Breaking from tradition, AB price increase this yr will be 2-tiered, with draft prices going up $5.00 per half bbl to retailer across board Aug 1 in many (most?) major mkts, including Fla, Tex, Ill, Oh, NY, Tenn, probably many more. Packaged price hikes coming on Sep 26 in Calif, Tex, Fla, NY, Ill, Oh and more. AB originally wanted to do both draft and packaged in early Aug, said one plugged-in AB distrib, but reconsidered. Draft going up the same $5.00 per half bbl on all segments, INSIGHTS hears. That's compared to "our strategy of managing price within segments," said MC source. Even as AB numbers better for many distribs in 1st half, relations improved, a number of AB distribs ain't thrilled by this move. One distrib said retailers didn't like it, MC not likely to follow, but AB "resolute." In each mkt where we checked, AB distribs now expect pretty "normal" price increases this fall, likely averaging 2% or so after discount reductions. Importantly, pricing activity over Jul 4 weekend "not as intense as Memorial Day," according to one supplier source. And now price hikes coming. So no price war.

Constellation prices will go up modestly in Fla largely in form of discount reductions. In Calif, Constellation so far ain't expected to do much on pricing, which could change AB's approach. With Constellation closing in on #1 position in LA, AB "starting to relinquish price leadership" in area, said 1 source. Even if it goes out first with increase, AB will react to whatever Constellation does/doesn't do.  

Just another sign o' the times: big brands strugglin' to hold onto volume and drinkers. In annual surveys, thousands of consumers in cities across US tell Scarborough Research the brands they drank in previous mo. Scarborough projects numbers across metro populations. (Importantly, data doesn't reflect volume.) Lookin' at 5-yr trends across top metro mkts shows: big brands still very popular, but they're mostly losing drinkers in these huge mkts. For example, Top 3 brands in NYC held exact same ranks in 2015 and 2010: Coors Light #1, Corona #2 and Bud Light #3. (Heineken and Sam Adams held same #4 and #5 spots too). But while Coors Light claimed 1.95 mil drinkers in NY metro in 2010 (28% of all beer drinkers in the city), according to Scarborough, that fell to 1.56 mil drinkers last yr, 23.4% of beer drinkers. Corona also slipped from just over 1.9 mil drinkers to 1.53 mil. And Bud Light lost 300K drinkers to 1.4 mil. Other top brands lost drinkers too, but Blue Moon (#6) and Stella Artois (#9) each gained drinkers same period in NYC.

Slightly different story in Los Angeles. Bud Light held #1 spot both yrs in LA, but dropped 300K drinkers and slipped from being named by 36.4% of beer drinkers to 27.8% in that city. Corona hung in at #2, but also lost drinkers, Scarborough reports. Modelo Especial, not in 2010's top-10, grabbed #6 spot in 2015 survey with over 800K drinkers, even as scan data indicates it's #2 brand in volume. Coors Light grabbed #3 spot from Heineken during this period and added about 70K drinkers to 971K. In addition to Modelo, Blue Moon took off in LA too since 2010, grabbing #5 spot last yr with 832K drinkers.

In Chicago, Miller Lite held on to lead, with 940K Chicagoans, about 30% of beer drinkers, consuming the brand. That was down from 1.15 mil in 2010, and a third of drinkers then. So Lite held share of beer drinkers better than lead brands in NYC and LA. Bud Light lost about 200K drinkers too but passed Corona, which shed 380K drinkers. Blue Moon passed Corona in interim as well, picking up over 50K drinkers. Corona losses in these mkts very puzzling, especially as Corona, unlike most big brands, up since 2010. Gotta note that in 2013, Scarborough changed entry from "Corona" to "Corona Extra," which may have thrown some drinkers. Could also be that avg Corona drinker drinks more and/or more often than he/she used to, i.e. occasional Corona drinkers became regular Corona drinkers. Could be another reason; these are consumer surveys. Miller Genuine Draft and High Life each fell out of top 10 in Chi, but Coors Light gained drinkers and rose in ranks to #5 brand. Less dramatic changes in Philly, but similar pattern. Yuengling held #1 position both yrs, but dropped about 70K drinkers. Coors Light and Miller Lite flipped #2 and #3 spots, with Coors Light shedding about 235K drinkers, Lite gaining 92K drinkers.

