This is probably most challenging period for craft brewers collectively in 15 yrs, since craft segment flat way back in 2004. BA-defined indie craft still up 1 mil bbls, 4% last yr, 3% in 2d half. But a bifurcation has become increasingly marked.  You could feel it at recent Craft Brewers Conference in Denver. Huge difference between big established craft brewers who are mostly declining and many small craft brewers still excited by their growth and prospects. There are also many brewers dragged down by debt and/or too much capacity. And there’s everything in between.  It’s a big, messy scene. (Irony: AB and MC also sitting with lotsa extra capacity and too much debt.)  

Regional brewers over 15K bbls (70% of segment) just flat for 2d yr in a row, including many down. Almost all the growth, close to 900K bbls, comes from small and new brewers opened since 2015, much of it from their own taprooms.  That biz model still working well for many as micros (brewers under 15K bbls) collectively up double digits last yr.  In scan data, this yr undeniably tuffer.  Recent Nielsen craft trends: -6% for 4 weeks thru Apr 6. That’s softest we’ve seen for segment and a similar decline pace to (much larger) premium lights in period.  Craft down 2% YTD in Nielsen (Nielsen includes Blue Moon, Shock Top, Leinie as well as acquired craft). In IRI, craft up slightly YTD.    

CBC attendance still massive, over 14K with over 1000 exhibitors. There are now over 7300 US craft brewers, with 1049 opening and 219 closing (both records) last yr, and over 2500 still in planning. What are these brewers getting into?  It’s already a very crowded and competitive environment with lotsa excess capacity.  Craft brewers collectively have almost 20 mil bbls of excess capacity, a capacity utilization rate under 60%. That’s “well below” most manufacturers, said BA’s Bart Watson, tho yr-over-yr change ain’t dramatic. Many behind-scenes conference conversations turned to tuffer times ahead and uncertainty of what’s coming next. “It’s like watching a train wreck in slow motion and yet people are still jumping on the train,” said Brooklyn co-founder Steve Hindy.   

San Diego Blues Hit Stone and Ballast Just before and after CBC, several craft developments seemed to augur new more difficult era. While San Diego sometimes described as craft mecca, recently its largest players visibly struggled. Craft evangelist Stone sold off its Berlin brewery to BrewDog, facing a grim reality. After spending over $25 mil to start in Germany with blazing revolutionary rhetoric, Berlin barely got off ground. And several suggest that won’t be Stone’s last move needed to get squared away with private equity firm VMG.  But Ballast Point, which briefly overtook Stone as top craft co in San Diego, confronted even more challenging circumstances. Corporate parent Constellation closed Ballast Point’s Temecula brewpub and its sour and barrel aged facility Trade Street brewery (also used for innovation and R&D).  Ballast Point implemented another round of layoffs (big one last summer). That followed its $108-mil impairment charge 2 weeks earlier (see last issue) amidst steep declines.

Meanwhile, two other craft brewers sold off control in week before CBC: Avery sold control to Spanish brewer Mahou and Ninkasi to new private equity platform Legacy Breweries. Both piled on debt to expand, without getting big payoff.  Heavy debtload is sad flipside of too rapid expansion and not meeting growth targets.  One craft vet told INSIGHTS: “None of us got in this to get rich but none of us got into it to go broke either.”

Widely Dispersed Growth Is “Pain Point” That’s a vastly different set of circumstances than craft faced just 3 years ago, when many had real chance to score big on a sale as strategic buyers flooded mkt. Now big strategics ain’t so eager and there isn’t enuf growth to go around. With 7300 breweries currently splitting 1 mil bbls of growth, that means craft growth down to an avg of 100 bbls per brewery per yr, as Bart noted, adding that’s “where the pain point is.” What if craft slows further, with even more newbies? 

It’s already long “after the revolution” for most established craft brewers.  Six of top 10 craft brewers below their peak beer volume in 2018.  Each of top 3 indie craft, Boston, Sierra and New Belgium more than 10% below peak on craft beer volume.  (Boston Beer hit record volume in toto, but down almost 1/3 in craft). Nearly all those 6 down again so far in 2019. At same time, AB and MC acquired craft portfolios keep gaining ground, growing double digits.  Meanwhile, hard seltzers and other low ABV options are presently stealing craft’s thunder with new generation of drinkers. And distrib enthusiasm for craft waned as growth slowed. Distribs also less than thrilled with taproom success outside 3-tier system. What’s more, there’s “new wave of competition,” as Bart said, from local distilleries, cideries and kombucha-makers. Net-net: It ain’t getting any easier out there.

