Nearly 5 mos after AB and Devils Backbone announced deal, DOJ has finally closed its investigation, allowing cos to move forward.  This was by far the longest investigation of a craft deal yet; other AB deals typically took 1-3 mos to close. DOJ pointed to “distribution relief secured in the ABI/SABMiller settlement.” But it may not have cleared up all of DOJ concerns. Instead, the “competitive implications” of this deal “are too uncertain at this time to warrant further investigation,” said Deputy Assistant Attorney General Juan Ateaga of the Justice Department’s Antitrust Division in released statement.  So DOJ “will be carefully monitoring ABI’s compliance with its distribution obligations” and “will also carefully scrutinize any further craft acquisitions by ABI.”  

DOJ promises to consider plenty of possible impacts as it reviews any future deals “singularly” and “collectively.” Red flags for DOJ would include, among other things, transactions that result in “giving ABI the ability to prevent its craft rivals from effectively getting their products to the market or the ability to increase high-end beer prices which, in turn, would enhance ABI’s ability to raise prices in the premium and sub-premium beer segments.” The agency insists it’ll “consider all enforcement options,” even re-open investigation into Devils Backbone acquisition, if necessary. AB and Devils Backbone appeared to be confident that deal would get done all along, especially after DBB entered new distribution territory in PA and DE with AB network in midst of investigation.  Recall, DBB expects to finish yr over 90K bbls, and up over 40% in IRI MULC thru Aug 14.

Liquor-price battle in Connecticut took a pause after rhetoric reached new level of tension as each side played it out in press earlier this week.  Latest development: Total Wine agreed to pay settlement, govt called it a fine, of $37,500 after it advertised below cost prices in wake of fed lawsuit challenging CT pricing scheme.  Total, and another retail chain, BevMax, also agreed to drop ads and stop selling below cost.   (Correction: we misreported name of latter chain in Wednesday’s Express.)  Agreements followed move by CT Package Store Assn to form “rare coalition to ask the legislature to uphold the law” that Total Wine and BevMax flagrantly challenged, reports Hartford Courant.  Coalition includes beer distribs, wine & spirits distribs and restaurant assn, paper said.  Total “should be shut down and they should suspend their four permits…. It’s atrocious if someone could do that.  It’s like police ignoring the law,” CPSA’s lobbyist fulminated. 

State officials quickly launched investigation of Total and BevMax, showing govt can move quickly, and got payment of $9,375 per Total store, but, of course “no admission of wrongdoing,” said Total spokesman Ed Cooper.  Cooper had earlier told Courant that CT’s pricing scheme is only one in US “that guarantees high profits for package stores and high prices for consumers.”  Total will win lawsuit, he assured, adding CT package stores “like to make a lot of money and do so by fleecing their customers.” He also used the phrase “ripped off.”  Meanwhile, CSPA’s lobbyist told CT Post that “we have uncovered several new issues dealing with Total that we will be exploring in the future.”  Finally, gotta note that CT Gov Malloy very much in Total’s camp, at least on pricing scheme.  He pointed out in statement that CT’s “minimum bottle pricing law is backwards and illogical” and it “penalizes our residents by artificially charging them substantially more” than what consumers in neighboring states pay for their liquor.  “No other industry has a protection like this,” he added.  Keep in mind: we’re only in week one of this story.

Interestingly, a competitor of Total Wine from Minnesota spoke about his dealings with retail chains in his state at Center for Alcohol Policy meeting earlier this week. MN has combo of indie retailers competing with city-owned stores.  Paul Kaspszak, who represents assn of those city-owned stores, claimed that selling below cost also “technically illegal” in MN, but hard to enforce.  In MN, he believes, Total and other chains sell natl brands at near or below cost.  But he focused more on their private label or “proprietary” brands.  He said chains feature, steer customers to, and sell these proprietary brands at much higher margins than natl brands.  To compete, muni stores now purchase those proprietary brands (MN law requires all brands sold to all stores even if ostensibly “proprietary”) and sell ’em at significantly lower margin than Total applies.  So govt entities pushing Total’s price down on its proprietary brands. Did someone say alc bev biz is unique?

Indiana Will Appeal Decision Granting Liquor License to Monarch Bev  More shoes to drop in liquor battle in IN too.  Predictably, state AG will appeal decision that cleared Monarch Bev’s bid to add liquor to its big beer and wine biz (see Aug 26 Express).  “Unless Indiana’s Legislature decides to change the law, my office will defend both the statute and the authority of our state’s elected representative to regulate alcohol,” he said in statement reported by Indianapolis Star.  He’s also seeking a stay to postpone enforcement of court order clearing Monarch’s liquor license.  At same time, Monarch filed request to hold alc bev commission in contempt for not granting the license, according to Indiana Lawyer.  

