Ninth Annual Alcohol Law and Policy Conference, hosted by NBWA-sponsored Center for Alcohol Policy, kicked off yesterday in Dallas.  This yr’s conference featured broader range of biz-oriented issues (i.e. intl trade, intellectual property) and less public health participation (i.e. no Alcohol Justice critics this yr) than past sessions.   Indeed, not a lotta specific alcohol policy issues in yesterday’s presentations, tho underlying policy considerations were part of trade practice and litigation reviews.  

One interesting and important sideshow in relationship between industry and public health emerged during two panels.  Many public health advocates and some govt policymakers reject outright the notion that industry members can be legitimate partners in prevention of underage drinking and other alcohol-related problems.  They constantly voice this opinion in international journal articles and presentations.  But chief of staff for lead US fed agency charged with reducing teen drinking took opposite position.  Asked directly about partnering with industry, SAMHSA’s chief of staff Tom Coderre said that while this “can be controversial” question, his agency “absolutely” committed to dialogue with and consideration of industry as “stakeholder” in preventing underage drinking.  Tom and SAMHSA colleague Rob Vincent gave presentation that balanced significant progress in reducing teen drinking, especially among 12-17 yr-olds, with continued challenge of 18-20 yr- old/college student drinking and heavy drinking trends.  Tom also said: “We would never have made the progress” in reducing teen consumption “if we didn’t have everyone working together.”

On a separate panel, Spencer Nevins, prexy of Michigan Beer & Wine Wholesalers Assn pointed out that his assn works with public health officials in MI on regulatory and other issues.  He also stated a very blunt and basic truth that public health advocates simply refuse to accept and industry members have failed to convince the advocates (and some govt officials) of.  The basis for public health’s skepticism of industry is the belief that sales and profit motives in and of themselves prevent industry from being a legit prevention partner.  But Spencer clearly stated a message that he stresses to his colleagues and others in supporting state regulation of the biz: “We don’t work in an industry designed to maximize sales.  We just don’t.”  More effective and wider communication of that message may be necessary to advance SAMHSA’s attitude about all stakeholders working together.

Perrin Brewing  up 92% thru Aug and on track to virtually double to 27,000-28,000 bbls.  And it is the #1 fastest growing new craft brand family in IRI multi-outlet nationally with $1.6 mil in sales as of 7/9, ahead of 192 other brand families.  And that’s with 95%+ of its biz in just 1 state, Mich.  Perrin already on track to be 4^th largest craft brewer in Mich (out of 270 or so), behind Bell’s, Founders, and Short’s, just 4 yrs after its founding.  Perrin is run by Keith Klopcic, former AB distrib in Mich (his brother Don still runs large AB distrib West Side).  Keith along with Dale Katechis, founder of Oskar Blues and the folks at Fireman Capital formed Oskar Blues Holding Co, which includes not only Perrin, but Oskar Blues, Cigar City and Utah Brewers Coop.  Just this week, Perrin intro’d 15-pack cans of its session IPA No Problem and also a session Gold Ale, line priced with Founders All Day IPA.  

Plenty to celebrate for New Belgium these days: depletions are up 7% yr-to-date for 3d largest US craft brewer as it celebrates opening of new Asheville, NC brewery and 25th anniversary. It hosted big party at the brewery Saturday with live music, acts from its carnivalesque Tour de Fat series and plenty of beer. It’s capping off an impressively strong month too, with depletions up in mid-20s in August, founder Kim Jordan reported during Brew Talks event hosted by Brewbound last Thursday (as reported in sister publication Craft Brew News last week). She also discussed the co’s “multi-country death march,” determining if a sale of all or part of the company was right next move, in the past tense. That process taught her about difference between folks in biz “who love beer” vs those “who couldn’t care less” about it and are “not so much our type.” She still believes “business models matter,” and remaining employee-owned still fits best with values held closely by her and other NBB leadership.

Numbers ain’t everything, Kim insisted, “but we also like to win.” And this yr “we’re killin’ it.” New markets and runaway success of Citradelic clearly part of that. It’s easily biggest new craft brand this yr at almost 0.5 share of craft in IRI multi-outlet + convenience data YTD thru Aug 14. Citradelic already larger than NBB’s Seasonal in MULC data, and #35 craft brand overall. Flagship Fat Tire $$ +2% YTD too. And “same-state growth is really healthy,” Kim said. But not all NBB brand trends as bright and number of year-round offerings, including #2 brand Ranger IPA, down double digits in scans. Biggest drop-offs seen in more recent launches Slow Ride Session IPA and Snapshot Wheat.

