Kefir leader Lifeway Foods rode mainly volume rather than pricing gains to strong Q2 with net sales rising 17.1% to $39.23 mil, +34.5% vs 2 years ago. Its core drinkable kefirs grew by 20% in period, ceo Julie Smolyanski indictated. Gross margin soared 11.7 pts to 28.7%, partly on easing of milk input costs as well as pricing taken in Q4. Operating income came in at $4.77 mil vs trivial $241K a year earlier.

Above premium beer segments are collectively gettin' back to bigger share growth in recent periods amid consistent flux of mainstream brands and surge of Mexican imports. Indeed, above premium segments gained 1.3 share of volume to 52.6 and 1.2 share of $$ to 64.5 for latest 4 wks thru Aug 5 in NielsenIQ channels. Improved to volume +0.8 share to 50.8 and $$ +0.6 to 62.9 YTD. While hard seltzer declines keep steepening, imports gained over 2 share of volume and $$, FMBs continued to gain over 1 share and craft beer share losses are stabilizing in scans with flattish volume share and $$ share down just 0.1 pts for 4 wks. Now that pricing increases aren't as large for mainstream segments and volume remains soft, they're collectively shedding more share in summer scans. Premium lights lost over 1 share of $$ and volume for 4 wks, now down 0.7-0.8 pts YTD amid massive shifts from Bud Light losses. Premium regular, below premium and malt liquor shed some share for 4 wks too.

History hasn’t yet turned the page on disputes pitting the dormant Commerce Clause against the 21st Amendment. Far from it. In fact, lawsuits about the issue seem to be flying faster all the time. Within just the last 2 wks, two federal courts issued decisions and two new lawsuits were filed on the subject. Another lawsuit popped at the end of July. While individual plaintiffs and defendants vary, the major players are the same: state regulators and distributor advocates join forces to defend against challenges from the same plaintiffs attys, over and over again.

Neither perspective is surprising. The suits pit various folks who view state laws that restrict the flow of alcohol as overly burdensome and unfair. And there’s no shortage of them. But the challenges also cut to the heart of state alcohol regulation, often dealing with provisions deemed “essential features” of state 3-tier systems, as numerous judges have now written. So in view of many state defendants and the distrib advocates who often intervene as co-defendants, the stakes could not be higher.

State & Distrib Advocates Run the Table Against Plaintiffs in Arizona Ruling handed down by Dist Ct of Arizona this wk is among the most comprehensive rejections of plaintiffs’ arguments we’ve seen, voicing full-throated support of state regs, including 3-tier laws. “This decision is a complete repudiation of many of the claims brought by these retail shipping cases,” as NBWA exec veep/genl counsel Paul Pisano wrote on Alcohol Law Review blog. And given that attys filing many of these parallel cases “already had a loss in the 9th Circuit,” it’s less clear that they’ll appeal this decision as they’ve done in numerous other suits. (This is an expanded version of an article that appeared in sibling pub INSIGHTS Express earlier today.)  

Indeed, judge here points to problem after problem with plaintiffs’ claims. First issue is that the 2 remaining consumer plaintiffs “do not clearly identify the precise laws or regulations that they challenge.” Removing a single statute wouldn’t do the trick, leaving other regs that would block the practice. So since it isn’t clear to this judge that he can offer them the relief they seek (allowing out-of-state retailers to ship wine directly to them), he finds even their standing to sue in the first place “doubtful.” 

But even presuming the ct could do something about it, the plaintiffs’ “claims fail on the merits.” The AZ laws barring direct shipments from out-of-state retailers are “not facially discriminatory, nor are they discriminatory in effect,” this judge determined. In-state retailers are subject to various state laws that out-of-state retailers are not, so it’s also “doubtful” that such cos “can be seen as similarly situated.” 

Neither Granholm nor Tennessee Wine Sup Ct decisions save the plaintiffs, the ct wrote. The 2005 Granholm decision only requires that exemptions from the 3-tier system be evenly applied to in- and out-of-state entities. Here, plaintiffs request an exemption to out-of-state retailers that in-state retailers do not benefit from. The 2020 Tenn Wine decision tossed TN’s residency requirement for retail applicants, not the requirement that licensees maintain a physical presence in the state. While the former is discriminatory, the latter is not, this judge points out.  

