Pabst has deal with small craft brewer in Chicago, Small Town Brewery, which reportedly has hot little brand, an alcoholic root beer called Not Your Father’s Root Beer.  Under terms of deal, Pabst will expand brand thru Pabst distribution network.  Small Town Brewery will continue to produce draft at its (very small) facility.  Pabst not likely to expand brand rapidly as capacity quite limited; some details on potential packaging in works.

It’s “part of our strategy,” veep Rich Pascucci told INSIGHTS, “partnering with craft brewers.”  Pabst sez PBR is “domestic beer of choice” for many craft drinkers, so this is in keeping with Pabst identity.  This will be “first of many interesting partnerships,” said Rich.  

Solid start in scans continued into first wk of Feb.  Volume +2.9% and $$ sales +5.5% in Nielsen’s total US + convenience data for 4 weeks thru Feb 7.  Growth pretty much across the board, with above premium +9%, premium lights +2%, and even near- premium +1.2%.  Continued -3% pace in lowest-price budget beers brought overall below premium volume into negative territory, but down just 0.8%.  Dollar sales trends also up in all segments except budget, including double-digit dollar pops in craft, imports and malternatives, plus cider.  So, even with improved mainstream sales, above premium grabbed nearly 2 share of $$ to 38 for the 4 wks.    

Just as MillerCoors ceo Tom Long said on conference call last week, notable improvement showin’ up in c-stores, which many link to lower gas prices, higher employment and better wage data.  Indeed, volume jumped 5% in c-stores for 4-wks thru Feb 7, dollars up nearly 8%.  And premium light volume almost matched overall gain, +4.7% virtually held share in the channel, even as above premium rocked c-stores this period: volume +15%, $$ +17%.  If only these trends continue!  Compare to much softer supermkt biz, where volume up just 0.4%, $$ +3% for 4 wks.  Premium lights down 2% in supers, above premium up “just” 5.7%. 

This is a new one on us.  AB expanding Montejo brand into Oreg and introducing Oculto. But there’s a twist.  For 1^st time we can recall, AB gave new brands Montejo and Oculto to its own branch, outside its territorial footprint.  Western Bev in Portland will sell in Maletis Bev’s territory (another part of Portland).  Wow!  Why?

“Despite ongoing efforts to negotiate the transition of 10 Barrel distribution rights to Western Beverage’s Salem and Portland, Ore, territory, Maletis Beverage in Portland continues to sell 10 Barrel outside of its assigned Anheuser Busch territory and into Western Beverage’s territory,” said region veep David Craig.  “As a result, we have decided not to assign Maletis Beverage the distribution rights to two new Anheuser-Busch brands – Montejo and Oculto – at this time, which is our right under the Anheuser-Busch Wholesaler Equity Agreement.  Our position has always been – and continues to be – we want all of our brands distributed by our equity wholesalers within their assigned Anheuser-Busch territories.  This was an unfortunate step that we hope will be temporary.”

Recall, Maletis tried to buy Portland distrib Morgan, but AB picked it up late in game.  And of course Maletis has shipped outside its AB territorial footprint (and in AB branch territories) for yrs with different brands.  Several yrs ago, then-prexy Dave Peacock labeled practice of selling competing brands outside AB territorial footprint as “insidious.” That continues to be a big no-no for AB, preventing many AB distribs from acquiring other distribs.  But now AB taking a page from “insidious” distrib playbook, even if it’s not exactly same, as it’s selling AB brand against its own distrib. This sends tuff message to non-aligned distribs all over US, especially those contiguous to branches, and is likely to cause another ripple effect throughout its network.  

Meanwhile, Montejo so far not setting world on fire sales-wise.  Sold 36,000 cases for last 4 weeks thru Jan 25 in IRI multi-outlet + convenience out of AB’s total of 49 mil cases in US. So it’s less than 1/10 th of 1% of AB volume.  Montejo ranked as 25^th largest AB brand. Montejo at 138,000 cases (10,000 bbls) last 13 weeks in IRI. 

