Even tho Constellation stock has appreciated by 750% in 5 yrs, it’s still “most undervalued” bev co, according to Morgan Stanley’s Dara Mohsenian this morn.  He did deep dive in advance of STZ reporting qtr thru Aug early next mo.  “Sustainability of strong STZ beer revenue growth has been proven,” noted Dara.  Qtr thru Aug “will be the tenth straight quarter with at least 8% y-o-y depletion growth and sixth straight” above 10%, he added.  In fact, Dara estimates beer depletions will be up 12% or more this qtr.  Constellation beers up 16.3% in Nielsen from 5/29-8/27.  Corona brand rebounded to 10.5% growth during period, compared to slowdown to 4.6% growth in qtr prior.  And Modelo brand accelerated to 30.2% growth during period, up from 25% a yr ago.  Growing faster off a bigger base.  STZ also “on the cusp of significant beer margin expansion with a ramp up in Nava productivity,” Dara continues to argue, tho STZ has not changed margin guidance. “After years of underperformance” in wine, Dara notes that STZ “focus on its higher margin focus brands appears to be gaining traction” with recent acquisitions like Prisoner and Meomi “nicely accretive to growth and margins.” Finally, Dara expects “beer momentum will likely slow” in STZ’s 2d half (thru Feb 2017) as “comparisons become more difficult.”  He expects depletions to decelerate to just under 10% (9.6%) from 13% or so in last 4 qtrs.

Even tho Constellation stock has appreciated by 750% in 5 yrs, it’s still “most undervalued” bev co, according to Morgan Stanley’s Dara Mohsenian this morn.  He did deep dive in advance of STZ reporting qtr thru Aug early next mo.  “Sustainability of strong STZ beer revenue growth has been proven,” noted Dara.  Qtr thru Aug “will be the tenth straight quarter with at least 8% y-o-y depletion growth and sixth straight” above 10%, he added.  In fact, Dara estimates beer depletions will be up 12% or more this qtr.  Constellation beers up 16.3% in Nielsen from 5/29-8/27.  Corona brand rebounded to 10.5% growth during period, compared to slowdown to 4.6% growth in qtr prior.  And Modelo brand accelerated to 30.2% growth during period, up from 25% a yr ago.  Growing faster off a bigger base.  STZ also “on the cusp of significant beer margin expansion with a ramp up in Nava productivity,” Dara continues to argue, tho STZ has not changed margin guidance. “After years of underperformance” in wine, Dara notes that STZ “focus on its higher margin focus brands appears to be gaining traction” with recent acquisitions like Prisoner and Meomi “nicely accretive to growth and margins.” Finally, Dara expects “beer momentum will likely slow” in STZ’s 2d half (thru Feb 2017) as “comparisons become more difficult.”  He expects depletions to decelerate to just under 10% (9.6%) from 13% or so in last 4 qtrs.

Even tho Constellation stock has appreciated by 750% in 5 yrs, it’s still “most undervalued” bev co, according to Morgan Stanley’s Dara Mohsenian this morn.  He did deep dive in advance of STZ reporting qtr thru Aug early next mo.  “Sustainability of strong STZ beer revenue growth has been proven,” noted Dara.  Qtr thru Aug “will be the tenth straight quarter with at least 8% y-o-y depletion growth and sixth straight” above 10%, he added.  In fact, Dara estimates beer depletions will be up 12% or more this qtr.  Constellation beers up 16.3% in Nielsen from 5/29-8/27.  Corona brand rebounded to 10.5% growth during period, compared to slowdown to 4.6% growth in qtr prior.  And Modelo brand accelerated to 30.2% growth during period, up from 25% a yr ago.  Growing faster off a bigger base.  STZ also “on the cusp of significant beer margin expansion with a ramp up in Nava productivity,” Dara continues to argue, tho STZ has not changed margin guidance. “After years of underperformance” in wine, Dara notes that STZ “focus on its higher margin focus brands appears to be gaining traction” with recent acquisitions like Prisoner and Meomi “nicely accretive to growth and margins.” Finally, Dara expects “beer momentum will likely slow” in STZ’s 2d half (thru Feb 2017) as “comparisons become more difficult.”  He expects depletions to decelerate to just under 10% (9.6%) from 13% or so in last 4 qtrs.

