Beer Marketer's Insights
Avg price paid for Miller beers up 45 cents, 3.6% in supers thru May 28, according to IRI. That’s considerably more than 27-cent, 1.9% increase on AB brands, or 36-cent, 2.5% increase for Coors brands. Avg prices paid for all Miller brands at $12.90, still $1.23 lower than AB and $1.97 lower than Coors. But avg prices on Miller Lite about 25 cents lower than Bud Light and Coors Light, compared to 50 cents 1 yr ago. Gap narrowed more recently as prices paid for Miller beers up 50 cents, 4% for 4 weeks compared to 20 cents, 1.4% for AB. Total industry pricing held up really well for 4 weeks thru Sunday of Memorial Day weekend in supers: up 61 cents, 4.2%, according to IRI. That’s identical to yr-to-date change as big brewers raised some prices and consumers continued to trade up (see below). Meanwhile, AB continued to gain volume and share. AB volume up 8% and it gained 1.2 share in supers to 44.1. (Beer volume up nearly 5% YTD in supers, better than in all channels, as large supers gaining share of beer sales.) But as Miller upped avg prices, its volume even yr-to-date and lost 1.6 share to 24.2. What’s more Miller lost 2 share over week leading into Memorial Day while AB gained 2. Coors also only up slightly latest week, but its volume up 11% YTD and it gained 0.6 share to 11.0 in supers thru May 28. Pabst volume down 15% and off 1.5 share in supers, but avg prices up 51 cents, 5% YTD.
Imports Gained 1.5 Share of $$; Bud Light Gained 1.1 Share; Mexican Beers Pick Up Steam
Import $$$ sales up a whopping 21% YTD and accelerating in supers (up 26% for 4 weeks). Import $$ sales gained 1.5 share to 16.0 of $$ YTD thru May 28. Unbelievable!! And Bud Light $$ sales up 19%, as it gained 1.1 share of $$ to 13.3. AB gained just 0.3 share of $$ in all, even tho its $$ sales up 9.9%. Coors $$ sales up 13.7% in supers as it also gained 0.4 share of $$. Meanwhile, Miller share of $$ sales down 1.5 share and Pabst share of $$ off 1 share to 4.3. Barton/Gambrinus up 0.6 share of $$ to 5.8 and Heineken up 0.3 to 2.8. Those 3 cos at 8.6 share of $$$. Interestingly, Mexican beers gaining momentum again. All Mexican import volume up 16% YTD, but up 22% for 13 weeks and 30% for 4 weeks. Corona doing fine: up 18% for 4 weeks, 14% for 13 weeks, 12% YTD. Corona Light even hotter: up 25% YTD, more recently. Some other brands really on fire: Tecate up 82% for 4 weeks, 45% for 13 weeks as avg prices paid down almost a buck per case for 4 weeks and 45 cents for 13 weeks. Pacifico up 110% for 13 weeks, 93% YTD. Many other imports also showing strong trends, including Heineken up 20% and Labatt Blue up 23.5%. In fact, 9 of top 15 imports up 20% or more YTD. And 9 of top 15 micros up 20%+ YTD too.
Frank Sellinger, Schlitz prexy from 78-82, and important veep at AB in 70s, passed away recently at 85. Frank surprised everyone by taking on task of saving a declining Schlitz, but ultimately agreed to sell to Stroh. Frank had worked his way up ladder and also played key role in AB's rapid brewery expansion in 70s. He was a respected man. His son Joe is AB's current veep of operations.
