Three fast growin' Idaho brewers known for their canned brews are slated to expand distribution as they expand their capacity, reported Idaho Statesmen in 4-part article about Ida craft scene. Payette Brewing "sells about two-thirds of its beers in cans," mostly (about 80%) in Idaho with some sales in OR, UT, NV, and "parts of Washington." Yet once its new $4.5 mil brewery opens in Q1 2016 (see May 20 issue) it'll be able to open new mkts like "highly competitive" Seattle, noted paper. Last yr co grew 88% to just over 10K bbls according to Brewers Assn stats.

Sockeye Brewing expects to "expand canned beer sales into Montana and Wyoming" once it "unveils new, automated production line in September," that'll have 20-bbl and 40-bbl system "side by side." That "could potentially double our canned beer output," head brewer and brewery manager Josh King told paper. Currently co "probably canning close to 6,500-7,000 cases a month," he added. Last yr Sockeye grew 60% to 8,300 bbls according to BA. Aside from Idaho, Sockeye also sells in "parts of Utah, Oregon, and Washington."

Crooked Fence is "considerably smaller" at "about 2,000 cases of beer a month," using Portland-based mobile canning operation, Northwest Canning. Majority of its canned beer is sold in Idaho, with some in Portland area and "parts of Washington," yet recently added Wisconsin distribution too. "The distributor [unnamed] approached us. They wanted beers that nobody else has over there," brand manager Kelly Knopp told paper. Co grew 40% to 4,200 bbls last yr according to BA.

Boise Brewing Doubled Capacity; Local Craft Beer Bar Chain Opens 3d Location Another Ida brewery, Boise Brewing "recently doubled its brewing capacity by installing two new 30-barrel fermenters." Around same time (in late June) it also just began bottling its brews. It brewed 552 bbls in its first yr tracked by BA.

On pace to ship around 10,000 bbls this year, No-Li Brewhouse of Spokane, WA has quickly established itself as the hometown brand for the mid-size inland PacNW city. In 2015, it'll grow another 2000-3000 bbls for the 3rd year in a row, turning up the heat since industry vet John Bryant took over the brewery in 2012. As the city gets used to having its own beer (the area's gone from just 3 breweries to 38 in a few years) and as the re-born No-Li's young team expands the brand, "my job is to kind of guide it," he told CBN. So the co's promoting craft beer culture in the city at events like recent 'KAN JamBEERee, while using its brand to promote the city in the few outside mkts where it's available. Posting strong growth, No-Li's "running out of capacity and not having to price promote to get it," John said.

Number 6 Craft Brand and Rising in Hometown Supers; Top 22 Portfolio No-Li grabbed another 1.1 share of craft $$ in Spokane foodstores yr-to-date thru Jun 28, according to IRI. It's up 36% this yr, taking on 5 much bigger craft suppliers. Total craft neared a quarter of beer $$ YTD in Spokane, +1.1 share but up only 9.3%. Craft over half of total beer $$-growth tho. And No-Li the #6 craft brewer, cracking 5 share of segment. Top 5 fully half of craft $$ in Spokane foodstores. Craft Brew Alliance at 15.6 share, +0.7%, and Deschutes at 13.4 share, +7%. New Belgium just under 8 share of craft there, $$ up about 1%, while Sierra up 22%, got just over 7 share. Boston craft brands down 3% altogether, down to 6 share. So No-Li putting up about same absolute $$-growth as Sierra; slightly bigger in total than Alaskan Brewing in the market; getting close to big 3 natl players.