Even tho Constellation stock has appreciated by 750% in 5 yrs, it’s still “most undervalued” bev co, according to Morgan Stanley’s Dara Mohsenian this morn.  He did deep dive in advance of STZ reporting qtr thru Aug early next mo.  “Sustainability of strong STZ beer revenue growth has been proven,” noted Dara.  Qtr thru Aug “will be the tenth straight quarter with at least 8% y-o-y depletion growth and sixth straight” above 10%, he added.  In fact, Dara estimates beer depletions will be up 12% or more this qtr.  Constellation beers up 16.3% in Nielsen from 5/29-8/27.  Corona brand rebounded to 10.5% growth during period, compared to slowdown to 4.6% growth in qtr prior.  And Modelo brand accelerated to 30.2% growth during period, up from 25% a yr ago.  Growing faster off a bigger base.  STZ also “on the cusp of significant beer margin expansion with a ramp up in Nava productivity,” Dara continues to argue, tho STZ has not changed margin guidance. “After years of underperformance” in wine, Dara notes that STZ “focus on its higher margin focus brands appears to be gaining traction” with recent acquisitions like Prisoner and Meomi “nicely accretive to growth and margins.” Finally, Dara expects “beer momentum will likely slow” in STZ’s 2d half (thru Feb 2017) as “comparisons become more difficult.”  He expects depletions to decelerate to just under 10% (9.6%) from 13% or so in last 4 qtrs.

Not exactly man-bites-dog when a financial analyst sees more savings/synergies in an AB InBev deal than the brewer guides to.  But notable that Jefferies Intl initiated coverage of AB InBev with a “buy,” including note from analyst Edward Mundy that Jefferies rating “predicated on the realization of $3 billion cost saves on the SABMiller deal vs guidance of $1.4 billion.” That “aggressive” estimate based on “deep dive on ABI/SAB cost bases and in-depth analysis of previous transactions” and puts Mundy well ahead of consensus.  Reviewing ABI-SABMiller’s footprint, “sizing the value uplift from revenue synergies” and ABI’s stated goal of increasing its “low alcohol mix” leads Edward to forecast mid-term rev growth of 6%.  Longer term, ABI’s goal of $100 bil revs in Dream Incentive Plan, plus continued, tho slower M&A, also supports higher share price, in Edward’s view.  

Another ABI-deal related clip from Bloomberg this morn focused on impending sell-off of its Eastern European brewing assets for about $6 bil, including prize of Pilsner Urquell (remember MC gets to keep that in US).  Apparently, there’s lotsa interest from strategics as well as private equity, with Bloomberg naming over half a dozen potential acquirers and quoting one analyst: “The competition will be huge.”  But one surprise potential bidder is China Resources Beer Holdings Co (half owned by Chinese govt), which is also about to buy SABMiller’s minority stake (49%) in their joint Snow beer venture for $1.6 bil.  You’ll recall that was condition of Chinese govt approval. 

ABI’s future M&A pace also on Reuters’ Martinne Geller’s mind yesterday.  Tho ABI-SAB still not officially closed, once it is, ABI “could find itself party to other smaller deals, involving Castel Group, Coca Cola and Andalou Efes,” she wrote yesterday.  French brewer-vintner-soft drinks co Castel is oft-mentioned future partner; it already has cross-shareholder relationship with SAB.  It’s #2 beer and soft drinks producer in Africa and “some analysts estimate is worth more than $30 billion,” Martine wrote.  Turkey-based Efes is a top-10 global brewer (17.6 mil bbls in 2015) that also sells soft drinks.  ABI picks up SAB’s Coke stake with deal,  tho some expect Coke to purchase SAB’s stake.  Note too, ABI mentioned in recent articles as potential buyer of Vietnamese brewers govt putting on block there. 

Hey, ABI-SAB deal hasn’t even closed yet.  And analysts/media are already ramping up the speculation on what’s next.  This morn, Susquehanna’s Pablo Zuanic pondered Pepsi or Coke and preferred Pepsi for ABI down the line.  Leading financial paper Barron’s promptly picked up the piece, headlining: “Coke or Pesi: Which One Should Be a Takeover Target?”  Pepsi much more accretive to earnings, according to Pablo, but here’s the twist.  ABI would just buy the beverages and spin off the snack co to… ding, ding, ding you guessed it KraftHeinz, backed by the same Brazilian 3G folks who are the largest shareholders in ABI.  

Once again, holiday timing skews 4-wk trends in Nielsen in run-up to Labor Day so we’re holding off on reporting overall trends.  But look at “Top 10 Growth Brands” in grocery channel vs c-store channel in Nielsen scans for 4 wks thru Sep 3.  Only 4 brands make both lists: Michelob Ultra and Modelo Especial are top 2 in both channels, with Ultra #1 in grocery, Especial on top in c-stores.  Corona Extra #3 in c-stores, #9 in grocery.  Henry’s Hard Orange is #4 in both outlets.  One more common factor: Imports were 5 of fastest growers in grocery, 4 of ’em in c-stores. But that’s about it for similarities.