MillerCoors now in 3 different fed cts with 2 competing brewers and 1 of its distribs.  In CA, MC fought off preliminary injunction sought by Stone Brewing, which claims 2017 “refresh” of Keystone Light violated its trademark.  Stone “demonstrated that it has a moderately strong infringement claim against Miller,” US Dist Ct judge ruled, “but not that it would suffer irreparable harm” without injunction.  In fact, Stone “hard-pressed to determine that it would suffer any harm absent” injunction, judge observed, so no go.  He also found Stone’s charges of consumer confusion “largely unfounded.”  Case continues.  Stone vowed to present “evidence of the significant impact” that MC campaign had on Stone and “massive sales which Keystone has accumulated since reviving itself using Stone’s trademark.”  MC said decision shows Stone’s motion “lacked merit.”  Its counterclaims survived. 

In NV, MC still awaiting fed judge’s decision whether to grant distrib Bonanza Bev

preliminary injunction in dispute over Bonanza’s desire to sell its Miller biz to its preferred buyer (Southern Glazer’s) vs MC’s preference, Breakthru Bev (which has Coors).  Recall, Bonanza charges several aspects of MC contract’s transfer provisions (exclusive negotiation, right of first refusal, match and redirect) violate NV franchise law.  MC sez they don’t, that process only got to step 1, so “unripe” to review other provisions.   

Finally, MC seeks injunction (in WI) to halt AB’s “sustained false advertising attack” via corn syrup ads.  Campaign has “already had dramatic impact on consumer opinions,” MC claims, causing “confusion, health concerns and disgust toward” Miller Lite and Coors Light.  MC relies on consumer survey by mktg expert in wake of ads and insists MC “already suffering real reputational harm and business injury.”  AB campaign contains “materially false claims that confuse consumers,” MC charges, that final products contain corn syrup and/or HFCS (they don’t).  AB responds that “recent Bud Light campaign is truthful,” that Miller Lite and Coors Light “are brewed with corn syrup; Bud Light is not. These are facts.... We stand behind the Bud Light transparency campaign and have no plans to change” it.  If this weren’t enough for MC’s inside and outside counsel, parent Molson Coors faces numerous attempted class action suits over accounting errors it reported earlier this yr.

                                 Best Wishes,     

Oddly, even while US alc bev biz now in a golden era, it faces growing, perhaps policy-altering skepticism on the health front.  Even while beer volume soft, overall alc bev revs and profits are strong.  Producers scored fed excise tax cut in 2017 and hope to extend that.  State tax hikes get proposed, but very few get passed.  Meanwhile, tho traditional bar biz has taken a hit, alc bevs more widely available than ever.  From craft producer “tourism” to expansion of licenses to every kind of biz from barber shops to “Bespoke Clothiers,” ain’t a challenge to find a drink these days.  Public health advocates/critics notably failing to achieve key policy goals: raising price, limiting availability and/or restricting ads or mktg.  Nor have producers slowed flow of innovative new products aimed at broadening alcohol’s appeal to different consumers and occasions.  But there’s a growing skepticism in the research community, media and among some policymakers about what used to be a solid belief that moderate drinking has health benefits.  A revived “no safe level of drinking” mantra has spread in recent yrs.  That view explicitly voiced by UK’s chief medical officer in early 2016 when UK changed its drinking guidelines.  And you see it more and more in comments from researchers and in media.  In last few wks, 4 new studies emerged that will feed this skepticism.  One linked moderate drinking to hypertension risk, a 2d to stroke.  A 3d questioned the link between moderation and longer life.  A 4^th equated drinking a bottle of wine/week with smoking 5-10 cigarettes/ week.  Each has implications for the “messaging” health providers and govts will adopt.

“I Can’t Take this Lunacy!”  UK health economist Christopher Snowden took apart flimsy wine = cigs “research” and reiterated that real science still supports links between moderate consumption and better cardiovascular health, longer life and more in The Guardian.  Citing “no safe level” mantra, he reminds: “Along with the equally dubious assertion that alcohol is a major cause of cancer, it forms the bedrock of the drive to treat drinkers like smokers.”  Elsewhere, wine expert Rob McMillan declared: “I Can’t Take this Lunacy!”  Like Snowden, Rob’s hair caught fire with wine = cigs claim. He calls the “science” into question, but also notes increasing abstention among young people: “We are in a fight for the young consumer who believes BULL*&@! science like this, and the one-sided articles that get printed from this kind of crap.... What are we going to do as an industry to counteract this constant barrage of misinformation?”          
 

