After a nearly 30 yr relationship (1987), Constellation will “relinquish its rights as the exclusive US importer of Tsingtao” as of Jun 30, Constellation announced today.  Tsingtao somewhat less than 1 mil cases and in process of looking for another partner.  All imported beer from China (vast majority Tsinsgtao) at 909,000 cases in 2014, up 27%.  But Chinese imports haven’t grown much over yrs and still just 0.2 share of imports in all. 

This is “very bittersweet,” said Constellation Brands Beer Division prexy Bill Hackett. “We don’t like stepping back from a partnership….  But it’s absolutely the right decision for us and importantly for them,” said Bill.  He characterized it as an “amicable parting.”  Constellation and Tsingtao didn’t have same vision of where brand could go in US in future. In past, Tsingtao an important brand for Constellation’s predecessor organization Barton.  Tsingtao was the first brand that “allowed us a national footprint,” said Bill.  That gave added perspective that prepared Constellation to where it is now.  But to some extent, Constellation has “outgrown,” the Tsingtao brand, said Bill.  With this move, Constellation seeks to “model the behavior we expect,” said Bill, by focusing squarely on “really fueling the opportunities that are in front of us.”  Constellation will “do the right thing on the way out” and “make sure the transition is well managed.”  

It’s accelerating.  That’s what scan data shows for industry’s hottest brand, Modelo Especial, in latest period.  Modelo Especial up a whoppin’ 30% in IRI multi-outlet +convenience for 4 weeks thru Feb 15, reported Morgan Stanley’s Dara Moshenian.  That compared to 25% for 12 weeks and 52 weeks.  Corona Extra also up 7.8% for 4 weeks.  Total Constellation volume up 14.7%.  These impressive results just as Constellation heads into its natl convention next week.  That’s even faster growth on a much bigger base than Boston Beer.  Boston Beer “slowed” to 13% growth last 4 weeks, led by 39% growth for Angry Orchard.  That compared to 15% growth for Boston Beer for 12 weeks and 23% for 52 weeks. 

AB volume doing better than MC in early 2015 scan data, tho both continue to lose share  and AB losing more share of $$.  AB volume up 0.7% for 4 weeks, compared to MC down 0.5%.  For 12 weeks, AB flat in IRI, while MC down 0.4%.  But AB lost 1.1 share of $$ last 4 weeks (an improvement from 1.4 for 52 weeks), while MC lost 0.8 for 4 weeks, compared to 0.6 for 52 weeks.  Meanwhile, just prior to its natl distributor convention, Heineken USA steady as she goes; volume up 4.4% for 4 weeks, remarkably consistent with 4.4% for12 weeks and 4.5% for 52 weeks.  

Raw data for Jan liquor sales in control states suggested a flat mo, but selling-day adjusted figures show volume +3.3%, dollars up 6.6%.  For 12 mos, volume +2.2%, $$ sales +4.7%.  Wine volume in control states +2% in Jan, +1.8% for 12 mos.

While Lexington Brewing and Distilling Co is small part of Kentucky-based Alltech’s operations, it’s interesting to know just how deep its owner’s pockets have become. With revs “comfortably over” $1 bil, Alltech is now worth $3 bil and on target to reach $4 bil, owner Pearse Lyons told Sunday Independent.  Alltech has been ramping up operations in China, working on JVs (including one with Nestle) while Pearse eyes further deals in biotech.  He’s looking for co’s with sales between $50-100 mil, but also won’t rule out a large “transformative buyout” to grow co.  At same time, Alltech is “also ramping up” its brewing biz at it heads into co’s craft beer festival in Dublin this week and plans on introducing an educational program for new craft brewers, noted report.   Recall, co is expanding its own Lexington Brewing and Distilling facility to have 140,000 bbls of capacity per yr by end of 2015 and is building separate brewery and distillery in Pikeville, KY called Dueling Barrels Brewing & Distilling Co.  $$ sales up 36% in IRI in 2014. 

Who would buy Mike’s at floated price of $1 bil?  That’s question puzzled over by folks at just-drinks website in UK.  They see “few options.”  AB InBev, SABMiller and Heineken don’t really need additional “portfolio diversity” Mike’s brings since they’re already in flavored malt bev mkt with brands of their own.  For Molson Coors or Constellation, a Mike’s buy “could be a positive move to diversify their still narrow beer portfolios” and for Mike’s to “take advantage of their nationwide distribution networks.”  But Mike’s already national and just-drinks doesn’t ponder possibility of footprint issues.  Then too, Molson Coors could move Mike’s abroad, especially to Eastern European mkts where category expected to grow.  For Constellation, Mike’s would be big buy as its still drawing down big debt from Modelo deal.  Mike’s “greatest synergies…would seem to be with the craft beer companies,” just-drinks opines, but $1 bil would be “extremely risky venture” even for biggest craft brewer Boston.  Plus Boston has strong tea biz and lemonade waiting in wings.  Likely to be some footprint issues there too.  And most big craft brewers pretty wed to beer, not FMBs.  All in, “it would seem that the price tag and significant market overlap might make it a hard sell for Mike’s Hard Lemonade,” just-drinks concludes.  

