“I don’t think wholesalers could have written it any better,” one sizable AB distrib told INSIGHTS.  The consent decree “makes their operations more valuable,” he added, since there will likely be a greater pool of potential buyers and AB distribs could become even more interested in bidding for non-AB brands as well. “I don’t see any downside for distribs,” he concluded.  “I think your comment on this being a red letter day is right on the money,” chimed in another.  “AB has to stay the course of working with wholesalers with open and fair practice.  Wholesalers in markets where they need to be competitive and need other brands to be strong can do it without looking over their shoulders.”  

The DOJ’s “consent decree just reshuffled the ‘value cards’ of every ABI distributor in the country,” wrote consultant Andy Christon of Ippolito Christon.  Settlement between AB InBev and Justice Dept over ABI-SAB “will promote greater independence and marketability” of beer distrib rights, opines Andy “which increases the value of distributorship and 3d party brands.”  In Andy’s view, this “reshuffle will lead to stronger distributors, which will benefit ABI longterm,” tho Andy also noted “exceptions and cautions.”

As DoJ built “30-foot wall” to rein in AB actions, AB will construct “35-foot ladder” to maintain its leading industry position, acquire more craft brewers and “aggressively manage the transfer of ownership” of AB distribs, Andy believes.  “We see a big squeeze coming over the next few years for anyone who gets in ABI’s way,” added Andy, “including distributors.”  Andy does not fully flesh out this point; remains to be seen how many more craft brewers AB will buy or the govt will allow AB to buy.

Vaporizing VAIP, or what he calls “disincentive payments,” is positive for non-aligned AB distribs that expanded with new brands outside their footprints, i.e. Ben E Keith in Tex.  Without VAIP, these “brave pioneers” have boosted their “intrinsic values” because of “less future coercion from” ABI and “improved marketability” of 3d-party brands to AB distribs outside those footprints.  Distribs who stayed aligned with AB and “bypassed” brand buys “will miss VAIP rebates,” Andy acknowledged, but will still be rewarded for “good behavior” via approvals for strategic expansions, as ABI can still “match and redirect” deals.  Then too, further ABI craft purchases will help strengthen their portfolios. 

The 10% cap on branches creates “sigh of relief” for both buyers who may have feared getting squeezed out of deals by the brewery and sellers “worried that ABI may limit competing bidders and thus lower the value” of their bizzes.  Could be “bad news” tho for those counting on ABI as “exit strategy.”  Even so, “creative shuffling” likely to occur down the road where out-of-state or even private equity buyers may get oppy to buy a branch while picking up “contiguous, strategically located independent distributors – creating a two-step shuffle.”  Net-net: “future transactions must become more creative.”  Tho ABI won’t be able to do Coke-like broad purchase and re-franchise, road clear for more “family-based PE firms” to be acquirers, Andy believes.

As scan data shows significant craft slowdown so far this yr and several biggest players flat-to-down in first half, craft segment as defined by BA posted 8% growth Jan-Jun, estimates Bart Watson.  Craft scored double-digit gains each of last 6 calendar yrs.  Elusive craft definition complicates reported trends.  Bart’s growth estimate based on brewers that will be in BA-data set in 2016.  That excludes fast-growers Lagunitas and Ballast Point (Founders already out), as they’re not BA-defined craft brewers anymore.  Another fast-grower, AB’s Goose Island, ain’t in the number either.  Trend would be higher with ’em. 

Recall, BA does not include big brewers’ craft brands/acquisitions, nor Craft Brew Alliance. But BA does include Yuengling, which softens trend.  So do first-half downturns at Boston, Sierra Nevada and a coupla other big craft brewers.  But “long tail of craft continues to smoke,” sez Bart, “there's very little evidence of much of a slowdown there.”  Tail and newbies adding incremental and oft-missed on-site/taproom volume not measured by other data services.  

Speakin’ of newbies, no slowdown in folks entering the biz.  A whoppin’ 917 new operating brewers in US since same time last yr and brewer count now sits at 4,656.  Oh yeah, there’s another 2,200 in planning, sez BA.  Bart calls this a “maturing” market.  Be interesting how aging breweries adapt and how many newbies survive/thrive.       

Marty Birkel, a 20 yr Constellation vet, most recently chief sales officer of Constellation Wines, takes over reins as Ballast Point prexy, starting today.  This follows directly on heels of sudden departures of chief commercial officer Earl Kight and prexy Jim Buechler yesterday.  Marty is already in Miramar, at Ballast Point’s facility today.  Recall, Marty has plenty of beer experience, since he spent 8 yrs as head of sales at Crown Imports.  Jim and Earl left to “pursue other interests within the alcohol beverage space,” Constellation communications veep Mike McGrew told INSIGHTS this morn.  Stay tuned on that.  