Up Next: 2020 Dietary Guidelines  So far, none of this has translated into policy change in US.  But US Dietary Guidelines under review again.  Last revision (2015), removed key language linking moderation to “beneficial effects,” including lower cardiovascular disease risks, longer life, better cognitive function.  Could next version add negative language linking moderate drinking to increased risks?  Regarding mortality, lead author of study noted above, Tim Naimi, wrote: “Overall, this study adds to the literature questioning protective effects for alcohol on all-cause mortality.”  Naimi is on Advisory Committee reviewing Guidelines.  It will explore relationships between alcohol and cancer, cardiovascular disease, neurocognitive health and all-cause mortality.  In another irony, all of this going on while industry execs increasingly talk (too loosely perhaps) about products in context of “health and wellness.”  How these debates play out could have serious impacts on alcohol policy going forward and determine whether golden era can continue.

Silver Eagle Dist, largest AB distrib, struck deal to sell its Houston biz for eye-popping price of $1 bil, sources say. That’s over 12x adjusted-EBITDA INSIGHTS understands. So some distribs do still command huge valuations. Owner John Nau kept 12-14 mil case Silver Eagle biz in San Antonio. At least for now.  Houston was biggest deal ever in AB system; only Reyes buy of Gold Coast in FL also cracked $1-bil mark. Silver Eagle deal followed on Jeffreys deal in NC, previous high at around $375 mil. 

Distrib deals so big now that private equity and family offices necessarily play a much bigger role.  And the buyers can be billionaires.  Silver Eagle buyer is Redwood Capital Investments, investment firm of Allegis founder Jim Davis (whom Forbes 400 put at $2.9 billion in 2018). Redwood Capital will be big player in AB distrib system.  Redwood owns at least a stake in about 75 million cases.  Or close to 5% of AB biz. That’s kinda amazin’ considering AB traditionally didn’t allow private equity to own distribs. Recall, Redwood also owns majority of Lakeshore, AB megadistrib in metro Chi (Hand Family Cos is other owner) and took stake in Adams Bev Co too as Adams bought over half of Jeffreys.  

Private equity more present in MC system too in recent yrs. Recall, Meritage owns megadistrib Columbia, which sells over 70 mil cases all in, beer, wine, spirits and NAs.  Recall, Meritage is family office of Simons family; Jim Simons worth about $20 billion sez Forbes; gained $1.6 bil last yr alone, leading all hedge funds. But it ain’t just private equity or family offices. Constellation plans in CA could involve several other families worth billions as 2 vie to buy a third.

“Private equity will become the predominant form of ownership for beer distribution over the next decade,” Ipplito Christon predicted Apr 3, following Silver Eagle. Why?  “Transactions for beer distributors are getting larger and require more money than a typical beer distributor can comfortably afford.” Ippolito Christon envisions 40+ mega distribs worth $600 mil to $1 bil each that do 40-50% of total volume. Then too, “private equity is no longer perceived as ‘hot money’ with a short-term investment horizon.” Family offices are more likely to have “patient long-term investment horizon, seek stability in the marketplace” and “will be dependent upon experienced and skilled managers.”  Indeed, Redwood will keep existing Silver Eagle sr mgt, including prexy Bob Boblitt and exec veep John Johnson.   And it will keep the name Silver Eagle Distributors too.

INSIGHTS tracked 9 deals so far in 2019. Most distrib deals are smaller distribs selling to larger ones. But many can no longer get 10-12x EBITDA multiple. So far only slightly faster pace than usual. Between giant deals like Silver Eagle, Constellation’s consolidation plans still looming in its largest market CA and smaller guys looking to get out, this yr already feels different.  Lots of deals still to come.