No-Li's lead brand remains Born & Raised IPA, "30%+ of No-Li total business and growing double-digits," John confirmed. It's #2 brand in 22-oz single bottles in Spokane foodstores too. Indeed, No-Li's got top 22-oz portfolio in Spokane and no one else close. No-Li sells 5 of the top 8 22s by $$. Its portfolio still about $50K in sales ahead of Iron Horse from Central Washington and more than twice as big as Ninkasi, #3. Six brands in the large-platform bottles still represent almost 60% of No-Li sales in scans, +7% as a group. They hold 18 share of craft 22s and gaining, as all craft 22s actually down 1%. Indeed, lots of No-Li growth coming elsewhere too, including 4-pks and newly-launched 6-pks. This fall, Slacker, a lower-ABV version of summer Seasonal Brass Monkey (bomber-biz almost doubled thru 6/28), joins Poser and Crony in 6-pks. As mix shifts a bit, with increase of smaller pkg sizes, big impact of 22s likely to bring No-Li's avg price per case down. But it's still head and shoulders above most other craft brewers in mkt at $58.45.

Needing A New Space, Holding Onto Existing Spot While Building Spokane Beer Scene As John looks for a spot around Spokane to build a new brewery at same time that chatter about craft acquisitions and entry of private equity, he's asking himself "how do we do it to endure?" Committed to the Spokane community, he doesn't want to give up the current "cozy" brewery or pub, as the original building is "part of who we are." The eclectic pub set-up with multiple spaces and patio on Spokane river, neighboring other bizzes not far from group of universities in town, supplies 16 taps, with always 6 new or unusual "for regulars," John said. Building a craft community around No-Li "starts in the pub," he said, and the "individual experience with craft beer."

Building that community and "nurturing" craft in Spokane involves more than just No-Li. The co hand-picked 8 breweries to come in for 'KAN JamBEERee, the largest festival it's hosted at the brewery with about 700 folks last weekend. It raised $2000 for 2 charities, including local fire fighters (top of mind in Spokane and elsewhere in the region; on the day we visited, smoke continuously clouded more of the sky). Connecting with and bringing in respected breweries like Firestone Walker and Oakshire from Oreg help "[give] our staff confidence," John said, proving to them that "we deserve it." He's also been working with the Inland Northwest Craft Brewers Assn, promoting breweries in Eastern Washington and Oregon as well as Northern Idaho. That's turned into beer articles appearing "once a week now in the major paper," the Spokane Spokesman Review, and regular beer-centric feature in the local alt-weekly. Local US Representative Cathy McMorris Rodgers recently stopped by No-Li to see the growth of local business and employment.

Brands Point to Growing City, Poised for More "Designed to travel," as John said, No-Li brands reference Spokane landmarks, providing extra meaning for locals and memories for visitors. But the icon-like images offer room for personal interpretations, according to John, who has no problem with folks mis-reading the 3 gondolas on No-Li logo (references to the gondolas that take riders over a set of waterfalls downtown) as Chinese lanterns. The co's also exporting the name and idea of Spokane elsewhere, attracting visitors to the city at the same time the city pursues economic development as a medical school hub. Both WSU and UW got state funding to expand existing programs, which the city hopes will lead to longer-term population growth. That could spell even more local run-room for No-Li. So John and his team "get to help shape something," he told us, as No-Li facilitates outsiders' experience of "discovering Spokane."  

When a 31-acre plot of land out by the Frederick Airport became available recently, Flying Dog jumped on it. The brewery's been seeking options for expansion as it keeps pushing closer to maxing out its current facility in Frederick. The co "offered full-price" to the city, which owns the land, CEO Jim Caruso told CBN, or about $2.5 mil. Building out a new brewery that could produce up to 700K bbls annually would represent "a potential $50 million economic development project" for the area, according to Flying Dog statement. Nothing finalized, and city must approve the co's bid. But it's been "good partners in many ways" with the city already, Jim said, and indeed Mayor Randy McClement quoted in Flying Dog release, "pleased" that the brewer is willing to pay what the city asks.

