Boston Beer took another hit in financial press this morn as Seeking Alpha column titled “Can Boston Beer Get Its Groove Back” basically answered question in the negative “it’s hard to see how.”  Boston’s stock is down 50% over the past 18 months. But “we don’t see any realistic catalysts for SAM.  The slide should continue,” said author Quinn Foley.  SAM’s “days of blistering growth are a thing of the past,” he continued.  What’s more, “we think a takeover is unlikely.”  Why? “The growth is not there.”  Interestingly, INSIGHTS has heard precisely that rationale for apparent lack of interest from the 2 seemingly most obvious suitors, Constellation and Heineken.

Meanwhile, Martin Cashes in More Chits Amidst these tuff conditions, ceo Martin Roper did what ceos do when options vest.  He cashed more of ’em in, as reported on financial website (the cerbatgem) this morn, noting the latest 5,000.  But that’s just latest tranche. Over last mo, Martin sold 85,000 shares for $15.3 mil (don’t know what he paid for those shares).  Not only that, he also acquired options on another 120,000 shares for $5.2 mil ($43.55 per share) which would be valued on open mkt today at around $19 mil. But Martin can’t sell those shares yet, probably not for yrs.  Still, don’t forget, Martin realized $45 mil in value of options in last 2 yrs, INSIGHTS reported in Apr.  At that point, Martin still had options on 179,000 shares. 

Massive wine/spirits distrib just picked up a bunch more craft beer biz in key Colo market. Breakthru Bev’s Colo outfit announced acquisition of C.R. Goodman craft and import portfolio today. Recall, Breakthru formed after merger of Charmer Sunbelt and Wirtz; C.R. Goodman started up in Colo in 2006.  That year it picked up small craft distribution biz established by Left Hand Brewing. Since then, it’s distributed top in- and out-of-state craft brewers including Left Hand, Upslope, Stone, Dogfish Head, Firestone Walker, Boulevard and more, according to release. Statewide, Breakthru also has thick book of craft in state, including Odell, Avery, Great Divide and others (in at least part of territory). “With the changing landscape in Colorado we felt the timing was right to make this change for our suppliers, customers and employees,” C.R. Goodman owner Ken Goodman said in statement.

“We chose our suitor carefully,” he added. Choice to go with Breakthru, primarily in wine/spirits biz, certainly notable in such a core craft market, where landscape “changing.”  Indeed. Both AB and MC operate branches in state. Following acquisition of Breckenridge, AB transitioned that volume into its system, including from a Coors distrib that had Breck for a long time, an “especially tough” move for Breck prexy Todd Usry, he told Fort Collins Coloradoan recently. And recall, state now also getting ready for big new changes to alcohol retailing, as indie stores that sell beer, wine and spirits will be joined by chain supermarkets over next few years. Craft brewers in Colo have long spoken of benefits of largely working with small indie accounts. Now that work with much bigger chains on the horizon for all types of alc bevs, much much bigger Breakthru could provide additional assistance.

“The shift of the Blue Moon and Leinenkugel’s marketing teams to the MillerCoors organization will allow a deeper focus and commitment on these two strategic brand families,” sez Tenth and Blake’s prexy Scott Whitley, “while enabling Tenth and Blake to focus on the development and integration of our new craft partners into the MillerCoors system.”  New strategy, he adds, “will enable our national crafts, prestige imports and craft partners to play an even larger role” in getting MC to growth.  Blue Moon and Leinie brand mktg team, plus Tenth and Blake’s innovation group, “transition” immediately to MC cmo David Kroll’s group, Scott said in email this afternoon.  Sr director of innovation Bryan Ferschinger bumped up to veep, natl craft/innovation.  Blue Moon/Leinie brand director Ryan Hemsing keeps role and reports to Bryan. 

Interestingly, sales team remains with Tenth and Blake, which also keeps “prestige” import portfolio (Peroni, Pilsner Urquell) and becomes “business development arm” of MC, “tasked with building and expanding our new craft acquisitions,” Scott wrote: Saint Archer, Terrapin, Hop Valley and Revolver.  Tenth and Blake will also “explore future Molson Coors” craft/import oppys.  Molson Coors operates its own Canadian division of specialty brands called Six Pints.  Other personnel moves: David Reny, sr sales director at Tenth is moving on.  His team reports to Scott on “an interim basis.”  Mike Sikorski gets new title/role as sr director of finance, craft partnerships and imports, combining current role at Tenth and Blake in finance/ strategy with “M&A Integration work streams” and operations oversight.

