Rarely have so many financial analysts lined up so quickly to cast doubt on hot alc bev deal prospect.  After word dropped Friday afternoon that Brazilian billionaire Jorge Paulo Lemann and his colleagues at 3G (20%+ owner of AB InBev) were considering an offer for Diageo, the alc bev co’s stock shot up 8% in NY, then made similar move this morning in London.   Neither Lemann nor Diageo commented, natch, on story that ran in Brazilian mag Veja, then picked up here and abroad.  Financial analysts pondered plausibility of 3G working in tandem with AB InBev for such a deal, and most figured 3G and ABI have taken a look, but virtually all of the analysts who commented expressed skepticism.  Here are some of the comments:

“Highly unlikely,” pronounced Evercore ISI’s Robert Ottenstein within hours of the story hitting. That story unsourced, he pointed out, tho he thought it “plausible” that ABI would talk about buying Guinness brand (which Diageo has long said is not for sale).  Robert and others said such a deal would be “off strategy” for both ABI (getting into spirits) and 3G (considering complexity, relative lack of synergies).  An ABI bid would be counter to mgmt statements that it is a “beer company and intends to remain one for the foreseeable future,” that ABI “culture favors simplicity and hands-on understanding.”  But spirits biz would “add significant complexity,” has different route to mkt in established mkts and poses “huge financing risk” given price tag in neighborhood of $90 bil which is “likely too much for 3G to do on its own and a stretch with ABI.”  Then too, deal would be hostile.  “We don’t think Diageo is a seller,” Robert concluded.

“Beer and spirits do not mix, with the exception of early stage emerging markets,” Bernstein’s Trevor Stirling wrote.  Echoing Robert, he added: “The strategic challenges” of ABI- Diageo “would appear to be much greater and more complex than any deal ABI/3G has carried out so far,” especially questions of whether and how beer and spirits could be integrated in different regions and given relationships Diageo has with other brewers in other places.  Nor is Trevor sure “how attractive” the “financial return” would be given likely price and bid premium.  Recently announced 3G/Kraft deal, and need to monitor that, makes prospects of a “near-term bid seem slim.”  Trevor also sees “global PR backlash” vs deal that would put together world’s largest distiller and largest brewer, “an awful lot of public anxiety.”  And especially in US, both spirits and beer wholesalers “would likely fret very publicly about a potential ABI-inspired consolidation/roll-up.”

“Off strategy, both from 3G’s perspective and ABI’s perspective,” agreed Stifel’s Mark Swartzberg, and therefore “unlikely.”  3G “prefers providing capital to aid consumer-business consolidation vertically more so than horizontally (food, beer, quick service),” Mark pointed out.  And ABI senior mgmt has “consistently stated it does not seek to consolidate outside beer, a major beer asset remains available for purchase (SABMiller), and global spirits companies have shown themselves more economically sensitive than global brewers (slowdowns in revenue, profits, cash flow).” 

“We do not see the spirits industry as ticking the M&A boxes for 3G (more about revenue growth than cost cutting),” wrote Ian Shackleton at Nomura and he remains “skeptical.”  He sees synergies between beer and spirits “in theory” but also regulatory issues, especially in US.  

Not just on-premise where beer trend worsened in May.  After posting 0.6% gain for 4 weeks thru May 2 in Nielsen all outlet + convenience data, volume slipped 0.5% for next 4 weeks thru May 30, including Memorial Day.  Supermkt volume held even, but c-store volume slipped 0.5% and drug store volume tanked, down near 12%.  Dollar sales up 1.7% for 4 weeks.  Above premium slowed to 6% volume gain, 8% $$ gain, tho that was enuf to add 2 full share of volume, 2.4 share of $$. Premium lights decelerated from -0.8% volume and flat dollars in Apr to 2.7% volume drop, 2.4% $$ drop in May.  

Fortune mag cover piece this week called “The War on Big Food” resonates with some issues big brewers face, especially notion that “big” is “bad.”  To best “capture that skepticism” rippling through consumers about big food and bev cos, Fortune cited Credit Suisse analysis which found that the top 25 US food and bev cos have lost equivalent of $18 bil in mkt share since 2009. “I would think of them like melting icebergs,” said Credit Suisse’s Robert Moskow. “Every year they become a little less relevant.” 