Ballast Point is “fastest growing” craft, added Mike and Constellation sees that “continuing well into the future” with “significant runway.” It will be in all 50 states by end of yr.  Constellation will be “making significant investments” in Ballast Point, including East Coast brewery in Roanoke.  Constellation bringing in a senior and well-regarded exec such as Marty shows “how important and how integral” Ballast Point is to Constellation’s future plans.  Taking Marty’s place as chief sales officer for Constellation Wines is Kevin Cooke, who just joined company in May as sr veep of sales strategy and transformation. Most recently, he’d been at Jim Beam.

Constellation execs stress “business-as-usual” and continued independence of Ballast Point, even after these high-level departures, “consistent with what we articulated,” Mike said, when Constellation bought Ballast late last yr.  Going forward, Ballast Point will “continue to make decisions” that are in the best interest of Ballast Point and consumers, Mike added, including on portfolio and route to market. Earl Kight had reportedly clashed with Constellation over some of his distribution choices. Earl got to choose in most instances, to a number of Gold Network wholesalers’ chagrin.  But since Marty is Constellation, one could assume that alignment on such decisions will be a near certainty, right?  “Marty will make that call,” said Mike.  Ballast Point has 700 employees and it’s “very important we maintain the culture” that’s been built, emphasized Mike.  That just got more challenging with the sudden departure of Earl and Jim.  With Marty, Constellation “very, very confident” that Ballast Point “very well equipped” to “build momentum” concluded Marty, both at Ballast and in Constellation Brands Beer Division overall.

AB InBev has made its “final” offer for SABMiller, it announced today, boosting bid by £1, 2.3% to £45 for the cash consideration part of 2-part deal.  Cash element of the partial share alternative designed for Altria and BevCo increased from £3.78 to £4.66.  Recall that several groups of activist investors have sought a higher bid in wake of devalued pound post-Brexit.  ABI and SAB chairmen talked last week after SAB’s annual mtg, but “there was no discussion or agreement about the terms of today’s Revised Offer,” SAB said.  And while SAB chairman said last week his board would wait for Chinese approval of deal to review the numbers, ABI apparently decided to up the bid.  “It’s clearly designed by ABI to bring matters to a head, and rather than let a groundswell of agitation build up, they’re saying ‘This is it, like it or lump it’; it’s put up or shut up,” commented Bernstein’s Trevor Bernstein to Bloomberg. 

But activists argued all along that Altria and Bevco are getting a better deal, even if their shares locked up for 5 years.  That hasn’t changed under new offer.  Indeed, one of those activist investors, Aberdeen Asset Mgmt has already sounded off that “the revised deal remains unacceptable as it both undervalues the company and continues to favor SABMiller’s two major shareholders.”  Trevor wrote “ABI will not be allowed to increase its” bid under UK Takeover code, tho “in theory this bid could lapse and after a cooling off period, there could be a new bid.”  Another analyst, Javier Gonzalez Lastra at Berenberg, pointed out to Bloomberg that some of the very recent activist positions have already gotten a “juicy return” with upped bid and “the question is whether they think they will be able to extract more from ABI.  It’s a negotiation at the end of the day.”  And the end of the day hasn’t come yet. 

Four of the top 60 global billionaires are heavily invested in beer, and their fortunes have mostly grown rapidly in recent years, according to numbers published in the latest Bloomberg Billionaire Index.  ABI’s Jorge Paolo Lemann is listed as worth $30.3 billion.  He’s the #23 richest guy in the world, according to Bloomberg.  That’s amazing, since a decade ago, before the AB deal in 2008, his net worth was less than $3 bil, according to Forbes in 2011.  Another beer “baron” is Alejandro Santo Domingo, listed at $15.7 bil, #50.  Recall, his family sold to SABMiller and he is one of SAB’s largest shareholders, about to reap rewards from latest ABI deal.  Jim Simons made most of his money in finance, but now thru his family office fund called Meritage, he is also one of the largest beer wholesalers, as the owner of Columbia Dist in the Pac Northwest.  Jim is listed as worth $15.5 bil and #52 on list.  And Jorge’s partner in ABI (and all the 3G investments), Marcel Telles, is worth $14.4 bil and #58 on this list.  

But that’s not all.  Heineken heiress, Charlene de Carvalho, is worth $12.6 bil, according to Bloomberg.  She’s #76 on the index. And the 3d in 3G trio, Carlos Sicupira, is worth $12.3 bil, listed at #79.  One other lesser-known beer billionaire also in Bloomberg’s top 100: Thai Beverage 66% owner Charoen Sirivadhanabhakdi, listed at $14.2 bil at #62.  That makes 7 of top 80 richest in world.  Thar’s gold in them thar’ brews.  Not beer, but Red Bull founder Dietrich Mateschitz is listed at $13.5 bil, #67.    