In grocery, Coors Light was #3 grower (based on case share change for 4 wks), Stella Artois #5.  Only craft brand on either list: Founders All Day IPA, #8 in grocery.  Only premium regular brand on either list: Yuengling Amber Lager is #7 in grocery.  Rounding out grocery list are 3 imports: Stella Artois, Estrella Jalisco and Tecate Light.  C-store list has 3 flavored beers in addition to Henry’s Hard Orange: Four Loko Gold (#5 with a bullet), Best Damn Root Beer and Modelo Especial Chelada (#10).  Then too, two economy brands on c-store list: Natty Daddy (#6) and Busch Light (#8).  Heineken is 7^th-fastest grower in c-stores. 

Still other brands pop up as top share gainers in Aug in small drug store segment.  Modelo Especial is #1 and Michelob Ultra #3.  But Bud Light actually 2d biggest share gainer recently in drug stores.  Also on list from AB: Busch, Busch Light, Natty Ice and Natty Daddy.  So AB had 6 of top-10 growth brands in this channel in Aug.  Miller Lite’s there too.  And a pair of craft brands: Founders All Day IPA and Firestone Walker’s 805.         

Effective Jan 1, 2017 Heineken USA will launch Five Points Trading Company, “a new venture aimed at incubating some of our most popular beers into the US,” with oppy “to connect with millennial beer drinkers as they become more global and more adventurous with their taste,” co announced.  Five Points is particularly focused on “emerging global HEINEKEN brands,” including Tiger, Red Stripe, Birra Moretti, Prestige, Sagres, Mort Subite, Affligem and Murphy’s Irish Stout, which will be “rolling out on a national and regional basis.”  Handful of these brewers focused primarily on lagers, with exceptions of Affligem (Belgian Abbey beer), Murphy’s Stout, Mort Subite (Belgian lambic).  Tho others such as Moretti and Tiger have extended portfolios into different styles too.  Five Points was “named after the five points” of Heineken red star “and America’s first melting pot neighborhood in lower Manhattan,” per release.  Unit will be run separate from HUSA’s current portfolio with Chas Littlefield as General Manager. 

Recall, Heineken previously launched similar subsidiary called Star Brands, which then included brands such as Strongbow, Paulaner, Affligem and Moretti La Rossa.  But subsidiary couldn’t make money and ultimately dismantled years ago.  So HUSA goin’ back to the future in a sense.  Now Heineken global has three different operating entities in US including HUSA, JV with Lagunitas and now Five Points.  More signs that beer biz is getting increasingly fragmented.    

CBBD volume shows strong gains throughout southeast, with especially hot Aug thanks in part to 2 extra selling days, a recent report shows.  In MD-DC-VA region, CBBD volume up 8.6% yr-to-date for 8 mos; Aug +24%.  In Fla, CBBD’s Aug volume jumped 22.3% and yr-to-date volume +10.5%.  In GA, NC, SC and Gulf Coast region, Aug volume soared nearly 30% (+28.3%) and yr-to-date volume up 15.8%. All in, southeast region volume up 25% in Aug, 12% yr-to-date.  Off-premise volume +13.2%, on-premise trended up 6.5% YTD. Not bad.

Separately, survey of Labor Day Sales at 15K c-stores showed alc bev sales +3.4%, reports Bonnie Herzog at Wells Fargo.  Each of top 3 up over Labor Day.  Constellation led the pack at +6.3%, AB +3% and MC +2.4%.  Holiday period actually a slowdown from Q3 so far.  Overall alc bev sales +5.3% for Q3 thru Labor Day, with Constellation posting 10.4% gain, AB up 3.9% and MC +4.3%.  Bonnie sees more run room for CBBD in c-stores and specifies two key oppys: 1) 2/3 of retailers expect to add more shelf space for CBBD brands in 2017; 2) Corona cans “remain a significant opportunity.”  Cans still just over 8% of Corona sales (Q2 2016) compared to 70%+ for several leading brands, Bonnie notes.  And even tho trend for Corona can sales slowed, “of the total 5% growth in Corona $ sales reported for 2Q16, 24.6% growth was attributed to can sales vs. 3.6% to bottle sales.”  Fast growth of Michelob Ultra also “can be in part attributed to its increasing marketing/ promotional spend and outperformance in the can format – which could offer guidance on the future opportunity for STZ with its Corona cans,” Bonnie wrote. Editor’s note: Trend in Bonnie’s sample looks a little light.  Constellation volume up 17% in Nielsen c-stores for 4 weeks thru 8/27, 20% yr-to-date.