Next up on Pabst’s list of “local legends” brands, Old Style Oktoberfest will officially relaunch this Sep, “returning to its roots of being brewed in La Crosse,” Wisconsin at City Brewing reported La Crosse Tribune.  Recall, Pabst plans to be “a major player” at La Crosse’s City Brewing, cmo of Pabst Heritage portfolio, Dan McHugh said at Pabst distrib conference earlier this yr when talkin’ about both Old Style Oktoberfest and Ballantine Burton Ale among other heritage styles co plans to revive.  Indeed, there’s lotsa history with Old Style in La Crosse.  Originally with G. Heileman Brewing in La Crosse, Old Style was its #1 beer “for nearly a century and helped start Oktoberfest USA in La Crosse 56 years ago.”  And now Old Style will return as “the official beer sponsor for Oktoberfest.”  All in, perhaps this marks another small step away from MC contract biz, in midst of lawsuit.  “It’s a small step in us hopefully doing more production for Pabst in the future,” City Brewing brewmaster Randy Hughes told paper.  This is “the first product out of La Crosse with the Heileman shield and name since mid-1999.”

Even after adjusting for big selling-day variation in Mich (extra 7 days), spirits volume +6% in June, reports NABCA (raw data showed 10% pop).  And adjusted dollar sales up 8% in Jun.  Running 12-mo volume trend +2.8%, $$ up 5.2%. So, just as we reported last week how hard it is to move the needle on brewer share trends across Nielsen scans, looks like pendulum in absolute alcohol share still very much swingin’ in spirits’ direction. 

Meanwhile, in most controlled of control states, Utah, frustrated Dem Senator from Salt Lake City is talkin’ about a ballot initiative (after 2017 legislative session) to “privatize liquor sales and do away with the Utah Department of Alcoholic Beverage Control,” reports Fox 13 there.  State Senator Jim Dabakis apparently unhappy with pace of “legislative action on loosening liquor laws that” he sez hurts business.  “State control of the economy doesn’t work in North Korea and it doesn’t work in Cuba,” he said, adding: “And guess what? State control of alcohol in Utah isn’t working.”  Members of the powerful Church of the Jesus Christ of Latter Day Saints, public health advocates and others would no doubt counter that last claim, pointing to low per capita consumption, low alc-related traffic crash data, low binge drinking rates and more in Utah, as another state Senator noted.  Then too, there may be a medical marijuana ballot initiative next year in the state.  And “if they were both on the ballot at the same time, you might see some people feeling like there’s a dual vice on the ballot,” said director of libertarian-leaning policy group. Indeed.  

Finally, as Pennsy legislature took modest steps toward privatization last mo, State Supreme Ct there tossed lawsuit brought by home D distribs to prevent c-stores and grocery stores that operate gas stations from getting/ having licenses to sell beer (and now wine).  Law passed in Jun to open up wine sales “clarified the liquor code,” reports triblive.com.  So this was “foregone conclusion” as Frank Pistella, veep of home D group Malt Bev Distribs Assn, acknowledged.  He also said MBDA now focused on allowing its members to sell wine too, along with grocery, c-stores, others.  “We’d like to be a part of that, too.  I’m not sure why we were left out.”              

With activist investors taking stakes in SABMiller and agitating for higher price, SABMiller board met today which one source told Reuters is “routine” before annual shareholder meeting tomorrow.  But SABMiller “has not ruled out asking” ABI “to revamp its proposed $100 billion plus takeover offer,” another source said.  “At this stage, the board will reassure investors and tell them their concerns will only be addressed after the deal gets regulatory clearance,” a “source close to SAB said,” added Reuters.  But now that DoJ cleared, only China remains.  “While we can’t completely rule out the possibility of an increase,” Evercore ISI’s Robert Ottenstein said, “we believe it is unlikely…. Of course shareholders can challenge the board and ABI by threatening to vote against the transaction, but we currently see little likelihood of success.”    

