As next round of Maris-AB battle begins, each appealed verdict awarding $50 mil to Maris Dist. Maris seeks additional $89.7 mil awarded by jury but which judge tossed. He had reduced award, saying verdict "inconsistent" with Fla law, when he saw handwritten notation on verdict form that broke down $50 mil for value of biz and $89.7 mil damages for lost sales. That written breakdown "should not have been considered by the Court," Maris argued. Even if judge felt $139.7 mil verdict too high or inconsistent with law, the remedy would have been to give the jury the chance to correct problem through further deliberations," Maris added. Reducing award was "based solely on speculation," Maris argued, adding that $89.7 mil award was "within reasonable range supported by the evidence." At one point judge threw atty Willie Gary off case for improper conduct during closing arguments. "You are to have no more role in this case under any circumstances," judge told Willie. Willie also faces contempt charges brought against him during trial. At presstime, spokesman sez Willie's still on the case.

AB filed huge 120-pg appeal. Seeks at best a directed verdict and/or a dismissal; at "a minimum" a new trial. AB claims it proved Maris broke contract. Tactics of Maris’ attys during trial a key part of its appeal. Maris atty actions, AB claims, were "highly prejudicial" to jury, sez AB, pointing to a "staggering record of misconduct by the plaintiff" attys. They were cited for contempt 5 times and "ejected from the courtroom 3 times" for ignoring judge’s instructions. Fines imposed on Maris attys "do nothing," AB argues, "to alleviate the prejudice" to AB. "The misconduct in this case is far worse in terms of severity, frequency and sheer variety" than other cases where there was mistrial, vented AB. So much misconduct "leads to the inescapable conclusion that this conduct was an intentional effort to affect the jury’s deliberations," according to AB. In support of dismissal motion AB also filed a supplemental memorandum under seal, which undoubtedly includes fascinating behind-the-scenes fireworks. AB faults judge too. Claimed judge erred when he put Rudy on stand when Maris attys didn’t seek his testimony. "Under the law, there was no reason" to call Rudy and allow him to float $300 mil valuation to jury. That "only compounded the prejudice." Judge allowed "prejudicial, irrelevant" testimony that harmed AB, AB claims, as Maris side questioned "virtually every AB witness about the Jacksonville termination" tho they were not supposed to bring up that suit. AB also complained that Maris side was allowed to present testimony based on RICO claim against AB that had been dismissed. Jury instructions worked against AB too, AB claims. Key instruction said Maris should not be held responsible for actions of employees working in their own best interest. But AB cited case law to show that Maris should be held "responsible for the admitted actions of its employees" such as repackaging old beer, that it is not necessary to show Maris principals knew about repackaging to prove breach of contract. Judge erred too when he didn't allow testimony of distribs who had corrected deficiencies after being subjected to MET crew, AB sez. Also wrongly barred testimony as to how low Maris expenses were compared to other AB distribs.

Bill Weintraub, respected as one of principal architects of Coors late 90s revival will leave at yr end to become prof at Univ of Colorado. Spent 8 yrs at helm of Coors mktg. On his watch Coors Light grew 3.3 mil bbls between 1995-2000. But it has stalled in 2001. Bill’s 3-hour-long mktg presentations were usually one of highlights of big brewers’ national sales conferences. Coors prexy Leo Kiely called Bill a "consummate marketing pro" in Rocky Mountain News article about this change. And yet Bill and his team faced more criticism in last 2 yrs as more distribs felt Coors Light ads didn’t continue to connect with young adults. Replacing Bill is Ron Askew who is ceo of Integer Group, a $600 mil co he built from scratch, which provides mktg services to Coors. He and Coors prexy Leo Kiely go way back. He will come in during tuffer time for Coors: retail sales trend went from +5 in 2000 to –1 in 2001. Stock price slipped from high of 80 last Nov to current 47-48. And for various reasons, several on sr exec team have left or announced departure. Bill will be 3d sr veep to leave this yr, following operations honcho L. Don Brown and top legal exec Caroline Turner.

