Not a total surprise, given surprisingly strong Dec gain (+4.6%) and AB InBev guidance this morn that its Q1 shipments would be down mid-single-digits.  Still, Beer Inst estimate that domestic brewers’ taxpaid shipments down 920,000 bbls, 6.7% puts industry in a near-1-mil-bbl hole to dig out of.   

BMI’s annual Spring Conference will take place May 11-12 in Chicago at the Ritz Carlton.  It will once again focus on the High End of the US beer biz, the engine of growth and opportunity for the last many yrs.  Many industry leaders will present.  The last several conferences have completely sold out.   Click here for more info.  Click here to register.      

Everyone expected lotsa legislative action in alc bev biz in 2015 and plenty of excitement already.  Seems like new stories, bills, charges and counter-charges poppin’ every day as combo of self-interest and broader legislative goals plays out in state legislatures.  Look at some recent developments:

Ky House Passes Bill to Boot AB Branches  Vote not even close.  Full Ky House voted 67-31 Tuesday to pass bill that would force AB to divest Louisville and Owensboro branches.  Amendment to grandfather branches but bar further purchases narrowly defeated; its sponsor said “it’s just not right,” and not legislature’s role to “take away somebody’s business.”  Another amendment to allow Ky brewers to self-distribute defeated more soundly.  Bill now moves on to Senate.  Small brewers “confident” Senate will pass ban too, said one craft brewer to Courier-Journal.  AB vows to fight on vs “tiny number of greedy special interests,” as AB spokesman Damon Williams said after vote.  Damon posted lengthy op-ed in Courier-Journal earlier this wk stating again that 200 jobs at stake, that “our competitors seeking this government-mandated taking of our property have a history of snatching up facilities like ours and then closing them down,” tho didn’t specify.  He did point to recent tv interview with distrib who supports ban who Damon said “flatly stated that his company was very interested in owning our property in Louisville and that is why they were supporting the bill.” 

Meanwhile, KEG group that supports ban praised vote that will “strengthen the commonwealth’s independent three-tier system,” assure consumer choice and a level playing field for craft brewers, while closing loophole exploited by “out-of-state mega monopoly brewers.”  KEG noted too vote put Ky “on path toward joining a majority of states that prohibit brewers from owning distribution,” clearly the larger goal here.  KEG again noted 7 states have banned branches since 2010, by collective vote of 695-81, and now 35 states have laws preventing brewers from owning distribs.  Recall too that MC weighed in favoring ban since allowing AB to keep branches would be “picking winners and losers and providing competitive advantages to one brewer” while others “put at a competitive disadvantage.”  

Tenn Branch Battle Mirrors Ky, So Far  In neighboring Tenn, same battle underway with so far same results.  Bill to ban branches passed thru House subcommittee yesterday, reports Knoxville New Sentinel.  Tenn distribs defend bill as closing loophole, strengthening 3-tier, while AB attacks as anti-competitive, govt interference

Pennsy Distribs Express “Concern” About Privatization of Wine/Liquor  Distrib assn Pennsy Beer Alliance  voiced “concern” about current effort to privatize liquor and wine in biggest control state.  House passed broad privatization plan and full House could vote today.  PBA concerned that current privatization play – including proposal to allow home d beer distribs to get wine/spirits license – will “tear down the existing beer industry” and jobs it provides.  (In this view Home d retailers, where most off-premise Pennsy beer purchased, who add spirits and wine will have less room for, focus on beer.) Current laws “work,” sez PBA’s Jay Wiederhold, and “change is occurring,” as more grocery and c-stores are now selling beer.  Privatization also poses risk of limiting choice, according to Jay, as retailers only stock best sellers, proliferation of outlets in highly populated areas and higher prices “especially in rural PA where there will be less competition.”  So privatization could lead to more competition in some areas, less in others.  Net-net, Jay sez distribs “welcome discussion on modernization efforts of the beer industry” (Gov Wolf opposes privatization, supports “modernization”) to provide more choice and convenience, “without disrupting the existing beer industry.”

Elsewhere, different alc bev interests sideways with each other over expanded retail sales.  Independent liquor store interests in Ind won battle over legislation that would have legalized Sunday sales but disadvantaged grocers who would have had to separate liquor from beer, putting it behind counter, mandating clerk age etc.  The bill died, maintaining status quo.  In Kans, similar battle going on with indy liquor stores fighting expansion of strong beer wine/liquor sales to grocery and convenience stores. 

Total ABI revs jumped 5.9% to $47.1 bil in 2014 and EBITDA up 6.6% to a mighty $18.5 bil, as ABI’s own beer volumes up 0.5% globally.  But here in US, AB revs flat at $14.1 bil (up 0.3%) and EBITDA down 1.4% to $6.029 bil.  And EBITDA margin contracted 72 basis points to still impressive 42.7%, “as a result of increased investment behind the long term growth of our brands and higher distribution expenses due to increased freight rates.”  US earnings now under 1/3 of AB global EBITDA.