MillerCoors announced “an agreement to acquire a majority interest” in already 25% owned Terrapin Beer Co.  So “key management still has a vested interest” one source told CBN, tho how much of an interest was not disclosed.  And timing of announcement “purely coincidental,” meaning that in MC was “not at all” waiting for DoJ to approve ABI-SAB in US, sez source.  Terrapin will now operate as a business unit of Tenth and Blake, and transaction is expected to close Aug 2016, per release.  Last yr Terrapin grew shipments 25% to 57K bbls and has nearly tripled its volume since MC took minority stake in 2012  (19,565 in 2011).  Then too, INSIGHTS hears there are more deals to come, potentially in short order.  INSIGHTS knows of over a half dozen craft brewers reportedly still on block.

Dept of Justice today approves ABI’s purchase of SABMiller and Molson Coors purchase of SAB’s stake in MillerCoors, via consent decree, after review since late last yr.  But consent decree contains important conditions for ABI.  Two changes just “formalize prior commitments,” ABI said in press release.  First, ABI agreed to cap branches at 10% of its volume and committed to no distrib acquisition that would place it over that limit.  That’s what AB already promised its distribs, but without a hard cap.  Second, AB “will not terminate any wholesalers as a result of the combination with SABMiller.”  ABI ceo Brito had promised that during Dec Senate hearing. Then consent decree gets really interesting.

ABI’s controversial but limited Voluntary AB Incentive for Performanc (VAIP) program “will no longer exist,” AB ceo Joao Castro Neves said in letter to distribs.  Consent decree also includes important changes in AB’s contract with distribs and its buy/sell process.  While AB “will continue to approve (or disapprove) transfers of ownership as well as Managers and Successor Managers based upon the qualifications and competence of the individual,” Joao wrote, “the sale of third party beer will not be a factor we may consider.”   Then too, AB’s “Maximum efforts” standard will “transition to a new standard called: ‘Best efforts’…. This new standard will be defined as ‘efforts designed to achieve and maintain the highest practicable sales volume and retail placements of our brands.”  Finally, commitments to “annual spending on promotions and incentives by wholesalers will be based on the proportion of revenues that our brands constitute in your overall beer sales.”  This annual spending used to be based on % of volume that AB represented.

Several of these changes will likely be greeted favorably by AB’s independent distribs.  Collectively, they reduce AB power and influence over its independent distributors to get them to sell less of competing brands.  They also take away potential hammers. Then again, recall AB hasn’t terminated any distrib since Maris in late 90s.  And clauses like “maximum efforts” in AB’s contract are notoriously difficult to enforce.

Consent Decree Doesn’t Impose Limit on Craft Acquisitions Importantly, the consent decree does not impose limits on AB craft acquisitions.  This is contrary to what INSIGHTS heard repeatedly in weeks leading up to consent decree, and incorrectly suggested could be part of consent decree.  However, Devils Backbone is still going through the regulatory process and is not yet approved by DoJ.  Stay tuned.

Everyone’s a Winner In all, everyone got something they wanted.  ABI gets approval of the deal without any major concessions and can still essentially operate its biz in same way going forward.  Molson Coors gets MillerCoors.  NBWA gets hard limits on branches, promise of no terminations, and increased independence for distribs.  BA gets elimination of VAIP.  Now there will be 60 day comment period, after which court expected to approve.  ABI still needs formal ok from China and expects to close SABMiller deal in 2d half of year.

What’s more, make no mistake, ABI still playing to win in US.  ABI is “more committed than ever” to invest and win together with its wholesalers “in its most important market,” the US, AB ceo Joao Castro Neves told INSIGHTS.  And “better results” in recent mos, “reinforces” this approach as “valid.” Joao added.   “We will continue to invest heavily in the U.S., including our efforts to build our entire portfolio of brands, support and incentivize our wholesalers and compete effectively in a dynamic and fast-changing market,” said Brito in a statement.  “While we will make some adjustments to certain aspects of our U.S. sales programs and policies, our fundamental approach and commitment to this market will not change.” 