Finally, even if the ct agreed that the laws were discriminatory, the state showed that “the premises requirement is such an essential feature of the three-tier system that it is supported by the legitimate, nonprotectionist state interests.” AZ has sufficient reasons for preventing “direct shipping from unlicensed, out-of-state retailers,” including regulating the quantity and quality of products sold, while protecting minors and state revenues, judge wrote. Alternatives presented by plaintiffs were not persuasive and in view of this judge, the state has not “abandoned” the 3-tier system just because it created limited exceptions to it, like winery direct shipping. 

New Suits Over Shipping, Self-Distribution Filed in IA, MD and ID At the same time attys for the above plaintiffs, led by James Tanford and Robert Epstein, advocate for cross-border retailer shipping, they’ve returned to supporting suppliers, too. Recall the successful suit against Oregon on behalf of small brewers in Washington and the more recent suit against Washington on behalf of a small distiller in New York (as we wrote last mo). Attys filed 3 more new suits in just the last few wks. 

First came a suit against Iowa, seeking expansion of self-distribution privileges to out-of-state wineries, including plaintiff from Oregon. Then came a suit in fed ct in Maryland focused on direct shipping by breweries, quickly followed by a suit aiming to allow self-distribution in Idaho by small out-of-state breweries. Plaintiffs in each of those 2 suits include some of the same small brewers from Washington. 

It will be interesting to see if cts consider self-distribution similarly to how they’ve viewed direct shipping. Again, as AZ fed judge reminded, Granholm ruling asks states to afford out-of-state players the same 3-tier exemptions that in-state players receive. Direct shipping suits on behalf of suppliers seem more clearly cut, given closer parallels to Granholm. But look out to see if cts try to make distinctions based on commodity (i.e. beer, wine or spirits).  

11th Circuit Blocks FL Regulators’ “Untimely” Attempt to Smooth Over a Nearly 20-Yr Old “Imprecision” Meanwhile, the 11th Circuit Ct of Appeals rejected an attempt by Florida regulators to claw back a ruling dating all the way back to 2005. At that time, the state Division of Alcoholic Beverages and Tobacco settled a suit with out-of-state winery plaintiffs after the Granholm decision, paving the way for direct wine shipments from producers into the state. Florida regulators and plaintiffs (represented again by same folks as Granholm plaintiffs, above plaintiffs in AZ, MD, ID and numerous other Commerce Clause challenges to alc bev laws) agreed to an order clarifying that the state could not enforce its ban on cross-border shipments from wineries. 

But as a district ct found last yr and the 11th Circuit upheld last wk, the fed ct inserted the words “against out-of-state vendors and producers” when handing down the injunction. The inclusion of the word “vendors” was apparently not seen as problematic by regulators at the time; a draft ruling apparently used the word “synonymously” with “wineries,” regulators wrote in their motion. However, a state Senate committee acknowledged the ambiguity in a report shortly after the injunction took effect, the 11th Circuit pointed out.  

Wasn’t ’til 2018 that the DABT caught the problem. That’s when the agency issued a declaratory judgment saying that out of an “abundance of caution,” it would not block shipments from out-of-state retailers, often referred to as “vendors” in other sections of state law. And it wasn’t ’til 2021 that DABT sought clarification of what it characterized as an “imprecision.” But by then it was too late, dist ct ruled and appeals ct affirmed. The state claimed the ct could correct the “error” under a couple of fed rules without time barriers. Not so, both cts agreed. A different rule applies and it requires action within 1 yr. So the state’s motion was “untimely” and the injunction stands as is, preventing the state from taking action against out-of-state retailers shipping alc bevs into Florida. 

The decision was hailed by Natl Assn of Wine Retailers exec director Tom Wark as a “clear and compelling ruling on the terms of the original injunction against discriminatory enforcement of Florida’s laws.” It “will not only protect Florida consumers’ rights to legally access the wines they want but also keep the state of Florida out of the business of discriminating against out-of-state retailers via wholesaler-supported protectionist wine shipping actions,” he continued. Then too, Tom also asserted that, “as the appellate court found, there was no error in the original injunction and the US Supreme Court decision in Granholm mandated enjoining Florida from enforcing its prohibition on out-of-state vendors and producers from delivering wine to Florida consumers.” However, the AZ district ct judge and numerous other fed judges have broadly disagreed with this reading of Granholm to include retailers. And the beat goes on. 

Cheers,