Elysian coulda been bought by New Belgium, an intriguing snippet from Denver Post First Drafts blog indicates. The Colo co “made a last-minute push to purchase” the Seattle-based breweries/brewpubs, the Post’s Eric Gorski confirmed with Elysian co-founder Dick Cantwell. And “New Belgium was prepared to make a competitive offer,” Gorski writes of Dick’s comments. Indeed, “late in the AB discussions, Elysian’s board held an emergency meeting and voted to give New Belgium time to develop a concrete offer,” but “no time was given in the end,” per Post.  The rest, as they say, is history.
    

Now that it’s separated from Molson Coors in Canada, SABMiller will rollout Miller Lite nationwide next week.  Lite was previously only available in Ontario and Newfoundland but “has not been sold at all here since 2010,” noted The Globe and Mail. Lite launch will be supported with “heavy rotation” of TV ads thru summer that tout Lite’s history, as the “light beer that invented light beer” and also put emphasis on quality to draw craft drinkers.  Ads will also note Lite is “purpose brewed” to be a light beer, not like other brands “diluted with water” after brewing, per G&M.  Sampling events “will be rolling out aggressively through the summer,” as well.  So on heels of tuff Q1, Molson Coors will have to deal with Lite competition in Canada, where light beers account for around 25% of mkt, per SABMiller’s own research which also found “a third of those consumers” are not loyal to any particular brand.  

As reported in our Craft Brew News yesterday, hottest craft brewer of recent yrs, Lagunitas Brewing, named Maria Stipp as ceo of co.  Founder Tony Magee will become exec chairman.   Maria comes aboard Jun 15, leaving her position as ceo of Eco-ATM, a unit of publicly traded Outerwall.  EcoATM “recycles consumers old phones, mp3s, tablets and more,” while “paying cash for most devices,” according to its website. She also worked for co that built Mortal Kombat into a billion dollar brand, good preparation for bruising competition in craft beer. 

Interestingly, Maria started her career with Miller Brewing, working there in chain sales and other depts.  So full circle, Maria coming back to beer.  Ironically, announcement came same day that MillerCoors named Gavin Hattersley interim ceo for up to 6 mos, its search for departing ceo Tom Long’s successor continues.   And turns out MC had employed same search firm that Lagunitas did ‒ Spencer Stuart ‒ in its unsuccessful search.

Lagunitas still growing shipments at about a 50% clip, depletions up 41% thru Apr, Tony told CBN.   Hiring new ceo is “not about bringing in something new,” he said, but about “expanding bandwidth in the c-level suite.”  Maria is the “right person,” the “right fit,” with the “right skill set” at “the right time,” he said.  Tony described her as “very, very smart,” “personable” “empathetic” and “nurturing”; also as “able to drive good results” and “get the best out of people.”  As Tony moves exec chair role, he will be “focusing only on the future,” the stuff he’s best at anyway he says.  

So far, AB has not filed suit to challenge law Ky passed to force AB to divest its Louisville and Owensboro branches.  That’s while AB statements at time law passed indicated AB believes law violated its constitutional rights in state.  Interestingly, state not waiting for that shoe to drop.  It’s already hired Louisville law firm Wyatt, Tarrant & Combs to defend the law, reports Courier-Journal. Contract started Apr 22 and runs thru Jun next yr.  Current contract is for $100K, paper reports, at rate of $200/hr.  Rate “exceeds what the committee normally allows, but the department has submitted an explanation to legislators.” (We’d bet that AB pays far higher rate to its outside counsel in big legal battles.)  New law bars state ABC from renewing AB distribs licenses.  Louisville license runs out Oct 31, 2015, Owensboro Jan 31, 2016, we understand.  That could explain why no suit yet filed.  Or not.

State shipments estimates by Beer Inst track pretty close to total shipments combining domestic taxpaids and imports, tho state data indicates slightly steeper dropoff Jan-Mar, -2%.  Recall Calif was big driver of US gain last yr.  That may help explain Calif’s slow start in 2015: -200K bbls, 3.7%.  NY, which had horrible Q1 weather, off 100K bbls, 4.5%.  Other big states with soft starts (-3% or worse): Mass, NJ and NC.  Big Midwest mkts down, but not whacked.  Fla shipments, also strong in 2014, off 0.5% for 3 mos, BI estimates.  Tex shipments +0.7%.

Even as AB and MC, among other large beer cos, shift more and more mktg spend toward digital, they’re both still spending plenty on traditional TV ads during sporting events.  Budweiser spent $267.2 mil on advertising “during network and cable sports programming” in 2014, reported Sports Business Journal using data from Kantar Media.  That was enuf to make it #5 largest ad spender for the entire year on cable and network sports, only behind Verizon, Geico, AT&T and Chevrolet.  Then too, Coors and Miller listed at #44 and #49 top spenders respectively, tho combined were 17th largest at $145 mil.  Editor’s note: it’s not specified what Kantar includes under the “Budweiser,” “Coors” and “Miller” umbrellas. 