Numerous interesting reactions to our news flash Friday that AB selling brands thru branch outside its AB territory in Portland. First one from angry distrib suggested that AB move just “guaranteed” passage of anti-branch bill in KY.  Whether that’s so or not, safe bet that AB’s move will be brought up in KY.  AB had its reasons, gave ‘em in detail. AB made much of Maletis Bevs refusal to sell AB branch the 10 Barrel volume Maletis sold into branch territory and outside its (AB) territorial footprint as genesis of AB’s own move to sell Montejo and Oculto outside branch footprint into Maletis Bev’s territory.  But AB left out key detail, as a source notes, how much it offered for 10 Barrel volume.  Did it offer fair market value? 

Timing no coincidence said another source, shortly after retirement of Don Johnson. Yet a distrib doubted whether Don around or not would have had anything to do with this move.  “With this move they are not only sending a message to their wholesalers, but also to the craft industry.  But I just don’t understand how these recent moves help them sell more beer or get wholesaler buy-in,” added this distrib, concluding: ABI “only knows how to play hardball.” 

Altria “spoke more openly” about its 27% stake in SABMiller during q&a at last week’s Consumer Analyst Group of NY (CAGNY) meeting, pointed out ISI’s Robert Ottenstein, “suggesting significant flexibility.” Now that’s interesting. “Some investors who have followed Altria for years noted a new tone, with some even suggesting that the firm was inviting an offer, although we wouldn’t go that far,” added Robert.  He does believe the odds of an ABI-SAB deal have gone up from 50 to 60%.  And 2015 “seems as good a year as any.”  Tho he doesn’t  know if/when ABI may make an offer, he placed 70-80% odds that SABMiller is “ABI’s preferred next partner” and odds of deal as doable increased to 70-80% in his admittedly “imprecise” estimation.

“We Are Ready for All Scenarios” Altria said that it had extensively evaluated its stake “in context of global beer industry consolidation,” said Robert.  “We are ready for all scenarios,” Altria said at CAGNY.  And Altria can impact outcome, given its 3 SABMiller board seats, tho it would not necessarily demand board representation in a new co.  In terms of whether it sought cash, stock or a combo, “all options are on the table,” wrote Robert. Altria did note IRS would require at least 40% stock consideration for “tax advantaged status.”  If Altria took stock, “would likely no longer be able to use equity accounting for its stake in the combined entity,” reported Robert.  So move could be earnings dilutive.  Currently books $1 bil per yr of equity income from SAB investment.  The “bottom line” for Robert: “Altria has obviously spent a lot of time considering its investment and appears willing to consider a range of structures and terms as long as it’s convinced the outcome is in shareholders’ best interests.”  Robert also reminded that Santo Domingo family, which owns 15% of SABMiller, has invested with 3G, whose 3 founders own 26% of ABI. 

More on SABMiller CFO Jamie Wilson’s Departure Speculation also followed sudden resignation of SABMiller cfo Jamie Wilson announced last week.  Why?  The money that Jamie is leaving on the table.  Jamie resigned for “personal reasons” which “do not appear to be health related,” and perhaps “not on amicable terms,” reported TimeLIVE.  “Wilson will depart with the absolute minimum that SABMiller is contractually obliged to give him,” and his performance shares that’re currently valued about $8.6 mil “have been forfeited.”   He also will “lose claim to the 35,726 SABMiller shares held in the SABMiller Employee Benefit Trust, which were due to be released in equal tranches in June 2015 and 2016.”  While business media relations mgr Richard Farnsworth “said it was standard SABMiller policy that anyone who resigned forfeited unvested options,” another “recent ‘resignee’” said that  “even a ‘good leaver’ in robust health was usually allowed to keep his or her unvested options on a pro rata basis.” 

SABMiller Share Price Up;  Don’t Read Into Resignation/Retirements of Execs  SAB share prices “climbed” since resignation amidst enhanced speculation of deal.  “Did he oppose the bid, or was he an overly enthusiastic supporter of it?” asked Chris Gilmour of Absa Wealth and Investment Management.  Tho resignation was “genuine surprise…I don’t think it’s related to the potential AB InBev bid,” countered Bernstein Research’s Trevor Stirling.   “We do not read anything” into recent resignation of Jamie Wilson and retirement of Tom Long, echoed ISI’s Robert Ottenstein; “there is no read through in terms of timing or likelihood of a deal…. We also give no credence” to claim that 3G “may bid for SAB in conjunction with ABI” as it wouldn’t solve antitrust issues or “have interest in a non-controlling position.” 

