Trial now in 7th week; AB has yet to present its side of case and details of AB’s cross-examination of much of what's covered below not available at press time. But Maris attys scored points attacking AB surveys. Trial is frequently interrupted by bouts of intense atty bickering. Tues the 12th again had no testimony before jury at all. Both sides argued about how Maris valuation expert McClave could calculate lost profits. AB won that argument. But Maris atty tried to suggest McClave's higher number for damages to jury next day, anyway. Without jury present, judge harshly rebuked Maris side: "You’re trying to push a mistrial.... It was a direct contravention of the court’s order." Called it "egregious misconduct"and "unethical" and "horribly serious." The week before, he had also criticized Maris atty tactics before throwing out Maris defamation charge.

Tho McClave’s testimony on lost profits restricted, McClave put heavy fire under AB’s market evaluation team (MET) survey system. MET survey process "totally unreliable," he testified, based on 30 years' experience of survey work. MET process had "zero" statistical reliability, he said. Design of questionnaire "extremely poor;" form "biased" and "worded to elicit a negative response." Deplored use of the word "ever" in so many questions. Said survey was not random sample; claimed routes of more-senior Maris drivers/salesmen skipped. Survey implementation also flawed, sez McClave. Called surveyors "non-professionals" who received "minimal" training from AB. Added that results show surveyors, confused by form, left many blanks instead of answering all questions. Told jurors those blanks were counted against Maris in final evaluation. AB’s data entry was "replete with errors," "three of every four" surveys had at least one question response entered incorrectly. Showed jurors some surveys with positive response for Maris written in on form, but answers then left blank in computer database.

Maris attys also focused on the survey work of AB employee, Len Falcone. He said he had found old beer in Maris mkt, but acknowledged it was not more than you would expect to find in mkt that size and it’s virtually impossible to remove all out-of-code beer. Maris atty showed Len many surveys where he left questions unanswered or partially completed. Len had little explanation: "I didn’t always do everything" on the MET form, but "I did my best... I’m human." On the 2nd MET summary of Maris in Jan 97 Len wrote, "100% of large off-premise accounts complained about out-of-stocks." But atty then showed him survey form of Publix mgr who said he didn’t have any problems with out-of-stocks and said Maris Dist "never" cut or reduced his orders. Len said he still felt summary was accurate portrayal of mkt. Len did 75 surveys during each week-long MET.

Maris side put several retailers on stand who were basically happy with Maris Dist service. Ex-AB distrib Bob Reed testified but judge would not allow jury to hear most of Bob’s testimony of his past dealings with AB, including his own lawsuit following termination. AB also won another courtroom battle when judge dismissed defamation claim against AB. Narrows focus of this trial. After Maris atty showed newspaper article that misrepresented where it was published and almost showed jury video clip that judge had already ruled inadmissible, judge ruled a mistrial on just that defamation claim. He scolded atty: "I am terribly concerned about what appeared to be active misrepresentations of counsel." Maris attys will re-file defamation complaint for another time, another jury.

"BATF field operations has recently completed an investigation disclosing substantial slotting fee payments made by brewers to a large retail chain store. ATF is currently discussing this case with the Department of Justice Civil Division to determine what appropriate action to take." So said BATF spokesperson at recent mtg of Natl Conf of State Liquor Admins. No more details available at presstime about this long-running project, but ATF hopes to make decision on next step by end of summer. Options: injunction, offer in compromise or dropping case. Stay tuned.

Ten days after Memorial Day and right in midst of peak-selling season, AB group veep August Busch IV made significant and unusual round of senior exec changes, including sales veep. Tho official statement said AB "promotes" 4 sr executives, only 2 clearly expanded responsibilities. Veep brand mgt Bob Lachky moved up, as he added title director-Global brand creative and was placed on board of AB Inc (brewing subsidiary of AB Cos). So Bob assumes intl mktg duties now too. Three other veeps switched roles; some might be happier than others. Mike Owens, an insider, now has high-visibility sales veep job. Had been veep of retail mktg, a job that "grew in prominence during his tenure," August IV told INSIGHTS, as Mike "took on coordinating AB’s complex? marketing strategy and planning process." Had responsibility for geographic marketing, sales promotion, merchandising, promotional products, wholesaler communications and supervision of Caribbean sales. Mike, known as shrewd corporate player, also close to August IV from way back. Both served as former mktg head honcho Mike Roarty’s assistants in late 80s. Veep of wholesale operations division (WOD), Joe Castellano, took Mike’s job, vp retail mktg. August told INSIGHTS that branches "improved greatly" under Joe Castellano, "despite competing in some tough markets." And Mike Brooks, respected sales veep since 1995, took Joe’s job of veep WOD. These job switches are "innovative way to build the depth" of mgt team, ABIV told INSIGHTS "giving 3 top performers broader experience and doing it ... when things are going well." Most of these execs have been with AB about 20 yrs; Bob Lachky joined in 88.

