Mike’s depletions are up 50% thru most of 1^st qtr, Mike’s prexy Phil Rosse revealed to INSIGHTS last week, fueled by the power of White Claw.  White Claw depletions up a whopping 325%.  Even excluding White Claw, Mike’s up high single digits. Recall, Mike’s had outsized goal to double to 50 mil cases in 5 yrs.  Well, if growth sustains, it could blow thru that goal in 2 yrs.  Mike’s needs 40% growth for full yr to hit 50 mil cases in 2019.  If Mike’s gets to 50 mil cases, it will grow over 1 mil bbls in 2019.  In scan data, Mike’s “only” up 40%, but recall it’s basically all incremental on-premise, plus perhaps growing faster in non-scan data.  (More details on Mike’s in the current issue of Beer Marketer’s INSIGHTS.)

Silver Eagle Dist, largest AB distrib, will sell its Houston biz, while keeping San Antonio, according to press release.  Buyer is private equity firm Redwood Capital Investments.  This confirms deal INSIGHTS has heard about for a year now, including that it was imminent this week. But now it’s finally official and announced to employees.

Price Redwood will pay is eye-popping: $1 bil or so, well over 10x adjusted EBITDA, for somewhere over 30 mil cases, sources say.  That makes it by far largest deal ever in AB system, over 2.5x previous biggest deal. That was just recently completed Jeffreys deal in NC. Then too, deal marks emergence of private equity as far bigger force in AB distrib deal-making (similar to when Meritage purchased Columbia in MC system). Redwood Capital already owns stake in Chi AB megadistrib Lakeshore and helped finance Adams Bev purchase of part of Jeffreys deal.   Only one other $1+ bil beer distrib deal: Reyes purchase of MC distrib Gold Coast in FL.  And believe it or not, Reyes looked at this deal too. Yup you read that right. 

This long speculated-about transaction went through many twists and turns, once owner John Nau decided to sell.  Originally, INSIGHTS heard John would sell San Antonio, which he ended up keeping.  Along the way, largest beer distrib Reyes Holdings briefly got very interested.  It very much wants to get into Tex distribution. Especially with Constellation.  And Silver Eagle sells plenty of Constellation.

Indeed, Reyes reportedly intended to buy Constellation and sell off AB biz, looking to also buy local MC distribs and perhaps others down the line. But behind-the-scenes, AB able to put kibosh on that.  Legally, it could not have stopped deal, sources say, tho it could have tied it up in court.  In addition to AB and Constellation, Silver Eagle also sells much of Mike’s portfolio, including White Claw plus a number of craft brands (not just those AB owns),  like Bell’s and Saint Arnolds. 

Redwood will keep existing Silver Eagle sr mgt, including prexy Bob Boblitt and exec veep John Johnson, companies announced today.   And it will keep the name Silver Eagle Distributors too.  Meanwhile, Silver Eagle Distributors-West, reportedly between 12-14 mil cases, will continue on with John Nau as prexy/ceo. 

“The recent Bud Light campaign is truthful and intended to point out a key difference from Miller Lite and Coors Light,” AB communications veep Gemma Hart said in response to MC lawsuit yesterday.  “Those beers are brewed with corn syrup; Bud Light is not. These are facts. MillerCoors has admitted to using corn syrup on its website, in social media, in a full page ad thanking Bud Light following the Super Bowl, and even in the lawsuit itself.  MillerCoors’ lawsuit is baseless and will not deter Bud Light from providing consumers with the transparency they demand.  We stand behind the Bud Light transparency campaign and have no plans to change the advertising.” 

This is striking example of succession planning and also of ability of Reyes Beer Division to attract big corporate talent.  Diageo’s chief global sales officer and chairman of Diageo Beer Co USA Tom Day widely viewed as rising star in recent yrs. But he will leave Diageo to become ceo of largest beer distribution co, Reyes Beer Division. He’s a “proven leader” and “proven ceo,” current chairman/ceo of Reyes Bev Group (beer and bevs) Ray Guerin told INSIGHTS,“who could be with us for many years.”  Tom just 38 and represents next gen of leadership.

Tom will start with Reyes on May 1, working closely with Ray, who stays on as chairman of Reyes Bev Group.  Reyes Beer Division is “growing so quickly,” Ray told INSIGHTS, that “we need to acquire talent” and Tom among the “best and brightest.”  Ray “not going anywhere” and will “continue on.”  But he gets to perform more of an oversight role, work on future strategy. 

