According to 460 distribs surveyed by Tamarron Consulting, most suppliers did not even meet distribs’ expectations in 1999, despite strong sales of many. Recall that Tamarron devised this intriguing survey as independent in-depth evaluation of supplier performance by distribs. And just as suppliers stress need for distribs to improve performance, distribs find lotsa room for improvement by most suppliers too. Survey asked 59 questions across 9 key competencies. In all, only 2 of 11 suppliers "met or exceeded overall wholesaler expectations." That was down from 4 last yr; this yr both were large domestic suppliers. That means no importer met distrib expectations overall even while segment up 9%. "Seven suppliers actually received lower performance scores than in 1999," Tamarron wrote. Suppliers on avg rated below expectations on 8 of 9 competencies, exceeding slightly only on portfolio management, rated 4th most important. Distribs again rated mktg management, leadership/planning and "communication effectiveness" as top 3 most important areas and suppliers on avg below expectations on each. On #1 competency, mktg mgt, 1 large domestic substantially exceeded expectations, another was slightly above, while all other suppliers were significantly below. But several major importers got higher ratings than in 98 on mktg, even if still below expectations. Suppliers’ avg rating decreased in each of 4 most important competencies. While suppliers improved slightly on the fifth, retailer relationships, most were still well below expectations.

AB continues to gobble up share in nation’s 2d biggest beer mkt: jumped 2.1 share to 49.6 for 12 mos thru Jun 2000. But AB shipments gain pace slowed: up 149,000 bbls, 3.4% yr-to-date, compared to 5% for 12 mos thru Jun and a whopping 9% in calendar 1999. As AB shipments growth slowed, so did entire Tex mkt. Tex shipments down 71,000 bbls, 0.8% in 1st half 2000, following 5% growth in 99. Miller shipments down 117,000 bbls, 5% in 1st half. (Miller STR trends better than that: down 2% thru Jul in Tex). And Pabst shipments down 182,000 bbls, 32% thru Jun as it fell to 4 share (acquired brands sold to Miller in May 99 so some of that is not apples-to-apples). Meanwhile, Coors eked out 15,000-bbl, 1% shipments gain YTD so its share up a bit. Gambrinus import volume down 7,0000 bbls, 4% in 1st half and Shiner flat. For 12 mos, Gambrinus down 0.2 share in Tex from 2.9 to 2.7. Imports still only have 4 share of Tex mkt.

Light beers at 60.3 share of Tex mkt in 1st half. And Bud Light still on fire there. It jumped another 237,000 bbls, 13% for 6 mos. For 6 mos, Bud Light share at 22.7, up almost 3 points. Bud up 1% in Tex too. Means AB subpremium brands got hurt in 1st half in Tex: Busch down 39,000 bbls, 7%, Natural Light down 13,000 bbls, 3% and Busch Light down 16,000 bbls, 10%. Miller Lite shipments dropped 63,000 bbls, 4.3% in 1st half and share fell 0.5 to 15. Other Miller brands down too: High Life down 20,000 bbls, 8%, Mil Best down 21,000 bbls, 10% and Gen Draft family down 12,000 bbls, 9%. Coors Light actually down slightly in big Tex too: shipments off 17,000 bbls, 1.7%. Part of that could be because of surprising Keystone Light surge in Tex: up 29,000 bbls, 15%. Note initial Tex hard lemonade numbers: Mike’s shipped only 1,000 bbls in 1st half (compare to its 19,000 bbls in Mass thru May) while Doc Otis at 6,000 bbls and Rick’s Spiked at 4,000 bbls.

Light Beers Hit 67.4 Share in Ia! Wow! Light beers are over 2/3 of Ia biz and 4 of top 5 brands in Ia Jan-Jun. Those 4 brands (Bud Light, Busch Light, Miller Lite and Coors Light) got 57 share of Ia mkt. AB combo of Bud Light and Busch Light at 40 share. Bud Light now outsells Bud by more than 2 to 1 in Ia. What's more, each of these light brands still growing in Ia: Busch Light up 13%, 23,000 bbls; Bud Light up 5%, 12,000 bbls; Coors Light up 6%, 3,000 bbls and Miller Lite up 4%, 5,000 bbls.