Two big Tex mkts tell different tale. In Dallas, each of Bud Light, Coors Light and Miller Lite gained drinkers 2010-2015. So did Corona, Shiner Bock and especially, Dos Equis and Michelob Ultra. In Houston, Bud Light and Coors Light each gained drinkers, as did Dos, Shiner, Heineken and Ultra. Lots more detail on these half-dozen mkts, plus 4 more, in just-published 2016 Beer Industry Update.  

The high end is still where growth's at in beer and indeed alc bevs as talks by AB's High End mktg veep Andy Goeler and Constellation Brands wine prexy Marty Birkel underscored at North Carolina beer and wine distribs meeting this week. AB has bought 8 craft brewers, selling somewhere between 800K and 1 mil bbls (Andy used both #s, could be 2 different yrs). AB's High End Unit has 200 employees, about 150 salespeople and all are Cicerone trained, said Andy, "spreading the gospel of beer." This is "amazing time for beer," Andy said, with "new vibrancy" based on beer's "unmatched flavor potential," that is both "more versatile than wine" and "complex as liquor." Andy pointed to recent bottle of Goose Island's Madame Rose on sale at Chi restaurant the Publican for $55, like a fine wine. Beer biz has to "elevate the prestige of beer" and "continue building brands."

Andy's talk also had somewhat surprising focus on disruption. Andy detailed disruptions wrought by Uber on taxis, cutting value of NYC medallions in half in 5 yrs, and Air B n B on hotels. Uber has mkt cap of $50 bil, Air B'n'B $25 bil. AB clearly paying very close attention to all this. "We have to watch disruption," Andy said. "We must collaborate and guide innovative retailers" and "make sure we're partnering with people like this" so "we can influence and guide." Andy pointed to cos like Drizly, Fresh Direct and inevitably Amazon. "We must spearhead development of disruptive technology" and "continue to take chances on new service ideas." Why? Because "very scary prospects if we fail to deliver innovations to drinkers."

Meanwhile, Constellation sells 66 mil cases of wine with around 80 brands, said Constellation Brands wine prexy Marty Birkel (recall Marty spent many yrs on beer side as well), very focused on building a half dozen high end brands. Whereas 5 yrs ago "center of gravity" in wine was $8-12 bottles, now it's $15-20 and will eventually move to $25-30, thought Marty. Wine consumers are moving to "stronger bolder flavors," which he compared to beer drinkers and IPAs. And wine has its own version of "rotator nation," it's called "wine by the glass." That's all "consumer led," said Marty; trick is to continue to build strong brands, "balanced with the fragmentation." Of 75 mil millennials, "roughly 30%" drink across all 3 categories and that's where most of the volume is. Only 10% drink wine only. Just as brewers have often said in recent yrs, Marty noted that drinkers drink based on occasion. "How do we get more of their occasions," mused Marty? Constellation also looking at bundling brands. Marty showed pictures of fall tailgate program with Kroger's bundling Corona and Clos Du Bois. The grocery market basket "increases pretty significantly." Finally, Marty showed North Carolina stats, where Constellation getting 59% of growth in beer last 12 weeks and 34.9% of growth in wine.  

New state laws passed recently in Pennsy, Colo and Okla, which have 16 mil adults and sell 14.4 mil bbls of beer (about 7% of US totals). They were mixed bag for beer, with different implications for each tier and each alc bev. Debates on these retail "modernization" moves ongoing for yrs in each state. Each took incremental approach. No one re-invented the wheel, tho Okla will take pretty big steps if ballot issue passes. Perhaps most important, while beer got expanded access in Colo and Okla and wine scored access gains in each state, spirits got no expanded access in Pennsy or Okla, delayed expansion in Colo.