Reyes Beer Division just coming off “historic year of growth,” Ray said in internal announcement (recall Reyes did deals to buy 18-19 mil cases in beer alone last yr).  And RBD “now faces exciting and challenging changes as the industry evolves. As we continue to grow, the time is right to appoint a new” CEO “to lead us into the future.”  Ray praised Tom’s “relentless focus on outcomes, progressive thinking” and “passion for excellence.”  Diageo internal announcement regarding Tom’s departure thanked him for his “sizable contributions,” including “setting the stage for a new era for our beer business.”  Tom “enhanced Diageo’s relationships with our top beer distributors, significantly improved performance in beer… and led our efforts from idea to execution” for new Guinness brewery in Md. “Tom’s passion, energy and drive to deliver results will be missed by many,” said Diageo. And those same qualities will be appreciated at Reyes Beer Division.    

Seltzer growth still explosive in early 2019.  $$$ sales are up $73.2 mil, 240% in Nielsen all outlet thru Mar 9, while total beer biz up $88.3 mil, 1.4%.  Hard seltzers at 1.6 share of $$. White Claw alone up $43.5 mil, 300%. White Claw grabbed 56 share of hard seltzer segment yr-to-date.  Truly also posted phenomenal results.  Up $18.9 mil, 217%.  But unbelievably, it lost share.  Down to 26.5.  Yet White Claw and Truly continue to dominate the segment.  They got over 80 share of segment $$ yr-to-date. 

Each of the top 5 players in segment is at least doubling. How often do you see that?  Especially after several yrs.  AB is #3 with rebranded Bon & Viv Spiked Seltzer.  It grew $5.1 mil, 118% in Nielsen thru Mar 9.  But it fell under 10 share of segment.  Down to 9.2.  And Smirnoff also more than doubling in hard seltzers, up $2.9 mil, 118%.  But it fell to 5 share.  Meanwhile, Henry’s Hard Sparkling got fastest growth rate.  Up $1.9 mil, 447%. But it’s just 2.3 share.  All other seltzers about 1 share of segment so far, tho perhaps not all craft entrants in database yet.      

Anyone surprised?  MC is making a federal case out of its objections to AB’s ad campaign that MC uses corn syrup to make Miller Lite and Coors Light while AB does not use it to make Bud Light.  The gist of its lawsuit filed in US Dist Ct today: “AB’s misleading, deceptive, and disparaging Campaign is designed to prey on consumers’ fears associated with sugar generally, and corn syrup specifically, especially since [high fructose corn syrup] has been covered extensively in mass media as causing adverse health effects including obesity, type-2 diabetes, and heart disease.”   Specifically, MC charges AB campaign violates Lanham Act as false advertising and by diluting MC trademarks.  MC seeks order “permanently enjoining AB” from running current ads or any others that state or imply that Miller Lite and/or Coors Light contain corn syrup or HFCS, that they’re “made with” corn syrup, are inferior due to corn syrup or are not made with barley and hops.  MC also want corrective ads, an accounting of AB’s gains from the campaign, plus damages and costs.

Tho AB has not mentioned HFCS specifically in ads, it has “publicly explained that it designed, tested and launched a false and misleading advertising campaign…in order to deceive beer consumers into believing that there is corn syrup and high-fructose corn syrup” in Miller Lite and Coors Light, MC’s complaint kicks off.  It cites report in Beer Biz Daily that Bud Light chief Andy Goeler told distribs that consumers “don’t differentiate between high fructose corn syrup and corn syrup and that it is a major triggering point in choosing brands to purchase, particularly among women” (that’s BBD’s language, not a direct quote).  Andy made similar comment, MC sez, to Food and Wine mag that corn syrup an “ingredient that consumers prefer not to consume if they don’t have to.”  With such knowledge gleaned from focus groups, AB “plotted an extensive and pervasive advertising scheme designed to frighten consumers” into switching from MC brands to Bud Light, MC alleges.  Super Bowl ad time cost AB $13 mil, MC figures, and ads have run 1000s of times since for total of $24-$30 mil since Feb 3.

