As Oak had predicted in court filings, Miller gave Oak, 1 of its NY metro distribs, 90-day notice of termination. Heineken had successfully terminated in Jan when judge refused to grant Oak injunction. In Oak's bid to stop Heineken termination, it had written: "Miller will almost certainly terminate Oak." Heineken and Miller both triggered unique clause in NY law that allows a supplier to terminate for purposes of "national or regional policy of consolidation" so long as distrib receives "reasonable compensation for damages sustained." Oak and Miller had also negotiated unsuccessfully about a buyout of brands. Oak sells about 1 mil cases of Miller. Heineken already pulled about 3 mil cases from Oak. Meanwhile, Oak (and 3 AB distribs) have retracted their lawsuit in 1 state court and will refile it in another. Now seek damages only, not to keep brands. Oak will be down to a little more than 1/2 mil cases, mostly Guinness.

Two striking aspects to these developments: While Oak’s 2 largest suppliers (Miller and Heineken) have terminated it, they continue to do biz with Boening Brothers, the other operation owned by same family as Oak. Can’t recall that happening before. Meanwhile, Oak is being dismantled piece-by-piece as suppliers apply NY law distributors lobbied for to give them added protection. Gotta be a lot of nervous wholesalers now in NY.

How high is up? Imports kept hot pace in Jan: shipments up 350,000 bbls, nearly 30%. And that was going up against a 20% gain in Jan 2000. Imports up double-digits for 5 of last 6 mos; up 15%+ in 4 of those mos. Gained 1.6 mil bbls, 20% Aug 2000 thru Jan 2001. During same 6 mos, US brewers’ taxpaid shipments down slightly, Beer Inst estimates. Even if this number doesn’t fully account for all of the malternative volume in hard lemons and Smirnoff Ice, domestic brewer shipments were at best even during this 6-mo period. Note too: imports will cycle soft comparisons thru Jul 2001. Import shipments up "just" 7.6% Feb-Jul 2000. So imports have chance to make even more hay in 1st half 2001. Just about every major country shared the Jan wealth. Look at gains: Mexico +162,000 bbls, 42%; Netherlands +93,000 bbls, 29%; Canada +93,000 bbls, 45%; UK +14,0000 bbls, 20%; Germany +4,000 bbls, 6%. Only Irish shipments whacked, -26,000 bbls, 32%.

"The severity of the company’s financial problems will likely lead to further asset sales to raise cash," wrote debt-rating service Moody’s as it cut ratings on $135 mil of Pabst debt to Caa1 from Ba3 (that’s 1 of Moody’s lowest ratings). "The company is not in compliance with covenants and is currently in negotiation with its bank group for revisions to financial covenants," Moody’s continued. The downgrades "reflect the deterioration in the company’s financial condition" because of "reducing volumes, weak cash flow, a substantial debt burden and the absorption of sizable unforeseen liabilities from the Stroh ... acquisition." These "continue to weaken Pabst’s balance sheet and strain cash flow." In Feb, Pabst execs had written distribs about "cash flow issue," but claimed "very strong cash flow" for last 4 mos (see INSIGHTS, Vol 32, #5). Moody's analyst pointed out to INSIGHTS that it looks at cash flow relative to debt. Actually, "virtual brewer" Pabst doesn’t have many hard assets to sell. It recently closed its San Antonio brewery, leaving only Allentown. Its declining brands are also likely worth less every day. Moody’s will discontinue ratings on Pabst debt "based on an inability to obtain timely financial information." Bonds with Caa rating are in "poor standing" and "may be in default."

Amidst these financial struggles, Pabst just hired a new CFO named Brian Kovalchuk. And parent co S&P added 2 members to Board of Directors, 1 who used to be Calif Superintendent of Banking. Maybe these guys can figure a way out of this mess. But if they can’t, there’s always a higher authority. New chairman of Pabst’s Board of Directors (replacing atty Ron Malone) is Father John LoSchiavo who had already been on board of charitable trust that owns Pabst. Father Loschiavo said on Mar 13: "The Board has every confidence in Brian’s ability to execute our current three-year business plan and increase the long term value of the company."

"Our competition in St Louis has one major advantage that we don’t have," chairman Pete Coors told distribs, "it’s not size, it’s not quality.... Their distributors are focused on only their brands.... They can apply persuasion to just their brands. Most of you have to share your persuasion with multiple suppliers. It’s a tougher, more difficult task, but it’s a fact of life and we believe you can do it." Sr veep Rob Klugman talked consolidation: "Today the need to be economically competitive is no longer thought of as a radical or bizarre theory. For most of you, it’s a given. Consolidation is no longer a taboo or unspeakable word. For most of you it’s a given. Reaching critical mass, perhaps by combining with a Miller house, is not a violation of the laws of nature. For many of you it’s a done deal or in your near-term plans." For a minority tho, there are "still difficult and perhaps even unacceptable truths" about need to consolidate. "Let me say to this minority, you know who you are, we still need to talk, and we’ll do that privately," said Rob. Next step: Coors putting more emphasis on improving distrib performance, according to Rob and veep Tim Owston. Rob: "Having the economics that are comparable to your AB wholesaler is only the beginning. The real battle is using these economics to go to market as well as or better than your competitor." Tim outlined areas of increased focus: ownership/mgmt, organizational structure, selling processes, compensation. In each, Coors catalogued what its top distribs do; now seeks to apply those lessons more across its network. Echoing AB execs, Tim said "most successful" distribs have "active owners." Tim talked too about increasing "sales focus" and improving selling processes.