Constellation capturing increasing % of all hi-end share growth as yr goes along.  It’s up 1.5 share of $$ last 4 weeks thru 8/20 in Nielsen all-outlet (now 1.3 yr-to-date) as its $$ sales up 17%, while all above premium segments “slowed” to 2 share gain of $$.  That  compared to 2.4 for all above premium segments yr-to-date.  Means STZ went from a little more than half of high end share gain YTD to fully ¾ in latest period.  Nobody else is even in the ballpark.  Only other top 10 supplier that gained share of $$: Mike’s up 0.1 share,  with consistent 7-8% volume growth, 8-9% $$ sales growth.

Constellation got essentially all the $$ share gain for imports, which grew $$ 10% and gained 1.4 share YTD.  Total craft segment volume flat last 4 weeks, but avg prices up near 3%.  That 2.6% $$ sales gain was still good enuf for craft segment $$ share gain of 0.2.  (A chunk of which was STZ’s Ballast Point).  And sure, FMBs have starred this yr with the influx of many new hard sodas.  But while FMBs grew $$ double digits YTD, $$ sales are up just 1% last 4 weeks.  And tho FMBs gained 0.5 share of $$ YTD, share just even in last 4 weeks.  Partly, that’s because of the further falling of NYF franchise. $$ down 36% last 4 weeks and franchise lost 0.2 share of $$ in last 4 weeks, up just 0.2 YTD, while Henry’s franchise at 0.3.  

Appeals always possible, but courts in Texas and Indiana smiled brightly on craft brewers and a big distrib respectively this week.  Interestingly, each of these situations involved, at least in part, disputes between beer distributors in these states.  In TX, Travis County Dist Ct judge ruled that a law passed in 2013 which barred craft brewers from selling distrib rights is unconstitutional. That provision, passed as part of package that gave new rights to craft brewers, tacked on by Wholesale Beer Distribs of Tex, one of two big Tex beer distrib assns, reminds Houston Chronicle beer scribe Ronnie Crocker.  The other big distrib assn, Beer Alliance of Tex, opposed it, Ronnie also noted, quoting assn prexy Rick Donley at time: “It’s probably the most anti-competitive piece of legislation I’ve ever seen.”  Optics were indeed tuff, as distribs buy and sell distrib rights all the time.  Atty who represented brewers who filed suit said at recent hearing: “This law, it was written by beer distributors to enrich big beer distributors and that is not a legitimate state interest.”  In very brief order, judge did not opine, but simply ruled that section of law violated “Due Course of Law guarantees” in TX Constitution, tho it did not violate Takings Clause. 

Indy Judge Slams ABC, Monarch Wins “Long and Frustrating” Battle In IN, years of failed legislative and legal attempts by biggest beer distrib in state, Monarch Bev, to add liquor to its vast beer and wine biz finally reversed.  Marion County Superior Court judge ripped into state ABC commission’s process and denial of Monarch’s attempt to get a license in 2014 as “arbitrary and capricious,” reports Indianapolis Biz Journal.  Judge also slammed “disturbing and inappropriate” relations between commission, Gov’s office and Monarch’s competitors.  Recall, wasn’t just other wine & liquor distribs that fought Monarch’s bid to add booze, but Indiana Bev Alliance, which represents AB distrib competitors in IN, vociferously opposed Monarch.  In addition to sketchy hearing/denial process, judge pointed out that alc bev comm had “long history of granting permits to companies in similar situations,” IBJ reports, i.e. interlocking ownerships.  In Monarch’s case, same shareholders own transit co, beer distrib and Spirited Sales, which will be the liquor arm. 

Phil Terry, Monarch ceo, understated that he’s “pleased with the decision” and called process “long and frustrating.”  Phil also said: “We think this will allow Monarch and Spirited Sales to provide some local competition inside the liquor wholesale tier.  It will increase competition and provide good value to retailers and ultimately consumers.  This is a pro-business, pro-Indiana decision.”  It’s been a long haul, but this is second significant legal victory for Phil and Monarch this summer.  Recall, in mid-Jul special prosecutor refused to file any charges vs Monarch over campaign contributions.  Allegations of illegality had been made by Ind Bev Alliance.  Talk about a place where competition is fierce inside and outside the market!

Wine and Spirits Distribs of Ind spokesperson had opposite view, of course.  Called decision “legally incorrect and has potential to do great harm” by giving Monarch “unique advantage” to monopolize alc bev distribution.  State AG’s office said it will review decision and decide next steps, if any.                 