That’s one of reasons why so many big food and bev cos so active in M&A, according to RW Baird managing director Howard Lanser earlier this week on CNBC.  He noted that today’s consumer “very much an enigma” to big cos; that they have “overarching angst” leading them to save, buy less but trade up.  And to better capture those trends and niche oppys, big consumer cos have to buy-in.  And so there is much more M&A, volume up 65% this yr and deals $1 bil+ are up 90%, Howard told CNBC.  He specifically referenced speculation about ABI buying SABMiller as “reflection of market” conditions with so much activity.

Job Opening:   Fla AB distrib seeks operations veep.  Send resumes in confidence to This email address is being protected from spambots. You need JavaScript enabled to view it..

After several years of new variants and continued growth, AB’s family of Rita brands are quickly declining in scans so far in 2015.  Trends slipped further in latest period; $$ sales collectively down 26% in latest 4 wks, now -20% YTD in IRI multi-outlet + convenience data thru May 17.  That’s down $36.9 mil compared to last yr.  Other than its seasonal Rita brands (+343%), every other offering is declining at steep double-digit clip.  And Mixx Tails  and Oculto Lager intros only make up for a little over half of Ritas’ decline ($21.3 mil).  Meanwhile, Shock Top family declines steepened as well; down 11% in latest 4 wks and -7% YTD.  While AB’s various acquired craft brands all growin’ solidly, riding very strong IPA growth (see May 6 issue), they’re collectively not making up for Shock Top declines either.  Despite these declines AB still managing to keep volume flat, $$ up 1% in natl IRI this yr.  Big reason is Mich Ultra Light.  Mich Ultra is now the #1 volume growth brand in scans (#2 by $$), up nearly 2 mil cases and $52 mil YTD.  Also, at least in these channels, Budweiser is healthier than it’s been – $$ slightly up 0.3% – and Bud Light $$ up 1% YTD.  Continued growth from Stella (+20%), Bud Ice (+10%), Rolling Rock (+22%) and incremental $7.8 mil from Montejo Lager have helped stabilize trends in scans. 

First of several new Coors Light ads aired Wed night during Stanley Cup playoffs.  First spot titled “Place” (created by Calvary Chicago), airs footage of “an unadorned montage of snowy mountain visuals, along with a scintilla of cascading mountain waterfalls,” and ends with Coors Light can “superimposed atop a soaring Rocky Mountain peak,” noted Chicago Business Journal. Ad “moves at a pleasing, stately pace,” compared to most TV ads today, with voiceover by actor Bryan Cranston (Breaking Bad) asking, “Where were you born?”  “Beautiful” and “inspirational” are how cmo Andy England described new work, and MillerCoors execs hope it will represent the “authenticity” of Coors Light to lure more Millennials who drink craft for that very reason.   But many of mtn shots in “Place” ad were actually Alaska, not Rocky Mountains (that’s Hollywood folks), article points out, and also notes new ad “was born out of unexpected complications” when distribs so disliked “digital-focused” campaign that it had to be scrapped.  That led to departure of creative chief at Calvary later this mo, and forced MillerCoors “to dig into their grab bag of campaigns” for new work “under quicker than usual deadlines.” 

The “authentic” theme targeting millennials carries through in new “Bodega” spots for Miller Lite (by TBWA/Chiat/Day) with tagline “As long as you are you, it’s Miller Time.” The 8 spots are done in English and Spanish and “have a relaxed indie-film feel,” wrote Adweek.

Meanwhile, Bud Light’s “Whatever, USA festival,” on Catalina Island last weekend was described as a “content factory,” by Adweek with “several agencies working to create content” including BBDO which will make 6 spots for a new campaign.  Snoop Dogg’s jokingly delivered hot dogs on a bike (Snoop’s Dogs) before taking the stage, “was an instantly shareable moment” posted on Facebook, Twitter, Snapchat, etc and was “exactly the kind of exposure Bud Light hoped to gain.”  “Of course we want to make sure that the 1,000 people who come here have an amazing time,” said Alex Lambrecht, Bud Light veep. “But ultimately we want those consumers to broadcast to the world how amazing it was,” he added.  The “Whatever USA,” festival/campaign “is using insights about millennials, that they value experience more than material possessions and that they fear missing out on events,” noted mag. Last yr’s festival yielded 37,000 “pieces of content” for Bud Light, with “just 50 of them” created by AB itself.  “Whatever USA” has plenty of critics, but it grew markedly in popularity.  In first yr, 200K consumers applied for 1,000 spots, this year that jumped to 1.7 mil. Those entries represented “more than 5 percent of the total millennial population in this country, and that means we are doing something meaningful and relevant for millennials,” added Alex. 