Overriding theme of sr veep mktg Bill Weintraub: building brands for long haul. Coors "shifted ... profile" of Coors Light drinkers to "young adult guys" gradually over last several yrs, said Bill. Brand now perceived as more "masculine," more "regular guy," according to various research studies. Coors Light is also only major light brand, according to Bill, where "purchase intent is on the rise." That’s an indicator of "good things to come," added Bill. "We’ve got momentum," he said, pointing to double-digit growth rates in African-American and Hispanic mkts. Lotsa emphasis at mtg on building ethnic biz: Coors would pick up 3 mil bbls if it increases Coors' share of African American/Hispanic biz from current 4% to Coors' natl share of 11, another exec pointed out. Coors also freshened its approach on Original Coors, said Bill; got "big gains" in "awareness and purchase intent," but the brand needs more on-premise distribution. It gained 8.2% (volume) from late 99 thru mid-2000, then "stalled." Keystone Light grew at double-digit pace where it’s priced equal to Busch, but up only 2% in few remaining areas where it’s priced lower. Zima sold 2 mil bbls last 3 yrs; Bill urged distribs not to let retailers put Zima with "fad products." Bill also stressed need to build Killian’s presence outside core eastern and Colo mkts, where 3/4 of its volume sold.

More info from Coors mtg: At first, "we’re gonna ... fish where the fish are" with Molson brands, said sales veep Ed McBrien. For Molson, that’s northeast and midwest border states. In fact, 48% of Molson biz in just 5 states. Another 21% sold in 9 other DMAs. Molson brands have 30 dedicated sales/mktg people now, will have 60 by Memorial Day. Molson Canadian brand will be "primary growth engine." Canadian has 18 share in Canada, #1 there, but "barely on radar screen here." Coors also aims to "stabilize" Molson Ice, still 40% of Molson biz in US. Coors also lookin’ to consolidate Molson distribs, Carl said. Will concentrate on small markets first. In these low-volume mkts, "goal is to get many of those deals done by the end of the summer. In fact, a good number of the buy-sells and brand swaps are already in progress. Later this fall, we’ll begin to address the big markets and we’ll review each distributor’s performance on a case-by-case basis. Since 97, Coors cut 15% of its SKUs. Coors mkt development working, said veep Jeff Popkin. Indianapolis biz up double-digits 4th straight yr. Adding new areas to mkt development program: Van Nuys, CA, Colo Springs, Colo, Verona, Va, Columbus, Oh.

Coors and its distribs "delivered 5%+ growth for 32 consecutive weeks ending 1999 and for 53 weeks ending 2000" for an 85-week "running rate" over 5%, sr veep sales Carl Barnhill told natl sales convention. Coors grew at 4X industry rate last yr despite "serious product supply problems over the summer,... really stiff competition," Miller "getting their ship in order" and while "AB had us targeted," Carl said. He repeated Coors’ goal: "consistently grow at 5% or greater year-in, year-out." (Editor's Note: That 5% pace ain’t gonna be easy to maintain. Coors up just 1.5% in 4th qtr 2000 and sluggish in early 2001.) Another measure of success in 2000: 454 of Coors’ 567 distribs---80% of ‘em---either built mkt share, grew 3% or more, or beat both AB and Miller’s growth; 233 distribs accomplished all 3; 154 distribs did all 3 and grew over 10%. Prexy Leo Kiely pointed to 6th year of "sweet mid-single-digit growth rate" for Coors Light, but said late-2000 slowdown of Original Coors and Zima was "not acceptable." Coors up 2% or more in 41 states last yr, up less than 2% in 8 states and down in only 1 state, HI. Coors estimates AB gained 2%+ in 29 states, gained less than 2% in 13 states and lost volume in 8 states. Miller up in only 11 states, Coors estimates, down in 39. Coors now #1 or #2 in "about 40" of 200 or so biggest mkts, said Leo. Strategy: "Keep hi-share markets growing while we add more underdeveloped markets to the win list." Had some good news outside continental US too: Coors Light hit record 54 share in Puerto Rico and is #1 in US Virgin Islands and Caribbean mkts. Brand "on a roll" in Canada, said Leo, and took "#2 brand position in Ontario province during key summer and holiday months."

Leo and other execs spoke straight about last summer’s supply problem. "We all know we had supply constraints last summer. In fact, we let many of you down at a time when we could have sold more beer. That’s not good," said Leo. Group veep of operations Dennis Puffer said much of supply "frustrations" involved multi-packs. Coors’ multi-pack biz increased 30%, said Dennis, "but we couldn’t get you product." (Coors had prepared for 9% multi-pack growth, group veep Robb Casseria said.) Subsequent investments at Golden, Memphis and Shenandoah will add 14 mil cases of multi-pack capacity this yr, plus "we’re rolling into peak season with higher inventory than last year," said Dennis. To build inventory in current qtr, Coors extended credit 2 more days. "Compared to this time last year," Robb said, "today you have 2 million more cases of Coors on your floors.... We won’t let you run out of beer this summer."

Whoops! August's daughter Susie Busch Transou is AB distributor in Tallahassee not Jacksonville....... Shiner drop in Tex because state report not apples-to-apples. Included out-of-state shipments from 99 (required then by Tex ABC) but not 2000. Shiner trend in-state in Tex: up 4.5% in 2000, sez Gambrinus source....... Next issue in 2-1/2 weeks.