AB’s fall price hike is relatively modest tho it is going up in a number of larger states. In Fla, AB suggested just a 15-cent per case increase to retail on premium brands, 30 cents on subpremiums as it moves to close gap further between Bud and Busch/Natural families. For 2 yrs in a row, AB has taken bigger increases on subpremiums in key Mich and Fla mkts (those 2 states were 11% of AB volume in 2000). In Oh, AB going up only on suitcases (which is big % of biz there) with suggested increases to retailer of 40 cents on premiums and subpremiums. No draft hikes. In each of those 3 big states (15% of AB volume), AB fall price increase less than last yr. In Ala, AB taking 21-cent hike, with suggested 30 cents to retailers on premium and subpremium. And in Tenn, AB suggested 35-cent increase to retailers. But in Ga, 1 of AB's top 10 states which normally gets increase in fall, no price hike this yr. AB is taking some packages up in Calif Oct 1 (see last issue), but holding til Feb on biggest-selling packages. Prices had gone up there in Feb 2000. Several other states where AB prices going up: Ia, Kans, Oreg, Neb. Three-dollar draft increases in Ia and Kans. Tho not all details in, seems like AB going up on slightly smaller % of its volume and going up a little less than last yr.

Imports up a whopping 2.7 mil bbls, 14.7% for 12 mos thru Jun 2001. For 6 mos, imports up 1.3 mil bbls, 13%, including a 9% gain in Jun. Recall that imports up 16% in 2d half 2000. Means that for 12 mos total US biz up about 0.6%, including huge import gain and 1% domestic drop. Most of import growth from Mexico again. Mexican shipments up 900,000 bbls, 23% in 1st half. That's well ahead of depletions trend, so Mexican shipments should slow in 2d half. That's key because Mexican shipments 42 share of imports. Dutch shipments up 300,000 bbls, 12%, and 24.8 share. So over 2/3 of imports from 2 countries. Canadian shipments up more than ever, up 335,000 bbls, 21% YTD, because some Smirnoff Ice and other Guinness Bass Import Co products made up there. For same reason, Irish shipments takin’ it on chin. Down 273,000 bbls, 51%. UK shipments just even. And German shipments off 12,000 bbls, 2%. Those 6 countries got 90+ share of imports. But some small countries with important brands for big brewers growing rapidly. Belgian shipments up 27,000 bbls, 117%, led by Interbrew’s Stella Artois. And Czech Republic shipments, led by SAB’s Pilsner Urquell, up 15,000 bbls, 39%. Interestingly, imports slowed to 6% growth yr-to-date thru Aug 5 in supers, according to IRI (not including malternatives). Among top import brands, Corona and Heineken each up 8% YTD, while Tecate up 1% and Labatt Blue up 6%. Leading import charge lately: imported light beers. Corona Light, Amstel Light and Labatt Blue Light each up 20%+ yr-to-date in supers.

A 3% drop in middle of peak-selling season ain’t the way ahead. OUCH!! Jul domestic taxpaid shipments down 550,000, 3.4%, estimates Matt Hein of Beer Institute. Domestic taxpaids down 1 mil bbls, 1% YTD. So it sure ain’t a good yr for US brewers so far. Will be tuff to pick up all that slack, even tho there was 1.35-mil-bbl drop in 4th qtr last yr. Here’s why: Aug 2000 was big mo, up 700,000 bbls. Very similar 12-mo trend too: taxpaids down 1.6 mil bbls, 0.9% for 12 mos. That includes Beer Inst estimate for most of malternative volume brewed in US (some Smirnoff Ice made in Canada). Look too at soft sales-to-retail trends thru Jun: AB up 0.6%, Miller down 4.4% and Coors down 1.2%. Shipment numbers for top brewers in 1st half were better than that, so challenging 3d qtr was expected, especially for Coors. But Jul drop worse than expected.

