Beer biz up 1.55 mil bbls, 2.3% in 5 biggest reporting states (Tex, Calif, Fla, Ill and 0h) in 99. That’s 46% of total industry growth in states that were 35% of volume. AB gained 1.4 mil bbls, 4.4% in these 5 states, over half of AB's total shipments gain. More details on state data next issue......... Modelo exports up 6% in 1st qtr, while Femsa exports up 14%. Femsa expects 20% export growth in 2000 to 1.3 mil bbls, reported Reuters.

Controversial franchise law passed last yr to protect Illinois wine/liquor distribs got no help from US Appeals Ct decision this week. Judge ruled that liquor commission, not distribs, only one with right to appeal US Dist Ct decision that had directed commission not to enforce law. Also indicated that Appeals Ct agrees with Dist Ct that franchise law probably unconstitutional.

Interesting panel at NC distrib meeting included national beer assn heads David Rehr of NBWA, Jeff Becker of Beer Inst, Dan Bradford of BAA and state exec John Stasiowski of Mass. 21st Amendment disputes headed for Supreme Ct "whether we like it or not, Mass assn head and former NBWA atty John Stasiowski told distribs. Current direct shipping issues present Sup Ct with first opportunity "in a while" to look "at balancing the Commerce Clause and the 21st Amendment," said John. In recent cases in TX, IN, NY, and VA, wine shippers "blurred and distorted" reasons that 21st Amendment added to Constitution - temperance, control of product, taxation. Pointed out one recent victory for state regs (indirectly for 21st Amendment) as US Sup Ct refused to hear chain retailers’ appeal after they unsuccessfully challenged Mass law that limits # of retail liquor licenses that one co can have. BAA prexy Dan Bradford also pointed out that "inherent structure" of beer biz, high ratio of shipping cost to product cost "makes it really challenging to successfully execute" direct shipping of beer to consumers.

Distribs got 56 senators and "close to majority of House" to sign a letter to "get the Office of Management and Budget to look at OSHA cost estimates" of ergonomic regs, said NBWA prexy David Rehr. (Note: 9 weeks of OSHA hearings just ended with OSHA showing no signs of changing. WSJ wrote that OSHA regs are likely to be in court at least 5 yrs.) Dave also told distribs that consolidation hasn’t decreased number of NBWA members, which is about same as ten years ago. But "every person out of the local community is one less potential contact" with legislators, David added.

Beer Inst prexy Jeff Becker noted "exciting" time for BI: "We’re having conversations ...at the highest levels of our companies that have not existed for the last seven or eight years... It's our time to make things happen collectively." Asked what BAA’s contribution to new unity would be considering much smaller rev base, Dan told distribs that with 1400 brewers "very aggressively plugged in at a grassroots level," BAA will collaborate with bigger beer assns to "provide a positive atmosphere and local legislative influence." Both Jeff and David stressed that "communicating more effectively" with retailers "must be done" but very difficult since there are over 1/2 mil retailers and "probably 5% of them belong to one of their assns." However, David cautioned that big chains like Food Lion and Safeway "won’t get involved in some of our dicey issues." And some notes of concern: John noted "divergent interests" with retailers on lotsa issues and predicted that big chains will "put more pressure on brewers" for direct shipping to them.

You wouldn’t know much about Coors’ current health if you read Citizen Coors, An American Dynasty, a recently published bio by Dan Baum. Tho it contains many interesting stories about Coors family, its political views, and especially Coors’ early yrs, this flawed but intriguing book pays almost no attention to Coors transformation in last several yrs. In fact, Baum sez "the Coors story ends" when family hired Leo, that now Coors "in most respects another big corporation." Baum does capture some of flavor of Coors’ past: describes Coors "handshake integrity and old-style craftsmanship," details painful struggles to become modern sales-and-marketing corporation, and characterizes Coors’ "double-edged legacy of muleheadedness and ingenuity." He fleshes out familiar tales of Bill’s invention of aluminum can, Joe’s key role in conservative politics, and Pete’s successful efforts to modernize Coors’ mktg and mend various fences. But left-of-center Baum is obsessed with boycotts of Coors, which officially ended in 80s. Even on last page of book, Baum still intones "official or not, the Coors boycott continues, helping to keep the company from reaching its ‘critical mass.’" Citizen Coors also relies heavily on tales told by unhappy former execs, unsourced or unattributed quotes, and reconstructed conversations. While the book overemphasizes boycotts and some mistakes from long ago, it downplays how Coors managed to be only family-led US big brewer besides AB that is left standing, and thriving in 21st century.