In Pennsy, biggest change will be broader availability to sell wine (4 bottles) for off-premise consumption in grocery/c-stores that already have beer licenses, hotels/ restaurants and at gas stations. There will also be increase in number of those licenses over time, expected to be to be snapped up by chains. Beer likely to lose shelf space in current stores, but pick up space in new ones. Home D retailers that sell most off-premise beer in Pennsy not happy about new competition. But home Ds not getting wine, so beer won't lose space there. Craft brewers picked up some new festival/farmer's mkt rights, plus a state board to promote beer and higher ABV cap for cider. Also, distribs can now have 4 separate storage facilities in their territories and more flexibility to sell in "non-contiguous" territories. Some expect that will help big guys and may facilitate consolidation. Losers in Pennsy: distillers, since state still restricts liquor to 600 or so state stores. More modernization to come, politicians promise, but lotsa complaints already in press about limited moves they did make and not taking oppy to privatize totally.

In Colo, there's been decades-long battle for grocers/c-stores to get right to sell strong beer, wine and spirits. Limited to 3.2 beer now, with strong beer restricted to indie liquor stores. This yr, battle ended up (for now) in weird, 20-yr phase-in compromise (involving pricey license purchases). Grocers say they'll challenge this via ballot initiative as they seek to make it happen much faster. Initiative now includes grocery strong-beer and wine sales only, no liquor, no c-stores. Distillers praised "reasoned approach" in new law that will bring liquor more access. Beer forces mostly mum, tho craft brewers resisted grocery expansion for yrs for strong beer, as craft built via indie liquor stores and brewers haven't faced chain pricing pressures. Distribs apparently tried to get new law to include prohibition on merchandising grocery shelves for new licensees, but AB and MC opposed, we're told, and that language did not make it to final bill.

Okla could see biggest change. If voters approve ballot initiative and attached lengthy legislation this fall, cold, strong beer will be available in grocery/c-stores, along with wine. Now, strong beer limited to being sold warm in liquor stores, serviced by class B wine/spirits wholesalers. That reduces control most brewers, and especially AB, have over strong beer since class Bs sell across the state. Separately, Okla legislature passed bill to allow craft brewers to sell strong beer in their taprooms and for take-out, a big win for them. Recall too, bill originally attempted to force divestiture of AB's branches in Okla City and Tulsa (about 70% of AB volume in state). But neither final bill nor ballot initiative includes anti-branch language. Finally, no change for liquor accessibility in Okla. That's notable, because for yrs spirits scored gains in expanding access (Sunday sales, Washington state privatization, etc), but mostly stymied in these states this yr. Recall too, ballot initiative to end privatization dropped in Oreg and movement stalled in Montgomery County, Md this yr. Final thought: new rules adopted in Colo and Okla, two of biggest remaining mkts for 3.2 beer, put more pressure on very existence of that product.  

Despite softness and short-term noise in numbers in Apr/May, post-Memorial Day trends looking better again yr-to-date in scan. In fact, beer biz volume up 0.8% thru Jun 5 in Nielsen all outlet. And $$ up 3.4% as avg price/case +58 cents, 2.6% (only slightly less for 4 wks). So beer biz still trading up, big time, even tho craft growth slowed. Above-premium segments gained 7.2% by volume and 9.7% in $$ YTD. (over 44 share for 4 weeks). Imports outgaining craft; import volume up 8%, compared to craft up 4% (as Nielsen defines it). Imports gained 1 share of $$, while craft up 0.4 share YTD.

Both AB and MC continue to lose considerable volume and $$ share. AB volume down 0.8% and MC volume down 1.2% YTD. But AB basically flat for 4 weeks (-0.1%), while MC continued down 1+%. Still, AB off 0.8 share of volume and MC down 0.5 yr-to-date. But AB lost 1.2 share of $$, compared to MC, down 0.7. Meanwhile, Constellation volume up 14.5% YTD, $$ up 17.3%. It gained 1.1 share of $$ YTD, including 1.4 $$ share gain for last 4 weeks. Constellation at 10.4 share of $$ last 4 weeks, compared to 9.3 YTD. Heineken volume up 0.6% YTD, but it lost 0.1 share of $$.