NBWA convention shocked on 2d day by terrorist attacks on World Trade Center and Pentagon. At truncated Tuesday program, Coors chairman Pete Coors made poignant remarks about "price of freedom." That night, Miller prexy John Bowlin opened Miller’s reception to all distribs, brewers and supplier personnel. Provided all major suppliers’ products too. Classy....... NBWA’s 1599 active distrib members represent 86% of all distribs, it figures. That’s up from 73.5% in 96. (Gotta be well over 90% of US beer volume). For first time, NBWA has signed on every distrib that meets its "maximum dues" level: $50+ mil annual sales. That’s good news. But consolidation takin’ its toll. NBWA figures it lost 76 cos in last yr to consolidation, as # of active distrib members dipped from 1654 to 1599. But dues $$ up $229,000 to $4.1 mil, up from $3.4 mil in 96....... Nice moment: NBWA gave lifetime service award to NY distrib Hap Boening who’s always been active politically and who has battled in court with Heineken for last yr. Hap got standing O....... Best line: NY state exec Mike Vacek got industry service award for his work reducing state excise tax, and advancing state franchise protection law. Mike said he was surprised he got plaque, was "expecting a bulletproof vest so I could go to the supplier hospitalities" ....... Bad news: lotsa states expect to face excise tax hikes, according to state distrib assn execs and brewer govt affairs execs, as more and more states face budget shortfalls....... Smirnoff Ice was brand buzz of convention, natch. Lotsa reports of distribs not getting enuf product for Labor Day, leavin’ $$ on the table. Diageo announced $30-mil expansion of Chi-area production plant in part to beef up Smirnoff Ice capacity. Expected completion date: spring 2002. Meanwhile, plenty of Smirnoff Ice (and Mike’s Hard Lemonade) still comin’ from Canada....... Subject that seemed most on distribs’ mind: consolidation. Many deals in the works.

Guinness-Bass Import Co’s (GBIC) termination of Milwaukee-area distrib Beer Capitol in Jun 2000 was legit even tho without good cause, US Dist CT just ruled. Fed judge said Wisc Fair Dealing Law (WFDL) didn’t protect distrib, and rejected other distrib claims that GBIC breached contract, and that GBIC was "unjustly enriched" by termination. Turns out Beer Cap never got penny for brands, after refusing GBIC offer of 1X net. Fed judge’s thinking and background make case interesting, especially to distribs of GBIC and other smaller-volume brands, even tho case Wisc-specific.

Recall that GBIC terminated Beer Cap when it consolidated southern Wisc biz, moving it to AB distrib Beechwood. Beer Cap sued, but judge said general state franchise law (WFDL), which bars termination without good cause, doesn’t apply. Why not? Tho Beer Cap had 8-yr relationship with GBIC and exclusive territory (in practice), judge ruled other key factors "weigh heavily against" Beer Cap being covered. First, no contractual obligations existed; there was only ambiguous oral contract. 2) Second, GBIC was only 8-9% of Beer Cap’s rev ($2.7 mil of $31.3 mil in 99), not enuf to automatically trigger WFDL (ain’t clear what % does). Judge looked solely at GBIC sales as part of Beer Cap’s total revs, not as share of profit or specific segment like on-premise biz. Third, Beer Cap’s personnel, equipment, other spending over years were not "sizeable sunk investments" or specific enough to GBIC brands. In fact, the $79,000 Beer Cap spent on promotions for GBIC brands in 99 and 2000 were, judge wrote, "discretionary investments" which Beer Cap itself profited from. Judge rejected Beer Cap argument that since GBIC brands had higher margins, it had to increase sales of lower-profit products to cover loss. Ruled further Beer Cap’s investments in selling GBIC brands over years did not "unjustly enrich" GBIC: "Although [GBIC] no doubt benefited from the parties’ distribution relationship and advertising, there is no evidence in the record that it retained a benefit that in fairness must be returned." Nor was GBIC "unjustly enriched" by its Jun 2000 offer, refused by Beer Cap, of 1X net profits from GBIC brands for previous 12 mos.

