Like at his own conference last week, Pabst chmn/ceo Eugene Kashper shared story of how Pabst rapidly transformed into more of an above premium co again at Beverage Forum in Chicago yesterday. But he added a few new twists. In Eugene’s view, subpremium and premium beers “can’t really offer consumers much besides value.” Recall, he sees above premium brands moving to 70 share of the mkt from 42 now. “Light beer is starting to be perceived truly as Wonder Bread,” he added. As Pabst strives to become more high end, it will look for right craft and import partners, but won’t pay crazy money. “We’re not gonna be the kind of player that comes in and writes the biggest check for a craft brewer, or someone who wants to get out.” Rather Pabst will look for people “who are passionate” and a “good cultural fit” that “know the DNA” of their brands. He would “definitely” look at non-alcohol brand acquisitions as well, provided it’s high margin of course. On brand Pabst, trends are improving of late, up last 4-5 months after rough patch since he took over. Year one was certainly “challenging from a volume standpoint” because Pabst didn’t follow discounting lead of big premium players, said Eugene. There was “a bit of panic” from big premium players last year or two. “I would assume that at some point there’s going to be more rational pricing,” said Eugene.

More evidence of a tuff start to April: total beer sales up just 1% and volume down 1.6% for 4 wks thru Apr 17 in IRI multi-outlet + convenience data. Steeper premium and subpremium declines weighed down category overall and Easter timing took a toll, no doubt. Indeed, premium $$ down 3%, volume down 4% during period, compared to $$ flat and volume down 1% YTD. What’s more, each of the top-4 mega brands declined. Bud Light (-4%) and Bud (-5%) declines each a few points steeper and both Miller Lite and Coors Light down 1% tho still up 1% YTD. Similarly, total subpremium (-3% on both vol and $$) trends off a couple pts for 4 wks compared to YTD. AB’s Natty Light and Busch had been trending better to this point, but for 4 wks Natty Light $$ down 4%, Natty Ice down 5%, Busch Light and Busch each down 2%. MC’s Miller High Life (-7%) and Keystone Light (-6%) continue to decline at steeper pace than total sub-segment. Tho AB’s Bud Ice still up 5% for 4 wks and 8% YTD. Meanwhile, each high-end segment slowed for 4 wks too. Only FMB $$ up double-digits for period, +11%. And that’s compared to +18% YTD. Imports and craft both slowed a few points, $$ up 7% and 8% respectively. Superpremium slowed to +4% and Cider down steeper 10% for 4 wks. Of course, many of the same top growth brands within these high-end segments kept up strong paces. Mich Ultra and Modelo Especial each still up 20%+; Not Your Father’s Root Beer still up nearly 1000%; and new AB and MC alc soda entrants are among top share gainers. Lagunitas IPA (+20%) and Little Sumpin’ Sumpin’ (+42%) still gaining largest share of total beer sales among craft brands. But other large high-end brands within each of these categories are draggin’ growth too. Four of top-5 craft cos down for 4 wks including Sam Adams (top-4 brands -17%), Sierra -4%, New Belgium -3% and Gambrinus -9%. Total Heineken USA down 2% for 4 wks. Angry Orchard Crisp Apple down 10%. Rita family still down 18% including new splash launches and Redd’s franchise is actually down 6% for 4 wks. Stay tuned.

“Wider and deeper holiday promotions from ABI are a potential risk for STZ and TAP (Constellation and Molson Coors),” wrote Evercore ISI’s Robert Ottenstein. He cited a number of reports of holiday promos that first appeared in INSIGHTS Express in last couple of weeks (crediting us too - thanks Robert). “We are closely monitoring the situation,” he added. But “to be absolutely clear, we do not think that ABI has changed strategy to compete on price to gain share for a prolonged period.” That “would be completely counter to ABI’s strategy, culture and message to investors and distributors… for past 7 years.” Indeed, he continues, “ABI understands that competing on price would damage brand equity and harm profitability.” On the other hand, “ABI’s US share peaked in 2009, and the firm has made stabilizing share and profitably growing the top line a greater priority in recent years.” So now it “remains to be seen how long these promotions will last,” concluded Robert. It’s going to be a hot summer for sure. But how much of an impact will these deep discounts have on total AB and industry pricing? Will they change competitive dynamics at all? Stay tuned.

