Import shipments ain’t gettin’ any better despite soft, soft comps last few mos. Nov import shipments down another 133,000 bbls, 5.7%, goin’ against 6.4% drop in Nov 07. For 11 mos, imports down 720,000 bbls, 2.6%. Mexican shipments whacked again: -83,000 bbls, 8% in Nov and off 373,000 bbls, 3% YTD. No help from Netherlands either. Dutch shipments off 1% for Nov and 11 mos. Canadian shipments eked out 2% gain in Nov, but still -9% YTD. Looks like switch of Foster’s production to US more than offset any increase in Blue Moon headin’ south. German volume down another 6% in Nov. Off 110,000 bbls, 9% for 11 mos. UK biz up slightly YTD; Irish shipments +5%. Belgian shipments took hit in Nov (-38%), but still +15% YTD. Italian shipments jumped 68% in Nov; up 31,000 bbls, 25% for 11 mos.

Recent data shows how much damage a coupla lousy mos can do. US beer biz (domestic taxpaids + imports) had been up 1.3 mil bbls, nearly 1% Jan-Sep. But with soft Oct and really weak Nov -- taxpaids plus imports down 600,000 bbls, 4% in 1 mo -- gain cut by more than half. Thru Nov, US biz up just 600,000 bbls, 0.3%. Glass half-full view: domestic taxpaid shipments still up 1.3 mil bbls, nearly 1% Jan-Nov, and likely ended yr with solid Dec.

SABMiller organic lager volumes down 1% in Europe, flat in China, up 1% in South America, up 4% in Africa and 1% in South Africa, it reported.  Each region outperformed North America.  But a couple of key countries took big hits: SABMiller down 6% in Columbia tho it gained share there and down 22% in Russia affected by “destocking inventories” and “sharp economic slowdown.”  Carlsberg held up better in Russia, with volumes flat there, but slowdown in Nordic countries led it to announce job cuts of 274 people this morn.

Better news for SABMiller: earnings “in line” with expectations, supported by “firm pricing and cost efficiencies,” it said.   SABMiller stock virtually unchanged today.  But some US analysts saw “negative” read-thru for (alc) bevs in general based on MC volume.  “We believe the MillerCoors volume miss reflects a sluggish consumer and poor December weather rather than a company or beer-specific issue,” wrote Goldman Sachs Judy Hong, saying she expects other “disappointments.”  Added:  “Anecdotes of on-premise weakness bode particularly poorly” for Boston Beer and Brown Forman “because of their premium portfolios and on-premise skew.”  

Amidst weaker-than-expected global volume results (down 1% “organic”) because of “current global economic slowdown,” MillerCoors results also suffered. Sales-to-retailers down 2.3% “in the context of weaker beer category volumes and strong pricing.” Several surprising #s in brief report on MC: Coors Light slowed to just a 1% gain, while Miller Lite STRs dropped 7.5%. That’s perhaps its worst quarterly trend ever (no wonder Miller-dependent distribs voiced their displeasure). Miller Lite STRs down 5-6% in 2d half (off 3.6% in 3d qtr). SABMiller cited “particular softness in the on-premise.” MC craft and imports eked out a 1.6% gain, even with double-digit Blue Moon growth. MGD 64 “growth continued to accelerate.” Nary a word on MC’s hottest brand: Keystone Light. MC “integration” is “proceeding well.”

Constellation announced deal to sell 10 mil cases of spirits of 40 spirits brands for $334 mil to Sazerac Co.   Sazerac owned by Bill Goldring.  Goldring family also owns Republic-National, 1 of largest US wine and spirits distribs, (which is also largest distrib for these Constellation brands).  And Goldring family also owns half of 1 of largest beer distribs, Crescent Crown.   Constellation keeps 5 mil cases of just 3 brands (Svedka, Black Velvet and Paul Masson Brandy), while selling its “value” brands.  Value spirits brands heating up lately; this portfolio has recently shown double-digit increases, sez source.  While Constellation selling 2/3 of its spirits volume, these brands are 1/3 of Constellation’s spirits’ oper income, estimated UBS’s Kaumil Gajrawala.  He estimated deal multiple is 15.5x EBIT.  Constellation said it will use “entire net-after tax proceeds of approximately” $210 mil to reduce debt levels, which have already been coming down. 

