Long and winding road of modernizing Okla alc bev laws still playing out.  Senate just passed joint resolution to allow ballot measure for residents to decide if they want to expand strong, cold beer sales and wine to grocery and c-stores.  Bill now in House.  If it passes there and ballot measure passes, 280-page bill that revamps all of Okla alc bev laws goes with it and all would go into effect in Oct 2018.  That bill includes measures to enhance Okla craft biz, as does separate bill passed by Senate that would allow off-site sales, reports Tulsa World. 

As expected, European Union antitrust officials gave green light to ABI takeover of SABMiller, Reuters just announced.  They conditioned approval on ABI selling off  SAB’s Central and Eastern European biz, which folks at Stifel calculate to be about 25 mil bbls.  EU has right to approve purchaser(s), ABI said in statement, and deal or deals can be closed after ABI-SAB closes.  Nothing announced on those brands yet, but Bloomberg has ID’d potential buyers (see below).  Given size of Euro beer mkt, European Commission reportedly concerned about even small increase in concentration on continent.  “It was therefore very important that AB InBev’s takeover of SABMiller did not reduce competition in European markets,” an EU spokesperson said, quoted by Reuters.  ABI-SAB has secured approval in 14 jurisdictions, ABI said, tho others still pending.  All eyes now on US Justice Dept to complete its review.

PE Firms Looking at SABMiller Brands in Europe  SAB brands in Central & Eastern Europe, including Pilsner Urquell, have drawn interest from several private equity firms, reported Bloomberg. Advent Int’l, KKR, BC Partners Holdings are among those mulling offers for assets, “which may be valued at about $5 billion,” according to “people with knowledge of the matter.”  The PE co’s “would probably need to team up” because of size of deal, while “many European brewers might be dissuaded” from making offers due to regulatory headaches. 

Yet more strange timing in saga surrounding MC planned closing of Eden brewery.  Turns out that just as Teamsters held “investor” call on May 13 to suggest MC “jumped the gun” on closing the plant, union had 2 days earlier concluded negotiations for final plant closing agreement.  And, same day it held investor call, Natl Labor Relations Bd (NLRB) upheld earlier decision that MC did not violate Natl Labor Relations Act (NLRA) in closing Eden.  Plant closing agreement provides:

• Severance pay for 12-32 wks, depending on length of service.  Those who work 26 wks in 2016 get 2017 vacation pay.  Health care continues for 26 wks.
• Teamsters waived all grievances/claims under collective bargaining agreement, NLRA and WARN Act that come from closing brewery.  Teamsters also agreed to “flexibility provisions” regarding operations as plant winds down.
• If plant sold or leased prior to Nov 2017 when current contract expires, “successor employer will be required to honor the labor contract.”

Meanwhile, May 13 letter from NLRB rejected each of Teamsters’ charges that MC violated NLRA, that MC: 1) “unlawfully failed to bargain” over decision to close; 2) failed to provide proper info; 3) targeted Eden due to earlier attempts to organize Shenandoah workers and 4) retaliated against Teamsters for filing charges with NLRB.  “Evidence is insufficient,” NLRB originally concluded and in this appeal, that MC violated NLRA.

Labor Costs Not An Issue; No “Subterfuge” on MC’s Part  Appeals Bd found “insufficient basis” to agree with Teamster charge that closing decision based on “labor costs.”  Rather, as MC said all along, decision “premised on an ongoing decrease in production demands.”  What’s more MC “never postured” that labor costs were an issue or requested concessions.  MC board of directors decided Aug 3, 2015 to close Eden based on internal review of capacity and based on “overlap” of production, transportation costs, and savings tied to maintenance, equipment and production costs.  As such, MC “not obligated to bargain” over decision to close, nor was MC obliged to provide info regarding that decision, Appeals Bd found.  Nor did it find MC “engaged in any subterfuge or other fraudulent conduct” during Sept 2014 - Feb 2015 negotiations. Again, since decision to close Eden made in Aug 2015, “no basis” to think negotiators knew of “final determination” during earlier talks.  There was insufficient evidence to find MC retaliated vs union or that its decision “unlawfully motivated.”  Indeed, “evidence established” MC “bargained for a successor contract...without incident,” MC properly notified union and “remains willing to bargain over the effects” of closure, Appeals Bd noted.  MC actions “undercut the argument” MC “harbors animus and ill will against the Union.”  Union’s belief that closing Eden “makes no sense” on its own, without evidence of ill will, ain’t enough to find violation.  Finally, any potential antitrust issues not before NLRB to review or decide. 