Meanwhile, this yr’s NFL ad sales market is “soft” compared to last yr, however that’s only relative to previous seasons, as ad buyers still “expect to pay [mid] single-digit percent increases this season,” noted Sports Business Journal.  Despite numerous issues NFL has had with players and domestic abuse, “concussion lawsuits” and most recent “Deflategate” story, “seemingly no bad-news story can scare TV advertisers away from NFL games.”  And overall, “sports marketplace is probably healthier than the general market,” as “big events overall are still commanding considerable advertising interest,” according to Adam Schwartz, director of natl broadcast, sports media, for Horizon Media.  While “technology has been disruptive in most of the market…it’s made sports better,” quipped ESPN’s president of global customer mktg and sales, Ed Erhardt. 

SABMiller stock “spiked as much as 5%” in trading yesterday “after dealers picked up on speculation the company was about to receive a takeover approach worth £50 a share,” the Telegraph reported yesterday.  Pop in stock neared £36. Rumored to be “preparing to bid,” of course: ABI, investment group 3G and Warren Buffett.  None commented.  Elsewhere, NY Post got hold of Feb report on 3G from consultants McKinsey & Co that described it as “serial cost cutter that may be destroying growth for short term profits.”  Post played up “stark contrast” between 3G being “paranoid about costs and expenses” vs. Warren Buffett’s “reputation as a more reasoned manager.”  Also reported some familiar stories about cost cutting at AB, Heinz, Burger King.  McKinsey’s conclusion: 3G style creates huge value, expands margins but “its model does pose risks to brand health, particularly future growth,” as Post paraphrased.  Both of those evident in AB InBev Q1 report this week, as ABI put up big earnings gain, despite continued volume softness, in US and some other mkts. 

NJ has law similar to Ohio’s that a “successor brewer” can terminate distrib without cause and move brands to distribs in its own network if terminated distrib gets fair mkt value for brands, before they are moved.  AB just sued NJ distrib Hunterdon Brewing in US Dist Ct for declaration that termination legit under that law.  Hunterdon is statewide craft distrib owned by L Knife (Sheehan family), which has AB in several big mkts, tho not NJ.  It also has Elysian in several states. 

In Apr, AB tried to negotiate with Hunterdon Brewing to move Elysian brands.  Hunterdon wanted 12X gross profits.   AB said 4X more reasonable.  Not a lotta communication after that, tho there was second contact.  But atty for Hunterdon wrote AB to say that unless AB continued shipping Elysian brands AB would be violating state law and that AB and its NJ distribs were “seeking to coerce Hunterdon Brewing to accept less than” FMV and thereby “undermining the brands’ value,” according to AB lawsuit.  Letter also said Hunterdon prepared to “pursue all necessary legal action” vs AB or Elysian. 

On May 4, AB sent termination letter and check for $562,883.46 to Hunterdon.  That was its offer of 5.5X GP made on May 1; an offer Hunterdon did not respond to, AB sez.  How did AB get to that amount? AB estimated $12 per case gross profit, for total of $102,342.45, apparently on approx 8,528 cases.  That’s just shy of $563K.  AB also pointed out in letter (and lawsuit) that multiple “consistent with or higher than comparable New Jersey transactions.”  When AB moved Blue Point in 2014, brands transferred to NJ distribs at 4.75X GP.  So AB gave Hunterdon a “15% premium,” it claims. Tho AB wanted to negotiate transition all along, it sez, “faced with a refusal to meaningfully engage” and threatened with lawsuit, AB “had little choice but to invoke the successor brewer provision.”  

Recall, this is not AB’s first time down this road.  There was hugely expensive jury trial over same issue when AB wanted to move InBev Euro brands in NJ.  In the end, AB distribs got brands and paid multiple very close to what AB offered at beginning.  Key exhibit was long list of deals that went for multiples similar to what AB offered.  But legal fees were in the millions.  Other backstory here of course is long running tensions between AB and L Knife operations, which were among first to be non-exclusive, aggressively sell craft and sell against AB distribs outside their territory.  Indeed, INSIGHTS hears AB currently withholding Oculto and/or Mixxtail brands from L Knife operations in several mkts over transition of Blue Point.          

