Mixer co Fevertree Plc rode a brisk US market to 9% growth to £175.6 mil ($219 mil) in its fiscal first half tho gross margins declined 6.7 pts to 30.7%. By region, US vaulted into top region for Fever-Tree brand, soaring 40% to £56.1 mil. Branded biz rose 9% to £50.5 mil in Europe, tho including other brands distributed by Fevertree there, region was up 7% to £56.1 mil. Core UK market was essentially flat, +1%, to £53.8 mil. "Rest of World" segment dropped 36% to £9.6 mil but that was one-time impact of changes being made to distribution model, particularly in Australia, where it's establishing its own subsidiary, and Japan, where it recently partnered with Asahi. Adjusted EBITDA dropped by 54% to £10.2 mil. (The company goes by Fevertree, the brand is Fever-Tree, a reference to the quinine plant that underpins tonic water.)

Consumer price index for beer rose 4.2% in Aug vs yr ago, per Bureau of Labor Statistics. That's down slightly from 4.3% gain in Jul and less than half rate at start of yr when CPI for beer surged +9% in Jan. General inflation increased more than expected, up 3.7% in Aug vs yr ago, driven by a 10.6% jump in gas prices and overall higher energy and food costs. CPI for spirits increased 2% in Aug vs yr ago while wine prices up just 1%. YTD thru Aug, CPI for beer up 6% while inflation up 4.5%. CPI for spirits grew 2% YTD while wine prices up 2.3%.

The dangers of excessive consumption, like drunk driving and underage drinking, tend to come to mind first when asking folks outside the industry about alcohol policy. It’s a point exec director of the NBWA-linked Center for Alcohol Policy, Kelly Roberson, repeated during the org’s annual Alcohol Law & Policy Conference in Philadelphia last wk. It shows up in the results of CAP’s biennial survey and was abundantly clear in the remarks of Delaware atty genl Kathy Jennings. Industry members tend to focus on policies impacting competition and drawing lines between tiers and product types. Rooted in an interest in preventing alcohol-related harm, tied house rules also address those competitive concerns. Perhaps that’s why this set of alc bev regs and the wide array of conduct they can touch are evergreen hot topics at meetings like CAP’s ALPC.

“Amazon Bill Dead” After “Huge” Opposition Take the industry’s interests first. Tied house exceptions can tip the scales toward one player or set of players. So it was no surprise when a variety of industry groups lined up to oppose bills intro’d in CA and TX to allow Amazon, a licensed retailer, take advertising dollars from alc bev suppliers to show ads on its Prime streaming service, including broadcasts of Thursday Night Football. It didn’t get very far in TX and last wk died in committee in CA. “AMAZON BILL DEAD!” So headlined the CA Beer & Beverage Distribs, noting coalition of orgs against the bill, including the Wine & Spirits Wholesalers of CA, the CA Craft Brewers Assn, Wine Institute and the CA Teamsters. 

Amazon has responded one of two ways when faced with alc bev law issues: it “seek[s] to work within them or to get laws changed,” observed genl counsel for CA Alc Bev Commission Matt Botting at ALPC. Both routes are fine, of course. But “a huge amount of opposition” to this bill argued that “this is a giant tied house exception for the benefit of a single company,” he recounted (without commenting on behalf of the ABC, natch). 

Matt’s more personal concerns with the proposal were tied to enforcing some of its provisions. Certain “checks and balances” around “corporate structure, keeping people separate…might look good on paper,” but it can be “really, really difficult for a regulator to peel the layers of the onion back and to be able to enforce it,” he explained. One provision sought to bar “book-end advertising,” or placing alc bev ads right before or after ads for one of Amazon’s retailers, like Whole Foods. How would the ABC enforce such a rule, Matt wondered. “Pay an agent to watch Amazon Prime 24-7?” 

Pepsi, Crossover Bevs & NA Slotting Fees Asked about the entrance of non-alc bev suppliers, Matt summarized the “three big issues” he hears repeated most related to Pepsi and its Blue Cloud distribution arm. First, “do the components” of “this licensing agreement…flip Blue Cloud/Pepsi into a de facto manufacturer” and give the wholesaler an “interest in the manufacturing”? Second, does “carving out this product” from Boston Beer’s “existing relationships” with distribs conflict with “franchise protection laws”? 

And, of course, the “third issue is the slotting fees” paid for NA products. “Does that present a tied house conflict?” Matt noted the complication of other NA suppliers who use licensed alc bev distribs to get their products to retail. “That is a potential issue,” but “the position we’ve taken” in CA is to allow NA suppliers to pay slotting fees and use alc bev distribs as long as there’s “no common ownership.” 