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Once again, St Louis Brewery, which runs Schlafly, looked to bigger beer to hire key exec.  James Pendegraft  just named CEO to succeed Dan Kopman.  Dan will become co-chairman of St Louis Brewery with Tom Schlafly.  James comes most recently from North American Breweries where he was prexy of sales/mktg; he left NAB last yr.  But James was also prexy of Labatt USA and category mgmt director for InBev.  Recall, St Louis hired long-time AB exec Keith Moszczenski in 2013; he’s COO/CFO. 

James famously told group of NY wholesalers back in fall of 2008 as AB InBev deal wrapping up that InBev culture “non-negotiable” and “will happen.”  Employees are “on the bus or off the bus.”  He jumps on new bus a few yrs after meeting Dan at Beer Inst mtg and as St Louis completes 3-yr process of getting its ownership structure resolved, working thru semi-crisis with its key Mo distrib (Major Brands), which had huge legal battle with its spirits suppliers, and having just lost its brewmaster (to Brew Hub).  Recall, co-chair Tom Schlafly owns 20% of St Louis Brewery, Dan owns 10%, having sold 60% stake to pvt equity co Sage Capital in 2012.  A group of employees has stake too.  So St Lou a hybrid of founders still closely involved, pvt equity partner and employee ownership.  It has two breweries in St Lou, seeking land for 3d and contracts with other brewers when necessary.  Schlafly sold 60K bbls in 14 states/DC last yr, up about 7%, reports St Lou Post-Dispatch.  Focus on ownership and mgmt issues may have slowed expansion a bit in recent yrs but Dan sez team now in place and Schlafly ready to “fulfill our potential of being the leading craft brewer in the midwest.”  In new role as co-chair, Dan will focus on innovation, relationships with partners and customers and brewery’s participation in industry assns.  

Speaking of pot, Vt state senator intro’d bill to legalize possession, use and sale of recreational marijuana, plus personal right to grow nine plants in “secure indoor facilities,” reports Huffington Post.  Smoking in public would be banned.  Bill envisions excise tax of $40/oz on marijuana flowers, $15/oz for other products and $25 per plant, with 40% of tax take earmarked for treatment, education, enforcement.  A separate Marijuana Control Board would be set up by state.  If bill passes, and bill sponsor expects debate could push vote to next year, Vt would be first state to go legislative route vs referendum to legalization.  Sponsor admits to recreational use in college and “yet I turned out to be a productive business person.”  Gov Peter Shumlin on board too, sayin’ “my bias on legalization is toward legalization” and acknowledges widespread availability: “In the real world, folks, if you want to get marijuana in Vermont, we’re in LaLa Land if we’re pretending you can’t.” RI lawmakers may consider similar bill in 2015, Huff Post notes, and Md legislators have intro’d bills.  Pro-pot advocate from Marijuana Policy Project hadda draw the alcohol-pot distinction.  “Most Vermonters understand that marijuana is objectively safer than alcohol, and they know it makes no sense to punish adults who choose to use the safer substance.”

Like other industry numbers, state shipment totals get tweaked as year goes on.  But first look from Beer Inst for full-yr figures show shipments up 1.1 mil bbls, 0.5%.  That’s very close to industry shipments trend for taxpaid + import total based on other measures.  Calif led the way, as we reported all year.  Volume up 880K bbls, 3.9% in Golden State, by far best trend there in yrs.  In 2d biggest beer mkt, Tex, shipments up 159,000 bbls, 0.8%.  Fla scored 200K-bbl, 1.5% gain and NY up 115K bbls, 1.1%.  So each of top 4 mkts outperformed national trend and collectively up 1.4 mil bbls, 2%.  That meant some pretty big losses in other key states: 165K bbls, 2% in Oh; 90K bbls, 1% in Pennsy; 104K bbls, 1.2% in Ill; 83K bbls, 1.3% in Mich; 100K bbls, 2.2% in NJ. 

Beer Inst data shows 24 states and DC up, 26 down for the year.  Regionally, biz was soft in northeast (except NY) and midwest with shipments off in New Eng, Mid-Atlantic and both EN Cent and WN Central regions.  Southern trends spotty with small gain for region overall.  But West was best, with Mtn states +1.7%, Pac states +3.8%.  Note: legal pot didn’t hurt beer in Colo or Wash at all, with beer shipments up 2% and 3.6% respectively. 