AB took price hikes or discount reductions in much of US in early Apr.  In all, they are relatively modest, netting out to 1-1.5%, sources say.  Depends on state.  Increases often on secondary packages, or packages that didn’t go up last fall. But MC not always following; if not, then AB rescinds. That can be split within a state. In FL, AB wanted to go up 80 cents frontline on 12-packs of Bud/Bud Light. MC followed in some parts of state, but not others, depending on distrib. So AB rescinded, INSIGHTS understands.  In IL, Lakeshore went up downstate, and on smaller packages in Chi. Looks to go up on larger packs May 1; MC wants to hold, as mkt leader, go up in fall, it told distribs. How it plays out is to be determined.  In CA, AB actually went backwards as it reduced key 30-pack prices from $18.95 to $18.50 and 20-packs from $13.10 to $12.65, tho it increased EDLP on 12-packs.  Meanwhile, Constellation did not take any price hikes this spring. Its model/budget based on fall increases.  It will go up this fall, looking for 1-2% rev per bbl increase.  But Constellation now off cycle with AB.  AB won’t go up until next yr. Will that shift competitive dynamics at all?  None of top 3 got much in way of price realization in latest scan data. For last 4 weeks thru 3/23, each of AB, MC and STZ pricing up less than 1% in Nielsen all outlet.  AB avg prices up 16 cents to $21.34 per case, MC up 12 cents, 0.6% to $20.22 and Constellation up 12 cents, 0.4% to $32.12. Constellation reported just 1.3% rev per bbl gain in qtr thru Feb, towards the low end of guidance. Meanwhile, Walmart aggressively lowering prices on beer, in initiative to take share and build foot traffic.  Its beer sales didn’t meet expectations last yr, and “this is how they respond,” said one source. Another described it as “effort to buy back market share” but some prices “so far below cost” that people are scratching their heads.  Walmart just coming off a strong qtr overall.

Final, final figures for 2018 still in the air, but Beer Inst economist Michael Uhrich’s current take is that US volume dipped 1.2%.  That’s while spirits +2.2%, wine +1%.  So, Michael figures beer lost 0.8 share of “alcohol servings” (another term for absolute alcohol) to 49, while spirits picked up 0.7 to 35.6, wine 0.1 to 15.4.  Recall, beer peaked near 60 share in mid-90s.  At retail, consumer spend on beer growing, but “has slowed dramatically, which is likely to continue,” Michael said during Apr 4 State of the Industry webinar.  Total retail beer spend up just 0.4% last yr, he estimates, a steady decline from +2.2% in 2015, 1.8% in 2016 and 0.6% in 2017.  Off-premise spending slowed sequentially from +3% in 2015 to +0.2% last yr.  On-premise slowdown not as sharp, dipping from +1.3% in 2015 to +0.6% last yr.  Dollars shifting to off-premise, but that needle moves modestly. In 2018, bar/taverns (including taprooms) lost 0.1 share of total retail dollars, Michael estimates, but restaurants (including brewpubs), other venues picked up slight share. So, overall, on-premise gave up just 0.04 share to off-premise last yr.

Given slow start beer biz got off to in 2018, creating easy comp, a better beginning to 2019 seemed very possible.  Recall, Q1 shipments down near 3% last yr; Nielsen scans showed volume -1%.  Indeed, Jan 2019 was solid.  Jan domestic shipments and scans each +1.6-1.7%.  But things went south quickly.  Feb domestic shipments -0.4%, Jan imports down 11%, Beer Inst reports.  Total shipments -0.6% in available data.  And Feb/Mar scan volume negative in Nielsen, -2.1% for 4 wks thru Feb 23, -1.2% for 4 wks thru Mar 23.  Thru Mar 23, Nielsen all-outlet volume -0.3%, tho $$ still up 1.7%.  Wha’ happened?  Weather was lousy in much of US, especially CA, govt shutdown impacted Jan imports, Easter later this yr (tho spirits not slowed). One stubborn constant: growing segments/innovations ain’t offsetting (mostly) soft mainstream brands.  Once again, top 4 brands, Bud Light, Coors Light, Miller Lite and Bud, still over 1/3 of volume, collectively down about 4% in Q1 scans.  Note too: Beer Inst economist Michael Uhrich projects another 1-2% volume decline for US beer biz this yr, slightly worse than 2017/2018 trends.  In Michael’s view, underlying economic trends, together with ongoing share loss to spirits, volume erosion due to premiumization and declining retail spend on beer, unlikely to change much.  Meanwhile...