Coors family formalized leadership handoff between generations as Pete Coors became chairman of brewing co, and his dad Joe retired from it. Tho uncle Bill remains chairman of holding co, he is no longer chair of brewing co. Both Joe and Bill are in their 80s. Significantly, Leo Kiely, Coors prexy and coo for 7 yrs, promoted to ceo of brewing co. Coors family still owns all voting shares and about half of non-voting shares, mostly thru various trusts. Interesting info: cfo Tim Wolf told shareholders’ meeting that media spending would be up 10-11% in 2000 because of Olympics.

Wild case in Pennsy over price discount given to power retailer may finally go to trial after 8 yrs, even tho 3 wholesalers have settled. Back in 92, several 4th-tier distribs who sell to consumers and on-premise accounts in Pa (but buy from exclusive AB, Miller, Coors, etc wholesalers) sued a chain competitor Beer World and 3 exclusive wholesalers for violating federal antitrust law. Claimed these wholesalers illegally gave to Beer World a 25-cent per-case discount when Beer World threatened there would be "poor product placement" if it didn’t get discount. Wholesalers countered that the 25-cent discount not coerced, but based on volume. But US Dist Court Judge just ruled that’s for trial to decide as she threw out each side's motions for summary judgment. (Same judge earlier threw case out but Appeals Court sent it back.) Also for trial to decide: whether Beer World had "market power." Record shows it had 30% share of retail biz, not generally considered "dominant." But Beer World’s share has to be viewed in conjunction with wholesalers having exclusive territories, judge wrote. Any agreement on price between wholesalers and Beer World to sell to others at higher prices, she noted, "may have had an effect on the market which was disproportionately large as compared to Beer World stores’ market share." She also wrote some provocative language about connection between discounts and exclusive territories. Discount, she wrote, could have put its competitors at "distinct and unavoidable price disadvantage" since they were not free to purchase AB or Coors products from other wholesalers. Yet she concluded that "reasonable fact finders" could still conclude that discount was not violation, that there was no "concerted action" between Beer World and wholesalers.

In this case, 2 of the wholesalers had settled awhile back with these 4th-tier distrib-retailers. Fuhrer Wholesale Co (AB and Coors in Pittsburgh) just became the last to settle. Until then, owner Frank Fuhrer was at risk personally too. Judge had refused to dismiss case against Frank Fuhrer personally, citing evidence that suggests he "knew of and indeed approved of the price discount at issue." Cited quote from Frank at mtg with these distrib-retailers that he "would sell to whom he wanted at whatever price he wanted." Case had some unusual aspects too. Among them: for a while in early going, same guy was atty for distrib-retailers and Fuhrer. Judge wrote that this atty told 4th-tier guys they didn’t have enuf evidence to press case. Then 4th-tier guys found the "conflict," got another atty. Tho wholesalers settled, case continues against Beer World. Point of case for other distribs, Pa atty Cris Hoel sez, is this: "While most beer wholesalers are focused on following the liquor laws of their own state, they sometimes forget that some fairly common practices lead to antitrust problems, especially when the customer has no other legal source of supply." Fed antitrust laws "apply everywhere" in the US, Cris reminds. This case reported on extensively in BNA's Antitrust Trade & Reg Report.

Miller Brands in Pomona, Calif bought about half-mil cases of Coors from Haralambos for 1X gross. Recall that Coors and Haralambos in tuff legal fight last summer. Coors had charged "fraudulent" repackaging of overage beer by Haralambos, sought right to terminate thru arbitration. Haralambos shot back with charges that Coors acted wrongfully and tried to force sale at low price. Now lawsuit dropped, no money changed hands between Haralambos and Coors, and Haralambos still in biz with other brands. Also has Alta Mktg co that recently purchased 2.5 mil cases of Pabst in southern Calif from Logret (John Lenore). Another Calif distrib, Saccani, bought Logret’s northern Calif Pabst biz. Logret’s biz semi-direct to chains.