Spot-checking grocery/liquor store flyers around US for Labor Day pricing sparks lotsa déjà vu back to same time two years ago.  Many prices same as then and a bunch lower.  For example, San Fran Safeway bumped up Bud and MillerCoors 30-pks a buck to $18.99 vs Labor Day 2014, but 20 packs a buck less at $12.99.  Top craft twelvers at same $12.99 price point: this yr includes Sierra, Lagunitas and Firestone Walker.  Same price for Corona and Heineken twelvers too, tho Dos Equis/Pacifico a dollar less.  Swing south east to Tampa Winn-Dixie and Bud/MC suitcases going for $17.45, 4 pennies less than 2 yrs ago.  Similarly, subpremium suitcases about a dime less at $9.50.  Winn-Dixie also has a buy 1, get 2d at 1/2 price for Bud/Ultra/MC twelvers.  At Denver’s Argonaut Liquor, no movement: Bud and Coors 20-pks at same $14.99 as in 2014, lotsa local, natl craft twelvers at $13.99-$14.99.  You can get hot price of $7.99 for Bud Lt/Coors Light/Miller Lite twelvers at San Diego Vons, but you gotta buy 3.  Redhook and Leinie are buck a bottle at same Von’s;  Goose, Kona and Corona at $12.99 for a twelver.

You need a stamp to get best prices in NY/Long Island Stop & Shop.  Bud Lt 12-pks are $4.99 after $5 mail-in-rebate (MIR). Coors Light 18-pks are $9.99 with $5 MIR.  Blue Moon’s got a $5 MIR there, Sam’s got a $4 MIR and Stella a $2 MIR, bringing 12-pk prices down to $11.99, $13.99 and $14.99 respectively. Mike’s, Heineken and Corona have MIRs too.  And Seagram’s FMBs on a 10 for $10 deal.  AB rockin’ Cleveland Giant Eagle with $3 Ibotta that brings 20-pk of Bud 16-oz aluminum bottles to $16.99.  Bud and MC 24-pks goin’ for same $14.99 there as Labor Day 2014. And finally, in some mkts, Ultra priced at Bud levels – we got pic of Ultra/Bud Lt/Bud twelvers for $8.99 in Fla CVS ‒ higher in others.             

As Mexican shipments “slowed” to 7% gain in Jul, a coupla other big source countries saw improvement, others continued down. All in, Jul import shipments +117,000 bbls, 4.3%, reports Beer Inst economist Michael Uhrich from Commerce Dept data.  Belgian shipments bounced back with 91K-bbl, 61% surge, and Irish, German and Polish shipments scored double-digit gains in Jul.  UK shipments held even.  But Dutch shipments tumbled 20% and Canadian shipments continued down, tho not as sharply. 

Yr-to-date, imports posted 1.4-mil-bbl, 7.2% gain.  Mexican shipments up remarkable 1.9 mil bbls, 16%, still far outpacing the segment.  Irish biz strong too: +75K bbls, 16%.  German shipments up modest 2.5%.  But Dutch trend softened to -180K bbls, -6% with tuff Jul.  Despite big Jul bump, Belgian biz still off 106K bbls, 8.4%.  And Canadian volume still down 266K bbls, 23% yr-to-date.  UK shipments tumbled 28%.  Import gain still offsets domestic brewers’ taxpaid loss thru Jul.  US biz up about 600K bbls, 0.5% for 7 mos.   

We had some fun drawing parallels between beer and chocolate bizzes a coupla weeks ago (See Aug 18 Express).  Now comes release from folks at Mintel that rings same bells: “Less is more: Americans are eating less ice cream but are willing to pay a premium.”  Turns out “frozen treat” volume dropped 5% 2011-2015, a bit steeper than beer’s drop from peak in 2008 thru 2013.  But dollar sales rose 6% as consumers traded up to “premium offerings” that they believe “taste better than regular frozen treats” and may be healthier too.  Did someone say consumers have “broader portfolios” these days?  “Variety is the name of the ice cream game,” sez Mintel, as 27% of consumers now buy variety packs and “typically” have more than one kind of ice cream in their freezers.  “Infused flavors,” as Dan called ’em today?  In ice cream, they’re called “mix-ins” and 41% of consumers now buy flavored frozen treats with mix-ins.  “The rise of new, trendy flavors speak to the dual components nostalgia and indulgence play in the market, while internationally-inspired varieties like mochi ice cream and gelato are succeeding in flavor and format,” sez Mintel’s senior food and drink analyst.   And if you want to get into some geeky style conversations, dig into the differences between ice cream and gelato…