Just as AB InBev CEO Brito repeatedly pointed to AB’s “momentum” in US on conference call yesterday, outgoing MC CEO Tom Long stressed that  he sees “more tailwinds now than we have had in quite a long time,” for MC and US beer.  This optimism may seem puzzling given that top 2 continue to lose volume and share – MC STRs still down low-single digits thru Apr 25 – but reflects similar comments voiced earlier this yr at AB and MC distribs mtgs.   Tom especially confident that MC’s “marketing and sales work” for premium lights is improving in order to recruit new generations of drinkers to make “refreshing American light lagers” part of their beer “portfolio.”  (Miller Lite was up in March, tho down low-singles for Q1.)  Tom also pointed to improved performance of light lagers in GuestMetrics on-premise data (losing less share).  And while on-premise continues to be “challenging” and still “under water,” MC trends in that channel improving “quarter by quarter” said Tom. 

Sales prexy Ed McBrien pointed to MC’s “significant investment” on-premise, calling on 50% of outlets in top 80 mkts, which resulted in improved “volume, distribution and velocity” in those mkts.  Finally, Tom continues to believe that macro factors like better employment, higher consumer confidence and wages and lower gas prices “will spill into beer.”  One analyst noted signs of pick up in tobacco, leisure travel and gaming bizzes over last 6 mos due to these macro improvements and wondered why it hasn’t really happened in beer.  CMO Andy England pointed out that debt reduction rather than more spending seems to be higher priority now for many middle class consumers.  He also said beer is rare industry that’s “maniacally focused” on volume, rather than value, tho value more important to shareholders.  And value in beer certainly improving, with trade up.  Separately, Andy pointed out that Redd’s doing “extremely well” and that between Redd’s and flavored Steel Reserve, MC may have grabbed #1 position in FMBs.  Asked directly whether industry depletions would turn positive by the time he leaves in July, Tom demurred from predicting, but said again that he sees “more tailwinds than headwinds” in beer right now. 

Tom typically gracious answering questions about his successor Gavin Hattersley.  Gavin knows dynamics of US beer biz “incredibly well” and “if anyone can handle both jobs” of MC CEO and Molson Coors CFO “it’s gotta be Gavin.”  Tho plan is for Gavin to be interim CEO, “possible” that position could be permanent, Tom acknowledged.  Board is taking its time and “aiming very high” for CEO, Tom said, which is a unique position given JV structure and fact that “distributor relationships are so important.” 

Price Competition to Assure “Availability” As MC rev/bbl +1.6% in Q1, price was 1%, mix 0.6%.  Asked about that lower rev/bbl increase vs previous qtrs, Tom said again pricing decisions remain mkt-by-mkt, MC “seeks to be competitive in every market” and that “pricing environment more challenged” in Q1 than previous qtrs.  Asked about prospects of improved pricing going forward, Tom noted the competition among brewers for space “has never been more acute.”  Especially on-premise and especially for millennials, brands “just have to be available.”  And to assure availability, affordability and accessibility, sometimes that means “being more competitive in price.”  Protecting that availability, he said, should be viewed as a “positive investment in the franchise.”  Current competition not a “long term left turn,” in Tom’s view, but “investment to see brands are available, particularly on premise where there has been some warfare” and where in some cases big brands had become “invisible.”

Tom Looks Ahead  Tom also asked to look into future and identify what will “surprise” people in 5 yrs.  That’s a tuff call and Tom assured that “I’ll be wrong.”  But he suggested to keep an eye on the “evolution” of industry structure via state-based laws and whether attempts by craft brewers to “change the nature of the 3-tier system” succeed.  That kind of “tectonic shift” is important to “understand and watch closely,” he believes.  Beer will remain a “brand-based business,” Tom thinks, advising that brewers need to build “brand platforms” that get repeat biz, not just discovery and appeal to each cohort of drinkers as they come along.   “Great choice” in America for beer “not going away,” Tom said, but distributors will “reward brewers that build brands.”  He sees some consolidation in craft,” but doesn’t expect segment to “contract dramatically.”  Finally, “rise of spirits” has been “fundamental structural phenomenon,” Tom pointed out, especially with amount of females “participating” in it.  “If we bring more women into beer,” industry health “will improve greatly.”  

Molson Coors worldwide volume down 3.5% in 1^st qtr, with drops in most major mkts, including 3.7% STR drop in Canada, 7% drop in Molson Coors Europe as well as 2.7% STR drop in US.  “Our results for the first quarter reflect continued volume pressure in our largest markets and, as expected, a significant impact from foreign currency movements” and more, said Molson Coors ceo Mark Hunter.  Reported sales down 14%, but down 3% in “constant currency.”  EBIDTA dropped 9% in qtr to $229 mil. 

Craft Brew Alliance also reported tuff qtr late yesterday with shipments down 8%, revs down 5% and an operating loss of $1.8 mil for the qtr.  At least, its sales to retailers were up 1%. And CBA said it still expects 6-8% shipments growth this yr.