Constellation Brands portfolio of beer, wine and spirits, contributed 20% of all growth in alcohol biz overall in IRI last year, noted prexy/ceo Rob Sands at Beverage Forum yesterday. When things are going so well across 3 segments of alcohol biz, Rob said it’s easy to take the “if it ain’t broke” mentality, but co knows its biggest challenge is “maintenance of what we’ve got going right now…. We’ve got a huge amount of runway going forward.” Rob knows that as “parts of portfolio” mature, co must keep looking for next growth oppy, so Constellation is prepping to have new brands “right behind it,” across beer, wine and spirits, ready to continue to deliver high-margin growth for co. Number of brands like Victoria for example, “haven’t even scratched the surface” of what they can achieve, and Constellation has rights to many other Mexican beer brands that it hasn’t even brought to US yet, that offer future growth potential. Keeping up with its torrid gain pace is top of mind for co. “Strategically the most important thing is not to run out of beer,” he tells his team, and Nava plant expansion and other projects in Mexico “will hold us in good stead” for “quite a number of years” to come. When asked by Michael Bellas about recalls/quality control issues, Rob noted that they involved products “not manufactured by us” but “supplied to us.” Quality control measures have been put in place and that risk “will diminish” as co becomes 100% self-sufficient and “we don’t expect anymore” issues, he added. Asked about new performance guidelines laid out for distribs at its Gold Network sales mtg earlier this year, Rob said issue was “somewhat blown out of proportion by the press.” That was “really about updating some of our contractual guidelines with our wholesalers. It was about making it more definitive as to what kinds of things we expected from our wholesalers, in terms of things like brand management and investment” behind brands. Rob pointed out that the “great thing” about “our wholesalers” is they are “100% self-motivated” to invest behind Constellation portfolio. Our distribs are “smart business people” that look at their biz and figure out “where am I going to get the greatest return on my investment,” and “clearly” can see best returns will come from Constellation beers. “We don’t really have to twist anybody’s arm to do that,” said Rob. When talking about brand performance, Rob obviously noted, “it’s all about Corona and Modelo Especial” right now. He credits “incredibly consistent” mktg message for Corona growth while “a lot of our competitors” and products “confused” consumers about what their product stands for. When asked about future of brands, Rob thought it’s possible Corona could pass brand Bud “potentially,” especially if talking in terms of dollars. Cans have “been a gigantic plus” for Corona franchise and don’t cannibalize bottle sales, noted Rob. Meanwhile, Modelo Especial in his view, “has every possibility” to grow to be as big as Corona and “keep pace,” which would make it another top-5 brand for Constellation in US. Modelo Especial message of “authenticity” has resonated with Mexican consumers for long time and is now spreading to general consumers as well. Modelo Especial has big oppys ahead in both distribution gains and “velocity,” said Rob. He also sees huge potential for Constellation’s craft acquisition Ballast Point, a “very premium” brand, as co and brand are growing 3x the rate of any of top 10-15 craft players. Ballast Point will double in size this year. As definition of craft segment becomes “more blurred,” Rob said it’s about how the beer is made, “not ownership” in defining the category. Constellation will certainly keep an eye on other craft acquisitions given it’s a high growth segment. Doesn’t sound like it would be an AB-like shopping spree tho, as he likened size of its possible future craft portfolio to current import roster with a small # of sku’s. “I’m not going anywhere at the moment,” Rob joked when asked about succession planning at Constellation. He noted co has “a very strong” bench of mgmt talent and said next ceo is not necessarily assumed to be from Sands family but will be “best talent” to lead biz.