New Pabst distributor agreement replaces 17 or so different contracts out there among its 1500+ distribs (from Stroh, Heileman, Oly, Pabst etc). Pabst’s agreement is less demanding than any of top 3’s agreements. But it contains additional requirements for distribs and rights for Pabst. New wrinkle: Pabst demands portfolio mgr if distrib earns $1 mil plus gross profit and 20% gp margin on Pabst brands (this reportedly affects fewer than 100 of its distribs. Pabst requires distrib use "best efforts to aggressively promote, encourage and increase" Pabst sales. Distrib "shall strive to achieve and maintain the highest practicable volume of Pabst Products." Pabst doesn’t demand refrigerated warehouse, but distrib must "maintain the requisite delivery procedures to minimize temperature increases" of Pabst brands." Pabst requires "written approval" for changes in ownership under many different scenarios (except to family members on death of owner); demands approval in writing for grant of stock options, establishments of trusts to hold stock, etc. Pabst's approval criteria include: "the competitive impact upon Pabst Distribution," "the impact of the contemplated transaction or change on Pabst’s existing distributor network in the region," the "potential advantages of alternative market combinations," etc. "Absent Pabst’s prior written approval," no public ownership either. Pabst contract also gives it power to audit distrib’s biz concerning promo and reimbursement programs, but also sez it will "use its best efforts to reimburse amounts due Distributor under" such programs within 30 days after "Pabst’s receipt of all necessary documentation."
Guinness Response to Wisc Lawsuit: Move was Part of "Realignment"; Could Happen Elsewhere
Guinness-Bass Import Co (GBIC) hasn’t yet filed legal response to distrib lawsuit in Wisc (see last issue), but did give INSIGHTS a statement. "This represents a realignment of our distribution portfolio." Moving Guinness-Bass brands to single distrib will make Guinness "more efficient" and "drive value for our shareholders." Note too: "The principles we are applying in Wisconsin may apply to other markets." Tho GBIC acknowledges each market different, "we seek efficiencies in shareholder value in all markets." Keep in mind that GBIC parent Diageo played lead role attacking Ill liquor franchise law in 99.
Giant Hensley & Co (1 of top 5 AB distribs) of Phoenix, Ariz just bought contiguous Mile Hi Distrib, about 1 mil cases. Hensley & Co already over 20 mil cases, about $220 mil in revs. Sadly, deal closed just prior to death of founder Jim Hensley, 80. In Ida, Southern Idaho Dist (owned by Watkins brothers) bought 2 smaller distribs this yr, including B&F Dist Co in Idaho Falls. Southern Idaho now right around 2-mil-case mark. In Kans, newly formed co Flint Hills Bev LLC purchased Campbell Dist, a nearly half-mil case AB distrib in Manhattan. One of partners in Flint Hills Bev is Casey Musatto, who also owns contiguous Musatto Bros Inc, another approx 1/2 mil case AB distrib. Meanwhile, several recent Miller and/or Coors deals involve multi-state owners. In Ariz, Ken Mourton of Fayetteville, Ark and partners recently acquired 1-mil case Miller/Coors distrib Central Commercial Co in Kingman, Ariz. Ken owns at least parts of distribs in Ark, Fla, Ala and Colo. Total around 4 mil cases. In Fla, Eliot Maisel (of Mobile, Ala) just got bigger too: bought approx 1.5-mil-case Pensacola, Fla Miller/Coors. Already has distribs in Panama City, Mobile, Ala and Jackson, Miss. In Ida, Odom NW Bev bought Coors distrib Selkirk Bev Inc, adding to its distribs in Ida, Wash and Alaska.
At Molson’s annual shareholder’s meeting, newly appointed ceo Dan O’ Neill said Molson recently named new prexy of "US Strategies," a new group which "has the resources needed to assure proper attention and the task of regaining brand performance and improved relations with our US partner." Molson reportedly "working closely" with Miller to fix US performance, which has become more of priority for Molson now. Previously, Molson focused on fixing its Canadian biz. This yr, Molson gaining share for 1st time in 10 yrs in Canada, but Molson franchise down double-digits in US. Molson USA’s share of imports (including growing Foster’s, etc) declined from 21.7 in 94 to 10.9 in 99 even as imports boomed in US. Molson brands dropped from peak of almost 1.8 mil bbls to 1.2 mil bbls in same 5-yr period. Miller just came out with new tv ads in US.