Data released yesterday by Pennsy Liquor Control Board (PLCB) informs privatization debate there, and raises question about traditional belief that beer does better in control states.  Biggest control state hauled in total net revs of $1.94 bil on wine/liquor sales in fiscal yr thru Jun 2016, up 4.1%.  That’s in line with compound annual growth rate of 4.3% from fiscal 2010-2011 thru fiscal 2014-2015.  Meanwhile, wine/liquor sales provided $626.3 mil in total “contributions” to state/local govt entities in most recent fiscal yr, up 7.1%, PLCB sez.  Add to this about $135 mil in wages PLCB pays out annually to unionized retail workforce and you can understand resistance to privatization in Pennsy, tho steps in that direction, especially broader wine sales, already taken.

So how’s beer faring vs wine/spirits in Pennsy?  Not so well, even tho beer sold off premise in well over 10K outlets vs 600 state stores for wine/liquor.  PLCB reports “unit growth” rose at similar 4.1% CAGR over same 6-yr period.  Meanwhile, Beer Inst data shows calendar yr beer volume in 2015, down nearly 600K bbls, 6.6% since 2010.  For 12 mos thru Jun 2016, a better trend, but still off 0.7%.  Then too, Pennsy beer per cap consumption right at natl avg of 27 gals per adult, tho beer does have higher than natl avg share of absolute alcohol consumed in PA (approx 58 vs 51).  Broader wine availability may challenge beer even more.  But Pennsy trends raise question whether greater restrictions on wine/liquor in control states necessarily means beer will outperform.

Molson Coors exec Pete Coors Jr spoke Wednesday at Blue Ridge Mountains Rotary Club in Albemarle County in VA.  “You know, we’re always looking,” Pete Coors Jr told local NBC new affiliate. “Recently, MillerCoors has purchased a few breweries around the country and we’re always looking for opportunities to find partners in areas where they really bring great beer to our consumers,” he added.  Pete Jr “says he’s going to take on a new role with the corporation with the goal of expanding the craft beer business at the local level,” the station reported.  Pete’s current role at Molson Coors is more in international craft development, INSIGHTS understands.  At presstime, unclear how his role will be expanded or altered, once Molson Coors gets all of MillerCoors.  

Lotsa great info featured as per usual in Brewers Assn twice-yearly Power Hour featuring IRI’s Dan Wandel.  One of our favorite looks remains what’s happening in hotly contested arena of new brands.  New brands generated $100.7 mil in $$ sales in IRI foodstores yr-to-date thru July 10, which Dan called “a considerable jump” from the $82.4 generated from new products in 1^st half last yr.  Still, that amounted to only about 2% of total beer industry $$ in that channel.  But also represented 46% of industry’s $220 mil growth in that channel during first half.  

Eleven vendors generated $$ sales of over $1 mil from new products, including new packages, Dan showed.  MillerCoors led the charge,  grabbing $24 mil in new product sales in supers (a smaller account universe than we usually report).  Henry’s Hard Soda Orange and Ginger Ale were top 2 new brands overall, grabbing $20 mil in sales.  AB also generated $16.6 mil in new product sales, led by Best Damn Cherry at $4.8 mil  (#4 new brand) and Estrella Jalisco (#6) at $3.4 mil.  Boston Beer in a down yr still #3 in new products overall with $11.1 mil of new product sales. Riding surprising strength of Citradelic (#3 new brand with $5.9 mil in sales in supers alone), New Belgium #4 overall with $6.4 mil in new product sales.  And Constellation #5 with $5.9 mil in new beer product sales, led by Ballast Point Pineapple Sculpin IPA ($1.9 mil).  Those 5 vendors grabbed about 2/3 of new beer product sales.

In all, 665 brands were intro’d in 1^st half, selling 2.8 mil cases.  That’s up from 612 last yr.  But that’s also an avg of a measly 4,000 cases per item. So we’re in a period of incredible and perhaps unsustainable fragmentation.  Yet new products overall still on record-setting pace.  There were 1150 new “beer products” last year, almost triple the number of new products sold just 4 yrs ago, in 2012 (415).  In first half this yr, new craft “beer products” accounted for over half of new beer product sales, at $52.9 mil, while FMBs at $37.5 mil. In fact, notes Dan, 12 of top 16 “new beer brands have a flavor element to them.”  