Why Does MC View AB Campaign as Misleading?  There’s no corn syrup in final product; it’s just used (as AB uses rice) in fermentation process.  Only yeast consumes corn syrup; no consumer consumes corn syrup.  Then too, not only are corn syrup and HFCS different, but Miller Lite and Coors Light “never use HFCS.”  Yet, AB campaign, Miller alleges, “misleads consumers into believing” they contain both to “frighten” consumers away from them.  And by the way, AB uses both corn syrup and HFCS in other brands.  To back up charges that campaign dilutes MC trademark and goodwill, MC shows: 1) Twitter posts linking corn syrup to “poison” and stating they won’t drink MC’s brands; 2) Facebook post picturing Miller Lite with “packaged ears of corn and bottles of Aunt Jemima syrup – a product notorious for containing HFCS – placed on top”; 3) a flyer created by AB distrib depicting Coors Light and Miller Lite as “value” beers.  In addition to lawsuit.  MC put out a statement charging that AB “fearmongering over a common beer ingredient it uses in many of its own beers…. This deliberate deception is bad for the entire beer category.”  AB has not yet responded to the lawsuit, but will no doubt do so shortly.  Stay tuned.  Meanwhile, in the marketplace…

When current AB InBev chairman Olivier Goudet steps down at upcoming board mtg (see Mar 5 Express), proposed replacement is Martin Barrington, board member since 2016 and ex-ceo of tobacco co Altria, which owns about 10% of ABI.  Three other board members will step down and 3 women will join board, upping female representation from 2 to 5.  That’s notable, even while “leadership team is exclusively male and largely cut from the same cloth,” as Jefferies’ Edward Mundy observed.   Move part of “broader shake-up at world’s biggest brewer,” WSJ wrote, citing departure from board of 3G/Kraft Heinz chairman Alexandre Behring and that Kraft/ABI “have struggled to grow their revenues.” 

Barrington spent 25 yrs with Altria and is “expert in governance, regulatory topics and operational excellence,” ABI said in release.  That “seems a good fit,” commented Consumer Edge’s Brett Cooper, since ABI in highly-regulated industry, and is looking at entry into cannabis mkt (Altria has 45% stake in cannabis co Cronos) and other alc bevs.  Thus, Barrington’s “experience in dealing with tobacco could prove valuable for the company.”    Among the 3 women joining the board: Sabine Chalmers, chief legal/corporate affairs officer at ABI from 2005-2017.  ABI also adding former ABI exec Claudio Garcia who, co noted, “participated in all M&A integration projects from 1999 until 2018.”  So, while no lack of M&A experience at ABI now, as Brett observed, Claudio adds “deal experience.”  While WSJ sees “shake-up,’ Jefferies’ Mundy views board changes as “continuity rather than major change…with co keen to protect both its strong culture and ownership structure.”

While Wall St appears to embrace changes, one group who may be scratching their heads a bit: AB InBev’s CSR (corporate social responsibility) folks.  For years they’ve been fighting public health advocates and their allies in govt and media linking Big Alcohol to past sins of Big Tobacco.  That fight just got measurably more challenging.

Craft Brew Alliance will officially debut Kona’s first ever natl media campaign tomorrow, with three 30-second ads featuring Kona’s Hawaiian “Bruddahs” launching for this yr’s NCAA “March Madness” basketball tournament, co announced today. Indeed, Kona will double its mktg spend to $20 mil for calendar 2019, including nearly 1/3 of its spend on NCAA airtime alone coupled with “serious sales incentives,” as sibling pub CBN reported earlier this yr (see Feb 8 issue). Ads play up Kona’s easy-going “lifestyle” branding in each spot, whether taking a “Little Vacation” with every sip of Big Wave, considering your “To Don’t List,” or “disconnecting” your phone more frequently with “Kona Mode.”  Each ad features flagship Kona Big Wave golden ale, which continues to fuel Kona’s growth, as well as Longboard Lager, which struggled more recently. Other than Sam Adams (or MC’s Blue Moon), hard to think of any craft brands ever receiving this much media weight (MC’s Saint Archer Gold also getting the equivalent of $30 mil natl media campaign in 4 test mkts currently).

