As good as sales are, it’s kinda surprising that there are so many top mgt or structural changes at big importers. This latest round of changes ain't related to sales. Heineken USA just got new prexy Frank Van Der Minne in last mo following departure on Aug 31 of Michael Foley (who leaves to run Aer Lingus). Michael leaves on high-note: Heineken had very good 99 and strong 1st half 2000. Gained 1.3 mil bbls, 50% in 7 yrs he was there. Beck’s searching for new ceo. Beck’s North America prexy Bill Yetman will "be part of" new "top level management team to evaluate" international opportunities, according to statement by BNA chairman Michael Muller. "To replace Bill, we are looking for a top marketer who can work with" current mgt team. Bill "will continue to be" prexy and ceo "until our new management structure is finalized." Guinness parent co Diageo undergoing major structural overhaul and looks to combine Guinness and largest distiller UDV. "The move makes Guinness Stout a core part of its drink business and largely kills speculation that it could also be sold off," wrote Reuters. In fact, "as for further acquisitions, beer will be considered alongside spirits--but they would have to be premium brands without the drag of large brewing assets," wrote Financial Times.

Miller has new buy on CBS football and on Fox NFL all season long, Miller told distrib council meeting Jul 19-21. Miller also expanded its ESPN buy so that Miller Lite will be exclusive presenting sponsor of ESPN’s "NFL Primetime" program and Lite will be advertised during ESPN broadcasts in core mkts. This is "better allocation of our spending" with "more weight" than previous plan, sr veep sales Jim Mortensen told INSIGHTS. Miller also responded to those distribs who had felt local media weight insufficient. Pledged to make its local media buys earlier with longer-term commitments and to offer some minimum level ($$ tied to rating points) in every area in 2001. In small mkts, distribs will now decide what local media to buy. Miller approved a number of new commercials that will air later this yr but are presently held up by Screen Actor’s Guild strike.

On other issues: Miller will change its process so that it will pay distribs in 30 days or less on "returns, transfers" co-op ads etc. It will also eliminate annual fixed commitment for distrib spending on POS; that will be rolled into distrib’s biz plan. Distrib inventories will be cut on average 3 days by yr-end and on avg 1 additional day per yr thru 2004. Miller will announce in mid-Aug which SKUs it will cut as it eliminates 15% of ‘em. Miller’s plastic bottle selling well, but "pushing up against capacity limitations," Jim said, as plastic in tight supply. Miller exploring how to expand capacity. Miller also replaced another gm (Fla); it changed 8 of 16 in 16 mos.

Willow Dist in Dallas got summary judgment against Heineken as state ct affirmed that Heineken is "prohibited...from terminating the written distribution agreement" it had with Willow. Recall that Heineken sent termination letter to Willow (Coors distrib) Jan 99, wanted to move brand to Miller of Dallas. Never even claimed "good cause." Willow sued and won injunction and appeal then; now won summary judgment. A slam dunk so far. Court just ruled that under Tex law Heineken could not terminate without good cause by "agreeing to pay or paying ‘reasonable compensation’" to Willow. Willow won atty fees too. But another appeal still possible.

In Wisc, Guinness filed bare-bones answer to lawsuit by Beer Capitol that charged Guinness illegally terminated its agreement in order to move brands to AB distrib in Milwaukee. Guinness denied all charges. Argued Beer Capitol "fails to state a claim upon which relief can be granted," and that claims barred by fraud statutes, by contract, and/or consent, and by statute of limitations. Tho Guinness didn’t file motion to dismiss, it "demands judgment dismissing" Beer Capitol’s complaint and asks for atty fees. Recall that Guinness has stated its Wisc moves are a "realignment" of distribs to improve efficiency and "drive value" for shareholders. Question is whether these business reasons will allow termination under Wisc law, which doesn't have same protections as Minn law.

In Fla, much-anticipated fed ct trial between ex-AB distrib Maris and AB over legality of AB’s ban of public ownership pushed back from Aug 7 to Sep 25. Meanwhile, in separate state ct action, judge dismissed AB charges vs Maris associate Irvin Philpot. AB had claimed Philpot had "tortiously interfered" with AB-Maris contract, but judge wrote that Philpot’s advice was attempt to "save the contract," not interfere with it. Judge also tossed AB’s RICO claims vs Philpot.

US Dist Ct judge in Minn stopped Miller from terminating distribs for not signing its Acquired Brands Contract after it bought brands from Pabst. Decision could be very important down the line as suppliers move to consolidate distribs. "A brewer’s legitimate business reason is not consistent with examples of ‘good cause’" for termination under Minn franchise law, the judge wrote. Miller had argued that "good cause" should be interpreted to include "a brewer’s legitimate business reason." Why? Minn franchise law’s good cause definition "contains the phrase ‘includes but is not limited to’" wholesaler deficiencies. But judge didn’t buy. Acknowledged that tho franchise law’s definition of good cause could be considered ambiguous, every example of good cause that was given in law "falls within the category of wholesaler performance or deficiency." And Miller never claimed that Minn distribs that had the acquired brands were deficient. What’s more, Minn franchise law explicitly states that "’the sale or purchase of a brewer’ does not constitute good cause" to terminate. Judge went even further. He noted that Miller’s interpretation would "render the ‘good cause’ requirement essentially meaningless and thus would not be consistent with the remedial purposes of the statute." Minn franchise law also requires opportunity for distribs to cure deficiencies; that provision would also be "rendered meaningless," wrote judge if good cause for termination were "outside the wholesaler’s control, such as a brewer’s legitimate business reason."