Yet another report out of the UK over the weekend speculated about a coming bid for SABMiller by AB InBev.  This time sources told Financial Mail that 3G Capital Brazilians “studying” how 3G could purchase SABMiller “as part of a consortium of predators that could also include AB InBev.”  Again, nothing firm and no comment from the players.  And this time, SABMiller stock price bumped up just 2%.  Plenty of comments from analysts also shrugging off this round.  Nomura’s Edward Mundy repeated his skepticism about ABI-SAB since it’s not typical 3G play, which is to pick up poorly managed bizzes and run ’em more efficiently.  Mundy also questioned Mail’s suggestion that ABI could get around “competition hurdles” via 3G link and cast doubt on potential of 3G and Santo Domingo family (which has big stake in SABMiller) collaborating on a SABMiller takeover.  Other comments suggest other observers tiring of the story as well.  One trader told London Stock Exchange blog that modest SABMiller share movement may be “twice bitten, three times shy here for the hedge funds today.”  An analyst speculated to South African site that latest report seemed to be “an old story resurfacing”; another called it “thinly based.”    

Just as AB avoided labor trouble early last year, MillerCoors on similar path in early 2015.  Teamsters at MC breweries in Eden, NC and Fort Worth, Tex voted overwhelmingly to ratify contracts covering over 900 employees, the union reported last week.  MC had “proposed cutting the union’s seniority as well as lowering the wage rates…but the Teamsters’ negotiators fought back,” union claims, and got increases in wages/benefits.  Also, “any member with 30 years of time at MillerCoors who retires by January 1, 2016, will pay nothing for their retiree health care and neither will their spouse,” Teamster rep said.  Final Teamsters contract in MC system “currently being negotiated” in Irwindale, Calif.    

Contentious anti-branch bill could be voted on by full Kentucky House as early as tomorrow afternoon. Voices still joining fray on either side just as others raise questions about the time and money being spent on the issue. Big question as bill moves forward will be whether handful of amendments, already filed but yet to be voted on, come into play. Proposed amendments include a couple kinds of grandfather clauses and small brewer carve outs (including one paving way for self-distribution and another shifting way licensed microbreweries sell directly to consumers). Bill’s currently unamended form already on House calendar and may be taken up when legislators convene tomorrow afternoon, according to the Courier-Journal.

But craft fans in the state now being pulled in opposite directions. “If you support craft beer, great wine, entrepreneurship and small business in Kentucky, please encourage your legislators to vote no,” Rhinegeist Brewing co-founders Bob Bonder and Bryant Goulding concluded op-ed for Cincinnati Enquirer today. But that runs counter to message from small KY brewers encouraging fans to support bill. AB has unlikely ally in Rhinegeist due to that co’s recent formation of KY craft distrib Riverghost. It’s invested $250K plus another hundred grand on lease that co would “just have to walk away from” if bill passes, co-founder/prexy Bob told Enquirer recently. Rhinegeist wouldn’t mind an amendment “to exclude existing businesses and/or small businesses” from branch ban, op-ed states.

Count MillerCoors among those opposed to such an amendment tho. To maintain “a level playing field” in state, MC sees “only two options,” status quo or passing bill as is, spokesperson Pete Marino shared in statement late last week. Grandfathering in AB’s current distribs but barring future brewer-owned branches “punishes all other brewers,” in MC’s view, and puts it “at a permanent competitive disadvantage.” But government forcing the sale of a business “does seem a bit egregious,” bill’s sponsor House Speaker Greg Stumbo said late last week. That comment and decisions by a few local TV stations to pull ads from advocate group KEG were music to AB’s ears. “We ought to be able to have a debate that involves facts,” sales/mktg director Damon Williams said of KEG ads/comments “that have ranged from misleading to outright false.”

But others criticized both time and money already spent on this debate. More than half of respondents of recent poll ranked “beer industry regulations as the least important” issue facing KY lawmakers, according to Grayson Record op-ed from Jim Waters, prexy of “free-market think tank” Bluegrass Institute, which conducted poll. Focus on this bill represents “disconnect with constituents,” as it’s a “pet project” that provides “solutions for a problem that doesn’t exist.” The editorial appeared just before report from Kentucky Center for Investigative Reporting citing over $200K spent by “the warring sides” on lobbyists/campaign contributions in last yr alone.