ABI-SAB got lotsa buzz again earlier this week when Susquehanna analyst Pablo Zuanic came out with much higher share price target for Bud ($163) “to reflect M&A upside.”  ABI has proven track record and expertise of exceeding synergy targets, much more so than 3G, Pablo argues, and yet it is Kraft that now has a higher valuation multiple. “If KRFT now carries a ‘3G premia,’” sez Pablo “then BUD should too.”  ABI’s next move coming within 12 mos, believes Pablo, and “highly likely” to be SABMiller before year end.  Why?  He gives lotsa reasons.  ABI will be below 2x net debt to EBITDA, he notes, as have many others. But Pablo believes ABI could sell off lots of pieces, and keep less than 50% of SAB earnings base, which would leave it with only 4x net debt to EBITDA after disposals.  Altria and Santo Domingo family, which own 40% of SABMiller, would sell for 35% premium, Pablo believes. “Looming interest rate hikes might make this the right time for BUD,” sez Pablo. ABI “builds shareholder value more through an M&A than via organic growth,” adds Pablo, plus there’ve been some recent “odd management changes at SAB” like “sudden cfo resignation” and Tom Long’s resignation without naming permanent successor. “We see this as another sign of the poor working relationship between SABMiller and Molson Coors.”  All adds up to “increasingly likely” deal over next 6 mos, he argues.   

As sales numbers turned ugly in LA, nasty legal spat broke out there recently too.  Pabst sent letter to Mission Bev back in Feb that it was moving brands to 3 other Calif distribs: Beauchamp, Classic and Harbor.  Mission is part of 25+ mil case distrib biz headed by John Anderson.  Mission subsequently got “arbitration demand” from those distribs to negotiate value of its distrib rights, but refused to participate.  Mission sued Pabst Apr 15 in Calif court seeking temporary restraining order.   Judge did not issue TRO but situation status quo as Mission still has brands. 

Pabst claims Calif law allows it to move brands as successor brewer (similar to Oh) and arbitrate value of distrib rights.  But Mission insists law cited by Pabst “does not provide an independent right to terminate” under its contract with Pabst.  So Pabst termination “based on a gross misreading” of Calif law and violates both its contract and that law.  Mission sold 744K cases of Pabst in 2014. That’s about 10% of Mission volume/GP, 17% of Pabst volume in Calif.  Losing that biz would lead to layoffs, cancellations by other suppliers, loss of “reach” with retailers and other “irreparable harm,” Mission claims.  Pabst counters that there’s no irreparable harm here, since Mission keeps brands until fair mkt value paid and at least 90% of its $100 million business is “unaffected by Pabst’s termination.”  Lots more detail in this issue of beer marketer’s INSIGHTS.

Ordinarily, INSIGHTS doesn’t like to focus on short term, but this is truly wild set of numbers.  Tho YTD trends reportedly nowhere near this bad, something went really wrong with beer sales in Calif in 2d half of May (Tex too).  Latest evidence: 4 week trends for top 50 brands in LA IRI multi-outlet + convenience thru May 24 (Sunday of Memorial Day).  Bud Light and Coors Light $$ sales down double digits, 11.5% and 10.6% respectively.  Bud and Miller Lite “only” down 7-8% each.  Even Corona down 6%.  HUSA has 3 top 10 brands in LA and all were down double digits for 4 weeks as it had to match up against scanbacks from last yr.  Tecate is bigger than Miller Lite in LA, but dropped 14% for 4 weeks.  Tecate Light is HUSA’s big bright spot; up 38% and already #13 brand.