In 95, about 18 mos after August moved up to veep brand mgt, he had reportedly engineered Mike Brooks’ promotion from Bud brand director to sales veep. In 2d half of 90s, AB went on highly successful run with sales and mktg team led by ABIV, Mike Brooks & Bob Lachky. Averaged 2-3% growth and consistently gained share. But last 12 mos, AB retail sales growth slowed (as has whole industry) while pricing stayed healthy. Typical tenure of AB sales veep last 30 yrs or so has been about 6 yrs. Mike’s predecessor, Jim Hunter, was sales veep 8 yrs, including several strong yrs in late 80s and slower yrs in 90s. Last yr, ABIV took over $1 bil wholesale operations division. Branches and "shared branches" (as AB called WEDCO or AB-financed distribs) could become more important under his watch. These changes came out of blue and created a whole lotta buzzin’ in AB network.

Guinness Bass Import Co will actually exceed its wild projection of 10 mil cases for its Smirnoff Ice launch in 1st half in US. Malt-based Smirnoff Ice will ship 11 mil cases (almost 800,000 bbls) thru Jun 2001, Diageo told a group of British investors in early Jun. That's about 0.8% of entire US malt bev mkt. Its 1st half total exceeded full yr sales for each of #4-6 beer imports, Beck’s, Guinness and Tecate, not to mention Tequiza in 1st full yr. GBIC spent heavily to achieve this result, upwards of $50 mil on mktg. Tho AB had told Wall St that Smirnoff ain’t affecting beer much, seems like Smirnoff Ice is factor in slower sales for top 3 brewers in 1st half 2001.

Beer segments that are priced on avg over $20 per case (Micro, specialty and imports, which include Smirnoff Ice and lemonades) got 24.6 share of $$ in supers YTD, sez IRI. That’s up 1.9 share. In that 1/4 of biz that’s growing so rapidly, AB, Miller and Coors have very little presence. No wonder each of top 3 share of $$ down in supers YTD: AB down 0.1 to 41.5, Miller down 0.9 to 19.7 and Coors down 0.2 to 10.8. In fact, 7 of top 10 beer brands lost share of $$ YTD. Only gainers: Bud Light up 0.7, Corona and Heineken each up 0.1. Meanwhile, total import $$ share up 0.9 to 16.9 share. And specialty (as it’s defined in this IRI data, including Smirnoff Ice) up 1 full share to 3.1. Smirnoff Ice got 0.9 share of $$ YTD and 0.5 of volume. Got 1.2 share of $$ last 13 weeks. For last 4 weeks, Smirnoff Ice was #13 malt bev brand in $$ sales, bigger than Coors, Michelob and Icehouse. Lemon brews also at 1.1 share of $$, up 0.7 YTD (just starting to bump up against intro numbers). Mike’s Hard Lemonade about 1/2 of that segment, at 0.6 share of $$. Meanwhile, micro segment flat at 4.6 share of $$ YTD.

Avg price paid for a case of beer in supers up 74 cents, 4.9% for 4 weeks thru May 27, according to IRI. That?s slightly higher than yr-to-date increase. So no major discounting leading up to Memorial Day. Volume continued at same sluggish 0.5% gain pace (including a 2% drop in latest week) for 4 weeks and yr-to-date. Avg prices up most on key AB brands. Avg price paid per case of Bud Light up 63 cents, 4% for 4 weeks, while Miller Lite up 28 cents, 2% and Coors Light up 45 cents, 3%. Avg prices paid for Bud up even more: 76 cents, 5% in latest 4 weeks. Natural Light, Michelob and Michelob Light also averaged prices about 5% higher than last yr, while avg price paid for Busch up 4% during holiday period. These price hikes and AB?s strong performance last yr during same period affected AB trends in last 4 weeks (see below). Avg prices paid for Corona and Heineken each only up about 1% over holiday period, narrowing price gap with premiums.

