Series of Bud Light Party spots continues with latest installment this week, this time delving into specific topic of equal pay for women. “Women don’t get paid as much as men and that is wrong,” Seth Rogen tells audience while he shares a beer with Amy Schumer. “And we have to pay more for the same stuff,” such as cars, dry cleaning and shampoo, sez Amy.  “Bud Light proudly supports equal pay, that’s why Bud Light costs the same if you’re a dude or lady,” she adds.  Ad debuts tonight on TV and AB is supporting cause online as well and will donate $1 to Catalyst when someone uses hashtag #CheersToEqualPay between 6/27-7/1, an org “that champions equal pay initiatives.” Total donation is capped at $150K.

One by one, pieces of global ABI-SAB puzzle come together as deals inked and govt approvals attained. In Australia, AB-InBev terminated distribution agreements for some of its brands with previous market-leader Lion, owned by Kirin. They head to Aussie company Carlton and United Breweries (CUB), owned by SABMiller. Deal to transfer those brands finalized over the weekend, with Kirin expecting to get 250-300 mil Australian dollars ($185-220 US) for brands like Corona, Stella Artois, Budweiser and more, The Australian reports. Corona the biggest of ’em in Australia, where it’s #4 brand at 6 share. Transfer won’t go into effect til 9/30. Recall, the Australian government approved ABI’s bid to takeover SABMiller early last month (see May 5 issue).

From humble beginnings, Don Klopcic Sr and subsequently his sons built one of larger AB distribs in US. “Don started as an employee/delivery driver and rose to be one of the largest wholesalers in Michigan,” wrote former state assn exec/lobbyist Pat Laughlin. “He truly exemplified the American Dream.”  Don had “such great spirit, sparked by a great, warm smile, so warm with people,  and an intelligence that saw opportunity and knew how to use that opportunity to build a company that grew and grew,” said Beer Marketer’s INSIGHTS founder Jerry Steinman.  Both Pat and Jerry pointed to the primacy of family for Don. “To build something for the family,” that was Don’s goal, said Jerry. And he succeeded.   Don’s son Don Klopcic Jr continues on as owner of West Side; his other son Keith sold his interest in West Side and is now invested in Oskar Blues Holding Co and running local Mich brewer Perrin.  Our thoughts are with the Klopcics.  Don Sr will be missed.   

In response to AB’s response to Senator Klobuchar’s letter, BA prexy Bob Pease wrote INSIGHTS keeping issue alive.  BA “remains very concerned” with ABI’s “actions and acquisitons which disadvantage over 80% of BA member volume,” Bob wrote, “by trying to stifle the access to market of brewers over 15,000 barrels and reallocate that attention to the recently acquired” ABI breweries “and that these acquisitions and practices threaten the 3-tier system by trying to compromise wholesaler independence,” Bob maintained.  He also sent a picture of Maryland concert venue that featured almost all AB or AB-affiliated products, including Goose Island, Blue Point, Shock Top, Michelob Ultra, Stella as well as Kona (which AB owns 32% of) and Corona (which ABI owns in Mexico, but doesn’t have any interest in here).  “Sometimes a picture is worth a thousand words,” opined Bob.  “Is this really what the beer drinker wants the future of beer choice to look like or is this supplier push?”

State shipments data from Beer Inst shows industry with easily over 1% growth so far, even with taxpaid shipments flat (see Express, vol 188, no 111).  Growth driven 2-3% gains in several larger states, including Tex, up 195,000 bbls, 2.4%, Fla up 108,000 bbls, 1.9% and Penn up 107,000 bbls, 3.2% and even Ill up 83,000 bbls, 2.5%.  Those are somewhat offset by big 250,000-bbl, 2.6% shipments drop in Calif (almost all in May, oddly).  Lots of other smaller states also have big gains.  How all this will play out over course of yr is anyone’s guess. 

Late Friday afternoon, Boston Beer announced hiring of chief marketing officer,  Jonathan Potter, currently managing director of the Chandon Division at Moet Hennesey. Jon will start in Aug.  He “has nearly 30 years of marketing experience,” mostly in alc bevs, said Boston.  He worked at Diageo from 1997 to 2010, where he rose to cmo North America.  Release sez Jon “will have primary responsibility for overseeing the company’s planning development and execution of its brand development, marketing and advertising initiatives.” Boston Beer govt filing described his responsibilities in more detail:  “he will lead brand innovation and management, public relations, research and strategy, media and sales support for the company.”  Jon’s salary will be $475,000, he’s eligible for a bonus that could be as much as 50% of salary at “100% payout level,” and in Mar 2017 he’ll be paid a “hiring bonus of $250,000.”  He also gets option to purchase shares “valued at approximately $2.75 million” and restricted stock award “valued at approximately $600,000.”  Each will take yrs to vest. 

Jon comes to Boston during its most challenging time in many years, with volume down in each of the last 2 qtrs and several of its brands down double digits in scan data, including every leading brand in Sam Adams franchise (Boston Lager, Seasonals, Rebel) and Angry Orchard.  Only Twisted Tea still growing great guns.  Boston has a number of new brands, some of which are among top selling craft new items, like Grapefruit Rebel and Nitro Series.  It also recently debuted Truly Spiked and Sparkling, an alcoholic seltzer.  And its Alchemy and Science subsidiary led by Alan Newman has multiple projects going on at once, with Coney Island Hard Sodas providing most of volume bump, even tho that’s tailed off.  So how will Jon revamp Boston mktg and approach in this increasingly complex portfolio?  Stay tuned. 

