This is 3d legal shoe to drop in wake of MC charges that Dave Colletti, MC veep of on-premise natl accounts, worked with seven 3d party vendors (including one other ex-Miller employee) to fraudulently bill MC for events, promotions, mktg services that never happened or did not happen as described in estimates/invoices that MC paid.  Defendants “obtained at least $7 million” in scheme that started in May 2003 and ran thru “at least December 2013, US atty sez.  Colletti got a “portion of the payments.”  Recall, MC fired Colletti in Nov 2103 and sued him in state court last yr.   Colletti sued MC’s pension plan in Mar this yr for failing to pay accrued benefits.  US atty’s 20-count indictment filed Tuesday.  Defendants face “as long as 20 years in prison on mail fraud and wire fraud charges,” reports Bloomberg, plus big fines, according to Milwaukee Journal Sentinel.

Indictment charges Colletti worked with 3d party mktg services, promo and/or golf outing companies controlled by other defendants.  One co, Prime Productions, alone got at least $3.5 mil from MC, including bills for fictitious events at four different casinos.  That co run by famous Chi “club and tavern impresario Jim Rittenberg,” according to Sun Times.  MC charged in its suit that Prime was “shell company” that was solely a “front” to submit fraudulent invoices to MC.  Other co’s got at least $1 mil per from MC.  First count of indictment groups the fraudulent estimates/invoices and payments; remaining 19 counts are charges about specific money transfers to defendants for specific events, mostly between 2010 and 2013.  Defendants used payments for “personal expenses, collectible firearms, international golf trips, hunting trips, investments in a hotel and bar, and an arena football team,” indictment alleges.  Separate document sets preliminary bail at $5K.          

Very mixed bag of brand trends for MillerCoors in Q1.  Recall that when overall volume reported a coupla weeks back – shipments down 2.5%, STRs down 2.7% – not a lotta brand color.  Turns out premium lights were down low-single digits, as we suggested.  So Miller Lite went from positive qtr in Q4 2014 to down low-singles, tho MC claims it gained share of segment.  AB made same claim for Bud Light yesterday; gotta be talking very small share shifts here, with Coors Light the loser.  Coors Light also down low-singles in Q1, sez MC, but improved trend by 90 basis pts vs Q4. 

Better news from MC in above premium.  Tho overall volume in segment down low-single digits too, that was due to comp vs Fortune launch last yr.  MC up low-singles in segment ex-Fortune.  Redd’s up double-digits, and probably most important, Blue Moon “accelerated to mid-single digits” gain, with seasonals, which had been struggling, up double digits.  Leinenkugel Shandy also up double-digits and family up high-singles.  Coors Banquet maintained mid-singles growth and Steel Reserve up high singles.  But MC still takin’ hits in below premium, with segment volume off mid-singles.  High Life down low-singles, but Keystone Light and Mil’s Best family down high-singles.

On financial side, like AB, MC got just modest rev/bbl increase, +1.6%.  But MC kept costs in check and sliced gen/admin expenses, tho mktg spend up, it sez.  So gross profit margin inched up 0.5 to 39.4.  And operating income +4% to $309.3 mil, as margin expanded 0.8 to 17.4.  Recall, AB said yesterday that Q1 EBITDA margin narrowed by 0.7, tho ABI margins in US still more than 2X MC’s.           

A number of questions on US during ABI’s conference call this morning, but analysts didn’t really push and ABI ceo Brito’s answers didn’t contain quite as many nuggets as they often do. Michelob Ultra sales-to-retailers “up more than 10%” and ABI “very pleased with momentum,” said Brito.  Ultra is on a roll.  But Brito also used word “momentum” several times for Bud and Bud Light, both of which are down low single digits.  Bud is “much improved compared to historical trends,” said Brito.

Asked about move towards social media and recent mktg mishaps in social media world, Brito said: “Social media continues to grow within our mix of media spend” and “we are learning every day by connecting with consumers.” It’s a “very fast paced world” and “we don’t…get everything right.” But when “we don’t get it right, we apologize,” and fix the situation. “We take it very seriously,” said Brito, referring to ABI’s commitment to connecting with consumers in right way in digital space.

In Brazil, Brito noted it looks to price in line with inflation (about 8% in 1^st qtr), but rev per hectoliter gains ahead of inflation were because of increased premiumization of portfolio there, as well as increase in % of volume that is direct distribution.  ABI up to 72.5% direct distribution in Brazil, more like 70% last yr.  Direct distribution in Brazil “provides scale and alignment,” Brito said. But that’s “not the only way to do it. It’s not the way we do it in the US” where “amazing” things happen when AB and distribs aligned.  

Following tuff, tuff start, with taxpaid shipments off nearly 7% Jan-Feb, domestic brewers’ taxpaid shipments +300,000 bbls, 2% in Mar, estimates Beer Inst.  Meant Q1 taxpaids off 1.5 mil bbls, 3.7%, tho much of that was from adjustment AB made vs last yr’s inventory build.  Meanwhile, with imports up 13% Jan-Mar and cider still up, we figure total US biz down about 550,000 bbls, 1.1% in Q1.  Note too, AB estimates total STRs off just 0.5% for the qtr.  So, a slow start, but far from insurmountable.  