Total FMB category keeps finding new ways to source growth, whether from new brand intros by large cos, new subcategories altogether (i.e. alc sodas) or a constant addition of new flavors across the board.  This yr FMBs impressively up 12.6%, $162 mil YTD thru Aug 14 in IRI multi-outlet + convenience data, gaining over half a share of total beer sales to 6.7 (not too far behind craft segment’s 0.62 share gain).  But gotta note, that’s with three almost entirely new alc soda brand families – Not Your Father’s, Henry’s and Best Damn – making up about 13% of total FMB sales and just about ALL of total FMB $$ growth.  As NYF franchise sales took nosedive in recent periods, segment has significantly slowed.

Mike’s Up 10% to 1.5 Share of $$; Harder is #1 Brand; Innovations Driving Growth In this fast-changing, flavor-heavy world of FMBs, Mark Anthony Brands’ Mike’s Hard/Harder Lemonade line remains a steady, consistent performer and continues to grow.  Well into its 17th yr, with a full array of offerings Mike’s total brand family volume up 9%, $$ up 10% YTD thru Aug 14 in IRI multi-outlet + convenience data, now reaching just over 1 full share of total beer volume and over 1.5 of $$.

That’s not without significant change within its portfolio in recent yrs.  Mike’s more recent Harder line of lemonades and several new flavor variants have driven growth, natch.  In fact, Mike’s Harder Lemonade is already its #1 brand in scans, up 11% YTD, over $11 mil in total sales ahead of flagship Mike’s Hard (-2%) and accelerating in latest periods.  Variety Pk (+9%) is actually 2d largest brand, ahead of flagship Mike’s Hard too.  Black Cherry (+9%), Harder Cranberry Lemonade (+13%) and Seasonal (+35%) all growin’ solidly.  And newer Harder Blood Orange, Hard Peach Lemonade and Harder Orange more than make up for any declines within the portfolio on their own.  Interestingly, Mike’s is still losing a half share of total FMB segment $$ YTD to 22.7 total.  Also, parent co Mark Anthony Brands’ Palm Breeze line declining this yr too after launching last yr.  But overall co sales still up 10%, further separating itself as 7th largest vendor in IRI, now well ahead of next largest Diageo Beer Co USA.

AB Ritas, Mixx Tails and MC Redd’s Declining; AB Losing Lotsa Share of Segment Meanwhile, both AB and MC’s big FMB brands strugglin’ of late.  AB Ritas gradually improving as yr progresses (all from new intros), but still collectively off another 13-14% YTD.  And Redd’s total brand family $$ flat, volume down 2% YTD, with trends waning further in recent periods.  Both brand families still represent 1 full share (or more) of beer $$ and a significant 14-17% of total FMB category each.  But AB in particular losing lotsa share of FMBs.  Ritas collectively shedding 5 share of segment $$ YTD and 0.22 share of total beer.  And last yr’s Mixx Tails launch, down 74% YTD.  It lost over 2 share of FMB $$ and 0.14 share of total beer $$.  Best Damn gains (3 share of FMBs) unable to compensate.  Comparatively, MC’s Redd’s lost nearly 2 share of FMB $$, tho share of total beer only off a few hundredths of a pt.  Henry’s sodas (about 4 share of FMBs) more than makin’ up for both share loss and sales declines.

Twisted Tea and Four Loko Other Top FMB Gainers; Smirnoff Stable While majority of Ritas, Mixx Tails and Redd’s FMB share losses shifting over to sodas, Boston Beer’s Twisted Tea and Phusion Project’s Four Loko are the other well established FMB brands that’ve maintained strong growth this yr.  Twisted Tea particularly pickin’ up share of segment; up 24% driven by sizable gains from top two brands, Original (+23%) and Half & Half (+30%).  Now over 9% of total FMB sales.  Both brands have been top-100 brands in scans for multiple yrs now and Twisted Tea Original currently is 31st largest brand by $$ overall.  Ahead of Sierra Nevada Pale Ale among others, and has 13th largest $$ growth and 11th largest volume growth among all brands in IRI MULC. 

Four Loko brand family $$ up 15%, almost entirely thanks to new Four Loko Gold brand.  Just starting to lap last yr’s launch, it’s up 6809% to $18.2 mil YTD; that’s larger than total Four Loko family’s $12.5 mil gain.  Other than Gold, new Sour Apple ($4.2 mil), Mango (+20%) and Black Cherry (+91%), all other Four Loko brands are down in scans so far.