Marketplace Facilitators & Supplier Advertising on Apps Who profits from the sale of alcohol? Who collects payment and who collects taxes? More core alcohol policy questions linked to ensuring clear tier separations, independent operation and orderly markets. But do marketplace facilitator laws upset this apple cart? 

Such laws require large online marketplaces to collect and remit sales taxes to states even when acting on behalf of other sellers/retailers. And “there’s no carve out for alcohol in any state,” explained atty Jaci Flug, currently a free agent but once genl counsel for the NY State Liquor Authority and most recently genl counsel for Drizly. Alc bev laws tend to be concerned with the “orderly collection of taxes” and a good reason for blocking retailers from crossing state lines is so “you can neatly follow the tax,” she reminded. But “because of marketplace facilitator laws,” lots of other entities are “collecting and remitting taxes” on alcohol sales. “Does this chip away at the three-tier system?” 

In Jaci’s view, “there’s an argument to be made” that only licensed retailers should be touching the taxes. She also pointed to an Oregon bill creating a permit for 3d party alc bev mkts that allows them to take payments. “These were always functions that only retailers can do,” she said. “Throw in marketplace facilitator” rules and now you have a “non-retail entity…accepting orders...receiving the payments and collecting the taxes.” 

Jaci also posed questions about supplier advertising on 3d party alc bev apps and how to determine if it runs afoul of tied house laws. She pointed to Texas’ draft advisory in late 2021 suggesting that if you “can’t do it in a brick and mortar store,” then you “can’t do it” online either. A yr later, CA sent “letters to dozens of suppliers asking for their contracts” with 3d parties. Then TTB asked how it should deal with online marketplaces as part of its trade practice rulemaking project. Jaci highlighted comments from RNDC and WSWA, both of which pointed to the same key metric: “does the consumer have the ability to place something into their basket?” As a former regulator, somewhat more amazing to her is that “there was a call for enforcement on this issue” from multiple commenters. “This is an industry that constantly pats itself on the back,” Jaci observed. It “only calls for enforcement when everyone’s really run off the rails and things are amok.” 

First Amendment Concerns? If states try to set rules for advertising on digital platforms, could they face 1st amendment challenges? It shouldn’t be an issue “when you are in the equivalent of a brick & mortar store,” Jaci responded, citing 10 states with guidance on the issue and some with language “right there in the statute.” California even has “a pre-internet case” that’s “really helpful on this,” Matt pointed out. It dealt with a retailer who hired a publisher to make a catalog of products and basically take payments from suppliers to be listed in it. The appeals ct determined it was a “virtual store” and “applied the same rules that have been upheld against first amendment challenges.” The question gets more complicated, in Matt’s view, when a website “doesn’t identify any retailers at all” until consumers move to a different part of the site where there are no ads. 

What About Search? Platforms may also take payments to prioritize certain products in search results. Can that be regulated? Yes, Jaci thinks, tho it requires the same “rubric” to determine “what is the equivalent” of a brick & mortar retailer. “It is an incredibly complex issue,” Matt continued, not completely agreeing with Jaci’s assessment that there’s a way to do it legally. “The search algorithms, I think, are highly problematic,” Matt said. But what’s less clear is the proper way to regulate them and enforce those rules. “Liquor laws aren’t the only” types of rules regulators can turn to, Jaci added. The FTC requires “any paid placement to be disclosed to consumers.” So if it was paid for, it should be “indicated to a consumer why it’s there,” she said. 

Enforcement Against Wholesale Fronts, Delivery & Shipping The Massachusetts ABC is busy looking into lots of potential violations, including a “surge” in possible tied house issues, chief investigator Ted Mahony detailed. The agency watched as the number of wholesaler licenses in the state jumped from about 40 to “close to 180” over about a 5 yr period. It’s driven by “suppliers creating straw entities,” the state found. “Operational, financial control is all being driven at the supplier level.” Product’s coming into the state, “bumping the dock,” occasionally in locations that aren’t exactly fit to function as distributorships, and “going directly to the retailers.” 

Ted also reviewed extensive work his agency puts into tracking improper delivery to minors and shipments from unlicensed entities. MA is “finding the rate of ID checks” by delivery drivers “to be much, much better” and it’s “also finding a much improved response” from companies making direct-to-consumer sales into the state. But the “international sale of spirits to consumers” continues to be a “challenge” to “resources and jurisdiction.” And those shipments raise the specter of counterfeit products, which can be extremely dangerous, as Sazerac exec chair Mark Brown repeatedly referenced.


Cheers,