Constellation Brands Beer Div revs of $5.2 billion, profits of $2.04 bil both up double digits in fiscal yr ended Feb 19. That and best-in-class 39% oper margin show how far it’s come. Expectation of continued high single digit rev growth, 1-2% pricing and mktg at 9.5% of revs (over $500 mil!) underscore how much further it still hopes to go. Stock jumped 6% on results, tho some analysts found FY20 guidance “noisy,” “slightly below” expectations. Whatever happens, CBBD on amazing run. It doubled profits in last 4 fiscal yrs.  Oper inc up $1 bil as revs grew $2 bil and volume up 5 mil bbls. That’s makin’ hay. 

In latest fiscal yr, Constellation shipments volume jumped 26.1 mil cases (1.9 mil bbls), 9.7% to 294 mil cases, while depletions up 8.8%. That approx one point differential meant Constellation ended fiscal yr with higher inventories than expected, which it blamed on “muted depletion trends” driven by weather in CA in Feb. “The entire scenario around the slight weakening at the end of the fourth quarter was driven by weather. The last 2 weeks [of Feb] in California...literally wet. Soaking wet,” said ceo Bill Newlands on conference call.  Still, that meant Constellation’s 1^st qtr shipments will be up mid-single digits, co said. Constellation also scored extra profits in Q4 as it cut mktg to 6% of sales (compared to 9.3% for full yr). Oper inc jumped 16% in Q4, compared to 11% for full yr.    

STZ Expects Mid-Singles Growth on Corona Family, 30-45% Growth on Premier  Corona brand family depletions up 7% and over 150 mil cases in fiscal 2019.  With increased investment and 30-45% growth on Premier, natl launch of Refresca, STZ guides to mid-single digit growth for Corona family in fiscal 2020, said Bill (ending Feb 20). Modelo brand family up 12% to 125 mil cases and will also get its “biggest ever investment.” Modelo #1 growth brand in beer so far in 2019, #1 brand overall in state of CA, and Modelo brand family about to pass Coors brand family, sez STZ. There is “long runway” for growth, added Bill. 

Ballast Point the Only Blemish Constellation clearly made a bad deal, buying Ballast Point for $1 bil back in late 2015. Brand declined last couple of yrs. And Constellation now took write-down of $108 mil, following previous write-down of $87 mil. Ballast Point trends continue to deteriorate.  But Constellation’s craft portfolio is such a small part of its overall biz (1% or less) that it scarcely matters to overall results.     

Constellation Sells Off 40% of Wine to Gallo for $1.7 Bil Constellation will become more predominantly a beer co as it sells off big chunk (40%) of its wine biz to Gallo for $1.7 bil. That’s about 6.5x $260 mil in EBITDA it divested, sez RBC analyst Nik Modi.  Those wine brands had $1.1 bil in revs in latest fiscal yr, STZ said.  When deal complete, beer will be more than 80% of remaining co’s profits and over 70% of revs.

“Ask 7 lawyers how the Supreme Court will decide” pending case over Tenn residency law for liquor stores “and you’ll get 8 opinions,” quipped one of those lawyers at NABCA Legal Symposium opening reception.  That reflects lack of consensus about how hearing went and where Court will come down.  And, when Symposium finally got around to addressing case, oddly at very last session, US Dist Ct Judge John Jones, one-time chief of Pennsy Liq Control Bd, repeatedly declared “I don’t know” how Court will decide.  Judge Jones and two attys who wrote briefs in support of state law, set out key 21st Amendment (giving states rights to regulate) vs dormant commerce clause (Constitution’s anti-discrimination principle) conflict and discussed challenges facing Court.  

As they batted around possible outcomes, numerous possibilities emerged.  “The default is a narrow decision,” said Judge Jones, “but I don’t know.” Only 3 judges remain from Granholm decision that navigated same conflict, he reminded.  And “younger justices are thinking about the next challenge,” widely presumed to be laws requiring in-state presence to sell liquor.  (Those cases in the wings, atty Sarah Hunger noted, and Court well aware of them.)  New Justices “may swing at something bigger,” said Judge Jones, i.e. a decision with broad impact on 3-tier system.  “Do they try to give a test, guidance, a presumption in favor of the states?  I don’t know.”  Earlier, Judge Jones opined decision “may not be profound, overarching,” but may provide “some order and reconcile” differing lower court opinions on key conflict “and chart a course that I would guess avoids a case two years hence that’s trying to put one down the smokestack of the three-tier system.... I can’t see the Court going there.” By same token, Court “won’t blow up Granholm and Bacchus,” he believes, and go back to pure 21st Amendment, broad grant of states’ rights. 