City approval currently "scheduled for mid-September," Jim told us, which would initiate a "several-month due-diligence process," then permitting from the state and so on. If it all works out, "design and development could begin as early as 2016," the co wrote, with the new brewery up and running sometime in 2018. Flying Dog's "current facility is expandable," Jim said, but working space would get tight. It estimates current capacity around 100K bbls and produced almost 87K bbls last yr. "We're in good shape for the short-term," Jim maintained, and will "get by in the interim." But he noted the "luck" of "this property becoming available when it did," as he wants to keep Flying Dog in Frederick. Just last week, the city approved a tax credit program for manufacturers, providing a 10-yr break on all property taxes. Jim spoke in support of that plan at recent public hearing, according to the Frederick News Post. And though "every deal has some hair on it," he'd rather "lean into this," he told us, and "accept those challenges" to stay in Frederick. Nothing's definite, but his "intuition" says: "we'll be staying here." In the meantime, he's working to firm up Flying Dog's long-term strategy for growth in Europe, which the co's been "high-spotting" for about 10 years, he said. Like others, he sees significant opportunity there, so is considering multiple options to take them.

Calif plaintiff accusing MillerCoors of misleading consumers by marketing Blue Moon as "craft" beer when MC not a craft brewer (under BA definition) responded to MC request that fed ct dismiss suit (see Jul 14 CBN). Much of response repeats original charges, but plaintiff also counters MC's specific arguments and insists suit should move forward. "MillerCoors' deception runs deep," plaintiff sums up, by: 1) using fictitious biz name that implies Blue Moon made in tiny brewery inside baseball stadium; 2) omitting any reference to MC on Blue Moon website, label, packaging and ads; 3) using "artfully crafted" to portray Blue Moon as craft beer. "Intentionally disassociating Blue Moon beer from the MillerCoors name not only allows the company to keep consumers in the dark," plaintiff concludes, "but also to capitalize on their confusion about Blue Moon beer and tap into the multi-billion dollar craft beer market."

Specifically, recall that MC sharply challenged BA definition of craft brewer as "arbitrary" and without any legal force. MC insisted that "craft" defined in dictionary simply as made "with care or skill." But same dictionary MC cited also defines "craft beer" as "a specialty beer produced in limited quantities," plaintiff points out. He also cites a 1986 book that defined craft brewer and a 1996 Inst for Brewing Studies (a BA precursor) defn. "Combined, these definitions make it clear that a craft beer is one that is brewed by a craft brewer," plaintiff sez, and MC is not a craft brewer. MC "attempts to argue both sides of the coin - first that the term craft beer has no specific meaning and then that the company believes Blue Moon is a craft beer." (Actually, MC argued that the BA definition is arbitrary and noted BA does not define "craft beer.") In any case, key is that under Calif law, plaintiff only has to prove a "reasonable consumer" would be deceived. And while MC has every right to use trade name, key is how it uses the name Blue Moon Brewing Co. And that's the deceptive part, plaintiff insists, given "overwhelming evidence pointing to the company's practice of intentionally omitting any reference to MillerCoors on the Blue Moon website and in all Blue Moon advertising." Besides, not many Calif consumers likely to look up state's Fictitious Business Name registry before buying Blue Moon at retail, plaintiff adds. Then too, Blue Moon website includes no address or phone number for the company.

Plaintiff also challenges notion that fed and state laws give MC a "safe harbor from liability," given the way Blue Moon labels, ads and website mislead consumers into thinking brand made in "small, limited capacity brewery located inside a baseball stadium in Denver," when it's actually "mass produced" at MC breweries. Further, Blue Moon Brewing Co trademarked for "bar services," sez plaintiff, "not the retail sale of beer." That trademark unlike other trade names MC uses (Third Shift, Tenth and Blake, etc). Recall too that MC said plaintiff's complaint not specific enough to move forward and plaintiff not harmed because he already stopped buying the brand. Plaintiff responded that complaint correctly identifies the "who, what, when, where and how of the misconduct charged" and never said he would not buy Blue Moon in future "but merely that he would only purchase it at a lower price." Besides, "absent injunctive relief, MillerCoors' deceptive conduct is likely to continue, yet evade review." At very least, plaintiff concludes, he should have right to amend complaint if court finds it "deficient."