In never-ending commentary in US about pending ABI-SAB deal, Minn Sen Klobuchar sent another letter to Dept of Justice about her very familiar “concerns.”  This one gives voice to “a number of brewers and independent wholesalers” who suspect AB “may be pursuing strategies, including acquiring multiple craft brands and implementing incentive programs, to ensure only the smallest craft brewers have access to retail outlets.”  The letter acknowledges that “vibrant competition” has broken out in beer thanks to craft, that AB’s craft acquisitions “may not foreclose distribution and the incentive plans may reward effective wholesalers.”  These actions, she adds, “can be either anticompetitive or procompetitive.”  And she’s not opining on their legality.  Yet she remains concerned that by building its craft portfolio, AB “may be able to coerce independent wholesalers into replacing” current offerings with the new AB partners and/or that the incentive plan “seems to penalize” distribs for carrying larger craft brands.  

AB’s response will also sound very familiar. "Nothing in our combination with SABMiller will in any way impact” current environment of “vibrant competition,” AB assured, as “we will not be acquiring any new assets in the US. Today, more than 4,000 craft breweries operate in the United States. We are confident that our partnership with just seven of these breweries, as well as the voluntary incentive programs that we have offered for many years – during which time craft has experienced explosive growth – support a competitive marketplace.”  US beer biz “has never been more competitive,” AB sez.

Lost in coverage of key immigration and affirmative action decisions handed down by US Supreme Ct yesterday was important ruling that will impact drunk driving investigations.  Court ruled 7-1 that laws requiring suspected drunk drivers to submit to blood tests violate 4^th Amendment ban on unreasonable searches.  But in 6-2 vote, Court upheld laws that require motorists submit to breath tests.  Judge Alito wrote that with breath tests “physical intrusion is almost negligible” and such tests reveal “only one bit of information,” alcohol content of breath, according to NY Times report.  But blood tests “a different matter,” “significantly more intrusive” and give law enforcement oppy to preserve sample that provides a lot more info about suspect.  Justices Ginsburg and Sotomayor would have required a warrant for both types of tests.  Justice Thomas would have not required a warrant for either.          

Innovation is key as virtually every leading supplier will tell you.  But look no further than ABI to see some of the perils of innovation, especially the fate of innovations in yr two.  Take Mixxtails, for example.  Mixxtails not a big hit in yr 1, only about 0.2% of AB volume last yr in first half IRI.  This yr, Mixxtails volume down 62% yr-to-date thru Jun 12 in IRI multi-outlet + convenience.  The Ritas franchise is still huge.  But it’s down another 1 mil cases, 18.5% in IRI, while total AB biz down 2.3 mil cases.  Ritas are still 1.4% of AB volume.

In history of FMBs what often has happened is that new line extensions progressively give less pop, while base brands continue to decline.  For example, new lower alcohol Rita Splash variants less than 5% of Ritas total.  Now Best Damn hard soda brands are this yr’s model, selling nearly 900,000 cases YTD, 40% more than Mixxtails sold at same time last yr.  But how likely are those brands to cycle next yr?  Even in Mexican beer, where AB still up 15% overall, last yr’s model Montejo down 30% YTD, but this yr’s model Estrella more than making up for it. 

Ain’t just AB of course.  MillerCoors increasingly betting on FMBs as comments from its last quarterly conference call made clear.  Indeed, Henry’s hard sodas are a hit this yr.  Sold almost 1.1 mil cases, and accounted for 0.6% of MC’s volume.  How well will Henry’s hold up in 2017?  Meanwhile, Redd’s franchise already in negative territory yr-to-date, if just barely.  Down 0.1%.  And some of last yr’s intros ain’t yet lapping or fully lapping rollout.  Original Redd’s Apple Ale down 19% and Redd’s Strawberry down 36%. 

In a prescient piece released just prior to results of last night’s earthshaking Brexit vote in UK, Bernstein’s Trevor Bernstein cautioned: “We think it is possible that investors have overlooked a key potential risk to the deal.”  A “Leave” vote, continued Trevor could “lead to a sharp fall in Sterling, which could eliminate the implied bid premium and possibly even lead to the collapse of the deal.”  Indeed, the British Pound started down over 10% against the dollar this morning.

If the pound is sufficiently devalued, “the SAB board could retract its recommendation,” Trevor adds, “which would be a very tricky decision,” or alternately the board “could use the threat of withdrawal of approval to try to squeeze a higher…cash offer.  Given the already stretched economics of the deal, we think that ABI would be extremely reluctant to increase its offer price, which could just lead to the collapse of the deal.”

For SAB shareholders, collapse “would be less of a worry” since “cause of the collapse would have been the appreciation of SAB’s share price due to the improved value [in pounds] of SAB’s underlying cash flows.” But “the implications for ABI could be stark.”  A 15% devaluation in the pound “would lead to losses of” around “$10 bn on the forward contracts it has put in place to hedge its Sterling exposure on the SAB purchase price…. ABI would also lose the implied deal accretion.”  Concerns about this have been in the air for awhile, but now that Brexit is real, devaluation of the pound and attendant deal risk have gotta be watched. 

Stifel’s Mark Swartzberg takes far more sanguine view of the effects of Brexit, noting that ABI biz will “see little translational impact from a weaker pound, the SABMiller combination is nearing closing (SABMiller shares are unchanged this morning), and a weaker Sterling further reduces ABI’s USD-denonimated borrowing costs,” according to him.