Beer Cap bought distrib rights to GBIC brands in 92 for $82,000. Increased sales of GBIC products 10-fold between 92 and Apr 2000. GBIC was Beer Cap’s 3d or 4th biggest of 30 suppliers "in recent years." Beer Cap claimed loss of $500,000 in 2000 after it no longer sold GBIC brands. But judge determined Beer Cap "experienced little if any reduction in sales or gross profits" since losing GBIC brands. Looking at $82,000 original investment, judge said Beer Cap "does not suggest it did not recoup this investment during the 8 years" it sold GBIC brands and added "for a company that does over $30 mil" annually, "a one-time investment of $82,000 is modest." Beer Cap had claimed that, at GBIC’s request, it invested in "specialized" draft beer equipment for retailers. But GBIC "asserts that this expenditure cannot establish any cooperation or investment because it was illegal." Beer Cap "retreated from any real reliance on this expenditure," judge wrote, and added it was "unsubstantial amount." What about goodwill? Beer Cap argued that growth of GBIC brands in territory was "evidence of goodwill," but judge wrote Beer Cap "was compensated for its increased sales" and no evidence that "the goodwill it generated was so great as be equivalent to a sunk investment," necessary for Beer Cap to be covered by Wisc law.

Miller jumped spending on major brands by $42 mil, 111% in 2d qtr and by over $50 mil in 1st half. In these 6 mos, Miller spent $25 mil more than Coors and $25 mil less than AB. In same period last yr, Miller spent only half what AB did, and 20% less than Coors. Miller Lite was easily most heavily advertised brand for 1st time since 97, with spending up $32 mil, 69%. (Data in chart below, compiled by Competitive Media Reporting on spending in 11 media, includes major brands and brand-associated public service announcements, but not all brewer spending. Some say these figures are low.) Interestingly, AB spending on major brands down $5 mil, 7% in 2d qtr, following flat 1st qtr. In 1st half, AB dropped spending $14 mil, 17% on Bud, but jumped it $6 mil, 12% on Bud Light. (Bud Light spending down $4 mil in 2d qtr.) Meanwhile, Michelob family spending also up at double-digit pace in 1st half. Miller pumped lotsa extra $$ into several brands besides Miller

Lite; Gen Draft spending up $11.5 mil, 59% and High Life spending quadrupled to $12 mil. Spent $1.7 mil, 26% more on Foster's than it spent on all Molson USA brands last yr. But Miller whacked almost all spending on Icehouse and Mil’s Best. Coors outspent AB and Miller in 2d qtr, always a heavy spending period for #3 brewer. Jumped spending $7 mil, 8% to $93 mil in 2d qtr. Put Coors spending up $3.5 mil, 3.5% for 1st half. Coors Light spending up $2.7 mil, 4% in 1st half; at competitive levels with other top beer brands. But Coors spent nearly $39 mil in 1st half on Original Coors, Zima and Killian’s, which accounted for 3.1 mil bbls in all of 2000 and are each down in 2001. So Coors spending well over $20 per bbl on those declining brands.

Meanwhile, top importers continued to pour it on. Heineken spending up $11.5 mil, 48% in 1st half to $35.6 mil. Corona spending up $4 mil, 33% in 2d qtr; up 18% in half. Labatt similarly had big hike in 2d qtr; now up $1.9 mil, 26% YTD. But biggest boost for Guinness Bass Import Co, mainly Smirnoff Ice. Spent $17.7 mil in 1st half, up $14.3 mil and more than importers spent on Corona brands. Mike’s too spent $9.6 mil. Those high-end cos upped spending $39 mil, 80% in 1st half.

