Less than 1 mo after we noted Beer Inst had 4 positions open, 3 have been filled.  Recall, BI hired Dr. Joy Dubost as Sr Director, Science and External Affairs (see May 14 Express).  Yesterday, BI announced addition of new Chief Economist Michael Uhrich and Joe Heaton in new position of Director, Federal Affairs.  Mike hits the ground running.  He knows the biz and the numbers, after years with MillerCoors in its Insights division and working with his BI predecessor Lester Jones. Ditto Joe, who comes from Hill stints as key staffer for House Repubs Jon Runyan and Mike Turner.  This leaves only communications spot open, to be vacated this week by Chris Thorne, tho Chris staying on as consultant on several projects.  

Molson Coors stock up 1.5-2% today in a down mkt as Morgan Stanley’s Dara Mohsenian upgraded stock to “overweight.”  Ain’t cuz they’re killin’ it in the marketplace.  But Dara sees big upside potential for stock, over 50% if ABI-SABMiller deal happens and TAP gets rest of MillerCoors. He has other reasons for upgrade too.  Basically, recent “stock pullback” made price “reasonable” and “sentiment has become too negative,” according to Dara.  While “we remain skeptical about TAP’s growth potential,” he says “fundamental expectations are very low, with valuation at low end of peers,” (trading at multiple of 17.7x expected 2016 earnings, which is 14^th out of 15 cos he lists).  But “fundamental downside is limited by cost cutting, which we believe could ramp up going forward.” 

Near $500 Mil in Synergies if TAP Gets Rest of MillerCoors Tho he cautions that Molson Coors has “subpar historical acquisition track record,” Dara notes its “strategic potential is not fully priced” into the stock.  Meaning there’s huge upside if ABI takeover of SABMiller happens and TAP buys rest of MC (Dara notes multiple times he “only” knows about potential deal thru “financial media”).  If ABI-SAB becomes reality, Dara views that as creating $44 of value in stock in “bull-case” scenario; Molson Coors would acquire 58% of MillerCoors it doesn’t own for $11.3 bil, create synergies of $480 mil, or 5% of US/Canada sales.

MillerCoors $1.1 Bil Savings “Solid” But “Much Greater” Margin Expansion Expected  While historic MillerCoors cost savings “solid” at nearly $1.1 bil since JV formed (about $550 mil in synergies and another $530 mil in additional costs savings), and operating margin expanded 700 basis points from 10.2 to 17.2 since 2008, “we believe there is room for more MillerCoors productivity,” sez Dara.  He notes a margin gap of 2100 basis points compared to ABI, partly related to scale differential.  In Canada, where Molson Coors biz 85% as big as ABI’s, margin difference is 1400 basis points (34% EBIT margin vs 20%). ABI oper income in Canada at $683 mil vs $360 mil for Molson Coors in 2014.  Even taking into account scale and org differences, still “we would have expected MC’s margin expansion to be much greater than 1/3d of the level achieved at ABI during this time period.” 

ABI in North America jumped from 24.2% operating margin to 37.7% since 2008, while MC plus Molson Coors in Canada only moved from 13.2% to 17.8%.  ABI is 36% more “efficient” in “brewery production” (measured in cases per facility), 17% more efficient in revs per employee and 150% in EBIT per employee.  Given big gap, MillerCoors guidance of no margin expansion in US in 2015 was “disappointing” to investors and a reason for stock pullback. But “market expectations have moved too low” and Dara sees upside either from deal, improving macro conditions or further cost cutting.  

A few really hot, really big brands especially notable in latest IRI.  Corona Extra volume up 14% for 4 weeks thru May 17 (in period including key Cinco de Mayo) and it gained 0.45 share of $$ to 4.95, just 1 share behind Miller Lite (6.01) in IRI MULC.  Corona up 9% YTD.  Mich Ultra also flyin’ high.  It jumped 20% for 4 weeks.  Gained 556,000 cases compared to Corona’s 522,000. But $$ sales up $14.3 mil, compared to Corona’s $17.2 mil.  Ultra gained 0.42 share of $$.  Meanwhile, Modelo Especial still on a tear too, tho it didn’t pick up steam. It’s also up 20%.  That came out to 422K cases, $13.4 mil.  The 3 brands gained 1.3 share of $$ in latest 4 weeks.  Constellation Brands Beer Division collectively up 0.9 share last 4 weeks, up 0.7 YTD. 

Another sign that pricing getting more difficult to come by for top brewers on their top brands.  Each of the industry’s top 4 brands in US beer biz, Bud Light, Coors Light, Bud and Miller Lite got lower avg price per case in supers for latest 4 weeks thru May 17 in IRI.  And they still lost more than 1 share of $$ between ’em (1.02).  But that was better than yr-to-date share loss of 1.17.  Most of improvement in Miller Lite, up 4% last 4 weeks. Price per case of each brand down 0.1-0.3% in latest period, compared to about flat YTD in supers.   Meanwhile, avg prices of the big 4 brands up between 0.3-0.7% in multi-outlet +convenience.  Three of the 4 are basically flat in volume in scan data in IRI MULC, but share losses slightly steeper, especially for Bud Light (down 0.6).  AB and MC off 2.1 share of $$ YTD in IRI MULC and their megabrands down 1.2 share.  Judging by these prices, not to mention flat CPI, and not-so-great results we’re mostly hearing for Memorial Day, pricing pressure ramping up as peak-selling season begins.  