Distribs and suppliers face not only tuff excise tax battles in the states in 09, but plenty of mkt “reform” bids as well.  A couple have already popped.  In Colo, grocery/c-stores pushin’ for legislation to allow Sunday sales of  “strong” beer.  Recall state allowed liquor stores, only place where non-3.2 beer sold in state, to open on Sundays last yr.  That reportedly whacked grocery store sales of 3.2 beer on Sundays, by as much as 66-75%, according to some sources in Colo press.  Interesting allies of liquor stores to keep strong beer outta grocery stores: small Colo brewers who believe liquor store support helped build mkt for local beers.  In fact, grocery/c-store sales of strong beer would “completely junk up the market for craft beers,” Left Hand Brewing’s Eric Wallace told Longmont Times Call. Grocery/c-store owners respond that their outlets would provide big oppy for small brewers.  Big brewers and beer distribs neutral for now on grocery store sales of strong beer. 

Similar battle shaping up in NY, where gov has proposed allowing grocery stores to sell wine.  Liquor stores battlin’ that.  So far, big liquor/wine distribs have pledged to fight grocery sales, but lotsa skepticism that Southern Wine & Sprits and others really want to give up potential new outlets, despite those pledges.  (Southern has reportedly fought grocery sales in Colo in past.)  Lotsa liquor store owners “are convinced” SW&S “is conducting a quiet campaign to get wine into supermarkets,” Times Union of Albany wrote yesterday.  As one consultant told paper: “distributors walk a tightrope: They don’t want to offend their current customers – the liquor stores – so they hesitate to support proposals” like NY guv’s.  NY beer distribs oppose grocery store sales of wine.  Beer has competitive advantage in channel now and would likely lose shelf space if wine added.  Space for wine has to come from somewhere and since neither beer nor wine co’s can pay slotting fees, retailers not likely to “disappoint a paying customer,” as one observer told INSIGHTS.   

Finally, in follow up to chatter about 3-tier reform in Wash state – see Jan 5 Express – The Columbian newspaper in Vancouver, WA, came out solidly behind state’s vintners and against distribs/state regs.  Argued for example that 10% minimum markup at supplier/distrib levels “works great” for distribs, “but consumers are forced to pay artificially inflated prices.”  Sounding like Costco during its battle with state, editorial quoted head of small vintner assn who argued: “All the police powers, all the public safety protections need to stay, but every other protection needs to go.”  Paper also criticized state regulators’ argument that regs which raise price in place to “deter people from consuming too much alcohol.”  Real reason for those regs, paper insists, is “to make money.”  Net-net, protecting status quo, state regs and distrib image is never-ending challenge.   

“Consolidation within beer and spirits has run its course in Europe,” and that “may lead us to a new phase of consolidation which integrates both categories,” sez Credit Suisse team of analysts, including Carlos Laboy.  Diageo and Heineken, which already have a successful JV going in South Africa (up 25%), could “greatly improve their scale and cost efficiency” by combining spirits and beer into one co.  Since Heineken stayed on sidelines in Latin America, it has “much less access to growth markets than its key global competitors InBev and SABMiller,” noted Carlos.  Further oppty’s for Heineken in emerging mkts “are few and far between,” he added.  But a combo with Diageo could yield 600-700 mil pounds ($900 mil -$1 bil) “in synergies, revenue and bottom line combined” and add “an incremental 15% to current combined EBIT” of 4.5 bil pounds ($6.7 bil), estimated Carlos.   