Top growth brands remain Michelob Ultra and Modelo Especial. Each up more than 20% by volume and each gained 0.6 share of $$ YTD thru Jun 4 in Nielsen all-outlet. Corona still ripping along overall. Volume up almost 8% YTD and it gained 0.3 share of $$, continuing as #3 growth brand. Four hard soda brands in top 10 growth brands: Not Your Father's Root Beer, Henry Weinhard Orange, Best Damn Root Beer and Best Damn Cherry Cola. Those 4 brands alone at 0.8 share of $$, but perhaps share gains peaked. Up 0.7 last 4 weeks, as NYFRB gained 0.2, (compared to 0.3 YTD) as it starts to go against rollout #s.

Most top brands still soft in scan. Bud Light volume down 2.3% and Bud down 1.9% YTD. Those 2 brands lost 1.1 share of $$. Coors Light up 0.6%; Miller Lite flat. They each lost modest 0.1 share. Other big drag on each of AB and MC: subpremium brands, nearly all of which are down. Collectively, subpremium volume down 2.5%. Subpremium $$ share down to 16.4 for 4 weeks and at 17.9 YTD. That's partly because pricing getting messy among subpremiums. Down 10 cents a case, 0.7% for 4 weeks, up 7 cents, 0.5% YTD.  

 AB "very aggressive" with discounting, MC ceo Gavin Hattersley said in response to question on Molson Coors Investor's Day. "Our intent is to remain competitive," he added. As each seeks to stabilize share, beer biz becoming more of a dogfight. AB out first with programs like "buy 2 get one free" and variations in different parts of US for Memorial Day. MC typically matched. AB claimed holiday victory in communications with distribs. Gained 1 share in foodstores for 1 wk, gained in May overall and in 5 of 7 regions for 4 wks. "Congratulations and a Big Thank You for your support in helping us to deliver a Big High 5 market share GAIN in May!" enthused AB ceo João Castro Neves. "Both On and Off trade channels were positive with broad based growth across multiple channels." There were wide mkt-by-mkt variations and even some AB distribs thought AB overplayed gain in communications. But nationally AB share performance much improved in IRI multi-outlet + convenience data for 2 weeks thru Jun 5. AB down only 0.15 share of volume for 2 weeks and 0.6 share of $$, compared to 0.8 of volume and 1.3 share of $$ yr-to-date thru 5/15. MC share performance weaker over same 2-week period, off 0.8 share of volume, 1 share of $$. AB gained 1.5 share of volume in Fla, lost 1.5 in LA. Meanwhile, MC's Pacific region veep wrote distribs it did better than AB in 8 states in West over Memorial Day,"grew total volume for the 3 holiday weeks combined vs three similar weeks in 2015." In individual mkts, AB's promotions led to some real crazy prices, like advertised $4.99 30-pack in big upstate NY home d Consumer Bevs. That included $19.99 promo price (cheap enuf) plus $5 mail-in-rebate and $10 Ibotta coupon. Both the mail-in and Ibotta have low redemption rates. But that's still $1 per 6-pack. Such crazy prices struck some as already out of control. AB also had ad for $14.99 case of Beck's in Calif. Not exactly import pricing. Then again it ain't exactly an import. In Wisc, AB pushed price button again. Experimented earlier in yr with "Buy 2, Get One Free," liked results, then pushed it even harder over Memorial Day. This certainly got MC's attention in its highest share mkt. MC responded with price cuts on each of Miller Lite and Coors Light to $9.99 per 18-pack for 2+ weeks in Jun and July that one distrib called a "price war." But nationally, this clearly isn't a price war, so far. Recall, top ABI execs have said AB will have about same "envelope" of promotional dollars as last yr, just spending it differently. Idea seems to be: spend more on bigger promos, while not even doing some smaller ones. And for one holiday, broadly speaking, AB achieved better results. But in recent visit to NC, INSIGHTS heard grumbling about a 12-pack strategy there, where MC was already lower than AB. Instead of just matching, AB went deeper, then MC matched. Leading consultant McKinsey reportedly did multi-million $$ pricing study for AB a few yrs ago. McKinsey argued that price leader should never go deeper, only match a competitor's discounts so as to teach that there will be no advantage, according to source. That preserves greater price rationality. Yet recent AB moves do go deeper, also try to come up with novel variations, sometimes making it more difficult for consumers to comprehend or less attractive to retailers. In NC, not much changed competitively, another source said, but everyone made less money. It's an old story. Yet at least in some mkts, AB's attempts to "shock the system" did lead to short-term gains. AB will still face questions of what such low prices do to brand equity, and what it will do for an encore next yr. Meanwhile, neither IRI nor Nielsen scan data indicates overall beer pricing impacted much by promotions. Avg prices up 2%+ across board, tho economy segment showing price declines in recent periods. And govt CPI measure continues to show beer prices up about 2% this yr, outpacing inflation and far outpacing avg wine and spirits prices, which have barely budged. So several key price "gap" dynamics unchanged from last yr: 1) overall beer prices movin' up, driven by trade up; 2) gap between high end and mainstream continues to expand, with little impact on growth trends, tho could be a factor in craft slowdown; 3) beer pricing continues to significantly outpace wine/spirits.