MC spokesman Jonathan Stern told INSIGHTS that since MC decided to close Eden, “our top priority has always been handling the closure with dignity and respect for our employees, their families and the community at large. We are also pleased that the NLRB has validated that MillerCoors did not violate labor laws with our decision to close Eden, the timing of the decision or how the decision was communicated to the Union.”

Gotta be hoping for big Memorial Day, as soft spring numbers continue in Nielsen all outlet + convenience scans.  Volume dipped 1% for 4 wks thru May 14, $$ up just 1.4%.  That brought yr-to-date volume gain down to +0.6%, $$ up 3.3%.  Above premium gain slowed to 3.5% for 4 wks, tho continued to gain share (+1.4) as each of premium and economy segments off about 3%.   Nielsen’s craft segment (with Blue Moon, Shock Top etc) up just 1% for 4 wks, 4% YTD, as Sam Adams and Shock Top each off double-digits, Blue Moon off 8% for 4 wks.  Craft tail still relatively healthy; “remaining domestic brewers” (everyone below Mike’s) still up 11% YTD, tho slowed to +7.7% for 4 wks.  At same time, import gain slowed to less than 4% for 4 wks.  FMBs posted best gain for 4 wks, +7%, but even that’s just half of YTD trend.  Premium light took 3.2% hit, 2X its YTD dropoff pace. 

AB and MC each off 2%+ for 4 wks, about 1% YTD, tho each eking out small $$ gain thru mid-May.  Constellation dipped below double-digit pace for 4 wks, as Corona slowed to 2% gain and Corona Light down slightly.  But CBBD still up 14% YTD and share up 0.8.  Pabst only other share gainer with NYFRB hangin’ in at 0.2, even with Henry’s and Best Damn each at 0.2 as well.  Bud Light trend slipped to -3.9% for 4 wks and down 2.5% YTD.  Coors Light and Miller Lite each negative for 4 wks, but still up slightly thru mid-May.  Bud Ice remains only top economy brand up YTD.        

As we noted during our Express Live presentation at the Spring Conference, Mediamark Research provides the latest take on beer losing popularity vs wine and especially spirits.  Since 2011, the LDA population (age 21+) has grown by 10 mil in the US, from 223 mil to 233 mil.  During the same period, Mediamark surveys show alcohol beverages picked up 6.2 mil adult drinkers.  But beer gained just 1.7 mil drinkers during this period while wine gained 2.8 mil drinkers.  Spirits picked up 9.6 mil drinkers. Some of these are the same people, of course.  Put this together with some Scarborough data that Michael Uhrich had in his Beer Inst Update recently for roughly the same period: the percentage of adults aged 21-34 who consumed beer in the last 30 days dropped from 48% to about 46%.   During the same period per capita beer consumption by adults dropped by a full gallon.  As we’ve noted many, many times, per caps matter.  Boston Beer’s Jim Koch reminded at the Conference that had beer per caps held over the last decade, the industry would have shipped 10s of mils more bbls of beer.      

Selling-day adjusted spirits volume in control states up a steady 2.5% in Apr, $$ sales +4.9%, reports Natl Alc Bev Control Assn.  That’s right in line with +2.6% and 5.1% trends for 12 mos.  Lotsa references to beer’s continued share losses to spirits/wine in US at INSIGHTS Spring Conference earlier this week, but no revelations yet about how to bend that curve significantly.  