AB released massive documents today detailing UK Scheme document, US preliminary prospectus and much more. Early articles focused on a few key facts. ABI plans to cut 3% of its enlarged workforce over next 3 yrs after takeover of SABMiller, which amounts to 5,500 jobs, according to numerous reports.  Those job cuts will be part of the $1.4 bil in synergies expected by 2020.  Synergy target less than 2008 deal for Anheuser Busch (over $2 bil) and not that much more than $20 bil 2012 deal for Modelo ($1 billion).   But it’s also almost 10% of SABMiller’s $15 bil in revs. That $1.4 bil unchanged from ABI’s previous estimate, tho some had hoped when ABI got closer look it would increase the target.  The other fascinating nugget from early reports: ABI and SAB will pay $2 bil in fees to advisers and taxes.  That’s “some of the largest fees ever paid to bankers, legal advisers, and public relations companies for a single deal,” noted Financial Times.  ABI will pay “the bulk of the deal-related payments,” $1.74 bil.  Of course, bankers get the biggest fees, but amazingly even ABI longtime PR firm Brunswick scored $20 mil in fees for its work.  $20 mil for PR!  Accountants got $15 mil.  More details in coming days. 

Distrib perspective will be part of Appeals Ct’s consideration to reconsider key California trade practice case.  Recall, lotsa attention paid to Retail Digital case in CA earlier this yr.  In Jan, US Appeals Ct reversed US Dist Ct decision and sent case back for further consideration.  Appeals Ct refused to uphold CA law that barred manufacturers and distribs from paying retailers for in-store ads, based on interpretation of 1^st Amendment.  NBWA, CA distrib assn and others feared implications, not least of which was opening door to vast pay-to-play schemes.  State officials in CA, who defended law all along, then asked same panel of Appeals Ct judges to rehear their arguments or for full Appeals Ct panel to take another look.  Distrib assns also sought to have their separate arguments, originally made via friend-of-the-court briefs, to be considered again.  Among others, California Beer and Bev Distribs requested US Appeals Ct again review a “statute integral” to enforcement of tied house in CA.  Invalidation of current law, assn argued, “would open a pipeline for large players to pay off retailers, dispensing advertising money in exchange for favored treatment” and create “serious risk of a flood of illegal payments.”  US Appeals Ct recently granted assns’ requests to file briefs in support of rehearing, tho no decision yet whether Appeals Ct will grant a rehearing. 

No Misconduct, No Grounds to Dismiss Charges vs RNDC, Govt Sez  Elsewhere, US Atty Gen’s  office defended indictment that Republic Natl Distrib Co (RNDC) filed to dismiss (see Aug 8 Express) over alleged liquor smuggling.  Recall, RNDC argued govt failed to allege specific crimes, lacked factual support, engaged in a “vindictive and retaliatory prosecution” and tried to impose “new regulatory scheme” upon distribs already regulated by states.  Govt attacks each of these arguments.  Indictment specifically charged RNDC employees with acts of conspiracy (with MD retailers to illegally divert liquor to NY and evade taxes) and specific acts of wire fraud.  Then too, govt cites RNDC’s “bizarre” argument that it can’t be charged with crime since it follows 3-tier regs in MD.  “This, of course, is nonsense,” govt responds.  US isn’t “using criminal law to regulate the liquor industry; it is using criminal law to regulate fraud.”  RNDC’s crimes: knowingly selling to smugglers and knowing they didn’t pay NY taxes “or were willfully blind to the fact,” plus wire fraud and money laundering.   “RNDC supplied liquor to the smuggling chain with full knowledge of the scheme and to its own benefit.”  Indeed, govt sez RNDC “instigated the smuggling” in some instances. 

Regarding RNDC’s charges of govt misconduct, US sez key judge reviewing earlier action “did not make any findings of government misconduct” and record doesn’t support charges.  No false statements, no conflicts of interest (recall US atty who brought charges and investigating agent were married, tho agent since retired), and no improper tactics, govt insists.  Finally fact that another distrib who may have engaged in similar conduct was not indicted is not evidence of “vindictive prosecution,” govt claims.  Besides, investigation ongoing, govt reminds.  Tho RNDC claims govt indictment this May was “retaliation” after RNDC fought hard (and won) reinstatement of frozen funds, govt sez “another reasonable explanation for the indictment is that there is probable cause to believe the defendants committed the offenses with which they are charged.”  Besides, RNDC itself responsible for many delays in case.  Net-net: grand jury found probable cause for indictment, “there was no misconduct…no grounds to dismiss the indictment.”          

Talk about a tuff month.  Domestic brewers’ taxpaid shipments fell 782K bbls, 4.9% in Jul, estimates Beer Inst economist Michael Uhrich.  That turned modest 61K-bbl, 0.1% Jan-Jun gain to 721K-bbl, 0.7% dropoff YTD thru Jul. Big import gain thru Jun keeps US biz in black in current YTD measure, but only by half-mill bbls, 0.4%.

Big news out of Mississippi yesterday.  Adams Bev scheduled to close deal Friday to buy 3.2-mil-case Rex Dist on Mississippi Gulf Coast.  At 11^th hour, Adams got word that this was not to be.  AB exercised match and redirect clause in its contract.  Buyer of Rex will be Mitchell Dist, which already has several other operations in MS. 