Modelo Especial Closing in on Bud Light in LA Only 2 top 10 brands up: Modelo Especial, #2 and up 15% and Stella #10 and up 10%.  Amazingly, Bud Light is only 2.5 share points ahead of Modelo Especial in LA IRI MULC, 13.96 to 11.5.  But Bud Light down 1.1 share and Modelo Especial up 2 share.  So if same amount of share shifts again next yr, Modelo Especial will be #1 brand in LA. Wow!  Corona is #3 brand in LA at 9 share. That’s right, bigger than Coors Light or Bud.  AB’s Montejo is 30^th biggest brand in LA IRI, got 0.6 share of $$ and bigger than Angry Orchard or Negra Modelo. Most leading craft brands also took it on chin, but a few fast-rising craft brands among top 50 brands overall and flew even in this difficult period. Lagunitas IPA up 80% and #28 brand overall.  Firestone Walker 805 up to #37 brand and up by more than 500%.  Stone IPA up 26%.  

Turns out that while big and small distiller assns, DISCUS and ACSA, tout unity over bill to reduce spirits taxes for all producers (see May 27 Express), there are in fact two bills in Congress to reduce spirits taxes.  And like Fair BEER vs Small BREW issue, one of  ’em only reduces taxes for small producers.  Senators Gary Peters (D-Mich), Kirsten Gillibrand (D-NY) and Dan Sullivan (R-Ark) intro’d Distillery Excise Tax Reform Act late last mo (DETRA) in their chamber.  (Same bill intro’d in House earlier this yr has 9 cosponsors).  Unlike DISCUS/ ACSA-supported legislation (DIE TRA) DETRA only cuts taxes for distillers producing fewer than 100K gals, to same $2.70 level per proof gallon that DIE TRA proposes.  DIE TRA cuts taxes on all remaining production from $13.50/proof gallon to $9.  Like Small BREW, DETRA being advanced as jobs-enhancing break for small producers.  But so far at least, no rhetoric pitting mega vs small producers has surfaced publicly. 

Still, interesting to read language used to advance DETRA.  First is bit of a howler, as Mich distiller Kyle Van Strien told Fox 17 in Grand Rapids: “We’re not asking for any special favors here.  We’re just trying to decrease that huge liability that we have so we can support our local sources.”  Note too a hint of equalization, as Fox reported: “But beyond the savings, Van Strien said, the cuts would place distilleries on a more level playing field with beer and wine makers.”  Meanwhile, small brewers hitting the Hill in DC this week to build support for Small BREW as BA-hosted SAVOR tasting festival on tap this weekend in town.      

Miller Lite inked a multi-year deal to become  official beer of Major League Baseball in Canada, announced CanadaSABMiller.  Deal “takes effect immediately.”  Lite joins other well-known American brands incl Pepsi, Gatorade, Frito-Lay and Gillette as baseball sponsors north of the border. Each of those also have deals with MLB in US too, while AB of course has beer rights here.  Canada is down to just one team tho, Toronto Blue Jays, and AB has exclusive pouring rights deal at Rogers Centre “and aggressively protects that deal,” noted The Toronto Star.  So what’s sponsorship worth without only team in country? “What we have before us is an untapped opportunity,” said Lite mkting dir Keith Fawcett. “It’s bigger than the Jays. There is a strong link between our brand and the MLB brand,” he added. He notes many fans near borders also follow Boston Red Sox and Minnesota Twins. “Beer sponsorships coexist in the U.S. and it will do the same in Canada,” said Dominick Balsamo, VP of Int’l Broadcasting and Sponsorship for MLB. 

Meanwhile, ABI and other key World Cup sponsors “applauded the surprise resignation” of FIFA prexy Sepp Blatter as bribery scandal continues to unfold across the globe, noted St. Louis Post-Dispatch. “We expect today’s announcement to accelerate FIFA’s effort to resolve internal issues, install positive change and adhere to strong ethical standards and transparency,” said ABI. Branding experts said Sepp’s resignation and the call for new leadership “eases concerns of sponsors who have been in tough spot,” over past wk, noted report. “I think the sponsors are going to do a lot more,” said James Gregory, chmn of Tenet Partners, a brand strategy co. “They are going to have to make sure this doesn’t happen again.”