Lengthy interview with Lagunitas founder Tony Magee in local Santa Rosa Press Democrat included several choice Tonyisms and a bit o’ news too.  “Some people have had the idea that I sold out.  The truth is I bought in,” Tony told paper.  “I really haven’t worked more in the last five years  than I have in the last year. Now there are so many of these doors whose knobs have been unlocked.  My job is to move the brewery into all these doors.”  Tony is “brimming with ideas and plans to grow the business of craft beer both domestically and internationally,” Press Democrat wrote.  “I feel that our job at Lagunitas is to take over Heineken,” he said. “They laugh a little bit nervously when I say it… I don’t mean ever sitting in the big seat, but kind of infiltrating its culture,” he added.  Meanwhile, Lagunitas will get two London pubs and build a European brewery “likely in the” UK, Tony said.  In UK, Heineken owns a couple thousand pubs, two will be turned into Lagunitas pubs.  And in European Union,“we’ll build at least one brewery.  Heineken will build it for us to our specifications, using our equipment suppliers.  We still have to chew our own food, so we lease it from them.  It’s not as if here’s your rich uncle.” 

As for his recent deals to buy stakes in smaller US craft brewers (Independence in Austin, Southend in Charleston and locally “beloved” Santa Rosa brewery Moonlight), Tony said: “I want to do a lot of them.  I think the biggest brewers in the country to some extent have treated the United States as it’s one place.  It never was. It’s increasingly less than one place. There’s a rising regionalism.”  Asked if Lagunitas would “ever enter that space” if marijuana legalized in Calif, Tony responded: “I’m not a farmer…. I’m not going to step in and try to capitalize on it.  I will be a good customer.” 

Meanwhile, Lagunitas maintains strong growth in US even as craft slowed.  Up 464,000 cases, 22.6% in IRI multioutlet + convenience yr-to-date thru Aug 7.  That growth represents 12% of 3.75 mil cases craft up overall, but 9% of $$s.   Lagunitas IPA is still over half of biz in scans and it’s up 213,000 cases, 18.5%.  L’il Sumpin Sumpin still on a tear.  Up 166,000 cases, 50% and almost 20% of Lagunitas biz. 

Key court decision on way that SABMiller shareholders will vote on ABI-SAB deal, expected today, but now delayed til tomorrow, both SAB and AB InBev say. Recall, court will decide whether Altria and BevCo to be treated as separate class of shareholders from others (see Aug 2 Express). SAB recommends separation, seen as easier path to approval.

Largest on-premise account for many beer brands is Buffalo Wild Wings, an on-premise growth engine over most of the last decade, up 24% a yr over last 5 yrs.  But it’s sputtering a bit these days.  “Softening US restaurant spending has pummeled” Buffalo, as Financial Times’ columnist Lex noted Friday.  Same store sales dropped 2% in latest qtr.  And activist investor Marcato Capital has taken a 5% stake. Last week, it began agitating for change, with a letter to the chairman of  Buffalo Wild Wings’ board and presentation for investors.  Its “main grievance” is that Buffalo’s mgt lacks an “analytical approach and is, well just wingin’ it,” quipped Lex.  Marcato wants BWW to sell off many of its stores to franchisees to raise capital, free up cash flow.  Meanwhile, BWW’s “high margin alcohol mix declining,” noted Marcato in 48-pg deck for investors.  Fully 29% of revs were from alc bevs at IPO, down to 24% 5 yrs ago and 19% in latest qtr.  “Have consistent menu price increases rendered food ‘expensive,’ thereby reducing ‘attach’ of alcohol?” asks Marcato.  That’s not one of top reasons for Marcato’s concerns, but an interesting point nevertheless.  BWW has already responded to Marcato by saying it would buy back a buncha shares ($300 mil) and reflect on its proposals. 

Hard sodas still up 78% by volume and 67% by $$ in latest 4 weeks thru Aug 7 in IRI multi-outlet + convenience. So segment well above last yr’s #s when Not Your Father’s Root Beer first hit the scene.  But there’s a ton of churn.  All the growth and then some comes from new brands like Henry’s and Best Damn.  Last yr’s hits taking it on the chin. Total hard soda $$ up  $9.3 mil for 4 weeks, but Henry’s franchise got $7.5 mil of sales and Best Damn got $5.3 mil.  Those 2 new franchises accounted for over half of segment sales.   Meanwhile, Not Your Father’s franchise slightly ahead of  Henry’s.  At $7.7 mil for 4 weeks.  But flagship Not Your Father’s Root Beer down 43% and franchise collectively down big.  Ain’t just NYF.  Coney Island Root Beer $$ sales also down 36% last 4 weeks and Crabbie’s Ginger, #3 in segment last yr, down 24% and fell to #9.  How likely are Henry’s and Best Damn franchise to sustain significant growth next yr?  