Nub of argument in Oh lawsuit, now pitting 8 distribs vs MillerCoors, is whether MC is successor brewer under Oh law allowed to terminate distribs within 90 days of JV formation.  MC insists it is.  Distribs say it ain’t.  MC just filed request for summary judgment, claiming it “undeniably is a ‘successor manufacturer.’”  MC “did not result from a single entity reshuffling its own assets among pre-existing wholly-owned subsidiaries that it alone controlled, but instead arose from two fierce competitors forming a completely new entity that neither one controls.”  Keys to MC argument:  Miller and Coors gave up control of their brands in US, MC got new federal/state licenses (over 500 new licenses in toto, 35 in Oh), extensive Dept of Justice review of JV that involved over 500K pages of documents, more than a dozen depositions, day-to-day operation “vested” in MC CEO and JV exec committee, etc.  Two Oh legal decisions support MC position, it sez: 1) InBev lawsuit that found that it had simply rolled up its own US operations and therefore wasn’t successor manufacturer; 2) Schieffelin & Co case which ruled Schieffelin was legit successor to Moet-Hennessy and Guinness that could terminate distribs under Oh law.  MC points out too that Colo Dept of Rev recently “found MillerCoors to be a successor manufacturer” under Colo law similar to Oh.

MC motion lifted veil a bit on DoJ/JV process.  In addition to disclosure of documents/depositions, MC pointed out that the two brewers hadda form “clean teams” to “conduct months of due diligence with the understanding that if MillerCoors was not formed, members of the ‘clean teams’ would be precluded from working at either” co.  Also, MC sez all employees had to go thru “selection process” for MC jobs, that 30% of positions eliminated.    

After 10 yrs as ceo of what is now 1 of top 10 distribs in US, Gold Coast prexy Art Friedman sent out letter this morn, saying “it is time to broaden my horizons.”  Art will retire Feb 27 at age 49.  Art sez he would like to own his own biz and tenure with Gold Coast has afforded him luxury of spending time to look for right oppy.  He noted that when he became ceo in 1999, Gold Coast had $165 mil in revs, 25% mkt share.  Now Gold Coast at $500 mil in annual sales rev and well over 50 share.   Thru what Art called “unprecedented turnaround,” Gold Coast also acquired 3 major competitors during that time frame.  Gold Coast now at 29 mil cases annually, but down 2.5% or so in 08.  Tho Coors, Yuengling, etc remained strong, as Fla economy went south, it reportedly took toll on Heineken/Corona there.    

Long in works, another pair of beer distribs who are longtime rivals have agreed to merge their operations. Amoskeag (Miller) and Capitol Dist (Coors) will merge into a 50-50 JV that will sell 6 mil cases, according to report in New Hampshire Union Leader. Amoskeag prexy Tom Bullock will be prexy of new co, while Capitol prexy Jack Shea will be operations veep. Co will consolidate into current Capitol warehouse. Deal expected to close Feb 2 and after that there will only be 2 MillerCoors distribs in NH.

Recall that Crown Imports chose AB network in Sacramento, instead of going with DBI, when Capital Bev sold to DBI last fall.   Turns out AB network  paid $36 mil (or 4x GP) tho DBI had offered $45 mil for 1.8 mil cases (5x GP).   And so Capital (and owner Ken Adamson) sued Crown in Calif state court last week, to make up difference, citing violation of Calif state statute on fair market value.  Law sez that any supplier “who unreasonably withholds consent or unreasonably denies approval of sale” will “be liable” for fair market value of brands.  If distrib gets paid less than FMV, then supplier “shall be liable only for compensatory damages in an amount reflecting the difference in the amount already paid to the beer wholesaler.”  And that’s $9 mil Capital seeks, plus legal costs. 

Crown “failed to set forth any commercially reasonable basis for a disapproval” of DBI, charges Capital and “simply opted to restrict the negotiations to a single bidder.”  Crown “has never set forth any reason,” adds Capital.  Disapproval “unreasonable” for several reasons including: DBI is “large, experienced distributor with a secure financial history” and a Crown distrib “in good standing” in SF/Memphis.  Then too, Crown approved DBI in other N. Calif  deals late last yr, in Stockton and Ukiah, as suit notes.  And for same 5x GP multiple.