Jim Beam Gets Another Suit Dismissed Over "Handcrafted" Claim Interestingly, same fed ct in Calif, tho different judge, just handed Jim Beam another victory in similar battle. Judge dismissed attempted class action from plaintiff who argued Beam's use of word "handcrafted" on labels misleads consumers into thinking Beam actually made by hand, not machine. Recall that Beam got similar charges tossed vs Makers Mark; a couple other distillers have won similar victories, tho suit vs Tito's Handmade Vodka still alive. Note tho that Calif judge did not grant dismissal based on Beam's argument (also being used by MillerCoors in Blue Moon suit, and successfully by AB in defending Ritas) that TTB's label clearance gives it "safe harbor" and so not liable. No indication, Beam judge pointed out, that "TTB specifically investigated and approved the veracity of Jim Beam's use of the term 'handcrafted.'" But judge did agree with Beam that a "reasonable consumer wouldn't interpret the word 'handcrafted' on a bourbon bottle to mean that a product is literally 'created by a hand process rather than by a machine.'" If Beam simply wanted to associate brand with "high quality," then "handcrafted" is simply "mere puffery" and plaintiff's claim not actionable, judge wrote. Be interesting to see where his colleague comes down on safe harbor, "craft beer" and "craft brewer" in Blue Moon suit.  

Budweiser reached $1.4 bil in revs and 13 mil bbls in China last yr, it revealed at recently concluded 2 day forum for investors there.  That compared to 15.4 mil bbls in US (BMI estimate).  But Bud in China more than doubled since 2011, while Bud in US down 2.4 mil bbls  last 3 yrs.  Back in 2011, Bud in US outsold China by almost 3 to 1; this yr they could be neck-and-neck.  And which has better growth prospects?

ABI revs in China climbed to $3.9 bil in 2014, reported Redburn’s Chris Pitcher, writing on the meeting.  That compared to $14 bil in US.  Its mkt share rose from 12% in 2010 in China to 18% now, about half of that thru acquisitions.  ABI is the #3 player overall in China, but the leader in profitability.  It made over $700 mil EBITDA there, given 18.5% margin reported by Exane BNP Paribas.  That’s only a little more than 10% of ABI EBITDA level in US.  But ABI has 29% of EBITDA profit pool there, added Exane BNP Paribes based on comments from ABI zone prexy Michel Doukeris. 

China is already 23% of global beer volume.  And ABI expects its biz in Asia Pacific (73% China) to grow to 20% of total co revs by 2020, up from 11% last yr.  So clearly it expects continued big growth in China going forward.  Yet China economy sputtering recently and beer sales there down 4% last yr and 4.5% in 2015.  Still, ABI expects 1-2% growth to return to China mkt, said analysts, far faster in the hi-end segments.  That’s where ABI plays best in China.  AB has 49 breweries and 5,000 distribs in China.  In response to question, it said direct distribution in China is not a “crazy” idea,’ reported Exane BNP Paribas.  

Hearing memo filed by Craft Beer Guild for Mass Alc Bev Control Comm over allegations of “pay to play” argues that: 1) the Mass distrib did not violate “either the statute or regulation” cited by ABCC; 2) if ABCC determines there was a violation, it should “impose only a penalty” of a fine (elsewhere suggested by CBG to be no more than $150K) and “not suspend or adversely act against Craft’s license.”

To defend itself, CBG delves into specific language of statute and reg, legislative history, intent, litigation and what goes on in the Boston beer market.  As we reported yesterday, CBG stipulated to the facts in Violation Report filed by ABCC.  That report identified transactions in 2013/2014 where “Craft made 15 payments to … non-licensed marketing entities.”  These payments ultimately made their way back to retailer groups, ABCC sez, 5 of whom ABCC charged yesterday as part of “pay-to-play” (as in securing tap handles) scheme.  Here is CBG’s basic defense:

• Since CBG’s 2002 inception, it “encountered” pay-to-play trade practices used by distrib competitors, “invited and encouraged by retailers,” that included payments to 3d parties “for the opportunity to sell certain beers in retail accounts.”  CBG felt it had to “meet the competition.”  What’s more, “ironically,” CBG was singled out after not making a payment sought by a retailer and losing its business.
• A close reading of the language, litigation and history of the statute and regulation that the ABCC sez bars pay to play shows there was no violation of vague, previously unenforced law/reg. 
• To violate statute barring price discrimination among customers, ABCC has to prove “one retailer paid a different price than another for the same product,” or that only certain retailers got discounts, CBG insists.  But “no such allegation whatsoever” that CBG “offered different volume discounts or early payment discounts to retailers.” So, no violation of price discrimination statute.  What’s more, CBG never paid retailers directly, rather payments went to “unlicensed entities that provide marketing services.”  That makes the payments “rebates” which are not illegal in Mass, sez CBG.
• Nor did CBG violate regulation barring payments of money or “things of value as inducements.”  That regulation, in CBG’s reading, “intended to only prohibit a supplier from acting through a wholesaler to induce a retailer,” not to prohibit direct inducements from distribs to retailers.  Without that 3d party involvement (the supplier), no violation, sez CBG.  Besides, no evidence that CBG induced retailers, it argues: “Rather, these transactions were driven by retailers.” Again, “it was, ironically, Craft’s refusal to offer a rebate that originally provoked the tweets [by craft brewer Pretty Things] that set this investigation in motion.”  “A fair inference from” the retailer’s dropping Craft’s brand, “is that another wholesaler conceded to the retailer’s unlawful demands when Craft refused.”  But no other wholesaler has been cited. 
• What’s more, the regulation ABCC sez CBG violated was “specifically repealed” by the legislature in 1971, which “chose to permit” rebates.  Thus, ABCC has “no authority for the regulation.”  Besides, the language of the reg, including the phrase “thing of substantial value” is vague, the reg has never been enforced and ABCC has previously cleared the use of mail-in rebates and the “swiping of credit cards at retail establishments” by supplier reps.  So ABCC created a “rather startling contradiction” by allowing certain rebates and inducements for years but now taking the position that the reg “prohibits all inducements.”  And it’s doing so “without fair warning,” thereby violating CBG’s due process rights.

Finally, if after all this, the ABCC still determines CBG violated the statute and/or regulation, the appropriate penalty, based on legislative history and a previous case involving Miller, would be a $5K fine per violation.  Since Craft issued 15 checks to unlicensed entities, ABCC “should find that no more than 15 violations” of each of the statute and the regulation occurred.  That would be 30 violations at $5K per, or $150K. 

CBG also reminds the ABCC of mitigating factors that: 1) this is only time the regulation has ever been enforced and ABCC hasn’t provided “any guidance” about it or any “fair warning of its choice to start enforcing it”; 2) “it is clear that the conduct originated with the retail tier in the Boston market”; 3) ABCC “only identifies” 15 payments over 2 years; 4) CBG “fully cooperated” with the investigation 5) CBG “immediately ceased all conduct identified by Investigators as problematic” and subsequently lost accounts; 6) over 130 employees would suffer if CBG’s license were to be suspended. 

ABCC will ultimately make and publish a decision; CBG will have legal options depending on that decision.        

Leinenkugel’s Grapefruit Shandy is leading the pack among new beer brands in IRI supers data yr-to-date thru Jul 5, IRI’s Dan Wandel pointed out today during always-informative Craft Power Hour hosted by Brewers Assn.  It got $4.6 mil in $$ sales, beating out AB’s Oculto, which got $4.3 mil in $$ sales.  Interestingly, top new craft brand Sierra Nevada Hop Hunter IPA is right behind, at nearly $4 mil.  And that’s with very little, if any, advertising.  It beat out each of Bud Light’s Mixxtails, with Long Island Iced Tea at #4 and $3.9 mil and Hurricane at #6 and $3.5 mil.  Firewalker didn’t even make top 15 new brands. Recall, Mixxtails got over $13 mil in ad support in 1^st half, according to Nielsen.  Sierra also got #7 new brand with Nooner Pilsner.