Some striking departures from recent trends in supermkt data for 4 weeks thru May 27 (including Sunday of Memorial Day), according to IRI. AB volume down 0.4%; share dropped 0.4. Yr-to-date, AB share of cases still up 0.4, but share of $$ down 0.1 YTD and down a surprising 0.7 for 4 weeks. Miller moderated its volume and share loss in latest month. Volume down 1.2% and share off 0.4. Lost 1 full share YTD. In latest week thru Sunday of Memorial Day, total beer down 2.2%, AB down 5% and 1 share, Miller about even and gained 0.4 share, while Coors up 5% and gained 0.8 share in supers. AB had gained 2 share of volume in supers in same week last yr. Coors up 2% and gained 0.2 share for 4 weeks, compared to flat YTD trends. Total imports slowed to 6% growth for 4 weeks, but still gained 0.6 share. Up 8% YTD.

"Tension... could be cut with a knife." That's how judge described (during sidebar) courtroom atmosphere "most of the time" in Maris trial. Trial finishing up 9th week in Gainesville, and Maris about to wrap up its side before brief Jul 4th recess. But surprise, there?s 1 more witness: Rudy Maris himself. Plaintiffs didn?t call Rudy, ceo of Maris Dist, after court had restricted number of Marises that could be called to 3. AB wanted to call him as its witness. But judge ruled that Rudy would be "court" witness, called by judge "in such a manner as it was not apparent to the Jury that he was called as a Court witness," and then essentially turned him over to attys. Said he did this because of "continued references to his performance" in case, usually by AB. AB atty "very strenuously" objected to "this procedure" but to no avail.

In last 2 weeks, Maris attys led several ex-Maris employees and customers thru same themes over and over: Maris fleet and warehouse in excellent condition; out-of-code beer/repackaged beer "not a problem" in Maris mkt; Maris service to customers "over & beyond," call of duty; Marises deeply involved in biz. AB atty challenged these assertions with photos and piles of paperwork like truck inspection reports, route books, correspondence, and deposition transcripts to suggest deficiencies in Maris fleet and warehouse, errors in bookkeeping, supply chain problems between Maris and AB's Jacksonville brewery, etc.

After Maris expert Dr. McClave had heavily criticized every facet of AB?s MET survey process (see last issue), AB atty brought out shortcomings of market survey McClave approved on behalf of Maris Dist. McClave criticized AB for using inexperienced surveyors with inadequate training to conduct MET survey, but turns out McClave?s firm used college students to conduct two-minute phone surveys of retailers. AB pointed out AB employees spent avg of 20 minutes at each account, that in-person better than on-phone. McClave testified AB avoided routes of some drivers, but AB atty showed MET missed just 3 of 40 routes, and surveyed representative sample of accounts. On data entry mistakes, McClave noted, "there are thousands of errors and they go both ways."

McClave estimated damages for Maris over next 10 years to be worth $73 mil. But AB showed valuation based on just a 3.5% discount rate. Another Maris valuation expert, Dr. Eugene Brigham testified AB's Aug 96 offer of $20 mil "clearly not" fair and adequate; in fact, "absurdly low," but he wasn?t allowed to state his valuation of Maris. On cross, AB atty brought up that Brigham had never valued a beer distrib, that he left out many factors when evaluating AB's offer for Maris. And the beat goes on.

Barton Beers revs up $20 mil, 12% in Constellation?s 1st qtr, Mar 1-May 31st. And Barton oper income (including spirits) up $5.15 mil, 13% to $44 mil. Barton at 40% of corporate revs, but 62% of oper income. Constellation?s annual report points out that not just Corona did well last yr. Look at these trends: Pacifico up 50%, Corona Light up 24%, Modelo 20%+, St Pauli Girl up 16%. Showed that its imported beer sales more than doubled last 4 yrs. Climbed from $298 mil in yr ended Feb 28, 1997 to $659 mil in yr ended Feb 28 2001. What?s more, Modelo brands ain?t likely to go away anytime soon. Constellation sez that tho its contract expires in Dec 2006, but will be "automatically renewed" for 5 yrs if it meets "certain performance criteria" retains "certain Company personnel" and "other terms under the agreement."