And Smirnoff brand family continues to stabilize trends, tho still far off from previous peak; $$ up about 3%, volume up 1%.  Even while shedding another 1.2 share of FMB $$ YTD, Smirnoff still 11.9 share of segment.  Various new Electric and Spiked brands collectively providing largest boost this yr.  Flagship Smirnoff Ice (+1%) back to slight $$ growth.  Ice Screwdriver (+9%), and Variety Pk (+4.5%) up solidly and Watermelon Mimosa (+151%) still flyin’.  And right in line with other top FMB portfolios, rest of Smirnoff’s brands are declining. 

All in, these brand families make up vast majority of the FMB segment.  Keep in mind that IRI doesn’t include Seagrams, a significant player or alc seltzers (just coming on) in their malt-based alc bev category either.  So there’s even more biz overall and a whole separate avenue of FMB-like growth for several of these cos listed above.  However, as alc sodas decline and new launches lap, the FMB game remains one of constant churn and innovation.  

Hits keep comin’ in extremely hot late-Aug legal landscape.  Lotsa implications for 3-tier issues, state regs, contracts and more.  Texas is epicenter right now, as atty Keith Strama, who represents Wholesale Beer Distribs of TX, highlighted at Center for Alcohol Policy mtg in Dallas earlier this week. Texas ABC currently battlin’ dizzying array of cases regarding residency rules for retailers, distrib rights for craft brewers, distrib rights for huge McLane Co, private label issues and more.  We’ve reported on these cases as they’ve developed, and they’re in different courts and different stages.  At center, in Keith’s view, is Cadena case brought by co (FEMSA) that owns Oxxo retail chain in Mexico as well as 20 share of Heineken.  Key challenge is to TX separation of retail and supplier tiers.  Then too, Wal-Mart challenging retail license restriction that’s kept it out of TX and huge distrib co McLane seeking to get distrib license so far withheld by TX ABC. 

There’s more, but each of these cases attacks strong 3-tier system that has successfully created diverse, competitive, responsible alc bev mkt, Keith stressed.  If you look at laws “granularly,” they may seem “crazy” and thus hard to defend in court.  But “serious policy considerations” by legislature support system, he insisted, and that’s where laws should be decided, not courts.  In timely analogy and supporting statement for his state regulators, Keith said TX ABC is strong quarterback like Brett Favre (as opposed to brittle Tony Romo) now facing off “first class attacks” from huge “defensive linemen.”  (Meanwhile, TX retail group wants US Sup Ct to reinstate law that requires state residency for retailers, which could boost Brett’s protection, or potentially break it down.)   Two other points from Keith.  First, Wal-Mart entry into TX would be “transformative,” given what chain could do with volume discounts in liquor. Second, he believes last week’s decision allowing craft brewers to sell distrib rights will be appealed.  Called it “destabilizing when activist courts” decide such alc bev issues rather than state legislature.

Push Comes to Shove in CT; Total Goes Below Cost; BevMo Too  Days after it filed lawsuit vs CT pricing laws (see Aug 24 Express), retailer Total Wine advertised below cost prices in CT newspapers.  That move got attention of state regulators, who immediately launched investigation, reports Hartford Courant.  A week later, another retail chain, BevMo, did same thing, and said it’s reviewing Total’s suit, deciding whether to join.  Gotta figure these chains pretty confident about ultimate victory here if they’re willing to violate state law, tho remember it took Total over a decade and multiple trips to US Appeals Ct, to erode MD’s pricing laws.

Snoop Dog Still in Hunt for Scrap of Pabst Sale  Fed judge kept alive rapper Snoop Dog’s legal bid to be paid share of purchase price Eugene Kashper and colleagues paid Metropoulos family for Pabst.  Snoop had contract to get 10% of proceeds if Metropoulos sold Colt 45 as part of his efforts to promote Blast brand that fizzled.  Question is: “Was there a sale? That’s the big issue,” judge said earlier this week, reports Law360.  Pabst distinguishes between stock sale that occurred, which it sez doesn’t allow Snoop’s provision to kick in, and asset sale, which would.  Colt 45 still owned and controlled by Pabst, its atty points out.   Depositions show Eugene said he bought Colt 45 brand and Dean Metropoulos said sale would trigger the clause, claims Snoop’s atty, according to Law360 report.  He also points to document that describes deal as asset sale.  Attys also disagree over purchase price: Snoop’s side sez $700 mil; Pabst atty said less than $500 mil.  With Snoop, Eugene and Dean as potential witnesses, case could be YouTube worthy if it ever goes to trial.