Is a notable drop-off in restaurant visits by massive Millennial generation impacting on-premise beer trends? Seems likely in report showing marked decreases in visits to restaurants by Millennials from NPD Group research firm. Restaurant visits by “Older Millennials” (currently age 25-34) decreased by 50 visits/yr “over the past several years,” while the group’s spending is down over 13%, $213 per person to $1,369. Younger Millennials (18-24) “made 33 fewer visits per person,” spending -10.5%, $146 per person. Why? They’re “concerned about the money they spend at foodservice.” Many members of the Older group are starting families and having children, but Millennials of all ages recognize that “it’s cheaper to eat at home.” Plus, half of those surveyed said they “like to cook,” which they feel is healthier, besides, and often “tastes better than what they can get away-from-home.” Yet Millennials still “represent about 14.5 billion visits and $96 billion in spending” at restaurants, that reports shows. And that’s almost a quarter of total restaurant spend, per NPD, so it’s important for on-premise operators to engage a generation of consumers who “not only want to get their money’s worth, they want good food and service,” NPD analyst Bonnie Riggs said.

Among “foodie trends” that these younger consumers have tried, “craft beer” ranks at #4, named by just over a quarter of respondents to a YPulse survey of 13-33 yr olds, according to Washington Post (note that low age limit, suggesting that portion of legal age respondents who have tried craft would be higher). Additionally, 12% of these respondents have been to a “beer bar” and 10% have tried “beer pairings.” Yet note that male respondents tried these beer-related options with greater frequency than female respondents: 30% of males had tried craft beer, compared to 21% of females. Young men were about twice as likely to have gone to a beer bar (16%) or tried beer pairings (13%) than young women (8% and 7%, respectively).

ABI recently invested in a couple of cutting edge bev cos in US, including low-alc Kombrewcha and Owl’s Creek (maker of tea based NA mixers and tea based radler beers), as first reported by our sibling publication Beverage Business INSIGHTS.  Turns out ABI has funded separate investment vehicle called Z^X Ventures, which is apparently doing a lot of shopping these days.  “Z^X Ventures is a venture capital fund (backed by Anheuser-Busch InBev) focused on innovation/technology in/around the beverage category,” sez linked-in page of one of Z^X’s key execs, Dai Truong.  Dai also works in ABI’s global distruptive growth group.  Recall, ABI global disruptive growth officer Pedro Earp sits on ABI’s board of exec mgt.  ABI seemingly obsessed with disruption these days and putting out many feelers, investment and otherwise, to try to stay ahead of the curve, anticipate what’s next.  Recall, ABI also has global mandate to have 20% of its bevs in what it calls “near beer,” i.e. low-to-no alcohol by 2025.  Then too, another global ABI exec, Jerome Pellaud, appeared at Brewbound conference last mo and talked about Z^X as “incubator” ABI created last yr, “under the radar,” looking at “craft specialities”  and “e-commerce,” an “exploration” of “what can be the next thing.”  Called it Global High End unit “more or less.”

Here’s statement from home page of Z^X Ventures website:  “We are a global disruptive growth group, incubator and venture capital team backed by one of the largest multinational companies in the world, Anheuser-Busch InBev. Our trade is dreaming up what the future looks like, today. We are a small army of futurists, dreamers, doers, designers, engineers, scientists, marketers, brewers, builders and data geeks. For us, the future is now.”

With most of Holiday noise washed out (temporarily), last 4-wk Nielsen scans for all outlet + convenience show solid 2.2% volume pop for 4 wks thru Jul 9 and +1% gain yr-to-date.  Dollar sales up 3.5% yr-to-date, about a point better for 4 wks.  Import, FMB and superpremium segments leadin’ the way, driven by still-hot Mexican brands, new hard sodas and Michelob Ultra.  Imports gained 0.9 share of volume yr-to-date, half of total above premium share gain.  FMBs picked up 0.5 share, superpremiums 0.4 share.  Nielsen’s craft segment up just 0.2 share yr-to-date and showed no gain for 4 wks.   In $$, above premiums scored 2.4 share gain yr-to-date to 43.1, with imports up 1.1.  For 4 wks, above premiums grabbed just below 46 share of $$.  Premium light and economy segments each lost 0.8 share of volume yr-to-date.  