Following even tuffer than originally estimated Jan-Feb fall  (-2 mil bbls, -7.6%), domestic brewers’ taxpaid shipments ticked up slightly again in Apr, estimates Beer Inst.  Taxpaids +210,000 bbls, 1.4% in Apr.  So Mar-Apr gains knocked about a half-mil bbls off Jan-Feb loss and yr-to-date decline now 1.5 mil bbls, 2.7%.  Toss in Q1 import gain of 860,000 bbls and US biz down about 663,000 bbls, 1% yr-to-date, slightly better if you factor in cider gain.  

We just wrapped up our annual beer stats compilation 2015 Beer Industry Update.  You name it, Update’s got it: industry trends, brewer/importer numbers, segments, brands, region/state data, retail data and much, much more in detailed tables, text and graphs.  You get insightful analysis from execs with decades of experience tracking the US beer biz.  The CD-ROM version is available for immediate delivery.  Print version to follow.  Click here for details.  Click here to order.   

Nielsen survey of over 2,000 adults in Feb strongly supported notion that alc bev drinkers quite promiscuous these days.  But some big differences depending on age, shopping habits and alc bev of choice.  Turns out spirits drinkers significantly more brand loyal than beer or wine drinkers these days.  While 60% of spirits drinkers purchased just 1-3 brands in previous yr, that drops to 48% for beer, 43% for wine.   Flip that and wine drinkers most likely to have broader brand portfolios.  Almost 20% of wine drinkers purchased 10+ different brands in previous yr, vs. 15% of beer drinkers, just 5% of liquor drinkers.

More predictable, perhaps: those who shop for alc bevs more often are more likely to buy more brands, again especially for wine.  Among drinkers who buy beer “several times per year,” 15% tried 10+ brands.  That jumped to 22% among those who buy beer at least once/week.  Similarly, fully one-third of wine drinkers who buy once/week have purchased 10+ brands in previous yr.  Again, spirits drinkers much less experimental.  Just 5% of those who buy several times/yr bought 10+ brands compared to 12% of once/week spirits shoppers.   Of course, millennial craft beer drinkers among most promiscuous of all.  “Almost one-third (32%) of all craft beer drinkers who buy at least several times a year have bought 7 or more brands in the past year,” Nielsen points out.  “But younger, frequent craft beer drinkers are even more brand ‘promiscuous,’ as 37% have purchased seven or more beer brands in the past year.”  Younger wine and spirits drinkers also more likely to buy more brands than adults overall, Nielsen found.         

The Distillery Innovation and Excise Tax Reform Act – DIE TRA, not quite as friendly a name as Fair BEER or Small BREW – introduced in House yesterday by Repub Rep Todd Young (Ind) and Dem Rep John Yarmuth (Ky).  As planned a coupla mos back, bill reduces fed excise tax on liquor from $13.50 per proof gallon to $2.70 on first 100K gallons (for all distillers), then $9 per gal on everything above 100K.  Includes imported and domestic product and both DISCUS and craft distiller org American Craft Spirits Assn support the bill. 

Young is also cosponsor of both Fair BEER and Small BREW; Yarmuth’s not on either beer bill.  BEER now has 85 co-sponsors in House (16 new since May 1) and 9 in Senate (1 new since 3/27).  Small BREW sittin’ with 72 co-sponsors in House (11 new this mo) and 33 in Senate (3 new since 3/27).   All these dueling bills with some of the same cosponsors ain’t likely to resolve before summer recess and then it’s election season. 

“We continue to see some risk to our numbers in the USA,” wrote Bernstein’s Trevor Stirling this morn, noting that despite falling gas prices and “increasing levels of employment” that “improve the discretionary disposable income of lower income Americans” it remains “unclear how much of this will be spent on alcohol.”  Trevor still expects US beer up 0.5-1% in 2015, despite 1.5% drop yr-to-date.  Unemployment among young men 20-24 “has fallen sharply” to under 10% in Q1 and gas prices “remain down sharply” yr over yr, tho up 20% YTD.  Plus US consumer confidence continues to improve, Trevor shows, citing Conference Board.  Despite improved scan data in recent mos (up 2% in Nielsen for 3 mos to mid-May, Trevor notes), not much lift overall.  At least not yet.  Recall MC sales-to-retailers down 2.7% in Q1, AB down 1.5% and MC said it was down low singles in Apr too.  Meanwhile, US “spirits volume trends improved in 2014 and market trends into 2015 continue to improve,” notes Trevor.  Spirits in control states up 3.6% last 3 mos thru Apr, according to NABCA, following 2.5% growth in 2014.  

Peak selling season has begun.  And it ain’t off to best start from early reads we’re getting, at least in some key parts of US.  SoCal had bad weather that led to weak Memorial Day, Tex had horrific storms that created much worse problems than soft beer sales (but those too) and Chicago a mixed bag, according to various sources.  Sales under some pressure in several of the top 10-20 mkts in US over Memorial Day Weekend, which likely means they weren’t great overall.  How ‘bout in your mkt(s)?  E-mail us at This email address is being protected from spambots. You need JavaScript enabled to view it.