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As Pabst battles MC over their contract brewing agreement, it's also still in litigation with distribs in 3 states over Pabst moving brands under new mgmt after Eugene Kashper took over. In California, dispute with Mission Bev went to arbitration between distribs over fair mkt value. Arbitrator reportedly came up with number closer to what new distribs sought than Mission's number. Meanwhile, Mission still has suit vs Pabst for breach of contract and damages (which it believes far exceed FMV determination). Pabst filed motion to dismiss Mission's suit. Court ruled in Mission's favor, importantly separating Calif's brand transfer law from termination. Mission's suit, court ruled, "is for breach of contract" between Pabst and Mission. "The arbitration is for the claims between the distributors, to be used when there is a valid termination of a contract and the two distributors cannot agree on a fair market value." Pabst appealed this order. If it stands, could be lookin' at jury trial where Mission will seek lost profits, other damages. In Maryland, Frederick P Winner failed to get injunction stopping Pabst from moving brands and lawsuit continues. In Ohio, lotsa back and forth on discovery issues and how to best approach case, as handful of distribs challenged Pabst as true "successor manufacturer." Nuthin' filed since new magistrate named earlier this yr.

Did Ballast Point Create New Gold Network Footprint in Ohio? Same Ohio law at issue in Pabst suit, which gives "successor manufacturers" temporary window to move brands, has once again made some distribs happy in that state, others not so much. Ballast Point about to move its brands to two big OH distribs, Superior and Heidelberg, to cover entire state, we understand. Indie craft distrib Premium Bev Supply currently has Ballast along with big craft book, including Lagunitas, Bell's, Founders and many more. Superior and Heidelberg have big craft books too. Each has Constellation in at least parts of their territories and each will now cover huge swaths of OH for Ballast Point. So Ballast technically stayin' within Gold Network. But Constellation distribs elsewhere in state "livid," we're told by one, since Ballast didn't stay within current Gold Network footprint, but "created a new one." Constellation distribs that didn't get Ballast include AB distribs with limited craft books lookin' for more craft and ready, willing and able to "take Ballast Point to the next level," source insists.

Constellation chief commercial officer Bruce Jacobson said: "We place tremendous value on the relationships we've built with our Gold Network partners over the years. Together, we've had a lot of success.... At the same time, we respect the business our partners at Ballast Point have built over the past 20 years and the decisions they make," noting their success. "As we've said from the beginning, Ballast Point's leadership team will continue to run their day-to-day operations and make decisions they feel are in the best interests of their business as they look to continue building momentum for their brands."  

