Another high-up move at Diageo Guinness USA.  After promoting Tom Day to prexy in late Jun, here comes Diageo vet Jack Edwards to fill Tom’s previous sr veep sales role.  “Jack has an incredible track record” in Diageo’s spirits biz, Tom told staff, working in finance, mktg and control states.  Jack comes in with DGUSA showing some momentum, at least in off-premise scans.  Volume up 3.3% in latest 4-wk report from Nielsen, +4.2% yr-to-date thru Aug 22.  Dollar sales runnin’ up about 5% same periods.   

In addition to providing peek into AB InBev’s current worldview, Mundy provided some insight into Heineken’s global strategy.  Some key points:

• Heineken combined chief sales/chief mktg functions beginning Jul into single position of chief commercial officer, Jan Derck van Karnebeek. Main effect, in Mundy’s view, “should lead to improved execution at the point of sale with a less silo’d approach.”  Heineken plans to “focus on integrating the commercial function to scale the premium opportunity,” globally.  What Heineken and Mundy mean by “premium” is what in US we generally call “above premium.” 
• Another integration at Heineken: cider with beer.  Historically, Mundy sez, Heineken treated cider as separate from beer, but that’s changing and it’s now “integrating cider at the opco [operating company] level, which is leading to better momentum.”  Interesting too, right now “cider is not profitable given the higher A&P vs beer,” even tho avg rev/bbl higher.  Heineken “expects” cider to turn profitable “on a five-year view.”
• Innovation (liquids, pkgng, more) near 8% of Heineken biz in 2014, up from just 3% in 2010.  “We believe the company will look to accelerate the speed of innovation,” going forward.  Tho top execs not overly enthusiastic in past about prospects of Heineken getting into craft beer biz, “the company views accessible craft (rather than discovery craft) as a sub-segment in which it can participate,” Mundy wrote.
• Other possibilities for growth/ innovation: low- and non-alcohol beer.  “Majority” of innovation on brand Heineken so far has been in packaging, Mundy notes, but he sees “potential to modify its ABV content downwards, although we would view any steps here as gradual.”  Heineken strategy also expected to be “tailored” by geography: build brand equity in low-share mkts (under 5%) vs attempts to “increase penetration in emerging economies and drive innovation and renovation in developed economies” where it has over 5 share.      

Even in wake of Q2/1st half conference calls, top brewery execs continue to engage with analysts on strategy and more.  That includes 2-day seminar in China with top AB InBev brass.  These seminars produced “quick notes” from Nomura’s Edward Mundy that add some color to AB InBev and Heineken strategies goin’ forward.  Meanwhile, others will be talkin’ to Barclays annual late-summer conference next week.  

AB InBev “acknowledges that it needs to grow its top line faster and be disruptive to stimulate growth,” Mundy wrote.  These are themes that CEO Brito, et al have voiced in recent conference calls.  That means, in part, ABI  “needs to capture a larger share of non-traditional beer occasions,” it believes, by “elevating the core,” growing global brands, developing flavored segment (without getting into spirits biz) and “premiumisation and invigorating beer.” While there’s been some skepticism voiced about ABI’s ability to build brands in US, its global brands Budweiser, Corona and Stella Artois up 5.6% in 1^st half, Mundy reminds, vs overall ABI volume decline of 1.7%.  And ABI’s not booking the Corona growth in US.  ABI believes “the world is more similar than different” and aims each of these 3 brands at a different “specific need state” that drives growth.  Bud is “King of relaxation and bonding,” Stella meets “food and savor” occasions and Corona “changes the mood” and celebrates the “night out.” 

While ABI focused on top-line growth, especially revenue, CFO Felipe Dutra reminded about ABI’s “financial discipline” and that it’s “continuously looking to improve processes and continue to close gaps through zero-based budgeting.”  Nuthin’ in Mundy’s note about M&A (Nomura has long been skeptical about ABI-SAB), but London’s Sunday Times reported this week that SABMiller is “strengthening its defences against a possible £75 billion takeover offer.”  Sources told paper that SABMiller hired two top “dealmakers amid speculation that rival AB InBev will pounce.”  These consultants “have worked on ‘defence’ mandates for some of Britain’s biggest companies,” according to Sunday Times.

Tho we reported a “so-so summer” in scans just last issue, with volume flat for 13 wks thu Aug 15, gotta note improved volume trends in most recent periods.  In fact, volume up for 4th-straight 4-wk period in Nielsen all outlet + convenience scans, following the -0.2% trend for 4 wks thru Jul 25.  Since then, each subsequent 4-wk volume gain in +1.4 to +1.5% range, with $$ sales up 4% or so.  Thru Aug 22, volume +1.4% for 4 wks, and biz is back to +0.7% yr-to-date. 

Again, imports led for 4 wks, with near 12% volume pop, driven by Constellation’s unreal near 20% pace and 1.1 share gain for the period. Corona Extra posted 17% gain last 4 wks.  All other above premium segments continued to outperform, tho cider slowed to +2.7% for 4 weeks.  Premium lights off just 0.2% for 4 wks, with Miller Lite +4.2%, Coors Light +1.1% and Bud Light -1.3%.  Brand Bud a point better at -0.3%.  Michelob Ultra Light runnin’ at +20.9% in most recent period, pickin’ up 0.5 share, while Bud Light/Bud combo off 0.6 share.   With Lite, Coors Light and Banquet each up, MC has the only 3 top premium-priced brands showin’ growth for 4 wks.  And only 1 top below premium brand up for 4 wks/yr-to-date: Bud Ice.  Net-net: 2-point share shift to above premium volume continues, while $$ shift closer to +2.5.    