Total 2d qtr beer advertising spending jumped $51 mil, 22%, according to CITI research last week, reporting on Kantar Media data in 12 different media. (Fully 87% of alc bev spending in this Kantar data set on tv, so perhaps it doesn’t include all digital spending.  Lone internet channel simply called “internet display.”)  Several big brands got bigger spending boosts than that.  AB spent $10 mil, 46% more on brand Bud (the “America” campaign), while Coors Light spending jumped $16 mil, 42%, Heineken spending up $9 mil, 79%, and Corona got a $9 mil, 23% boost.  Those 4 big brands got the lion’s share of the increase in beer spending in Q2.  Several of those brands trends improved by a point or so last 12 weeks thru Sep 4  (back to early Jun), compared to YTD in IRI multioutlet + convenience.  Bud down 2.9% for 12 weeks, compared to 3.4% YTD.  Coors Light basically unchanged.  Flat for 12 weeks, down 0.1% YTD.  Corona up 7.6% for 12 weeks, compared to 6.7% YTD (recall, it dipped for awhile Apr-Jun). And Heineken up 1.3% for 12 weeks, over 1 point better than 0.1% drop YTD.  Meanwhile, total ABI spending up a whopping $39 mil, 29% in 2d qtr, Constellation spending up 29%, $14 mil in Q2. MillerCoors spending up 18% in qtr and Boston Beer down 12%, according to CITI. 

“There’s no inflection in sight,” wrote Credit Suisse’s Laurent Gartner, regarding Boston Beer’s recent sales declines, as he initiated coverage of stock with “underperform rating,” as reported by Benzinga this morn.  Gartner’s estimates are below consensus forecasts, noted Benzinga: “He pointed out that while company’s sales had been declining, management had not provided a clear strategy to limit market share losses and boost sales.  Forthcoming years could be a ‘slow road’ and the current expectations do not reflect this fully.”  Boston is losing lotsa mkt share within craft and innovations in other categories are no longer enuf, sez report.  Since 2012, growth “driven almost entirely by Angry Orchard and Twisted Tea, but the recent drop of the cider category has exacerbated the declines leading to negative depletions in last 2 quarters,” Gartner wrote. 

Boston Beer’s total trends softened further in recent weeks in IRI, because of now precipitous decline of its Alchemy and Science subsidiary (which IRI reports separately).  Earlier in yr, Alchemy and Science boosted Boston. Lately, it’s a drag on trend as Boston matches up against Coney Island Root Beer rollout last summer.  Boston Beer down 2% for 4 weeks thru Sep 4 in IRI, ex-Alchemy and Science.  But Alchemy and Science down a whopping 58% for 4 weeks. Put ’em together and Boston down 8% for 4 weeks.  The two combined are down 231,000 cases, 1.5% yr-to-date with 80% of drop in last 4 weeks. 

Legislation intro’d (and defeated) in CA earlier this yr would “drive a stake through the heart of tied house” law, Matt Botting, blunt genl counsel for CA ABC, told CA Craft Beer Summit last week. He referred to bill that would have cleared payments by alc bev producers to individuals with interest in retail licenses. Bill ostensibly an attempt to allow sponsorship of celebrity chefs, said Matt. But language went far beyond that. Calif Craft Brewers Assn, CA Beer and Bev Distribs and others opposed as opening door to extensive pay-to-play, and bill died, CCBA exec director Tom McCormick said. “Big Alcohol doesn’t like equal access to market laws,” he said.  So his org “played defense this year.” Tom and Matt also referenced “very important court case” that brings 1st Amendment challenge by 3d-party service provider that sells ads to mfrs/distribs to place on digital video devices it puts in retail accounts. Between the two, Matt sees a possible “complete evisceration of tied house, essentially.” And “you wouldn’t be here without the tied house laws,” he told small brewers. They “allow you to compete with Anheuser Busch, at a certain level,” and “work to your advantage.” (A version of this article appeared Craft Brew News earlier this wk.) 

Like big players, small brewers also benefit from numerous exceptions to CA’s tied-house rules. Now that “there are more and more exceptions,” and “bigger exceptions,” Matt said, CA has to be very careful to scope out ones that “really bring the whole system into question.” So new exceptions, previously seen thru the lens of providing economic benefits to different players, no longer receive “just a legislative rubber stamp,” he noted. “There’s still going to be exceptions. There just needs to be more robust reasons” for why to allow them beyond simply expanding business. Indeed, the state’s views of its “interest” in alc bev sales shifted over time, Matt explained. Originally, after repeal of Prohibition, promoting “economic, social, moral well-being” all about promoting temperance.  Widespread use was seen as a damper on economic activity. But now, same language often interpreted as promoting the industry itself. In fact, that’s become driving force to change regs, particularly tied house/3-tier regs. And those are often much harder to provide a public policy reasoning for than, for example, keeping alcohol away from “kids and drunks,” as Matt said. So, a key challenge for CA ABC going forward: finding ways to make tied house laws and public policy reasoning behind them “relevant.”

Consumer price index for beer slowed to a 1.6% gain in Aug compared to Aug 2015, per latest gov’t stats. That’s down from 1.8% gain for month of Jul, 1.9% gain in Jun, 2.1% gain in May.  Beer prices still outpaced 1.1% gain for all items in Aug, while spirits were up just 0.5% and CPI for wine slipped 0.1%.  YTD thru Aug, CPI for beer up 1.9% vs 1% increase for all items.  CPI for spirits up 0.3%, while wine prices were flat YTD.