As MC plans to shutter Eden, NC brewery, it’s showing some love about 200 miles north in Elkton, VA.  Just announced $60 mil investment in its Shenandoah plant, newest in MC system, which will take over much of Eden’s production.  MC, local officials and VA gov McAuliffe all happy and proud, natch. Gov approved $500K performance- based grant and MC eligible for unspecified sales and use tax exemptions on manufacturing equipment, reports WHSV.com.  In sign of how efficient breweries now are, $60-mil investment translates to relatively modest 27 new jobs.

Ulysses Management LLC “decreased its stake” in AB by $31.5 mil, based on regulatory filings with SEC, as reported by Consumer Eagle.  Still has $18.3 mil worth of AB stock.  What’s so interesting about that?  Well, Ulysses Mgt, a hedge fund with $1.5 bil under mgt, heretofore one of more active private equity cos in acquiring craft assets.  It bought a majority of Southern Tier and Victory and formed ABV, Artisanal Brewing Ventures, whose ceo John Coleman spent a long time at AB.  Turns out craft ain’t only beer industry investments for Ulysses.   

At least in big swath across middle of country, largest retailer revamping its fall beer set in ways that reportedly didn’t make AB happy.  Wal-Mart will separate out premiums and premium lights as well as value and value lights.  That means Bud and Bud Light, as well as Coors and Coors Light, will be separated on shelf.  One distrib we talked to concerned that this separation would diminish the cumulative power of Bud brand and quoted AB e-mail which expressed “big surprise” adding that AB doesn’t “agree” with changes.  Developing…    

AB notified distribs that it would not be performing its routine equity agreement assessments this fall.  They are “suspended” in light of the Dept of Justice’s consent decree strictures, AB  told distribs.  Recall, AB will have to move from “maximum efforts” standard in contract to a “best efforts” standard. And make other changes.  Since consent decree with Justice came out just 1 month ago, it’s not terribly surprising that AB not yet ready to make assessments after revisions agreed upon with DoJ.  But it again does suggest that relations between AB and its distribs will change as a result of the consent decree. 

A crowded room of a hundred-plus hip NYers held chalices of Stella Artois last night, awaiting entrance to an exclusive dining experience that included digging up and eating heirloom radishes from small troughs of edible “soil,” melting candles of dippable rendered beef fat, watching tabletop contortionists and playing backup percussion on egg-shakers for The Roots. This is high-end experiential marketing in 2016. Le Savoir, the Stella-backed immersive event ‒ part theatre, part dinner party ‒ runs in NYC through this weekend, offering up a one-of-a-kind experience for up to a couple hundred attendees at each of 3 seatings per night at Skylight Clarkson Square downtown. It ran in Montreal earlier this month and goes to Buenos Aires in September. Tickets for the sold out event ran about $130 (tho a couple different discounts available to some). AB invited two Insights editors to special opening preview last night, packed with internal folks, other media and food & drink influencers. The Stella flowed freely (sometimes too freely) alongside a long list of memorable images, sounds, bites and smells. This isn’t your run-of-the-mill beer fest or even exclusive beer dinner.

AB, its High End biz unit and the Stella team partnered with 45 Degrees, the special event arm of Cirque du Soleil, and Bompas & Parr, duo of UK-based chefs, “food designers” and minds behind other similar innovative food-events. In fact, a coming London event called “Dinner at the Twits,” which Bompas & Parr are working on to honor work of author Roald Dahl, featured in The Independent just today. For that event, B&P worked with much smaller drinks co 40FT Brewery to create a beer fermented with yeast swabbed from the author’s writing chair. Flavor experiments on display at Le Savoir largely limited to the food, leaving original Stella and Stella Cidre to speak for themselves. Its most memorable moments featured unique food presentations and skilled performers, keeping Stella and its signature star logo as the guide rather than the literal star of the show. But in digital-driven world, providing snapshots and grabbable instants that spread quickly can make a good impression and all the difference. So as the beer itself stood behind some of the flashier features of Le Savoir, attendees couldn’t easily ignore the brand behind the hard-to-forget event. And if a few thousand NYers with rich tastes and an online following walk away with elevated thoughts about Stella Artois, that could justify the substantial costs of hosting such an event. It’s certainly not likely to hurt, especially for a brand that continues on a strong growth trajectory: Stella sales up 18% in IRI MULC yr-to-date thru Aug 7, up 0.6 share of beer $$.