We reported accurate import trend in Q1 in yesterday’s Express (+13%), but misreported it in the subject line.

That was headline in NY Observer yesterday about sale of 3100 sq ft penthouse on NYC’s Upper West Side. Who’s the buyer?  Not one of the Brazilian billionaires who are large shareholders in ABI, not even one of the top global execs.  Nope, it’s AB sales veep David Almeida, who played key role in ABI deal in 2008 and who’s moving here from St. Lou “to head up a new headquarters for the company’s sales and marketing operations,” according to the Observer.  This place has an 1100 foot terrace, wide windows overlooking Central Park and NYC skyline and “a 72-bottle wine fridge” among other details, so “as best to celebrate personal triumphs,” sez the Observer, “like the roughly $40.5 million in stock options Mr. Almeida reportedly received a couple of years back.”  

Same folks quoted last Friday in Ad Age about big hit to consumer perception of Bud Light last week following mktg gaffe told Mediapost yesterday that Bud Light’s score on its index “is recovering as we speak….  The quick response… probably helped this storm blow over more quickly than it otherwise would have,” said YouGovBrandIndex ceo Ted Marzilli.  “Unless there is a repeat incident, the brand will likely fully recover.” Last week Bud Light brand “sunk” to “its lowest consumer perception level in nearly five years over a period of four days.” YouGovBrand Index interviews 4300 people each weekday.  Ya gotta wonder if consumer perceptions really quite so volatile, how much of a difference that makes in consumption, or just what YouGovBrandIndex tracking really shows.  

Even if American consumers have a bit more cash in their pockets, and weather improved in parts of US, they ain’t runnin’ out in droves to celebrate in bars or restaurants.  That’s clear from latest GuestMetrics data, which shows on-premise traffic off 1.7% for 4 wks thru Apr 19, just a “minimal improvement” vs -1.8% for 12 wks, as GM’s Bill Pecoriello put it. 

Similarly, beer volume down 4.4% for 4 wks, barely better than -4.8% trend for 12 wks.  Better news, tho still no great shakes, for big brewers: premium lights’ share loss continued to “moderate.”  PL share -1.3 yr-to-date vs 1.9 share loss last yr.  Bud Light, Coors Light and Miller Lite collectively losin’ less to craft (+1 share YTD vs +1.8 in 2014) and cider (+0.3 vs +0.5).  Import share down abut same -0.3 yr-to-date as it was last yr.  All in, beer lost 0.7 share of alc bevs on-premise YTD and wine soft too, -0.2.  So spirits grabbed 0.9 share thru Apr 19.  That even while spirits volume -0.7% for 4 wks, -1.5% for 12 wks.   

Well, the runup may have been rough (as we wrote yesterday) and the US may still be soft, but globally ABI earnings power continues to impress. ABI handily beat consensus analyst earnings estimates and stock up near 3% this morning in Europe. Global EBITDA up 11% to $4 bil with a margin expansion of 170 basis points, “driven mainly by strong topline growth,” said ABI.  “Most of the beat is due to very strong pricing in Brazil,” Bernstein’s Trevor Stirling told Reuters. Rev per hectoliter up 11% in Brazil, with about 8 of the 11 points due to inflation, according to ABI cfo Felipe Dutra. 

Tho total beer volumes down 1% in qtr, compared to SABMiller even and Heineken up 2%, its rev per hectoliter grew 7.5%, leading to 6.2% rev growth overall.  ABI also “booked a gain of $757 million on derivatives used to hedge the prices of shares it hands out as compensation to employees,” noted WSJ or a “mark to market adjustment,” as ABI sez.  

ABI’s US shipments took a big hit, as expected, down 1.4 mil bbls, 6% going against big inventory load last yr while union negotiations were going on. Will be tuff to dig out of that hole.  But AB sales-to-retailers down “just” 1.5%, a little better  than last yr (-1.7%)  and also more than a point better trend than MillerCoors.  AB’s rev per bbl growth only 1.3%.  Lower 1^st qtr volume, not much price, predictably led to US earnings drop (tho up globally).  US EBITDA down $89 mil, 6.5% in 1^st qtr to $1.3 bil, about what MC makes in full yr. 

ABI lost 0.45 share in Q1, it sez, with total industry STRs down 0.5% in qtr.  Bud Light still down 2%, losing 0.2 share overall, tho ABI said it “continues to gain share of premium light segment.”  And Bud “delivered one of its best performances for several quarters” but still “declined by low single digits” and lost 0.2 share.  “We have a long way to go to stabilize the share of Budweiser, but the year is off to a good start,” cfo Felipe Dutra said earlier this morn, as reported by Wall St Jnl.  ABI’s Above Premium brands gained 0.2 share, “with the strongest performances coming from Ultra, Stella Artois and Goose Island.  Interestingly, ABI sez its share on-premise “is growing… with strong momentum since mid-2014.”  On-premise channel remains down several points overall (see below).