Beer prices up 2.5% in IRI multioutlet + convenience YTD, including trade up to higher-priced segments (which may not be factored into govt numbers). But up 2.2% for 12 weeks and 1.9% for 4 weeks.  

Total beer biz volume up 0.5% for 12 weeks thru Sep 4 in IRI multioutlet + convenience. That’s just slightly behind yr-to-date pace, which is up 0.7% (tho 4 weeks down 1%).  So why does it feel like industry became more of a slog this summer? Jul soft, Aug good, according to anecdotal reports, but two mos together not quite as good as 1^st half.  Overall, biz is slowing down some, say several sources.  AB and MC somewhat soft; but their trends for 12 weeks very similar to yr-to-date.  Neither picked up steam over summer.  AB did better than MC.  AB down 0.8%, MC down 1.9% for 12 weeks, compared to down 0.8% and down 1.7% YTD.

Summer sales for  two top 6 brewing cos took turns for worse, Pabst and Boston Beer.  In both cases, this was because their big hard soda #s from last yr didn’t cycle.  Pabst volume down 4.9% for 12 weeks, compared to 2.7% gain yr-to-date.  And Boston Beer improved slightly on its base biz (from -3 to -2) but if you include Alchemy and Science subsidiary, it’s down 5% for 12 weeks, compared to 1.5% drop YTD (see below).  Heineken USA off 1.8% for 12 weeks in IRI, down 1.6% YTD.  Meanwhile, even as total beer decelerated slightly in IRI, Constellation sales picked up a little speed.  Up 13.7% for 12 weeks, compared to 13.1% gain yr-to-date.  Mike’s is steady Eddy at 8.3% growth for both periods.  Yuengling and Diageo Beer Co USA each up a point faster for 12 weeks than YTD; got 5.8% and 2.7% gains respectively.  New Belgium picked up pace with 3.8% gain over last 12 weeks, compared to 0.8% gain YTD (expansions, Citradelic) even as total craft slowed further, up 0.7% for 4 weeks. But Sierra, Gambrinus and CBA drops steepened 1-2 points; down 7%, 7% and 5.5% respectively during last 12 weeks.  Lagunitas still up 20%+ but a couple of points off YTD pace

Tucked away in a “quiet corner” of Guinness’s “massive” St James Gate brewery in Ireland is 9-month old Open Gate Brewery, a 10-hectoliter pilot brewery which allows co to test new beers for US and global mkts with consumers, per Boston Herald. “Every innovative new Guinness beer starts off here in the pilot brewery,” said gm Padraig Fox. While Guinness has operated a pilot brewery for 100 yrs, decision to open to public last yr gave brewer a “chance to capture the growing number of craft beer consumers in Ireland and those who visit from abroad,” mainly Americans, noted Herald. On a recent visit, Herald reporter sampled “a Belgian-inspired plum sour, a viscous milk stout, a Flemish dark ale,” and a “well hopped rye pale ale.”  Guinness Nitro IPA and Blonde American Lager got their starts at Open Gate too. “You don’t stay in business for 250 years without constantly innovating,” said Padraig.   

While producers push for fed tax excise tax cuts on beer, wine and spirits, govt affairs execs have their eyes on potential proposals to hike state excise taxes after 2016 election.  A coupla hikes already floated in recent days.  In Michigan, House Rep Tom Hooker proposed a bill to jack beer tax 3.4X, from $6.30 to $21.70/bbl, which would make it one of highest in US.  It’s also an additional near-nickel per 12-oz beer, adds annual inflation kicker and leaves out wine and liquor.  Revs earmarked for treatment, drug courts and enforcement of underage drinking/ drunk driving laws. Hooker told media that MI beer tax unchanged in 50 yrs and cited alcohol-related traffic deaths.  “I think it’s obvious that something needs to be done,” he told MLive.com.  MI Chamber of Commerce and anti-tax/libertarian non-profit MI Freedom Fund immediately voiced opposition.  A spokesperson for Chamber called it “a bad idea from a lame duck lawmaker” that would bring growing craft brew biz in Mich “to a grinding halt.”  Another noted MI beer tax already highest in region and said: “Sin taxes don’t work” and they “backfire because people turn to illegal purchasing methods.”  Border drinkers already cross into OH, IN to avoid 10-cent deposit, she added.

In NM, State Sen Ortiz y Pino proposed hefty 25-cent per-drink tax, reports KRQE in Albuquerque.  Pino’s hike aimed to defray costs associated with alcohol abuse in the state.  “Statistics show the bulk of the tax is paid by a small percentage of very heavy users of alcohol,” he claimed.   Proposal has slight majority support (51%) among the public, one survey sez.  But past efforts to raise NM alc bev tax failed, KRQE reminded, and current (anti-tax) Gov Martinez does not support a hike. 

Finally, a question we raised earlier this week in our Alcohol Issues Update: how will pot legalization efforts impact alcohol taxes?  Will pot tax windfalls take pressure off of state alc bev taxes?  Or will efforts to “regulate pot like alcohol” and constant refrain “pot is safer than alcohol” add pressure to raise alc bev taxes?