As expected, light beers recently passed regular beer in case sales in convenience stores, according to ACNielsen Convenience Track data. YTD thru June 10, 123.9 mil cases of light beer sold in these outlets compared to 121.9 mil cases of regular beer. Dollar sales of regular beer were still ahead ($1.915 bil to $1.903 bil) since regular beer includes higher-priced imports. YTD trends: total beer volume up 4.3%, $$ sales up 6.6%. But volume of regular beer off 0.8% YTD, and $$$ sales of regular beer up just 1.6%, while light beer volume up 11.2% YTD, dollar sales up 13%. For 12 wks thru Jun 10, only light beers (+10%) and no-alc brews (+2%) were up in convenience stores. Chart below shows trends and pricing in supermarkets for comparable periods. Supermkt data from IRI. Total volume trends similar; light beers doing slightly better in convenience stores than supers. Average prices higher, natch, in convenience stores, about 50-60 cents per case for all beer. But as hot as light beers are in convenience stores, note avg prices $1.37 higher there than in supers. Pricing trends healthier in supers, avg prices paid up +4.3% compared to +2.2% in convenience stores.
| Convenience Stores | Supermarkets | |||||||
| Trend Thru 6/10 | Avg Price/Case | Trend thru 5/28 | Avg Price/Case | |||||
| Cases | $$$ | $ | Chg | Cases | $$$ | $$ | Chg | |
| Total Beer | 4.3 | 6.6 | 15.53 | 2.2 | 4.8 | 9.2 | 14.96 | 4.3 |
| Regular Beer | -0.8 | 1.6 | 15.71 | 2.4 | NA | NA | NA | NA |
| Light Beer | 11.2 | 13.0 | 15.37 | 1.6 | 8.9 | 12.4 | 14.00 | 3.5 |
Courts continue to reject the argument that alcohol producers and sellers should be liable for problems caused by abusive consumption. Over the last 12 months, US District Courts in Florida and New York dismissed suits brought by 1) two consumers against AB and 2) a group of lawyers called Alcohol Foundation against a number of producers, importers and industry associations. "Plaintiffs cannot meet the prerequisites in establishing a products liability claim since beer is not considered an
As Coors sales stay strong, a significant number of distribs, particularly smaller rural distribs and especially in midwest, are running out of some packages of Coors products. Some distribs getting very low on Coors inventory altogether. Coors definitely losing some sales at this point. But while problem pronounced in some areas we checked, it
As PM announced its $19 bil acquisition of Nabisco, Miller will become even smaller part of giant PM (it was already under 4% of PM income). At press conference on Kraft-Nabisco deal, PM chairman Geoff Bible was asked yet again: "Are you still committed to the beer business?" He said: "We bought it to keep it. We’re going to keep it and improve it." He added that Miller "needs some repair work, but we have a new management team and they’re doing it." Geoff also noted that Miller earnings are up and that "it’s a very tough competitive marketplace right now and we’re absorbing some brands we took over from the Pabst deal but the business is doing well at the moment." (These remarks more tempered than when Geoff told Miller distribs in March to "expect great things" from Miller.)
As part of Nabisco deal, PM also announced it would sell less than 20% of Kraft to public. In that context, Geoff was also asked whether other IPOs (Initial Public Offerings) would be possible in future ("international or whatever...Miller") if that IPO goes well. Geoff answered: "I wouldn’t rule out anything in the future," then added "right now we’re very, very comfortable with the portfolio of businesses that we have." Within hours after this comment, Bloomberg News headlined: "Philip Morris May Consider Miller IPO." But Geoff hadn’t specifically addressed Miller in his answer, so Bloomberg’s headline seemed a bit over the top. Yet Geoff did acknowledge almost anything is possible, a different spin than previously. Predictable speculation followed this tiny hint of a public maybe: Coors "would love to buy Miller," UBS Warburg’s Caroline Levy chimed in. Two days later, Merrill Lynch's Doug Lane did an analysis called "Miller IPO Possible." While Doug wrote "it appears that management is not considering a complete divestiture of Miller