 805 up 251K cases and Coney Island Hard Root Beer up 312K cases. Other big gainers not in BA numbers: Goose Island IPA +298K cases, Founders All Day IPA +262K cases, Leinie Grapefruit Shandy +201K cases and Lagunitas IPA +186K cases. Net-net: definitions wreaking havoc in different ways with the numbers these days and big players really makin' their mark in segment.

As we reported last issue, pace of craft deals also slowed last few mos, at least for bizzes over 50K bbls. News popped in interim: MC finally expanded stake in Terrapin from 25% to majority. And another deal imminent at press time. But valuations and largesse of buyers clearly bein' tested. Potential restriction on future AB purchases remains in air after DOJ settlement, which was silent on subject. Lotsa attention paid to condition that DOJ will review all AB craft purchases over $7.5 mil in revs (and over $3.5 mil for craft-brand distrib rights). But that's just continuation of current review policy, not new. Meanwhile, over at fastest growing major craft brewer, Ballast Point, 3 top execs, Earl Kight, Jim Buechler and Yuseff Cherney, abruptly left to pursue other interests in alc bevs. Constellation brought in beer/wine vet Marty Birkel to run Ballast Point. Ballast Point will maintain momentum and independence, Constellation insists, but Earl, Jim and Yuseff key to culture. Like we said, sharp turns still comin' from craft, left and right.  

Dept of Justice's sweeping 7/20 consent decree contained far more restrictions on AB's interactions with distribs than many saw coming. It includes 5 pages of dense detail called "Supplemental Relief" about what AB can and mostly what it can't do, especially regarding its distribs' sale of 3d party brands. These are big wins for most AB distribs. Indy AB distribs can sell other brands more freely than in past. Many were already doing so anyway. ABI also comes out ahead. Its big global deal can now move forward, without any serious constraint on its ability to grow its US biz. Perhaps some of the restrictions on it will even clear way for a better, more productive relationship with its distribs. NBWA, Molson Coors and BA all got at least some of what they sought.

Here are just a few highlights of decree: ABI now has a hard cap on branches at 10% of its volume. And neither AB nor Molson Coors can terminate any wholesalers as a result of combo. (That's only condition DOJ imposed on Molson Coors.) Both of these moves just "formalize prior commitments," ABI said. But formal commitment to DOJ is meaningful. More surprising: ABI's VAIP (Voluntary AB Incentive for Performance program went up in smoke. Less than 1 yr after it started, and just after some distribs got checks. Even more surprising: AB will no longer be able to use "maximum efforts" standard in its contract. New DOJ-imposed standard will be called: "'Best efforts'…. This new standard will be defined as 'efforts designed to achieve and maintain the highest practicable sales volume and retail placements of our brands,'" prexy Joa?o wrote distribs. In yet another big win for distribs, ABI can't even request distrib to report "whether in aggregated or disaggregated form," distrib's revs, profits, margins, costs, volume or other financial info on 3d-party beer. We've heard many AB distribs complain about this in past. And another thing: ABI must base distrib commitments to annual spending on AB brands as % of revs, not of volumes as it was in past. All these taken together are highly specific, granular. Hadda come from disgruntled distribs talking to DOJ, say sources, tho NBWA also obviously played key role and BA made pitch to kill VAIP too.

There's lots more, which we won't detail here (see our extensive INSIGHTS Express coverage), about deal and manager approvals, incentives, and much more. In some ways, all this govt restriction hadda be bitter pill to swallow. Yet ironically, DOJ has helped ABI remove impediments in its relationships with distribs. DOJ "did an excellent job here," said one source, who has dealt with DOJ before. "A Solomonic judgment." Now there will be 60 day comment period, after which court expected to approve.