Some distribs are finding Pabst still plagued by same problems as last yr: difficulty filling orders and administrative woes. Prexy Bill Bitting acknowledged admin woes and said Pabst workin’ hard to fix ‘em, but told INSIGHTS that production problems not widespread; cited southwest as 1 area experiencing difficulties. He also said orders in early 2000 "better than anticipated." In Jan 25 letter to all distribs, Bill wrote: "We are further behind in transitioning the business than I would like," but Pabst is "performing well financially and the business plan works." He added: "Pabst needs to improve its administrative functions.... We are working diligently on these administrative problems and will resolve them shortly." Turns out that many distribs still have not received promo credits due from last yr. Meanwhile, Pabst postponed issuance of its new standard distrib agreement another 60 days to Mar 31st. (Bill reminded in letter that Pabst has 17 agreements for 1500 distribs.) Bill wrote: "Resolving all issues related to 1999 needs to be completed before we can focus on the future." While Bill downplayed problems, one source did not. "Pabst is having a relapse," he said. Many have questioned whether Pabst has sufficient staff or direction to manage a company of its size. And while Ad Age had written of $40 mil Pabst mktg campaign last July, not much of it has shown up yet.

For most part, big brands got bigger again in 99. (All brand numbers are BMI estimates of domestic + export shipments.) Top 10 brands gained 1.1 share last yr. Up 4.1 share last 5 yrs. Reached 65.5 share of beer biz last yr, almost 134 mil bbls. Premium light beers led the way. Bud Light up 2.9 mil bbls, 11% in 99 to 29 mil bbls, and gained 1.2 share. That followed a 3-mil-bbl gain in 98. That’s Bud Light's 8th straight double-digit gain. If current trends continue, Bud Light will pass Bud in 2001. WOW! That will be momentous change. (Change already happened in supers. See below.) Coors Light also had rock-solid yr; up 800,000 bbls, 5.3%. Closing fast on Miller Lite. With trends of both brands improving, should be tight battle for #3 spot in 2000. Miller Lite up 2% in 99, including a 3% gain in 2d half. Those 3 leading light beers gained 4 mil bbls, 1.6 share and got over 30% of beer mkt for 1st time. In fact, each of 5 light beers in top 10 brands up; AB’s Busch Light and Natural Light gained over 600,000 bbls, 5%. Corona had another very strong yr; up 800,000 bbls, 20% even with 2d half slowdown. In 98, Corona had gained 1.2 mil bbls. Since 96, it scored 2d-biggest bbls gain behind Bud Light. Miller High Life up 300,000 bbls, 6% in 99 following down 98, up 96-7, lotsa down yrs before that. In all, 7 of top 10 brands gained in 99; core-brand strategy for big brewers appears to be working.

The 3 top 10 brands that declined were all regular beers, including #1 Bud. Bud down 1.2 mil bbls, 3.3%, following 3 straight yrs of 2% drops. Domestic STRs down 2.6%; exports declined double-digits. Another regular premium beer, Miller Genuine Draft, continued its long-term decline. But it was only down about 2%, a big improvement from avg of 4-5% drop over last 5 yrs. And Busch, the #1 subpremium regular beer, down 1.5%, following slight gain in 98.

Three brands dominated growth in last 3 yrs: Bud Light, Coors Light and Corona. Those 3 brands gained 13 mil bbls since 1996, with Bud Light up 8 mil bbls, Coors Light up 2.2 mil bbls and Corona up 2.7 mil bbls. Those 3 brands jumped almost 6 share points in 3 yrs; from 18.5 share to 24.3.

Specialty beer mkt up about 75,000 bbls, 1.3% in 99, following a no-growth yr in 98. That’s BMI’s current estimate, subject to revision. (Gotta note very tuff to figure half of specialty mkt below top 10: over 1000 brewers there, with wildly different trends, who don’t report shipments, and govt 2 yrs behind in tracking numbers.) Shipments of top-10 specialty brewers (as group) were even. Lotsa variation: Boston Beer off estimated 28,000 bbls, 2.4%, but Sierra Nevada strengthened grip on #2 spot with 56,000-bbl, 15% gain. Shiner and Leinenkugel scored small gains. Both Redhook and Pyramid gained in 2d half. Redhook off slightly for the yr; Pyramid eked out 1,000-bbl gain. Pete’s got hammered with 2d straight 30% drop and fell to #6 specialty player with just 3 share of segment. (Pete’s #2 with 8 share in 95.) New Belgium jumped from #9 to #7 with 43,000-bbl, 41% jump. Widmer managed tiny gain. We estimate Anchor off slightly. That means remaining specialty brewers, about half of mkt, up estimated 75,000 bbls, 2-3%. Here’s another way to look at specialty trends. Each of 4 biggest publicly owned specialty brewers—Boston, Pete’s (before Gambrinus bought it), Redhook and Pyramid—peaked in 96. Since then, these 4 brewers down 383,000 bbls, 24% as a group (Pete’s alone down almost 250,000 bbls), while total specialty segment increased by 370,000 bbls, 7%. Means specialty brewers other than these 4 up about 750,000 bbls, 21.3% since 96.