A number of AB deals got done in 1st half 2000; lots more still in works. At least 2 closed just this past week (in NY and Wash) in time for peak selling season. Most common type of deal: AB distrib bought smaller contiguous AB distrib. That’s what just happened in NY metro area where Dana Dist, a 1.7-mil-case distrib in Middletown, NY bought 1.1-mil-case Raso Dist of West Nyack, NY. Dana is an E distrib who carries non-AB brands including Heineken. Dana acquired Raso’s Heineken in this transaction. So this deal is departure from usual pattern on 2 fronts. First, since AB’s exclusivity initiative began, AB execs have frequently told E distribs that their opportunities for expansion were more limited. Second, hardly any AB distribs have acquired Heineken brand in recent deals, especially since Miller/Heineken "Distribution Consulting Agreement." In another deal in Wash, Crown Dist, also an E distrib, just bought contiguous Skagit Northwest Dist Co. In Oreg, Morgan Dist of Oregon City (about 1 mil cases) bought contiguous Portland Dist Co (about 650,000 cases) in part of Portland in Feb. Interestingly, AB has another larger distrib in Portland, Maletis Bev. In Ky, Seligman Dist bought contiguous Big O’ Bev in Frankfort. AB’s Tulsa branch (about 4.5 mil cases) recently bought approx 1-mil-case contiguous Premium Dist, previously owned by Cresap family which bought AB distrib in Okla City last fall. And in Neb, AB distrib H&H of Grand Island bought small Blue River. Now totals 2.1 mil cases in 3 areas. So in each of these 6 deals, AB has 1 less distributor to deal with, and combined entity is larger and ostensibly more efficient.

Some other deals had different twists. In Atlanta, AB actually added a distrib as it had in Orlando awhile back. Giant Atlanta Bev just split to become 2 very large distribs. Ex-partners Mark Pirrung and John Economos each has his own distrib as of May 1. Mark owns Atlanta Bev Co, with over 10 million cases. John owns Eagle Rock Dist Co, over 5 mil cases. In Orange County, Calif, giant Straub Dist (about 10 mil cases) got new equity mgr in Feb, longtime AB exec Mark Danner. In Walla Walla, Wash, small AB dist sold to ex-Miller distrib in Spokane, Wash. But his equity mgr is son of AB family who sold.

These deals (plus a couple we reported earlier in 2000) suggest a quickening pace of AB consolidation. In several states, a number of other consolidations are expected in coming months. Some others likely to be triggered by August 1 deadline for compliance with AB’s impact-selling provisions in equity agreement.

Miller continues efforts to move brands it acquired from Pabst to Miller distribs. Brands have moved in about a half-dozen states. In latest action, Miller sent letters recently to distribs in Wisc, NJ, NY, Ky and Del with 90-day termination notice and offer to purchase acquired brands. In key Wisc, Miller sent letter early May to at least a dozen Wisc distribs who had signed acquired brands contract last year when Miller bought 4 brands from Pabst. Miller now sez that agreement will "terminate" in Aug, 2000. Why? "In an effort to increase efficiencies and competitiveness in the marketplace, Miller has determined that it is important and necessary to have the Acquired Brands distributed by the existing distributor within your distributor area that currently sells the Miller brands." If distrib signs "settlement of claims and release" by May 31, including agreement not to sue, Miller will pay 1X gross profit on those brands for 12 mos thru Apr 30, 2000. If distrib doesn’t sign by May 31, "this offer will be automatically withdrawn, and Miller will pay the lower compensation amount" calculated in Acquired Brands agreement, which is smaller % of gross profits made on acquired brands.

No one really surprised that Miller seeking to move these brands; Miller execs have said all along they intend to move ‘em where they can and Acquired Brands Contract allows ‘em to do so with 90 days’ notice. But some interesting twists in Wisc. First, Miller did not send letter to at least 2 distribs in Wisc who still sell a fairly large volume of acquired brands. Why not? Some believe Miller didn’t want to implicate Wisc franchise law, which has stronger protections when brand is a substantial portion of distrib sales. Second, one distrib has made "formal request" to state assn to fund legal review of Miller move. That puts squeeze on assn already in tuff split over trade-spending proposals in state, especially as 1) Miller has over 46 share in Wisc and lotsa political pull; 2) chairman of state distrib assn is co-owner of biggest Miller distrib in state; and 3) assn in past helped fund legal efforts to protect Miller distribs. Gotta note these acquired brands’ trends are down 25 to 30% last 12 mos, according to one distrib, not because of distribs’ lack of effort, he claims, but because Miller didn’t always supply distribs with brands after it bought ‘em. Adding to distribs’ consternation is word that Miller’s acquired brands have changed hands for considerably more than 1X gross in some markets. All adds up to "unfair, inadequate payback," in this distrib’s mind, and example why distribs didn’t want to sign Miller Acquired Brands contract in first place. Finally, Miller ain’t only one changing partners in Wisc. Several Milwaukee-area Guinness distribs just got notice that Guinness moving brand to AB distrib there.