Conventional wisdom suggests that growth of craft beer at expense of mainstream has played role in declining per capita beer consumption in US, but it ain't necessarily so. Per caps are down in US "because of the growth of craft," Constellation Brands Beer Div Chairman Bill Hackett insisted at INSIGHTS conference last mo. Given the styles, higher ABVs and big flavors in craft, "you just don't get the level of per caps we used to get across the industry with easier drinking brands." (Recall too, a coupla yrs back at INSIGHTS' Nov seminar folks from IRI, Nielsen and GuestMetrics offered up numbers that showed consumers who bought craft bought less beer per occasion.) Yet BA economist Bart Watson questioned conventional wisdom on panel day before. He explored what he calls the "Valley of Craft" while analyzing Oreg data. He showed that as in-state craft brewers steadily gained share there, Oreg's share of total US shipments at first declined, but then grew. That suggests to Bart that "craft may hurt volume in the short run. But in the long run it gets people excited about the beer category; it wins back more occasions for beer." By the way, in 2015, Oreg beer per capita consumption about 12% higher than natl average. Ten yrs ago, Oreg's per capita beer consumption was slightly lower than the natl avg.

We compared adult per cap trends over a decade with current mkt share structures in 3 sets of states: 1) 5 states where mainstream beers have higher than avg shares, defined as combined share of AB and MC; 2) 5 states considered "craft-centric" and where combined share of all brewers below top 5 ("others") significantly higher than natl avg; 3) 3 biggest beer mkts in US. Gotta note, AB/MC lost share in all of these states over this period, but still dominate in many. Several observations. First, no real pattern in total per capita beer consumption in the 3 groups of states; #s all over the lot. Second, in 5 states where top 2 still have 83+ combined share, adult per cap beer consumption declined in each from 2005-2015. Most of the dropoffs were pretty close to national decline rate of about 3 gals, 10.6%. Third, in 5 craft-centric states, per caps actually increased in 3 of 'em, beat natl avg in a 4^th and basically matched it in the 5^th. Now, none of these are huge mkts and lotsa factors affect per caps. But look at the 3 biggest mkts in US. In most craft-centric (by far) of those, Calif, per cap trend outperformed natl avg, albeit still down 6.6%. In Fla and Tex, it may be toss up as to which is least craft-centric. In any case, easy-drinkin' domestic beers still about 3/4 of consumption in both states, vs roughly 2/3 for US (and much lower in those craft-centric states). But per caps down more sharply in both Tex and Fla than in Calif or natl avg. Go figure.  

>This spring, AB debuted a number of bold new initiatives, designed to shake up mkt, get consumers' (and distribs') attention, and hopefully improve brand performance. First, AB renamed iconic Bud brand "America" for peak-selling season. This big move triggered backlash from pundits far and wide, but early readings from distribs mostly positive, with many reporting gains on Bud. Still down near 4% YTD thru May 15 in IRI MULC. Meanwhile, AB also came out with controversial new ad for Bud Light, "Weddings," an ad supporting/celebrating same sex marriage with celeb spokesfolks Seth Rogen and Amy Schumer and Bud Light Party theme. This ad triggered lots more leeriness from distribs than "America" did but media coverage more positive than for America. Bud Light too still struggling in scan; down 2.3% thru mid-May in IRI MULC. Maybe ongoing softness made AB try new promo tactics for Memorial Day, like buy 2 get one free. Promos got big results in Fla, Calif, sources say, but biz not great in NY, parts of midwest. Another departure: AB partnering with Starbucks. Will make its Teavana brand in its breweries and AB distribs will sell it nationwide starting next yr in 30 yr agreement that prexy Joa?o Castro Neves told INSIGHTS delivers on AB promise to build better relations with distribs, improve partnership economics and brand portfolios. In spring of 2016, AB at least trying new things. Question remains what effect they'll have on total biz and distrib relations. Recall, AB STRs down only 0.3% in Q1, so AB's off to somewhat better start too.