Beer Institute heads into its Sep 8-9 mtg fully staffed.  Just hired Denise Dunckel as veep corporate affairs, replacing Chris Thorne who’s been consulting since he left in spring.  Denise brings lotsa experience in corporate world  (Blackstone’s Invitation Homes, Visa) and DC (White House, Fed Housing Financing Agency, US Depts of Education, HUD) to role, tho this is her first position with industry assn.  She will handle BI communications across govt affairs, alcohol policy/corporate responsibility, Brand Beer efforts, economic impact and more.    This completes senior staff at BI and tho lean compared to other beer and alc bev assns, Jim sez that “with new staff in the economics, policy and public affairs teams, plus the addition of an in-house government affairs role, the BI is functioning in a more integrated way to bring the most value to its members and represent beer in Washington, DC.”

“We come away encouraged about sustainable growth, capital allocation priorities and increasing discipline around wine and spirits profitability.”  So wrote Stifel analyst Mark Swartzberg in note yesterday after meeting with Constellation’s top execs.  Most notable comment about beer trend, in Mark’s view:  “Corona Extra is driving the total portfolio’s acceleration,” thanks to cans which are increasing shelf space for brand.  “To us, this indicates a bias to nourishing your most important brand, even a healthy paranoia.”  Meanwhile, Modelo Especial growth still kicking along at 20%+, still has distribution oppys and getting added focus tho support per case lower than Corona.  As we’ve noted, Constellation has led beer price hikes in at least coupla key mkts (Calif and Fla).  CFO for Constellation Brands Beer Div, Chris Stenzler, acknowledged that CBBD “adopting more of a leadership approach to price increases but continues to have a bias for sustaining volume momentum,” Mark wrote.   

In addition to Nava expansion (completion date moved up 6 mos to Jun 2017), Mark expects new greenfield brewery coming in northwest Mexico, close to Calif.  New brewery will be 10 mil hectoliters, cost $1.25 bil over 4 yrs starting in fiscal ’17, he figures.  Constellation already “undertaking measures to eke out extra capacity from Nava before any greenfield capacity becomes available.”  Mark also “encouraged” by CEO Rob Sands’ comment that STZ should have “balance between capex, returning cash and small tactical M&A.”  New Constellation Ventures, Rob said, “will focus on transactions of no more than a few million dollars each,” Mark wrote.  That would seem to take any significant craft brewer acquisitions off the table, at least for now.          

Beer/cider volume held even for 13 wks thru Aug 15 in Nielsen all outlet scan data.  Slow start after Memorial Day gained steam in more recent periods, including 1.8% volume pop in most recent 4-wk period.  Summer volume trends for AB and MC virtually the same at -2.3% and -2.4% respectively for 13 wks.  Dollars sales -1.2% for AB, -0.9% for MC.  While AB-MC combined dropped 7.6 mil cases and $69 mil in sales for 13 wks, Constellation gained 3.7 mil cases, boosted dollar sales by $120 mil.  Constellation trends: volume +14.4%, $$ +15.9%.  HUSA volume off slightly, $$ up slightly for 13 wks.  Pabst really got boost from Not Your Father’s Root Beer. For 13 wks, Pabst volume up 3.3%, $$ jumped 17%.  And for 4 wks, even as Constellation boosted $$ growth to 20% range, Pabst volume +7% and $$ outpaced even Constellation, +26%.  Boston Beer slowed vs earlier trends, but still up mid-high single digits all in for 4 and 13 wks.  AB and MC significantly improved trends in most recent period.  AB volume still off 0.7%, but $$ +0.5% for 4 wks.  MC cut volume dropoff to -0.5% and $$ up 1.2%.   HUSA volume and $$ each up slightly.          

Total measured media spend on beer/FMBs/cider up $11 mil, 1.7% to $679 mil Jan-Jun, Nielsen reports.  Overall, AB reduced measured spend about 5% while MC upped it about 5%.  Both AB and MC say increased mktg investments coming in 2d half.  Constellation and Boston jumped media support (+22-23%), as did DGUSA (+48%, on small base).  HUSA spend up 7%.  Keep in mind, tho Nielsen does include estimate for internet spend, brewers moving some marketing dollars to different areas, not all measured along with traditional media. 

At brand level, AB pumped big $$ into Ritas, Bud Light Lime, Mixxtails and Montejo.  Jacked Bud support too, but cut back sharply on Bud Light, tho AB sez increase coming in 2d half and Nielsen not capturing all of Bud Light’s digital spend.  Meanwhile, MC focused more on the core, raising support for Miller Lite and Coors Light by double-digits each. Banquet, Blue Moon and Redd’s got big boosts too, offset by slashing Fortune, Coors Summer Brew support.  Detailed report on media spend coming in tomorrow’s edition of beer marketer’s INSIGHTS.  

MC distrib Faust Dist in Houston just announced deal to purchase Dienst  Dist in La Marque. Picks up MC, HUSA, Pabst, Boston, Shiner and more in Galveston County.  Faust gains 1.4 mil cases and grows to 8.6 mil.  As part of deal, Del Papa (AB) picks up 200K cases of Constellation and Giglio picks up 40K cases of MC, others for small section of same county.  Deal expected to close Oct 30.    

Domestic brewers’ taxpaid shipments in Jul fell 300,000 bbls, 1.9%, estimates by Beer Inst’s Michael Uhrich. Together with TTB-revised figures for earlier mos, taxpaids off 2 mil bbls, 1.9% for 7 mos.  Wasn’t like there was huge hurdle: Jan-Jul 2014 taxpaid shipments were flat, even as AB built inventory last yr.  All eyes now on Aug-Sep.  Aug is an easy comp: down 700K bbls, 4.6% last yr.  But with Labor Day later, could push some volume into Sep, also soft last yr, down 1.4%.  Even with big import gain thru Jun, known yr-to-date US shipments off 800,000 bbls, 0.7%.