Your tax dollars at work. As part of DoJ’s analysis leading up to its legal complaint against an AB/MillerCoors combo (never contemplated by parties but govt had to protect against) and eventually consent decree, DoJ uncovered mkt shares for top 2 brewers in 58 metro areas in IRI foodstores.  DoJ then did its standard Herfindahl Index calculations (sum of squares of mkt shares) to show that AB/MC  combo would “presumptively raise antitrust concerns” in all 58. That’s what happens when index above 2600 or increased by more than 200.  Highest combined mkt share of AB and MC is 94% in Wichita, Kansas.  Lowest is Philadelphia, where top 2 at 37%, according to govt filing (but IRI foodstores likely a non-factor in Philly).  Lowest where IRI has meaningful account base is San Fran/Oakland at just 41.  That’s a pretty wide range.  But most of biggest mkts had lower concentrations.  See next issue of BMI for more details.   

HUSA ceo Ronald den Elzen shared some learnings with CNBC from his first year at the helm and visits to 28 different states.  “I thought when I came over here there would be more similarities across the states,” he said, but instead of  “one big country,” turns out “every state is different in terms of different legislation, different sales tax, different foods and habits.”   This variation and 3-tier system add both complexity and challenges.  “You can have a national strategy but not a national activation without fine-tuning for each state,” Ronald pointed out.  “So these small exceptions matter and can have a big impact on the deployment of your plans.”  Another learning from year 1: the wide range of beers Americans drink. “Here you go from 100 IBU crafts on the left side, to flavored malt beverages and hard sodas on the right with imports and domestics in the middle.”  And while you might expect one group of drinkers to gravitate to bitter, others to sweet, “we’re seeing people buying on the shelf from left to right and in the middle.  They buy everything.  It’s very unique.” 

Ending Most Interesting Man campaign for Dos Equis was one of Ronald’s toughest calls, he shared, as company discussed decision for over a year.  “You want to be consistent, but you don’t want to be predictable,” and while HUSA “believed it still had legs…it was time to move on and go out on a high [note], rather than saying the campaign is eroding and you’re two years too late.”  Dos reboot coming this fall with link to college football.  Ron also reiterated HUSA goals to expand Tecate beyond south and southwest and take more advantage of Mexican beer’s current growth.  While Strongbow up 27%, “I would love to see the whole category grow…because that would be good for the long-term sustainability of the category.”  And of course, defending brand Heineken (“the name above the door”) remains a top priority too.  

Molson Coors “to become world’s 3d largest brewer,” it said in press release following DoJ approval.  It will still be well behind Carlsberg by volume.  But it will be 3d in enterprise value, said source.  Meanwhile, Molson Coors also announced today its post-acquisition Executive Leadership Team (ELT).  It “made a number of new leadership appointments that will take effect upon the close of the MillerCoors acquisition” by the end of this yr, co said.  It will “create” new roles for chief growth officer and chief people and diversity officer.  Kandy Anand, currently heading up Molson Coors intl, will become chief growth officer, “responsible for leading” TAP’s “commercial excellence strategy, including brand development and corporate strategy.” Michelle Nettles, currently chief people officer for MillerCoors, will be “appointed to the newly created role of chief people and diversity officer for Molson Coors.” As Michelle moves up to Molson Coors ELT, MillerCoors will need new chief people officer.  MillerCoors ceo Gavin Hattersley continues in that role but is also now “president and ceo, USA” on Molson Coors ELT. Current prexy of Molson Coors Canada gets intl role “and will be responsible for accelerating the growth of” TAP’s “expanded international business with the addition of the Miller brands globally.”  And Sam Walker, current chief people and legal officer, will become chief legal and corporate affairs officer. 

Big news out of Ballast Point today.  Two top Ballast Point execs have left the co as of today, including chief commercial officer Earl Kight, who has been the face of the company with distribs for years, as well as prexy/ceo Jim Buechler, top exec of co.  On Earl’s Facebook page, he talks of “the final Longfin from my manZach Borba...all good things must come to end...my last day at Ballast Point...on to the next project (s).”  One distrib comments: “Dude…????  WTF???”  Ballast Point of course was bought by Constellation for a billion bucks late last year.  And so far, at least from a numbers perspective,  going swimmingly.  Constellation just reported that Ballast Point up 60% in latest qtr Mar-May. And Ballast Point virtually doubling yr-to-date in IRI multi-outlet + convenience data in what’s become a very tough craft environment for many.   More as story develops.