Miller Lite in Canada?  Could Gavin Return to SABMiller? Another interesting component of extensive ISI report: Robert sees “increased fundamental risk” for Molson Coors as he points to TAP weakness in Canada and notes SABMiller can enter Canada Apr 1 2015.  At CAGNY, SAB highlighted “portfolio expansion” for Canada, and “we now think there is high likelihood that SAB will introduce Miller Lite in Canada” which would “go head-to-head with Coors Light.”   Finally, Robert suggests “some potential risk that TAP’s cfo Gavin Hattersley will be considered for the vacant cfo position at SABMiller.  Recall, Gavin was MillerCoors cfo and before that cfo of SABMiller in South Africa.  Since he got to TAP, he has been “a key driver of the transformation,” leading to increased profitability. 

Heineken USA sr veep of corporate relations Stacey Tank will leave HUSA within a couple of weeks (tho she’ll be at natl distrib conference next week) to “lead global communications and external affairs” for Home Depot, HUSA prexy Dolf van den Brink wrote HUSA employees.  Stacey “significantly reshaped” Corp Relations “contributions” over last 3 yrs, wrote Dolf, including 360% “increase in high quality PR coverage, launched multiple new responsibility initiatives” and more. “I am proud to see her take this next step,” said Dolf.  Tara Rush “will act as interim CR leader… while we conduct a search for Stacey’s replacement.”   

Redd’s franchise will be looked at as “one of the biggest success stories of the decade,” declared senior vp of Internal and Investor Engagement, Gary Leibowitz at CAGNY conference yesterday afternoon. Gary was subbing for Jamie Wilson, who announced sudden resignation that morn.  It’s “not a line extension” and has been “knockout smash success…basically a million barrel brand,” and still goin’, said Gary. 

But it’s not all smooth sailin’ for Redd’s franchise lately.  Flagship Redd’s Apple Ale and Strawberry Ale declined 11% and 16% respectively for 13 weeks thru Jan 25 in IRI multi-outlet + c-store data.  Total franchise still up 22% in that time thanks to incremental gains from Redd’s Wicked (which sold more cases than Strawberry Ale for 13 wks) and Redd’s Variety Pk.  So Redd’s startin’ to look similar to AB’s Ritas model and FMBs more generally;  growth from new line extensions to keep franchise hummin’, for as long as it lasts.

SABMiller CFO Jamie Wilson Resigns; 2d Top Exec Change in Short Order SABMiller cfo, Jamie Wilson “tendered his resignation for personal reasons,” co announced leading up to CAGNY conference yesterday.  Jamie immediately steps down from board and will leave co at end of Mar.  “He leaves the group in sound financial health, and we all wish him every success in the future,” ceo Alan Clark assured.  Domenic De Lorenzo, “currently Director of Group Strategy and a member of the Group’s executive committee, will become acting Chief Financial Officer with immediate effect,” while the group searches for a permanent replacement.  Recall, this will be 2d big exec change in short order as MillerCoors ceo, Tom Long announced his retirement just over 1 week ago (also, Tom Cardella officially retired at end of last yr and Peter Swinburn announced his resignation as Molson Coors ceo in July).

AB had video conference over 1 hour long yesterday with its distribs going over its increased scrutiny of distribs’ compliance with equity agreement.  For vast majority of distribs, not going to be a big deal, or even much change, one distrib-in-know told INSIGHTS.  But AB very unhappy with small number of distribs it believes aren’t living up to agreement. AB put together team that will be regional sounding board when distribs placed out of compliance by district managers.  That team will be headed up by well-regarded AB sales exec Gil Morelli.  Team will examine whether distrib placed “out of compliance” for good reason and what to do about it.  Key to watch will be whether AB ratchets up pressure on “maximum efforts” clause against distribs who carry non-aligned brands.  But that’s not supposed to be emphasis of program, AB told some distribs.

Equity Agreement Didn’t Change; Assessment Process “Developed” With Panel and “Endorsed”  AB couched this as part of broader meeting: “We had a very positive meeting with our wholesalers yesterday, where we introduced and outlined our new ‘Work Together, Win Together’ strategy,” said veep of biz and wholesaler development Bob Tallett.  “We discussed major investments Anheuser-Busch is making in the marketplace, heard presentations from several wholesaler panel members, and unveiled a new Wholesaler Equity Agreement assessment process that was developed in cooperation with the panel and fully endorsed by its members.  Our equity agreement and standards haven’t changed; this new assessment process is a more focused, disciplined and consistent way to work together with our wholesalers to win in the marketplace…. This initiative is designed to drive focus behind our brands.”