Inefficiency Incarnate; More New Brands Sell Less Per; SKU Smackdown Coming?  Then again, craft brands over 42% of new brand $$ sales, Dan noted.  There are already 600 new beer brands this yr, following record 612 in all of 2014.  But velocity is clearly declining.  Six hundred new beer brands sold 1.8 mil cases, an avg of 3,000 cases per. That compared to 612 last yr selling 7.4 mil cases or 12,000 cases per.  This suggests a coming SKU smackdown and indeed Dan also shows that fewer SKUs sold so far this yr than last in all.  Last yr, SKUs at 10,500.  This yr so far, that’s down to about 10,000.

More New FMBs from Redd’s and Palm Breeze A couple of other interesting notes: at least 6 of top 15 new beer brands are FMBs.  Redd’s had 2 new brands in top 10, with Green Apple at #5 and Wicked Mango at #9.  Mike’s Palm Breeze Mandarin Orange at #10 with $2.1 mil in sales, just ahead of Blue Moon White IPA at #11 and $1.9 mil.  And Palm Breeze Ruby Red at #14.  

 Got a Total Wine Bottle Busters ad thru Sep 13 today with some low, low prices.  Taking cake, supposedly import-priced Beck’s at $9.99 for 12, $2 off.  All prices said “Save $2.”  Guinness Extra Stout almost as cheap.  At $10.99 per 12.  Surprisingly low price on Sierra Nevada 12-pack at $11.99, actually a buck per 6-pack less expensive than Shock Top at $12. 99.  Moving up absolute price curve, but down on a per unit basis: 30-packs of premium lights, all interchangeable and priced $17.99 or $3.60 per 6-pack.  Top of the price pyramid in the ad, but still low per unit: Stella Artois case priced at $21.99, equivalent to the Guinness pricing.  

A big day for pay-to-play in Mass.  As state Alc Bev Control Comm (ABCC) opened its previously postponed hearing into charges vs Craft Beer Guild (CBG) distrib for providing payments or “things of value” to Boston retailers to carry its brands and/or exclude others and for price discrimination among customers, it named names of 5 of Boston’s biggest retail groups (that own dozens of retailers) who accepted such payments from CBG, reports Boston Globe.  Paper got hold of ABCC report that charges:

• CBG paid one retailer $20/keg to carry its beers for “about three years.” CBG sales mgr told ABCC “payments were a ‘kickback’ in exchange for committed tap lines, and that his company would then bill the brewer of each beer for the kickbacks.”  Invoices masked payments as “menu programming,” “brand allocation” and “marketing support,” report sez.  One invoice showed payment to retailer of $4,700, implying 235 kegs and detailing how many kegs of which brands sent to retailer who had multiple locations. 
• Other CBG employees told ABCC that CBG paid another retailer group $20K per yr in “marketing support.”   But in another instance, same retailer group asked for payment representing 10% of what it owed CBG, approx $50K, and CBG “balked.”  Retailer “then refused to carry any beer” from CBG at its outlets.
• CBG allegedly paid co that owns bar near Fenway and others $12K in 2013 “to carry Yuengling beer in its restaurants” ABC charges, “among similar payments.”  (Yuengling did not enter Mass until early 2014.  No other brands/brewers named in Globe article.)

Our report on today’s hearing was provided by an atty/beer writer familiar with the situation, Andy Crouch.  Craft Beer Guild stipulated to the facts the ABCC had uncovered with substantial documentation supporting at least 15 payments of up to $12,000 per tap line. The ABCC detailed the lengthy investigation, which involved interviews with dozens of wholesale and retail employees, and candid acknowledgments and details of the payments, often made to marketing shell companies with no employees or physical offices. After the stipulation, CBG’s attorneys tried to argue that it’s a relatively new company (founded in 2002 – though it is a Sheehan-owned subsidiary) that was confused by an ambiguous and unclear law. They further argued the pay to play problem existed in MA long before CBG came into business and they had to do it to compete. Finally, CBG made a lengthy argument that due to a decades old change in Massachusetts law it is not actually illegal to engage in pay to play in MA. They also noted that the ABCC had never before enforced the inducement law.