This is a continuation and amplification of Kona’s “Dear Mainland” campaign with the Bruddahs that first debuted in select mkts in 2014. Since then, Kona grew more than 150K bbls, reshaping CBA’s portfolio in the process via “Kona Plus” strategy. In 2018, Kona shipments grew 8% to 456K bbls (including some intl biz) in 2018.  Kona now 10th largest individual craft brand family and nearly 2/3 of CBA’s total mix. Kona thrived while total CBA biz struggled in recent yrs.  CBA expects 2019 to be a “tipping point” back toward growth, CEO Andy Thomas commented on co’s earnings call (see Mar 7 CBN). Co expects Kona to accelerate to double-digit growth behind natl media weight, which would put Kona over 500K bbls, and ultimately help drive total CBA shipments and depletions growth of 5-8% in 2019, co forecasts.

New Miller Lite ads are so fresh they weren’t even shown at MC natl sales convention just last week. They broke this morn to take on Bud Light and will get heavy weight, including on NCAA tournament.  These ads will be “supported by Miller Lite’s highest two week investment of the year—and one of the highest buys ever during the basketball tournament,” wrote MC on its Behind the Beer Blog this morn.  And new ads are sure to amp up already heated battle between top 2 brewers.  Ads reportedly shot a couple of weeks ago, just finished editing over weekend, and live up to MC’s new credo (proclaimed at convention by ceo Gavin Hattersley) of “moving faster.” They also undoubtedly already reflect influence of new cmo Michelle St Jacques. 

Miller Lite’s new competitive ads are set in familiar Bud Light medieval kingdom.  Indeed, “Miller Lite’s latest ad assault on Bud Light picks up seconds after” Bud Light’s “biggest Super Bowl ad ended,” begins Wall St Jnl article, “imagining what happens after the commercial stops shooting. No surprise: The actors, even the guy playing the Bud Knight, pick up cans of Miller Lite.”  Instead of what Miller Lite ad calls Bud Light “fantasy world,” first Lite ad closes with the slogan: “In the real world, more taste is what matters.” 

“We’re using their campaign as a foil,” Miller Lite veep Anup Shah told Wall St Jnl. “While Anheuser Busch is living in a fantasy world, we’re focused on making sure people here in the real world know Miller Lite has more taste, fewer calories and half carbs of Bud Light,:  Anup added on blog.  “We did not start this fight,” MillerCoors chief communications officer Pete Marino told INSIGHTS. “But we’re going to stand up for our brands.” These commercials intend to “pivot back” to Miller Lite’s core message, which is “taste.”

AB was ready with its response.  A 30-second spot (digital?) has Bud Light King intoning “Miller, Miller, Miller” and asking if Miller Lite is “so set on imitating our kingdom,” why aren’t they “putting ingredients on their packaging.”  Bud Light veep Andy Goeler reiterates same point in statement, adding “it’s good for the consumer and the right thing for the beer industry too.”   And AB PR firm sez Bud Light is “starting to see signs in the marketplace that transparency is beginning to resonate.”  Sez Bud Light “brand health metrics” at “three year highs” and Bud Light share trend improving over last 12 weeks. “Corngate” is among other things, undoubtedly a response to Miller Lite’s taste challenge, so AB would likely disagree about who “started” it too.

But both brands continue to decline. In 2018, Bud Light dropped 2.2 mil bbls, 6.7%.  Miller Lite dropped 500,000 bbls, 2.8%.  And for last 4 weeks thru Mar 9 (as INSIGHTS reported yesterday), Bud Light down 9% in Nielsen all outlet and Miller Lite down 2.8%.  Will all this sturm and drang re ingredients and taste change the trajectory of either brand?

Boston Beer appointed Meghan V. Joyce, a 34 yr-old former exec at Uber, to its board of directors effective March 14, 2019, co announced. Meghan has an impressive resume, spending the last 6 yrs at Uber, most recently serving as Regional General Manager for all of US & Canada, as well as East Coast General Manager from 2015-2017 and Boston General Manager from 2013-2015. Prior to that, she worked as Senior Policy Advisor for US Dept of Treasury from 2011-2012, and worked as both an investor and consultant at Bain Capital. Meghan has an MBA from Harvard, where she also received her bachelor’s degree. “Meghan’s significant accomplishments and extensive experience in consumer recruitment and engagement, and using new technologies to reach audiences that align with our drinkers, will add significant depth to the Board as we grow our business, product portfolio, customer base, and employee base,” founder and chairman Jim Koch said in released statement.