Judgment vs AB jumped to $72.6 mil as judge added $22.6 mil interest on top of jury verdict. AB plans to appeal, saying judge jumped gun by entering judgment before all issues resolved. Meanwhile, Maris re-filed defamation suit vs AB. No figure stated in court papers, but Maris attys have said they’ll seek $1 bil damages. Suit cites lengthy list of statements by AB execs, employees and "agents" made to retailers and media that: 1) Maris engaged in "fraudulent conduct"; 2) Maris didn't perform to AB standards; 3) lotsa retailers complained about Maris. These statements all "false and defamatory," Maris alleges, and made "with the intent and for the purpose of injuring Maris’ image and reputation in the community, and particularly with Maris’ customers, in order to facilitate AB’s plans to force an ownership transfer" of distrib. AB hasn’t responded in court yet, but AB group vp Steve Lambright said: "We are confident that there has been no defamation."

Earlier, after uncharacteristically brief Aug 29 hearing, judge turned down every post-trial motion. Nixed AB’s request that he throw out $50-mil jury award and/or grant a new trial. But he also refused Maris’ bid to require that AB pay the additional $89 mil jury had awarded to Maris for "lost sales" and rejected Maris’ claim that AB was "unjustly enriched" by terminating Maris' "valuable distribution rights" (basically another attempt to get the additional $89 mil). Tossed both sides’ charges of "deceptive trade practices" under Fla law. That’s important because either side may have been able to win big atty fees if those charges went forward. In fact, Maris atty told Gainesville Sun he estimated Maris atty fees at $20 mil+. That includes estimate of Maris’ "costs of all litigation against AB," Maris spokesman later told INSIGHTS. Maris atty said Maris side "disappointed" with judge’s decision but "had no expectations" that judge would "change his mind" about the $89 mil. Maris will appeal to District Ct of Appeals in Tallahassee. AB veep John Jacob told G’ville Sun on Aug 29: "We’re not totally surprised that we’re paying some amount of money in this transaction. It’s certainly not what we would have liked to have paid." But John added it was "a very good day" for AB since judge ruled it didn’t owe Maris any more $. (Gotta note this was before judge added interest.) "The book has been closed on this piece of the case," John said, "and now that it has been closed, we want to sit down and see whether or not we want to reopen it."

Inevitable but noteworthy: Bud Light became #1 brand in US, AB group veep August Busch IV told analysts at Sep 5 Prudential conference. Bud Light passed Bud in US in 1st half, but Bud still #1 globally, August said. In 2000, Bud Light sold estimated 31.35 mil bbls in US while up double-digits 9 yrs straight. Bud sold estimated 34.05 mil bbls in US last yr, down avg 1-2% last 5 yrs. In 2001, Bud Light up about 8%, Bud down 2%. Hard to believe but just 10 years ago, Bud outshipped Bud Light by 37 mil bbls. In 90s, Bud lost 14.4 mil bbls in US while Bud Light zoomed nearly 20 mil bbls. At same Prudential conference, August pointed to "advantage" for AB arising from Miller-Coors distrib consolidation because these houses create "diffusion of focus," especially on Coors Light and Miller Lite. In fact, the 15 share of mkt held by those 2 brands now "more vulnerable than at any time in the past," August asserted. Imports and Smirnoff Ice may be distracting distribs too, he said. AB estimates 61% of Smirnoff Ice is sold by Miller/Coors houses, that those distribs putting "disproportionate amount of focus" on that brand. That creates "opportunity" for AB to make competitive gains in light beer segment, in AB view. AB has "closely studied" Smirnoff Ice in original test mkts, August said, and IRI data suggests "there may be some seasonality ...some softening" of Smirnoff Ice, "stabilizing" at 1 share. August and group veep Randy Baker made other interesting points. AB’s margins on Nat Light/Busch family are now same as margins on Bud 2 years ago; 61% of AB volume now sold thru exclusive distribs, up from 41% when 100% "share of mind" adopted. August expects that share to increase as more AB distribs buy Corona brands. AB’s promotion costs per bbl have declined each of last 3 years, down 8% Jan-Jun 2001. Both August and Randy acknowledged industry volume not growing at anticipated 1.5%, but said then they expected pick-up thru end of yr, and pointed out consumers still trading up to imports, other higher-priced brands, unlike in previous economic slowdowns.