Here in US, AB biz getting a little better as total beer biz gets better.  Shipments flat in Q4, sales to-retailers down 1.4% (MC STRs down 1.7%).   And for full yr, AB STRs down 1.7% (MC down 2.5%).  On shipments basis, AB reported 1.5% decline; that’s about 350K bbls higher than our estimate, with Q4 even.  Bud Light down 1.6% (very close to -1.8% INSIGHTS estimated) and down 1.1% in 4^th qtr. AB said it gained share of premium lights.  AB rev per bbl up just 1.7% for the yr, lower than usual.  But it got 2.1% rev per bbl gain in Q4, up from 1.2% in Q3, 1.5% in Q2.    

This yr, US will get off to a rocky shipments start, down mid-single digits in Q1, ABI noted.  Why? Because AB lapping “a difficult comparable following the buildup of wholesaler inventories in 1Q14 ahead of union negotiations.”  Recall, AB shipments +2.1% in Q1 last yr.  But overall, AB expects “industry volumes to continue to improve” in 2015.  ABI global sales and mktg expenses up 11% in 2014 (up 11% in North America too) and it expects ‘em to increase mid-to-high singles again in 2015.  AB InBev’s priorities in US this yr: drive “relevance” of Bud Light Light/Bud and share growth for Mich Ultra, Mexican brews and high end beer, plus “share of throat” via FMBs and cider.      

Reserve your copy today of this year's edition of Craft Brew Guide, the best compilation of data and analysis available on the fast-moving, ever-changing craft brew biz in the US. Craft Brew Guide includes key numbers: segment totals, top brewer totals (every player 100K bbls+), retail trends and more. Editors from beer marketer's INSIGHTS and Craft Brew News provide analysis of trends, top craft brewer profiles and put craft in the broader context of US beer. Graphics bring the numbers alive and our PDF and 6X9 printed formats are handy for quick reference or extended review. Brewers, distribs, retailers and suppliers alike need Craft Brew Guide to stay on top of trends, plan strategy, bring staff up to speed and more.  Craft Brew Guide will be available in early Apr. Click here for more info and to order your copy.

Reserve your copy today of this year's edition of Craft Brew Guide, the best compilation of data and analysis available on the fast-moving, ever-changing craft brew biz in the US. Craft Brew Guide includes key numbers: segment totals, top brewer totals (every player 100K bbls+), retail trends and more. Editors from beer marketer's INSIGHTS and Craft Brew News provide analysis of trends, top craft brewer profiles and put craft in the broader context of US beer. Graphics bring the numbers alive and our PDF and 6X9 printed formats are handy for quick reference or extended review. Brewers, distribs, retailers and suppliers alike need Craft Brew Guide to stay on top of trends, plan strategy, bring staff up to speed and more.  Craft Brew Guide will be available in early Apr. Click here for more info and to order your copy.

The battle of the beer tax bills still in very early innings, but effect of having 2 bills already evident in snail-like pace at which the BA’s Small BREW Act has added House co-sponsors so far.  On Feb 5, competing Fair BEER Act launched in House with 19 co-sponsors, compared to BREW’s 16.  Now almost 3 weeks later, Fair BEER up to 31, while BREW stuck at just 20.  Can Small BREW get close to 180 co-sponsors that it got last yr?  Given this slow pace so far, what are its chances of passing the House? 

Meanwhile, Small BREW has already gotten further in Senate.  It has more impressive 26 co-sponsors there.  True, most are Democrats and Senate is majority Republican.  So show of strength with 26 Senate co-sponsors doesn’t mean bill will move forward.  Then too, Fair BEER Act likely to be launched in Senate soon. Fair BEER may also slow Small BREW down there. But Small BREW has a Senate champion in co-sponsor Maryland’s Ben Cardin.  Cardin reportedly brought Small BREW up at a Senate hearing last week and tried unsuccessfully to attach it to a bill on bonding.  He is likely to try again.

Yet Small BREW faces other hurdles.  It’s not just BA vs BI in this battle, but rather BA vs most of the rest of the industry.  Indeed, glass companies wrote to Congress last week, opposing Small BREW, INSIGHTS hears.  NBWA now active against bill.  And ABI flexing its muscle, not just thru auspices of BI.  “NBWA is turning out to be a very potent opponent of our bill,” said one craft brewer.  Between NBWA and BI, “the two together are formidable.” 

With just a 40,000-bbl, 4% shipments gain in Q4, Boston Beer shipments came in up 687,000 bbls, +20% for the yr to 4.1 mil bbls.  That’s strong, but on the low end of guidance.  Sales-to-retailers continued to grow at a double digit pace, up 13% in Q4.  Depletions had been up 24% YTD thru Oct 18.  Shipments slowdown “was anticipated” and “due to timing of shipments and a decrease in distributor inventories,” Boston said.  