Tho closing date for ABI-SAB still not in clear sight, speculation already abounds about AB InBev’s next target, especially in wake of announced big option plan if ABI’s revs reach $100 bil, a big stretch without M&A. And while most of that speculation includes Coke and/or other soft drink firms as possible targets, ceo Brito reminded at ABI annual mtg that “we’ve always done it within beer. We don’t believe in going too much outside beer. That makes the likelihood of success in integration higher.” (Quotes from Reuters report today.) Gotta note tho that ABI is already a big Pepsi bottler. Yet it’s buying SABMiller, which is already a big Coke bottler. So hard to say Brito’s scotching any future soda tie-ups. Brito also pointed to growth potential of low- and no-alcohol beers. ABI has goal of 20 share of its global revs in such products by 2025, which would be more than a doubling of their current share. “There are a lot of consumer trends going in that direction,” Brito said, adding: “And the margins are very good because you don’t have the excise tax because it’s non-alcohol. You charge sometimes the same price as beer or higher, depending on how you position the product.” Meanwhile, ABI-SAB “likely to be approved” by Australian antitrust authorities, Seeking Alpha reports today.

No shortage of folks linin’ up to tell Dept of Justice how it should “remedy” potential anti-competitive fallout from proposed ABI-SAB deal, despite continued claims by AB InBev and Molson Coors that deal won’t impact US mkt at all. Non-profit advocacy group American Antitrust Inst (AAI) just weighed in for at least 3d time, sending letter to DoJ antitrust division that warns about how deal may raise prices, reduce choice, harm craft brewers and/or indie distribs. Comments track testimony from AAI’s prexy Diana Moss at Senate subcommittee hearing in Dec. This time, AAI fleshes out specific remedies it sez DoJ should adopt before clearing deal, in order to assure there’s independence on brewer and distrib levels. Net-net: AAI proposes a new take on Prohibition. It wants DoJ to: 1) prohibit “further acquisitions of distribution or craft brewers” by ABI and Molson Coors; 2) prohibit ABI and Molson Coors from controlling “input materials” like cans, glass or grains; 3) prohibit any “future contract or supply agreements involving” ABI, Molson Coors and rivals, including MC’s current contract agreement with Pabst; 4) prohibit ABI or Molson Coors from “pressuring any independent distributor from favoring their brands over rival brands,” including use of “incentive programs” that set requirements based on “volume shares; employee or managerial compensation; ‘maximum efforts’; display shelf space, and placement; and marketing programs.”

MillerCoors “has slowed decline” of premium lights and its portfolio of “powerful brands” such as Blue Moon at Tenth and Blake continue to perform well, MC ceo Gavin Hatterley told Beverage Forum in Chicago this morn. Gavin “quite bullish” on prospects for hard soda category. “I think it’s here to stay.” Hard sodas target generation of consumers that were “ignored a little bit.” While hard sodas are cannibalizing some cider drinkers, Gavin believes they bring new consumers into the category as well. He doesn’t see a fundamental shift coming in craft segment: “craft is here to stay,” he said, adding that Saint Archer “filled a nice portfolio hole” for MC. Gavin defended state of premium light segment, noting 4 in 10 drinkers consume them still and added “our job is to make sure our brands are strong and relevant.” Changes in mktg for Coors Light and Miller Lite are “resonating well” with consumers, said Gavin. They are getting feedback that consumers like the “direction we’re taking” with both brands. Asked about big success of AB’s Mich Ultra, Gavin noted it’s just more evidence that consumers have continued thirst for “light sessionable beers.” Asked to look forward 5 yrs, Gavin believes premium lights will surely be around “and doing well.” In interview with Michael Bellas, he touched on big success for imports and especially Mexican imports. “Unfortunately, we don’t have one,” but have to “deal with it,” said Gavin. But MC feels Coors Light, Banquet and Henry’s Hard soda brands all play “very nicely” with Hispanic consumers to help fill that void. On distribs, Gavin was asked if it’s a good/bad thing to have his distrib also working as a Coke bottler, in reference to recent Reyes acquisition. He noted, at MC, they “have seen no change whatsoever” in performance. Another Producer to Join FMB Biz AriZona Bev founder Don Vultaggio told Bev Forum that his co is building a brewery in NJ, sees "a big opportunity" in FMB’s for AriZona. Don’s not a stranger to malt bevs; he once had home D in NYC and played in malt liquor with Crazy Horse, beer with Mississippi Mud.