In recent talk with CLSA analyst Caroline Levy, AB InBev CFO Felipe Dutra echoed CEO Brito’s comments on Q1 conference call that the “envelope” of promotional dollars in US is same as in previous yrs.   ABI “remains committed to achieving price-mix ahead of inflation globally (including the US) and total spend on promotion (trade spend plus discounts) should be flat for the year,” Levy wrote, as quoted by St Lou Biz Jnl earlier this week.  Interestingly, Felipe also told Caroline that AB’s “tactical price promotions” are being used most often on Michelob Ultra. 

Biggest scan mkt in US remains unfriendly for top 2 brewers.  AB and MC each off 6-7% in volume and $$ sales in Los Angeles IRI multi-outlet + convenience yr-to-date thru May 8.  Combined they lost 2.3 share of volume, 3.1 share of $$.  And that’s with very modest avg price increases.  AB’s avg price across portfolio up 22 cents/case, 1.1%.  Avg MC price up just 3cents/case, 0.2%.  Bud family and Miller Lite prices up about a dime/case; Coors family prices up 4 cents/case.  Bud brands volume -9%, Coors brands -4% and Lite -3%.  Those families still near 40 share of LA scan volume, but down 1.7 share.  We don’t have other brewer/brand data or total trend, but cut we have shows Lite held share with 3% decline, suggesting mkt volume trend in that range.

Very few bright spots for either AB or MC, especially among major brands.  At AB, Michelob family (driven by Ultra) +16.6%, Stella +12.3%, Goose Island +73% and Golden Road +21.5%, Bud Ice +3.3%, Hurricane malt liquor +10.4%.  Montejo up 25% and hangin’ in with 0.5 share; Estrella Jalisco has 0.2 share in early going. But Natty and Busch families each down 2-4%, most of AB’s other import brands down sharply, Shock Top -23% and Ritas -20%.  Best Damn got 0.2 share tho, mostly offsetting Rita share loss.  At MC, Redd’s still runnin’ up slightly (this cut of data does not include Henry’s Hard Soda), and St Archer’s flyin’ on tiny base, but Blue Moon family -6.5% and Miller Genuine Draft -13%.  Then too, MC’s economy portfolio took a 14% hit all in, vs -1.7% for AB’s subpremiums.   One possible reason for gap: avg price/case for AB subpremiums 54 cents, 3.3% lower this yr, vs 12-cent, 0.6% price drop for MC’s subpremium portfolio.  High Life and Icehouse each down in 20% range, Keystone brands -14% and MC’s main malt liquors each gettin’ whacked.  

In fact, Molson Coors purchase of SABMiller’s stake in MC actually improves Molson Coors’ “underlying operating margin,” investor relations tells us.  That figure, based on pro forma 2015 data, excluding special charges and gains, bumps up to 14.4% from 13.7%.   When we reported yesterday that Molson Coors’ pro forma figures suggested a narrowing of operating margin, we weren’t making some key adjustments for special items and way that Molson Coors currently reports revs and equity income from its MC stake.  

Japanese brewer Asahi Group Holdings Ltd., “now pursuing deals in the US that would help boost distribution of its Super Dry beer,” reported Bloomberg.  Asahi “willing to spend 400 billion yen ($3.7 billion) starting next year, which includes raising debt and 100 billion yen in cash, on further acquisitions, president Ayoshi Koji said in an interview Wednesday,” according to paper.   Gotta note, Asahi has emerged as a potential buyer of US craft brewers and reportedly has already looked closely at various cos.  Also, Asahi recently acquired SAB’s European brands, Peroni, Grolsch and Meantime, for $2.9 bil in midst of pending MegaBrew deal, tho MC retains rights to Peroni and Grolsch in US.  “There’s huge potential that our Super Dry beer will gain popularity in the US,”  Koji said, adding that “the key is how to boost distribution power – then we can think of bringing our whisky, Shochu spirit and non-alcoholic drinks later on too.”  Altogether, Asahi aims to grow all of its overseas biz to 20% of total mix by 2018, up from 15%.