Atty Rachel Bloomekatz agreed: default is a narrow decision that may “split the baby” and try to accommodate dormant commerce clause and states’ rights.  But she also pointed out judges talked about broad “first principles” at hearing.  Deciding “proper result” tuff enuf.  But if Court is to create “true precedent” and provide real guidance on issues other than residency, that requires “a meeting of the minds on the reasoning.  It’s hard to get that.”  Will court draw up test to decide what’s too much discrimination and what’s not?  It’s “really vexatious” to judges when “you get 4- or 5-part tests” that create a “mechanical exercise, and you’re faced with bizarre facts to wedge in,” Judge Jones said.  “That’s cumbersome, creates reversals and decisions that are untethered and subjective.”  And that’s when judges get tagged for “legislating from the bench.”

Another atty who attended hearing, RJ O’Hara, offered succinct take.  While Appeals Ct found nothing to defend law but economic protectionism for established in-state retail stores, those same retailers (and others) defended law on public health/safety grounds.  They claimed residency law allows for easier inspections.  Hard to make that argument in Tenn tho, RJ noted, since it does not require any on-premise retailers to be in-state residents for any period of time.  On other hand, very rational (and much easier) to defend laws requiring in-state presence of retail licensees (brick and mortar), since it’s extremely difficult to inspect out-of-state operations and enforce in-state laws that would cover them.  So, in RJ’s view, “you can draw the line of presence versus residence.” 

                                 Best Wishes,           

Tho topic not on NABCA Legal Symposium program, lotsa buzz among attys about TTB’s stepped-up enforcement efforts that resulted so far in several offers in compromise (OIC) for pay-to-play, numerous one-day suspensions of small wineries/distribs for consignment sales.  Several industry attys privately supported recent blogpost by veteran alc bev lawyer John Hinman challenging fairness/appropriateness of recent actions.  (See our Mar 13 INSIGHTS Express.)  Indeed, one normally reserved atty actually suggested TTB actions amount to “extortion.”  Many waiting for next shoes to drop.

That could be in IL.  Recall, TTB tagged distrib Elgin Bev for $325K OIC in 2018, alleging it used 3d party mktg co to pay to play.  Donovan Borvan, chief of IL Liquor Control Comm when TTB did joint investigations with ILCC that resulted in offer, told NABCA that “a lot more coming” from those investigations.  ILCC launched some investigations on its own a coupla yrs back.  But, understaffed, working with ageing regs and convinced there was “a lot going on” in IL mkt, ILCC sought TTB’s help in looking more deeply at pay-to-play schemes.  ILCC expected to see tap purchases, charge-backs, credit card swipes, and more.  And, “we found all kinds of different stuff....  The industry is two steps ahead of regulators at all times,” Donovan noted. Amounted to “multiple violations of TTB’s tied house laws.”  Importantly, lying to TTB is a criminal violation, he added, which the state could use to go after a retail license (TTB doesn’t regulate retailers).  “That was the stick.  Then we got cooperation.”  Investigations “ongoing” in IL, with “a lot of moving pieces.”  ILCC more likely to tag retailers, who often make the “demands” of distribs/suppliers, Donovan acknowledged.  TTB will focus on distribs/suppliers.  “Don’t lie to state officials or the feds,” was Donovan’s brief, blunt advice to industry members.

That advice urgently seconded by Allison Herman, compliance chief for mega-distrib Southern Glazer’s.  SG significantly beefed up its compliance team after Southern Wine/Glazer’s deal.  Went from ad hoc state-by-state to coordinated regional approach.  Trained over 6K employees on compliance last yr, will hit same # this year.  If regulators come knocking, “tell the truth and cooperate,” Allison urged.

Ain’t just IL or joint investigations with TTB.  Arizona Liq Control Comm (ALCC) enforcement agency got $60K consent agreement from Phusion Projects.  Phusion sponsored special event in Jan 2017, “Fat Jewish Tour” in Tempe, via 3d party production co.  Subpoenas revealed contracts that called for 4 Loko getting exclusive, retailers got paid for product, received promo items, and more.  Phusion took back unused product.  There were also reports of over-service of large, high-ABV cans.  Ultimately ALCC charged numerous violations.  Phusion signed $60K agreement without admitting guilt.  Net-net: TTB and state ABCs are on the hunt, with big and small game in their sights.