Cider category dollar sales up 33.4% in latest 4 week period thru 4/11 in Nielsen xAOC channels (food, drug, mass and WMT scanner data), reported The Cowen Insight.  That’s a continued deceleration compared to +35.3% in latest 12 wks, and 52.2% in latest 52 wks.  Boston Beer’s Angry Orchard brands (slightly) “underperformed” total category, paper notes; $$ up 32.6% and actually lost 0.3 share of cider, yet still has commanding 55 share.  Meanwhile Heineken’s Strongbow brands more than doubled (+147.2%) in latest 4 wks, and gained 3.2 share of category to 6.9.  Indeed, “Strongbow continues to be a growth-driver for the company and is the #1 growing cider brand in Nielsen,” HUSA reported in its Q1 review (it grew 110% in Nielsen thru March).  ABI cider brands (Johnny Appleseed and Stella Cidre) “also outperformed,” up 40.6% in latest 4 wks.  However, ABI ciders decelerating at faster rate than total category; from +66.7% in latest 12 weeks and +126% in latest 52 weeks.  And MC cider brands (Smith & Forge, Fox Barrel and Crispin) up 22.7% – the lowest growth rate of these top cos – lost share of cider as well. 

In the marketplace, small brewers may still refer to revolution they continue to see themselves fighting against big brewers. But Brewers Assn leaders and genl counsel Marc Sorini of McDermott Will & Emery took decidedly different tone on government affairs and regulatory issues during Craft Brewers Conference last week. “We too often focus on what we want to change,” which quickly turns “negative,” Marc said during franchise-focused seminar, taking cues from Kim Jordan’s comments early in year (recall: “sometimes I think craft brewers have not done a very good job of leading with the headline,” she said, that they’re “wildly appreciative” of distribs’ work). So instead of citing “increasingly laughable” basis for franchise laws, as he said during last year’s conference, Marc chose “to emphasize that this system is largely very good for small producers” and “frankly it’s good for the big guys too.” In his view, “the system has evolved,” and “it will continue to evolve.” In fact it must: “the best way to avoid the disastrous revolution is to allow reasonable evolution,” he commented, referring to “editorials,” often from outside observers, encouraging more drastic change.

Marc took time to push back against some of the most common arguments against franchise reform and other regulatory shifts, including “historical” and “slippery slope arguments,” which often don’t “articulate some sort of public policy” reasoning, to Marc. His tone echoed that taken by BA director Paul Gatza during CBC general session the day before, who said “by far,” in his perspective, “more wholesaler relationships are in great shape.” But Marc still did interesting flip of “nomenclature” around franchise reform. “It’s the franchise law that is kind of the carve out,” he said.  “How many other businesses receive this sort of extraordinary protection,” his slide read as he encouraged shift from the way laws, like those passed in NY, are currently called small brewer “carve outs.” Still, Marc reminded that while he’d “like to see more progress on franchise reform over the next five to ten years,” he believes “this is going to be a long process” and that “evolution is going to be good, ultimately, for everybody in the system.” What a difference a year makes.

Heineken’s Renè Grooft Haafland celebrated “solid start to the year” on Q1 conference call this morn, his last as global CFO.  That included US where “both sales and depletions were positive, outperforming the overall market.”  He added some color in Q&A: 1) depletions ahead of sales, so HUSA did not build inventories; 2) HUSA took “some selective pricing”; 3) Dos Equis continued double-digit gains, with most of increase from Lager and Ambar, new products (i.e. Dos A Rita) playing a “minor role”; 4) Strongbow continued “very strong” performance. 

Then too, HUSA provided some additional details for its Q1 from Nielsen data thru Mar 28.  HUSA up 2.7% in off-premise scans yr-to-date, gaining share.  Brand Heineken up 1.7%, Dos Equis franchise +12%, Tecate franchise +5.5%, with Tecate Light still smokin’ at +52%.  Strongbow outperforming cider overall (slowin’ a bit, see below); up 110% in Q1, and fastest grower in category.  

Scanner Trends thru Second Week of April Maintained March Momentum  Both Nielsen and IRI reported continued solid scan trends in data for 4 weeks thru Apr 11/12, boosted by earlier Easter this yr, as we noted last week.  IRI reported $$ sales +6.9% for 4 wks thru Apr 12; Nielsen scans thru Apr 11 show even stronger +8.1% pop, with volume +5.8%.  AB and MC “improved trends,” as Cowen Insight reported Nielsen results, tho each continued to lose about 1 share of $$.  AB $$ sales +5.8% for 4 wks, MC +3.1%, Constellation rocked a 19% gain and Boston up 13%, tho beer sales flattish.      

Constellation Brands Beer Division Prexy Bill Hackett had some interesting observations about total US beer industry as well as his co in keynote interview at Bev Mktg Forum yesterday.  The beer biz “will continue to be fractured” with “mainstream challenged,” he said, and “high end beers growing in terms of favor. That’s a dynamic that drives the business.” But “overall the industry will most likely continue to be flat.”

What about pricing?  Beer biz “stabilizing in pricing.  I don’t know if there’s been a deceleration,” Bill said.  “With improving economy, pricing is relatively stable and the market will move accordingly,” he added.  “I don’t see on the horizon any challenge to taking price.”  Editor’s note:  Constellation avg prices up 1.6% for 12 weeks thru Apr 11 in IRI MULC, reported by Morgan Stanley yesterday.  Compare to MC up 1.4%, HUSA up 1.2% and AB up 1.1%.  Total beer pricing still up 2.3%, with effect of tradeup.  Interestingly, Constellation’s hottest brand Modelo Especial avg prices up 3%, but volume still up 24%.  