Atty Mike Madigan, who represented distribs here and who has successfully defended Minn franchise law against Miller challenges at least 3 times in last 10 yrs, told INSIGHTS: "This is an extremely significant decision for distributors because it clarifies that ‘good cause’ does not include brewers ‘legitimate business reasons.’ If Miller’s argument were adopted, it would eviscerate state franchise laws. Importantly, the judge also recognized that the state beer franchise law is ‘remedial legislation.’ As such, the beer franchise law is specifically designed to address the disparity in bargaining power between brewers and wholesalers." This decision as well as the Heineken-Willow decision in Tex (see below), underscores again the importance to distribs of having strong state franchise laws.

Strong sales trends and solid pricing drove Coors to double-digit profit increase (before special charge) in 2d qtr, even tho its cost of goods sold jumped sharply too. Coors had oper income of $12.77 per bbl in 2d qtr (not including $15.5 mil writedown of Spanish brewery), up 7% from $11.92 last yr. Coors earns about half its profits for yr in 2d qtr (AB and Miller get about 1/3 of profits in 2d qtr). In all of 99, Coors had oper income per bbl of $6.92. "Unprecedented demand pull in our largest quarter, combined with modest pricing drove our good results... while stressing our ability to support distributor inventories," Coors prexy Leo Kiely told analysts. Coors had "strong sales for key" Memorial Day and July 4th weekends, and top 5 Coors brands up for 3d qtr in a row. Demand "outstripped our capacity" on 30-packs and 18-packs, added Leo. Beer biz this yr "moved even more than in 1999 toward value-packs." Tho Coors had anticipated this, "we are chasing value packs with the greatest strain on Keystone brand," he pointed out.

Coors cost of goods sold up 7% per bbl in 2d qtr; it expects about 3.5% increase per bbl in 2d half. "Mix shift toward sales of more expensive products and packages" accounted for 2/3 of increase, said cfo Tim Wolf. Those included "long neck bottles, imported beers sold by" branches and Zima. Coors rev per bbl up 3.2% in 2d qtr, including price increases (1.5%), mix shift etc. Coors "maintained higher domestic pricing in key markets," but faced "modestly higher" discount spend-back, "mostly in the form of value-packs." Tho Coors mktg, gen and admin spend down slightly in 2d qtr, Coors "increased spending significantly" on mktg, reportedly around 5%. Shutting Spanish brewery will save Coors $7-8 mil per yr. At end of 2d qtr, Coors had $344 mil in cash, $105 mil in longterm debt. Coors inventories 150,000 bbls lower in 2d qtr 2000 than 2d qtr 99. If you added that to Coors total, its shipments would have jumped 5.8% in 2d qtr.

Since Miller revs up 2.8% while volume down 2.7% (and contract brewing apparently not on rev line), implies Miller’s rev per bbl up about 5% in 2d qtr. Compare that to 2% at AB and 3% at Coors. Miller’s higher prices undoubtedly contributed to its volume decline. Meanwhile, Miller oper income up $15 mil, 8.4% to $193 mil, giving Miller a healthy 15% operating margin in qtr and half. In 1st half 2000, Miller oper income up $32 mil, 10% and revs up 4%. That’s not bad. But Miller got middling trends on core brands: Miller Lite up 1% in 2d qtr and Gen Draft, High Life each down 1%. And Mil’s Best franchise down 5%, while acquired brands, Icehouse and Molson all down double-digits in 2d qtr.

AB had excellent qtr from just about every angle. As shipments up 4%, AB told Wall St that Bud family (2/3 of volume) up 5%. Bud Light "well on its way" to 9th straight yr of double-digit growth. Bud still ain't up but "rate of decline improved." Mich Light and Nat Light each up mid-single digits. AB sez it expects "domestic volume growth for rest of year will be about 3%" and just over 3% for full yr. While STR’s up nearly 4% in 1st half, AB pointed out that 2d-qtr STRs "benefited" because "retailer sell-in days prior to 4th of July weekend were at the end of Jun" this yr. This could have added 1 point to AB STRs in 2d qtr, according to Sanford Bernstein’s Bill Peccoriello. AB said 4th of July weekend sales were "strong" too. AB reduced inventories in 2d qtr. AB’s rev per bbl up 2.2% in qtr and almost that for half. Industry pricing "continues to be healthy as we move through the summer," said group veep Randy Baker. "All major brewers and importers" are "realizing good gains in pricing." Because of such "broad acceptance," AB "currently analyzing opportunities" for additional price increases and discount reductions in 4th qtr. Tho "plans are not final" looks like 4th qtr increases will be "slightly less in scope" than last yr. Still, AB raised guidance on rev per bbl slightly to 2-2.2% for full yr, incorporating assumption of some incremental pricing in 4th qtr. Strong volume and pricing led to very strong profit increases: AB earnings before taxes on domestic beer jumped $144 mil, 12% to $1.35 bil in 1st half. AB’s total corporate operating margin improved 0.5 to 21.9. This led way to 15% gain in EPS (earnings per share); AB’s 7th straight qtr of double-digit EPS growth. With "accelerated earnings growth momentum," AB split stock 2-for-1 and raised dividend. AB also getting profit boost from Modelo investment; equity income continues to jump 25-30%. In fact, AB raised guidance to Wall St for full-yr equity income to $190 mil net (that’s far more than Coors makes on its entire biz). And AB now expects to earn $30 mil from international biz in 2000.