Boston Beer depletions continued up 12% for the first 7 weeks of 2015.  But Boston lowered its volume guidance for 2015 from what it had announced after Q3.  Previously, it expected STR growth of 10-15%.  Now it expects 8-12%.  That’s even while it upped amount it intends to spend on Alchemy & Science projects to $10-15 mil, from a previous $6-12 mil.  It’s getting tuffer out there. 

Boston Beer had a strong financial yr in 2014 as well.  Net revs jumped $164 mil, 22% to $903 mil in 2014.  And oper income jumped $33.5 mil, 30% to $146.6 mil.  But Boston Beer’s revenue per bbl only increased 1.7% for the yr.  Since its rev per bbl increased 2.2% in 1^st half, implies only a 1.3% increase in rev per bbl in 2d half.     

Next week, Alaska becomes 3d state to legalize possession, transport and cultivation of pot.  State’s not setting up regulated mkt until 2016 tho, reports USA Today.  This week, veteran alcohol bev researcher Jurgen Rehm (we’ve followed his work for yrs via our sister pub Alcohol Issues INSIGHTS), adds to science that suggests alcohol far more dangerous, on both individual and population level, than marijuana.  Indeed, just-published study suggests alcohol more dangerous than nicotine.  Net-net: based on relatively novel weighing of drug-by-drug risks, the authors conclude that “the results confirm that the risk of cannabis may have been overestimated in the past,” at least for measuring death rates.  At the same time, “in contrast, the risk of alcohol may have been commonly underestimated.”  Also, the findings support previous “drug-ranking” estimates which score alcohol at the “highest” levels and cannabis at the “lowest.”

The methodology used here – comparing benchmark doses of harm with estimated actual use of drugs – has not previously been used in the addictions field, the authors acknowledged, except for alcohol and tobacco.  At same time, various levels of “uncertainty” mark the data regarding risk, interactions and more, including unknowns about illegal use.  These uncertainties need to be resolved, are likely to be picked apart and possibly questioned.  Yet the authors remain confident about the ranking results.  For individual use, they found that alcohol, nicotine, cocaine and heroin fell into “high risk” category.  But at population level, given the much broader use of alcohol and so many more deaths attributed to it, “only alcohol would fall into the ‘high risk’ category, and cigarette smoking would fall into the ‘risk’ category.”  In any case, pot poses nowhere near the risk of either, at least for risk of death.  That said, “our findings should not be interpreted that moderate alcohol consumption poses higher risk to an individual and their close contacts than regular heroin use,” given the “additional hazards” surrounding context of heroin use. 

How should these findings affect policy?  Rehm and his co-author clearly imply that governments have erred in the past by adopting “more restrictive policies” toward illicit drugs than for alcohol or tobacco, based on the belief that the former created “significantly larger problems” for society than the latter.  Explicitly, they conclude that their findings about the relatively much lower risks of pot compared to other drugs “suggest a strict regulatory approach rather than the current prohibition approach.”         

As expected, lawmakers in Tennessee followed neighbors in Kentucky and intro’d bill barring brewer interest in distribs and distrib interest in brewers and retailers. Chairman of State and Local Government subcommittee intro’d Senate bill early in month and that committee will take it up next week, we hear. Matching House version will get hearing tomorrow. Bill includes familiar exceptions, allowing brewers to hold temporary stakes (5 yrs) in wholesalers during sales, transfers, terminations, etc. But it also includes interesting grandfather clause purely for distribs that already have interest in brewers. Wholesalers with permits going back 6 mos that have “continuously” held stake in a brewer as well as “trademark or marketing rights” to brewer’s brands “may continue to hold the interest, and may expand the interest,” according to current bill text. Requirement for location of beer purchases between tiers and tweaks to “definition of ‘wholesaler’” also included.

Tenn debate not getting same kind of heat and attention as in Ky, at least not yet. Tho op-ed against bill from prexy/ceo of Beacon Center of Tenn, a free-market backing think tank in state, printed by Watchdog.org this week. Proponents of bill “will do so under the guise of protecting craft brewers from the big guys,” but that’s not so, Justin Owen wrote. A craft drinker himself, he’s “sensitive to the notion that we must protect our craft beer industry,” but “while well intended,” the bill’s “dire consequences” represent an “affront to the American Dream,” in his view. Why? Bill limits buyers of small brewing bizzes and he “just can’t get on board with that.” Indeed, worries that big brewers “can squash out their craft competition” should be set aside, because the “reality is that as the craft craze grows, we the consumers will force the big guys to sell us what we want to drink,” in this observer’s view.