This match and redirect move sent off shock waves in several directions.  First, previous buyer Adams Bev did several recent deals in AB system, including 2 last yr.  So why not here?  Second, Adams in Ala is run by Philip Mullin, who is the current AB wholesaler panel chairman.  So what’s up with that?  AB places big priority on its improved relationships with distribs, and panel chair is closest point of contact for AB with its distribs. Third, Yuengling just entered Mississippi this yr.  And Rex Dist sells Yuengling. But recall Mitchell the only AB distrib in state that did not take on Yuengling brands.  Adams was slated to buy Yuengling as part of the Rex deal.  Fate of Yuengling brands in Rex mkt unknown at presstime.

Lots of moving pieces, but Mitchell would appear to be big winner (if perhaps a heavily indebted one) in situation.  Both Mitchell and Adams are AB Ambassadors of Excellence distribs, each has done other recent deals, both are not quite contiguous (have 1 county inbetween to get to Rex).  But Mitchell already in MS.  Following purchase of Rex, Mitchell’s MS volume will increase to about 9.5 mil cases, almost half of AB’s volume in its highest share state.  Including its operations in Maryland, Mitchell will sell nearly 15 mil cases overall.  “It’s a great part of the state,” Mitchell prexy Adam Mitchell told INSIGHTS, with “a little different economy,” including casinos and tourism along the beach. Mitchell will “move as quickly as possible to quell uncertainty of employees and retailers and ensure a smooth transition,” Adam added. He cited Mitchell’s long service as distrib in state (60-70 yrs), relationships with retailers and that they’ve known sr mgt at Rex for a long time as factors that will help make for “smooth transition.” Mitchell has now got a good “blend” between Maryland and Mississippi; MD with its “growth potential” and MS with its “nice base and high share environment.” 

And this just in.  Here’s AB statement from vp of biz and wholesaler development Bob Tallett:  “We have decided to match Adams Beverages’ proposed purchase of the Gulfport operation and redirect the sale to Mitchell Beverages.  Mitchell is an excellent operator and, most importantly, currently runs three operations in Mississippi and has been servicing the market for 63 years,” said Bob. “After a thorough evaluation, we believe Mitchell Beverages’ existing presence in Mississippi, proximity to Gulfport, and greater familiarity with the market will provide better customer service and allow for a smoother transition.”

“This was not an easy decision,” continued Bob, “but it is in the best interests of our business.  Clay Adams and Philip Mullin continue to be valued wholesalers in our network.  Since 2012, we approved Adams Beverages’ acquisitions of three A-B distributors in Charlotte and Shelby, N.C. and Tuscaloosa, Ala. – which more than tripled their size – and we recently awarded them two wet territory assignments in Alabama.  This growth demonstrates the strength of our partnership and our belief in Clay and Philip,” he added. “This was the right decision for our business and we expect there will be other opportunities for Adams Beverges to continue to grow,” Bob concluded. 

No stranger to the courts or challenging state laws that interfere with its biz model, largest US indie wine/liquor retailer Total Wine & More is at it again.  Lawsuit in US Dist Ct alleges combo of Connecticut’s price posting laws and bans of selling “below cost” and volume discounts “facilitate and impel wholesalers to combine, conspire, and agree, either tacitly or explicitly, to fix and maintain wholesale and retail prices.... Total Wine & More sees evidence of price-fixing and resale price maintenance by wholesalers on a monthly basis.”   Producers participate in price fixing too, Total alleges, via price-posting info that’s shared among competitors.  System prevents Total from providing lower prices to consumers by leveraging its “market and business efficiencies.”  Suit cites study by Distilled Spirits Council that found CT residents pay up to 24% more for same products than consumers in neighboring states.  With no CT regulators “actively” supervising system that upper tiers use to post, match and coordinate both bottle and case prices, scheme violates fed antitrust laws barring horizontal and vertical price fixing, Total claims.  Total seeks declaration that laws “void and of no force and effect,” plus injunction against their enforcement. 

Specifically, price posting law allows wholesalers to “set bottle and case prices,” share that info with each other and thus “coordinate” pricing.  By juggling “on post” and “off post” prices, distribs “effectively control both retail price and retailer’s profit margins,” Total alleges.  What’s more, “competing wholesalers for the same brands routinely set the same bottle and case prices down to the penny, month after month, with each wholesaler exactly tracking its competitors’ on-post and off-post case prices.”  CT apparently has last remaining such system in US and Total sez it hurts its biz, harms consumers and only serves to “protect inefficient and politically well-connected participants in Connecticut’s” alc bev biz.  Recall, Total fought (and won) epic legal battle years back vs MD’s price posting/holding and volume discount ban.