When INSIGHTS spoke with legal experts about significance of Guinness victory vs Beer Capitol in Wisc (see last issue), some reminded that Guinness has won several franchise case/termination lawsuits in recent years, usually in Federal court, mostly filed by distribs. "Guinness has set a couple of precedents defining how states can regulate or control relations between suppliers and wholesalers," said Richard Blau, a partner at Holland and Knight. "Guinness chooses its fights carefully. It has demonstrated a willingness to go to court...even in franchise states." He pointed to earlier victories that Guinness had in Minn, Fla and Penn. Atty Cris Hoel echoed that Guinness legal moves "seem to be a coordinated strategy," adding "they pick their fights." "For a fairly small volume brand, they seem to show up in court a lot." He pointed out that parent co Diageo is "very large..very forward-thinking and familiar with doing business in ways other than those that the US alcoholic beverage business takes for granted." Minn atty Mike Madigan, who recently represented distribs on winning side in "good cause" case against Miller, dissented. Said he is "not at all alarmed" by Wisc decision. He added: "I don't see some strategic national campaign." He pointed out that Beer Capitol decision based on "unique" law in Wisc, where deciding factor was "community of interest," not applicable in states with beer franchise laws. Then too, Beer Capitol decision was only on question of preliminary injunction; could be reversed on merits. So Mike cautioned not to overread importance of Beer Capitol decision.

Parent co of Guinness, Diageo, is of course also world’s largest distiller, undergoing strategic overhaul that includes merging Guinness with its United Distiller Vintner unit. (This also fits with distiller emphasis on equivalence theme.) While Guinness Bass Import Co will reportedly retain separate sales force and separate distribution network in US, it has already stated that "principles we are applying in Wisconsin may apply in other markets." Stated principle is "efficiency" for "shareholder value." That means more consolidation. Diageo has also aggressively attacked liquor franchise laws; it took lead role and scored another US court victory in messy Illinois franchise law battle. Meanwhile, aiming to be an even bigger international force, Diageo in middle of what’s looking like a bidding war for Seagram brands. Some Wall St analysts are predicting lots more wholesaler consolidation in distilled spirits biz no matter who gets Seagram biz. In fact, Salomon Smith Barney recently wrote that whatever happens: "At last, Diageo could more aggressively rationalize its US distribution." That could mean more legal action.

When INSIGHTS spoke with legal experts about significance of Guinness victory vs Beer Capitol in Wisc (see last issue), some reminded that Guinness has won several franchise case/termination lawsuits in recent years, usually in Federal court, mostly filed by distribs. "Guinness has set a couple of precedents defining how states can regulate or control relations between suppliers and wholesalers," said Richard Blau, a partner at Holland and Knight. "Guinness chooses its fights carefully. It has demonstrated a willingness to go to court...even in franchise states." He pointed to earlier victories that Guinness had in Minn, Fla and Penn. Atty Cris Hoel echoed that Guinness legal moves "seem to be a coordinated strategy," adding "they pick their fights." "For a fairly small volume brand, they seem to show up in court a lot." He pointed out that parent co Diageo is "very large..very forward-thinking and familiar with doing business in ways other than those that the US alcoholic beverage business takes for granted." Minn atty Mike Madigan, who recently represented distribs on winning side in "good cause" case against Miller, dissented. Said he is "not at all alarmed" by Wisc decision. He added: "I don't see some strategic national campaign." He pointed out that Beer Capitol decision based on "unique" law in Wisc, where deciding factor was "community of interest," not applicable in states with beer franchise laws. Then too, Beer Capitol decision was only on question of preliminary injunction; could be reversed on merits. So Mike cautioned not to overread importance of Beer Capitol decision.

Parent co of Guinness, Diageo, is of course also world’s largest distiller, undergoing strategic overhaul that includes merging Guinness with its United Distiller Vintner unit. (This also fits with distiller emphasis on equivalence theme.) While Guinness Bass Import Co will reportedly retain separate sales force and separate distribution network in US, it has already stated that "principles we are applying in Wisconsin may apply in other markets." Stated principle is "efficiency" for "shareholder value." That means more consolidation. Diageo has also aggressively attacked liquor franchise laws; it took lead role and scored another US court victory in messy Illinois franchise law battle. Meanwhile, aiming to be an even bigger international force, Diageo in middle of what’s looking like a bidding war for Seagram brands. Some Wall St analysts are predicting lots more wholesaler consolidation in distilled spirits biz no matter who gets Seagram biz. In fact, Salomon Smith Barney recently wrote that whatever happens: "At last, Diageo could more aggressively rationalize its US distribution." That could mean more legal action.

One thing’s for sure: imports are again accounting for most of gain in US beer biz. Imports up 803,000 bbls, 8.8% in 1st half 2000, following another 134,000-bbl, 7% jump in Jun. Easy comparisons coming up too: in 2d half 99, imports gained just 125,000 bbls, 1.4%. As Corona and Heineken worked thru their 1999 price increases, Mexican shipments were actually down almost 4% and Dutch shipments up 6% in 2d half 99. In fact, imports from Mexico up less than 1% last 12 mos, as Mexican shipments up 180,000 bbls, 5% Jan-Jun 2000, going against 41% growth Jan-Jun 99. Yet Corona STRs continue to grow at double-digit pace. So import shipment trends likely to improve in 2d half. Dutch shipments heated up so far in 2000: up 330,000 bbls, 15.5% in 1st half. Other major countries showed mid-single digit increases in 1st half (Canada up 7%, Germany up 5.5%, UK up 3.9%) except Irish shipments which gained 21% YTD.