Sweet Parallels; Chocolate Biz Mirrors Beer as Nestlé Goes High End; $20 Kit Kats, Deluxe Kisses  Impossible to avoid the beer parallels in today’s Wall St Journal article (by a reporter who also covers beer): “Nestlé Seeks Bigger Piece of High-End Chocolate.”  The lead might ring a faint bell: “KitKat owner Nestlé is upping its game in high-end chocolate to chase revenue as overall chocolate volumes decline.”  Indeed, in US, chocolate volume has averaged 3% annual decline for a decade, much softer than beer trend.  But $$ sales up 3% annually, as, wait for it… “companies have sold health-conscious shoppers pricier offerings with complex flavor profiles, organic ingredients and less sugar.”  There’s been chocolate co consolidation, too, but WSJ did not mention explosion of indie craft offerings.  Nestlé has been a “laggard” in growing high end with a portfolio “skewed toward mainstream chocolate with brands like KitKat, Crunch, Butterfinger and Smarties.”  But that’s changing.  Nestlé’s going global with some of its brands, “highlighting their provenance and heritage.”  It’s also positioning some existing brands as more premium outside US.  There was a $20, limited edition KitKat sold in Japan last yr, according to WSJ.  Meanwhile, competitor Hershey is “pushing into high-end” as well, with a “deluxe version of its Hershey’s Kisses.”  Look for Three Musketeers Platinum any day now. 

Yet another craft evolution.  In wake of top exec team abruptly leaving Ballast Point/Constellation fold a coupla weeks ago, prexy position at Duvel Moortgat USA changed just as abruptly.  Long time Boulevard CFO and corporate affairs veep Jeff Krum will assume Simon Thorpe’s role at DMUSA.  Simon, prexy since 2009, key to building DMUSA’s unique combo of US craft and high-end Belgian import biz.  He brought M&A experience from previous role at InBev a decade ago (after running InBev USA), plus a sharp focus on high end of the high end, especially articulating value for distribs of luxury brands.  Interesting career path as Simon transitioned from global Belgian conglomerate InBev to tiny Belgian-inspired Ommegang in upstate NY and now moves on from another Belgian brewer that, with Ommegang, Boulevard and Firestone Walker, built to become top-10 craft brewer in US, with additional import biz.  Simon stays in “advisory role” at DMUSA  for only a coupla weeks.  Be interesting to see his next move.

Simon on Margin Oppy, “Pivotal” Resets, “Ridiculous” Valuations Among handful of lead voices in craft, Simon among most articulate on wide range of topics.  Here are some of his greatest hits.  Back at our 2012 High End Conference, Simon spoke about importance of consumers’ “luxury expectations,” connecting high end craft beer to upscale coffee choices, smart phones and other products spreading beyond urban centers.  At same mtg, he pointed out that gross profit earned by distribs on just 6 cases of Duvel required 25 cases of mainstream beer, and 16 cases of craft.  Even then, highest end of craft was growing faster in scan data than big-volume craft brands, a trend consultant Bump Williams cited again in recent missives to clients. 

Last yr, Simon among first to note that “pivotal resets” coming at retail that would “force a number of brewery brands out of the equation,” referring to brands without “viable rates of sale.”  That’s happening and will continue with next reset, we keep hearing.  Earlier this year, Simon elaborated to our sister publication Craft Brew News that retailers leaning toward “more regional sets” with more emphasis on local, natch, but he also saw increasing simplification down the road and need for “enduring” brands as well.  “Winners and losers” are emerging, Simon said, and ain’t that the truth. 

Finally, Simon’s M&A experience gave additional resonance to his blunt description, in wake of Lagunitas, Ballast Point and other craft deals, that “valuations are ridiculous” and “it’s hard to see how they’re ever worthwhile.”  That may have changed already, as MillerCoors prexy Gavin Hattersley told us recently that “valuations are coming down,” noting each deal MC makes has to be a “win-win” since “paying too big a multiple makes it difficult to get a decent return.”