The Commissioners seemed skeptical.  One told the CBG’s attorney: “It looks like from where I'm sitting that they went to a tremendous amount of trouble to hide what is going on.” Another said: “This goes beyond self-policing. They’ve engaged in a ruse and subterfuge to thwart the statute and regulation.” The commission took the matter under advisement and will later issue a decision.  Hearings for the violations for the five bars will take place November 3. 

CBG said in statement that while it stipulated to facts in ABCC report, it also “filed a legal brief outlining CBG’s position that its conduct did not violate existing laws and regulations as well as detailing the current regulatory scheme’s lack of clarity and guidance.”  At same time, CBG “cooperated fully” with ABCC all along, it sez, and “opted not to go through a prolonged hearing process challenging unclear and confusing regulations and has instead chosen to wait for the Commission’s decision on the matter and renew its focus on providing craft beer to the Boston market.”  Mass Beer Distribs assn also put out a statement: “Our member companies are committed to an open and competitive process in which the highest quality malt beverages get to consumers. Given the booming craft beer industry in Massachusetts, we believe we have succeeded in fostering that open market, with a highly competitive environment. We respect the ABCC’s need to look into allegations, and the ABCC has received the utmost cooperation every step of the way. We expect and look forward to a balanced and fair result that brings clarity to the marketplace.” (This same article appeared in today’s Craft Brew News.)  

POW!  First steps in AB attempt to consolidate northern Calif volume, reported as pending in Express and Beer Marketer’s INSIGHTS last week, just announced.  AB “acquiring a portion of Horizon Beverage Company’s distribution business in Oakland” and “buying the Anhesuer Busch distribution rights” of M.E. Fox in San Jose, 2 territories which AB sez are “contiguous.”  These are the 4^th and 5^th branch deals that AB has announced this summer (2 in Colo, 1 in NY, 2 in Calif), while it has also sold 2 as mandated by new law (KY).   In toto, AB has added about ½ of 1% of its total volume to its branch base.  It continues to say that it has no overarching strategy to acquire branches, and that these transactions were voluntary, not coerced.  But many AB distribs and their advocates are watching these developments very warily.  These acquisitions have been hot topics throughout much of beer biz in the summer of 2015. 

The latest 2 deals are also especially significant because they will give AB a beachhead in Northern Calif.  It has had several branches in Southern Calif for yrs and has long sought consolidation in Northern Calif.   M.E. Fox sells approx. 1 mil cases of AB and Horizon around 2 mil cases.  But for each, the real value in their operations resides in their larger volume and profit non-AB brands, which will sell for much higher multiples. And though AB sez it “plans to keep several local craft beers in our portfolio,” bulk of Fox and Horizon import/craft portfolios (notably Constellation) will reportedly be sold to local MillerCoors distribs, DBI in San Jose and Bay Area Bev in Oakland.  Won’t that ultimately make AB brands less competitive in those mkts as their branches compete against strengthened distribs with higher share and far broader portfolio, including red-hot Constellation?  That’s apparently not AB’s view.

M.E. Fox sells about 2.2 mil cases of beer in all and another 1 mil cases of non-alcs, including over 600K of Red Bull.  Fox is reportedly the largest indy Red Bull distrib in Calif, potentially a tenuous position considering absence of franchise protection for Red Bull brands.  Founders Michael and Mary Ellen Fox started the company almost exactly 50 yrs ago (Sep 1, 1965).  They have 6 children, all of whom worked in the biz for yrs.  Current prexy Terence Fox is on NBWA board of directors.  Both deals are expected to close in Nov.  More details as we get ‘em.