AB volume down 0.5% and MC down 1.2% yr-to-date.  AB lost 0.7 share of volume and MC down 0.6 YTD. But for 4 weeks, AB down 0.5 share and MC down 0.6.  Constellation up 14.6% and gained 0.9 share of volume YTD, 1 full share of volume last 4 weeks. Up fully 1.4 share of $$ last 4 weeks.  Heineken USA volume up 0.4% YTD and held share.

Bud Light off 2.1% yr-to-date, Miller Lite even and Coors Light up 0.6%.  So MC gained 0.5 share of premium light segments, while AB lost 0.5 YTD.  Budweiser outperforming Bud Light yr-to-date, off 1.6%, and up 0.3% for 4 wks.  Coors Banquet and Yuengling Lager up too, so premium regular segment outperforming premium light thru Jul 9.  Gotta note too that with better Bud and continuing growth of Bud Ice, Bud family lookin’ lots better than Bud Light family, even as Bud Select/55 down 11%.  Not only is flagship down, but Bud Light Ritas -15% yr-to-date, Bud Light Platinum -11% and Bud Light Lime -9%.  Bud Light family shed 0.9 share of volume yr-to-date.  Of FMB’s 0.5 share gain, Not Your Father’s, Henry’s and Best Damn franchises each up 0.2.  Mike’s and Twisted Tea each up, holding share.  Top AB and MC craft brands (in Nielsen parlance) takin’ hits: Blue Moon franchise -4.5%, Shock Top -12%.  Leinie’s Shandy up 1.3%.  Sam Adams brands -9%, Sierra Nevada up just 0.2% and New Belgium -1.3% despite adding geography. 

Top 3 growth brands accelerated last 4 wks: Michelob Ultra, Modelo Especial and Corona Extra, each 1-3 pts better than YTD trends, which are now +23.1%, 25.6% and 7.6% respectively.  Corona Light and Heineken each revved it up for 4 wks too.  Economy trends improved slightly, tho still down and losin’ share.  In fact, Busch Light, Busch, High Life and Icehouse each up for 4 wks, tho each still down thru Jul 9.  PBR softened. 

Allegations brought by distrib competitors that big Indy MC-All Others Monarch Bevs violated state’s campaign contribution laws will not end up in criminal charges vs Monarch.  In report filed last week, a “special prosecutor wrote that he could find no evidence that Monarch violated the state’s criminal laws by exceeding the limit of campaign contributions by a corporation, or making contributions in the name of another,” according to the Indianapolis Star.  Those competitors, via Indiana Bev Alliance (IBA), alleged that Monarch illegally funneled funds to tune of $1.5 mil thru separate co Vision Concepts, which shared same agent and address as Monarch.  But prosecutor found Vision had hundreds of independent customers and no laws broken.  “Monarch and Vision have known, believed, that our political activities have been legal, fully disclosed and in fact the special prosecutor’s report verifies that,” Monarch CEO Phil Terry told the paper.

Indy law limits corporations to $22K/yr in state and local political campaigns.  But LLCs, like Vision Concepts, can make unlimited donations.  Turns out some of the IBA members also have “affiliated LLCs that have contributed more than would be allowed under the corporate caps,” the report and a separate Star review of campaign finance records found.  Decision not to prosecute “is not based on what might be the best governmental campaign policy in Indiana,” the special prosecutor’s report noted.  “Instead the sole inquiry and decision is whether there is evidence that someone would be arrested for violating a crime.”  IBA released a statement that the report “failed to answer many of the concerns we raised” back in 2014 and sez it is considering its next steps.  

Brewers of Pennsy (BoP) are celebrating restoration of state tax credit for capital expenditures included in revenue package just signed by Gov Wolf.  Brewers pay $2.48/bbl excise tax on production sold in the state.  In-state brewers will now be able to get a credit up to $200K per brewery, per yr against that tax for capital expenditures to expand their breweries.  (Total state payout for credit can’t exceed $5 mil/yr, but that’s over 2 mil bbls.)  State brewers had similar tax credit 1974-2008, then lost it.  “Majority of the benefits will flow to emerging and smaller breweries who may claim credit on virtually all of their initial manufacturing investment,” said BoP’s prexy Bill Covaleski of Victory.  Tax credit has been one of BoP’s “top legislative goals” since 2013, assn sez.