Constellation Just Under 10 Share of $$, “On Track” Towards 20 Constellation Brands Beer Division “currently just under 10 share of $$,” said Bill.  But it’s “right on track” with big growth objective of getting to 20 share of $$ (and doubling its biz) in 10 yrs.  “Why have small plans when you can have big ones?  We got to this space where we know we can grow this business,” Bill added.  Asked about what’s driving growth of his co, Bill mentioned power of brands several times, and noted that Constellation “enjoying some of the best creative in the history” of the brands.  He of course mentioned the Corona can oppy, only 2% of Corona volume, compared to 70% of Modelo Especial volume.  And as for Corona can ad, “you’re going to see that ad incessantly over the next 8 weeks or so” on NHL and NBA playoffs.  Asked if there is image risk to putting Corona in cans, Bill said “that is absolutely something we thought through” but “we’re focusing on opportunities we can present incrementally.”  

One other factor Bill emphasized in Constellation’s growth is the removal of “overhang” of uncertainty on STZ’s 500 distribs.  That “overhang impacted them.  ‘Who’s going to end up with these brands?’” they hadda think and they didn’t want to be “investing” in Constellation’s brands “only to lose” them down the line.  But now “all that stopped.  All that was removed.”  And Constellation has “enjoyed the results of the positive reaction to the deal” where it bought 100% of co that imported most of Modelo portfolio.

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Nestle is biggest food co in world at $96 bil in revs and 2d biggest in US (including 3d biggest bev co).  So it’s notable that Nestle chairman, speaking at Nestle’s annual meeting, sounded off on effects 3G takeovers will have in food industry.  Recall, 3G principals are also 3 largest shareholders of ABI, so much of what Nestle chairman said will ring a bell.  The takeovers of Heinz and now Kraft (combo will be 3d largest food co in US) have “pulverized the food industry market,” he said, as “3G’s partners are known in our industry for ruthless cost-cutting.”  They’ve “already proven numerous times that they are capable of reducing operating costs in particular by between 500 and 800 basis points, which has a revolutionary impact on all other members of the industry,” he said.  But “although profitability for a company like Heinz is indeed greatly improved today, the same is not true for sales growth, which declined by 4.6% in 2014,” he said.  In fact, both Kraft and Heinz “posted subdued growth with products that were extremely attractive in the past but are not sufficiently adapted for the future.”

Every time you turn around these days it seems, there’s another craft deal.  This just in at presstime: another much smaller craft deal as Bronx Brewery just announced “a strategic partnership” with Tenth Avenue Holdings, “a private diversified investment holding company” in NYC with “permanent equity capital in excess of $500 million.”  Bronx did 6,000 bbls in 2014 and expects to produce 10,000 bbls in 2015.  Bronx co-founder Chris Gallant described the “partnership” as a “collaborative effort.”  This “latest addition of capital” will allow Bronx to hire additional employees and “to purchase additional brewing equipment.”  Bronx will also ramp up expansion to new mkts. As has become the custom in these deals, no mention of size of stake that Tenth Ave presumably acquired.  

While deals heating up again amongst distribs, they are at a near fever pitch in craft.  With over a dozen deals in the last 15 mos, including 9 of the top 50 selling part or all of their co, and several more large ones being discussed and/or moving towards fruition, last week’s Craft Brewers Conference notably full of talk about craft deals, at least behind scenes.  The atmosphere was rife with discussions about who’s next, what’s it mean and much, much more.  That’s not to mention all the private meetings concerning actually making more of these deals happen.  With so many bankers, private equity folks and potential strategic buyers on hand, one craft brewer likened it to this: “there’s a drop of blood in the water and the sharks are circling.”  Another observer called what’s happening to craft with so many transactions “a sea change.”

In the weeks leading up to CBC, Arlington Capital Advisers sent letters to lotsa prospective clients touting how it represented SweetWater in deal with TSG and Abita in deal with Enjoy Beer LLC. It claimed  to “have been approached by every foreign player out there” and to have “worked closely” with “notable US strategics.”  Arlington volunteered to advise these prospective clients and “walk you through a deal” like it did with SweetWater “where you truly keep control of your business.” In another letter, just before CBC, it said it was “engaged” in another top craft brewer transaction.   

MC distrib Fleck Sales of Cedar Rapids and South Burlington will buy neighboring MC distrib Wolfe Bev in Eldridge, Ia.  Wolfe is about 1.2 mil cases.  This move will consolidate big chunk of Southeast Ia.  Fleck will be about 4 mil cases or over 30% of non-AB volume in state (AB still at 61 share in Ia in 2013).  This is Fleck’s 7^th acquisition.  Tho the yr started off slow in distrib deals, and there are still no big transactions, this is the 4^th MC transaction for part or all of a distrib that INSIGHTS has reported on so far in 2015.  And there are many more deals in the works. 

After increasing for 110 straight months, the consumer price index for beer has now fallen for 2 straight months with 0.1% decline in Mar vs Mar 2014.  There’s not a lot of upwards pricing to consumers generally these days as CPI for all items up 0.2% while all food items were off 0.1%.  Yet even tho beer price index down again in Mar, CPI for spirits and wine increased 1% and 0.8% respectively.  Thru 1^st qtr, beer CPI flat vs a 0.1% decline for all food items and gains of 0.8% for spirits and 0.5% for wine.   So far at least, spirits continues to outperform beer despite more of an uptick in  pricing.  Meanwhile, at presstime noise percolatin’ about possible coming AB price reductions in Calif.