Mike’s Hard Lemonade jumped by outfit called National Consumers League for allegedly appealing to underage. "Juvenile tone" of label for brand is "geared to a teen audience" NCL prexy wrote in letter to chairman of FTC (Federal Trade Commission). Letter also said "it is the perfect introductory drink for teenagers raised on soda and other sweet beverages." Called these products "spiked lemonades" which are "enormously successful" in Canada; claimed they helped increase alc consumption there "for the first time in more than a decade." Letter and press release charged that Mike’s violates Beer Inst’s voluntary ad guidelines. (Mike’s is not a member.) Tho FTC had recently ruled that beer industry mktg generally responsible and embraced self-regulation, a product like Mike’s poses challenge to self-regulation. Could reopen internal govt debate, give ammo to those who push "3d party review" of ads (which NCL endorsed in its letter to FTC). Meanwhile, several companies are coming with similar products, including Seagram with Rick’s Spiked Lemonade and Boston Beer with BoDeans Twisted Tea.

It’s a honeymoon period for new leaders of alc bev assns. A lengthy (and puffy) profile called "Happy Hour" appeared in leading beltway mag Natl Journal. At same time, Beer Inst and NBWA jointly sponsored ads in 2 other Capitol Hill publications, Roll Call and The Hill. In discussions with INSIGHTS, leading execs from alc bev assns (including wine and spirits) saw much in common; they were also optimistic about policy outlook in 2000. Beer Inst’s Jeff Becker told INSIGHTS there’s a "general sense in Washington that the industry is responsible and is making serious efforts to reduce abuse." In fact, White House press secretary Joe Lockhart recently noted industry efforts "on reducing youth drinking." He also said: "You’ve seen a sort of sea change in this country" on drunk driving; credited community and interest groups as well as govt and industry. Joint NBWA/Beer Inst ads drove this theme home. Said: "Virtually no other policy challenge has been addressed more succesfully than efforts to reduce drunk driving and alcohol abuse.... We remain committed to supporting programs and policies that effectively combat alcohol abuse." Showed graphs illustrating long-term declines in drunk driving and underage drinking.

Nat Journal article focused on David Rehr, Jeff Becker and Daniel Bradford, new prexies of NBWA, Beer Inst and BAA respectively. It said "they are setting aside their group’s historic rivalries and are promoting an aggressive and united approach for the beer industry.... Unity is the new mantra." Each beer group plans "major new emphasis" on pr. "We have not done a very good job selling our commitment to responsible drinking," Jeff told Nat Jnl. Tho brewers have lots of written materials to tell legislators this story, "if you ask the legislators what we’re doing to solve the problem, they look at you pretty blankly." NBWA’s David Rehr broadened unity theme to include retailers. Told INSIGHTS that beer distribs "need to help retailers to become more active to protect their interests." Even new DISCUS prexy told Nat Jnl that all changes at top of assns "gives us an opening. We can take a fresh look at the opportunities to work together."

While each top-3 brewer beefed up profits from 1989-1999, sure didn’t accomplish that by raising prices aggressively. AB increased net income from its domestic beer biz from about $700 mil to about $1.4 bil, from $8.40 to $14.60 per bbl. But AB’s rev per bbl up just $11, 14% during same period. Means that AB built net income/bbl as % of rev/bbl from 10% to 15%. Key: AB’s cost of goods sold per bbl up only about $2. Similarly, Coors more than doubled operating income from 89 to 99, really zoomed net, despite a 20% per-bbl rev increase. Coors’ CGS increased by less than $4 per bbl, 7%. And while Coors raised mktg, gen and admin costs by about $10 per bbl to $32, nearly 50%, we estimate AB’s mga/bbl only $2-4 per bbl higher in 99 than in 89 and was still under $20 per bbl. Most of Miller’s $$$ data not reported, but it jumped operating income by 2.4X, from $226 mil to $540 mil from 89-99. Its rev per bbl increase certainly no more than AB or Coors. What about distribs? Didn’t face big price increases from suppliers, but discounting increased and on avg distribs faced higher delivery, merchandising, mktg costs. Net: while big brewers expanded margins in 90s, distribs didn’t.