Apr started out tuff for many, tho some say it got better as month went along. Total beer volume down 1% in Nielsen all-outlet for 4 weeks thru Apr 16. That was enuf to pull yr-to-date trend back by a point and a half. Beer volume was up nearly 3% for 3 mos, but now up just a little more than 1%. Total beer up 1.2% YTD thru Apr 16. Just 3 weeks ago, beer volume up 2.8% YTD thru Mar 26. So things are changing fast, as we’ve noted all yr. Total industry pricing still up a healthy 59 cents per case, 2.7% YTD, and 54 cents for 4 weeks. That’s mostly because of continued trading up. However, tuffer industry pricing is starting to show up in data already, especially on subpremium brands. Subpremium brand prices barely up, an average of a measly one cent last 4 weeks, and pricing on some of largest subpremium brands down nearly 1%. Avg price of Busch down 14 cents, Miller High Life down 13 cents. Avg High Life prices down 19 cents yr-to-date. And it’s still losing share of segment. Each of Natty Light, Busch Light and Keystone Light pricing flat last 4 weeks. Yet all 6 top subpremium brand trends worsened same period (as industry declined) and their share performance did not improve.

While leading public health advocates at the recent Alcohol Policy 17 meeting dismissed any notion of cooperation with alc bev industry, Responsible Retailing Forum (RRF) remains a bastion of collaboration to reduce/prevent underage purchase, over service and now taking on thorny college drinking issues. RRF’s Annual Forum in Boston last week included rare comingling of industry (represented by each of 3 tiers, including Diageo, MillerCoors, NBWA, Mass distrib assn, WalMart, Whole Foods and more), regulators, enforcement, academics, researchers and even a public health advocate or two to explore areas of mutual concern and potential collaboration. Industry miscues not ignored, but nor is industry excluded from debate and problem solving. Major themes included: 1) ceaseless expansion of industry outlets/offerings and evolution in face of dwindling regard for (or at least questioning of) regulation and need for it; 2) importance of broad coalitions of above stakeholders (and more) to properly address alcohol problems; 3) ongoing wild card of marijuana; 4) technology as both challenge and potential solution. Wide ranging program included fascinating discussion of e-cigs/vaping where it surfaced that public health and govt totally misrepresenting research to follow their own anti-tobacco co policy agenda (sound familiar?). Enforcement chief at Mass ABCC suggested more states looking at trade practice investigations like his own over pay-to-play allegations. More pot-alcohol policy parallels popping as Oreg deals with recreational use. Challenges of local vs state-focused regulation discussed as well, plus much more. As if tackling sales to minors and service to intoxicated patrons ain’t enough, RRF partnered with Intl Town & Gown Assn to take on stubborn campus drinking issues. It’s a full plate, but RRF has breadth and vision to make progress, develop best practices. We’ll flesh out the details in upcoming Alcohol Issues INSIGHTS, with comparisons to AP 17.

Such a letter may be pretty much routine when Senate Antitrust Subcommittee holds a hearing, but statements of US Senators to Dept of Justice re its review of ABI-SABMiller deal still significant. “While we take no position about the legality of the merger under the antitrust laws,” wrote committee chairman Senator Mike Lee and Ranking Member Senator Amy Klobuchar, “we believe it affords an opportunity to raise important competition issues.” Notably, those issues reflect viewpoints of NBWA and Brewers Assn. Nothing really new is said, and it’s what the DoJ thinks that really matters, but the letter does suggest these Senators are listening. “The success of craft brewers depends on access to retail markets through wholesale distribution,” assert the Senators. “The current strong and independent distribution system offers opportunities to craft beers, not just the large brewers, and has helped create the most diverse beer market in the world…. We are concerned,” they continue “about any consolidation in the beer market that would make it harder for small brewers to make their products available to consumers, and in particular any significant increases in the acquisition or control of distributors by larger brewers.” DoJ “must be confident that the merger does not alter the incentives or abilities of ABI or MillerCoors to foreclose craft or import brewers’ access to distribution.” ABI global communications veep Marianne Ammsoms reiterated ABI’s position in response to letter: “Our proposed combination with SABMiller is about our ability to serve new markets around the world, not the US. As a result of this transaction, we do not expect any change to the already highly competitive US beer market, our wholly owned distributorships” or ABI’s “commitment” to sell approx 10% of its volume thru branches. “We continue to work with” DoJ and “expect our transaction to close in the second half of 2016.”