As summer shipments of domestic brewers remain sluggish, gotta wonder if beer biz fundamentals have improved as much as many (including BMI) anticipated. Jul domestic taxpaid shipments off slightly; down 50,000 bbls, 0.3% estimates Matt Hein of Beer Inst. In 4 of last 5 mos, taxpaids down or flat. Domestic shipments up just 300,000 bbls, 0.3% for 7 mos, and 1.2 mil bbls, 0.6% for 12 mos. That’s less than 0.9% gain pace for all of 99. What’s more, domestic taxpaids don't have easy comparisons in last 5 mos 2000; Aug-Dec 99 taxpaids gained 850,000 bbls, 1.2% (most of that in Nov-Dec). US beer biz still up 1% or so in 2000 yr-to-date (including imports), but US biz was up 1.6% in 1999. Jul domestic decline "surprising" wrote Skip Carpenter at Donaldson Lufkin Jenrette since Coors and AB mgt said "inventories were below normal at the end" of 2d qtr. Here's some possible reasons for domestic brewers’ shipments growth slowing some so far in 2000: unusually cool and wet weather in much of east, pricing took a bit of a toll on volume, production shortages, reduced inventories, lemon brews and hard lemonades not fully captured in domestic estimate, etc. And while Jul shipments flat, Jul sales-to-retailers were down slightly for AB and more for Miller, while Coors retail sales up but at slower pace. Miller sales-to-retailers were down double-digits nationwide for month of July (that’s almost a half mil bbls), but still ahead just slightly yr-to-date.

AB will take Oct price increases in Oh, SC, Ia, Neb and other states in addition to Fla, Ga, Mich, Colo and others INSIGHTS wrote about last issue. Fla, Ga, SC, NC, Mich and Oh are almost 1/4 of AB volume. Some on Wall St suggested AB would raise prices on 20-30% of its volume. It looks like AB prices going up in at least 30% of volume. And in several big population states (Oh, Fla, Mich), AB took bigger increases on subpremiums in effort to narrow gap. That will be continuation of trend evident in supermkt scanner data. Big brewers narrowing gap so far in 2000 as avg price paid for budget beer in supers up 4.9% to $10.21 yr-to-date thru Jul 23, while avg price paid for premiums up 2.2% to $15.04, according to IRI.

It’s great to have pricing power in time of little inflation. That was subject of lengthy Aug 10 Bloomberg News piece that cited AB stock as beneficiary of a "rare privilege...the power to raise prices." "Only a handful of companies" can raise prices, chief investment strategist for J.P. Morgan told Bloomberg. Stocks of those cos that can raise prices have done especially well in recent mos, according to Bloomberg. Both AB and Coors stocks surged since Nasdaq peaked in early Mar.

Meanwhile, July consumer price index for beer up 3.6% over Jul 99, similar to increases yr-to-date. And tho total volume not stellar (see below), it’s still ok in face of price increases. That’s not case in soft drink biz where prices went up 5% last yr and volume flattened out for 1st time in ages. "We’ve pushed the pricing lever pretty hard in the last 12 months," Craig Weatherup, ceo of Pepsi Bottling Group acknowledged to soft-drink newsletter Beverage Digest. "A 2-3% pricing (increase next year) is rational from a consumer standpoint and would be accepted," he added. That’s thinkin’ like beer guys.

One little-noticed change in recent yrs as wine and spirits biz picked up: beer share of US absolute alcohol consumption slipped a little after growing steadily since WWII. Our estimates show beer peaked at about 59.5 share of absolute alcohol consumption in 95, slipped to about 58.6 share in 99. Wine was gainer: up from 11.3 to 12.9 same period. And spirits share of absolute alcohol consumption, which had dropped steadily in post-War period, stabilized. Chart below also shows that while per capita alc bev consumption in US still ain?t what it was in heady days of early 80s (probably peaked in 81) things are lookin? up. Per capita beer consumption (we use population 18+) dropped 7.4% in 80s, another 4% in early 90s, but downtrend slowed to 1.2% drop in last 5 yrs. Note too: beer shipments up 3.6% 94-99 compared to just 1% gain in early 90s. Liquor trends far more dramatic. Per capita spirits consumption off just 2.5% last 5 yrs, compared to sharp 14% decline in early 90s, a hard-to-swallow 30% hit in 80s. No wonder distillers pushin? for equivalence. And spirits shipments actually up last 5 yrs, tho still down in 90s. Wine trends distorted by cooler blips but both wine shipments and per capita consumption up double-digits in late 90s. And per capita wine consumption in 99 nearly back to 79 level.