Watkins Dist of Ida just bought 1.3 mil case Centennial in Hayden, Ida (near Couer D'Alene). That will make Watkins (owned by NBWA vice-chairman Mitch Watkins) about 3.5 mil cases.

Specialty Bevs of Va (hq'd in Richmond), almost 300,000 cases, closed deal to join with Sheehan family of cos in Dec. Some of key brands include Dogfish Head, Smuttynose, Saranac, Stone, Harpoon. That will make 5th state for expanding footprint of L. Knife Companies (Mass, NY, Wisc, NJ). Between all its distribution arms (website lists 9 before this deal), L. Knife sells about 4 mil cases of craft brands, including statewide rights for fast-growing brands in many instances. That's very likely more craft volume than is handled by any other distrib in US. L. Knife still mainly an AB distrib and sells over 22 mil cases in all, but craft footprint far exceeds AB footprint.

Yikes!  If you needed further evidence that economic slowdown starting to hit beer harder too, beer dropped 3.3% for 4 weeks thru Dec 28 in supers, according to IRI.  Big brands suffered disproportionately, especially top imports.  Each of Corona and Heineken dropped double digits; Corona down 10.5%, Heineken down 11.5%.  Miller Lite down almost 10% (-9.6%), Bud down 8.6%.  Even Bud Light down 5%.  Each lost share.  Those 5 megabrands lost 1.8 share of volume in Dec.  That's only 1 mo but it's ugly. 

Almost equally concerning: virtually all the top brands that grew were lower-priced brands, led by… you guessed it, Keystone Light up 11.5% and Pabst Blue Ribbon up 20%.  Gained 0.3 share and 0.2 share respectively for mo.  Busch Light, Miller High Life and Busch each gained 0.2 share too.  So 5 key premium-and-above brands lost 1.8 share, while 5 growing subpremium brands gained 1.1.  Uh oh.  Subpremium $$ sales up 8% 4 weeks, gained 1 share.  Import $$ sales down 5.6%, lost 1.4 share.  Not a very promising way to end 08 and a potentially ominous signal for new yr.  

With beer consumption down about 20% , on-premise beer biz off near 40% since 1980, and off-premise pricing very soft, brewers and pub owners in the United Kingdom are looking for ways to turn sales/profits around. "As a brewer, we make just about a penny a pint," Mark Hunter, ceo of Coors Brewers told Times of London. "Our profitability has been flatlining for the last three years," he added. Coors is 2nd largest brewer in UK behind Heineken, which purchased Scottish & Newcastle. He estimates up to 25% of existing pubs in UK could close "because they're either on locations or they have infrastructure that doesn't allow them to evolve properly."

For its part, Coors in UK is developing new brands with different taste profiles and fewer calories to appeal to women drinkers which account for just 14% of UK beer sales, noted Times. With wine and spirits sales growing, "there is an opportunity to make beer a bigger part of the consideration set for female drinkers," said Mark. Coors has also started testing Blue Moon for UK market and is launching Worthington's Red Shield, described as less bitter with less alcohol content than regular White Shield Ale. As for Carling, Coors' largest brand in UK, 75% of sales, brewer plans to emphasize the brands' "integrity and provenance" by working with hop farmers to guarantee all raw materials put into Carling brands are 100% from the UK within 2-3 yrs.

Meanwhile, pub owners are getting backlash from health groups for offering price breaks on alcohol to boost sales, reported BBC. Activists are particularly angered at pints priced at 99p. "We are trying to stay in business, keep our jobs in our sector and compete in a very competitive market," said Mark Hastings, of the British Beer and Pub Assoc. The 99p per pint was for 2 brands in one chain of pubs. "The drinks industry isn't able to regulate itself responsibly and it's for the government to take action," complained Nicolay Sorensen of Alcohol Concern.

Costco case did not end efforts in Wash State to revise 3-tier system, Seattle Post-Intelligencer reminded in article yesterday. "Everyone from grocery stores to small brewers [was] working to negotiate some compromises in the past year and lawmakers [will] likely settle the differences in the upcoming legislative session," PI wrote. Some players want to wipe out 10% minimum markup at supplier and wholesale levels, one of the goals Costco failed to achieve. Others want "more changes" to loosen restrictions on ownership between tiers. Even new exec director of Wash Beer and Wine Wholesalers Assn, John Guadnola, said: "The 3-tier system is still important and the tiers need to be independent, but you can protect the independence of that without barring ownership" across tiers. Costco still wants quantity discounts, but "other groups oppose the idea." That includes wholesalers: "We think it's really bad from a regulatory point of view," said John. "It doesn't preserve uniform pricing systems and opens up all kinds of problems," he added. Meanwhile, wineries trying to find ways to increase direct shipments to consumers, but without hurting in-state retailers. "We just don't know what the solution is at this point," said a wine lobbyist. Wash now has 600 wineries, sez PI, while WBWWA has roughly 50 wholesaler members.

Jeffreys Distrib has bought its 3d NC AB distrib in less than 2 yrs, approx 2-mil case Atlantic Bev in New Bern. It now will sell about 10 mil cases annually in 5 locations, making it easily largest AB distrib in NC, and 1 of largest in Southeast. NC is 1 of AB's top 10 volume states, 40-50 mil cases. Now 3 distribs sell about half of AB volume there. Many expect still more consolidation. Earlier in 08, Jeffreys bought Jackson Bev Co in Wilmington, NC, and it bought Lumberton in 07.

S Calif distribs purchased Pabst volume from Alta Mktg and will now get exclusive territories and sell Pabst brands DSD. Transaction closed at end of yr. "I am proud to announce that all fifteen transactions associated in the transition from a Direct to a DSD distributor alignment have been completed," network development veep Richard Bartlett wrote distribs this morn. That followed successful transition to DSD in northern Calif earlier in 08. Once Pabst went DSD, sales reportedly jumped in northern Calif. Switch to DSD in nation's largest state reverses situation that went back to 1980s. By going DSD and offering exclusive territories, Pabst building goodwill with distribs. Pabst, less than a 1 share in Calif compared to almost 3 nationally, sold about 200,000 bbls in Calif in 07, or about 3% of its volume.

Final figures ain't in yet, but looks like beer steadied in 08, at least in terms of share of absolute alcohol volume and $$. After losing share of the alc bev biz in each of the previous 5-6 yrs, beer's combo of modest volume gain and solid pricing as wine and spirits slowed suggests beer gained share of $$ and almost held volume share.

Spirits volume rose just 1.6% in 2008, according to DISCUS. That's slowest trend for liquor since 2001. Off-premise spirits volume up 2.9%, but on-premise down 2.2% and lost at least 3% (volume) in final qtr. Supplier dollar sales rose 2.8% to $18.7 bil for the yr. That was 32.9% of alc bev $$ at supplier level, DISCUS figures. Down 0.2 in 08. That's after 6-year string of solid growth from 28.7% in 01 to 33.1% in 07. DISCUS prexy Peter Cressy acknowledged loss was to beer. In subsequent conversation, AB sales veep Evan Athanas told INSIGHTS AB also sees increased trade over from wine/spirits to beer.

Beer volume up just 0.6-0.7% in 08, but dollar sales at supplier level hadda be up 4%+. For 9 mos, AB $$ sales up 5% and that was before Oct price hike kicked in. Coors $$ sales up 11% Jan-Jun and MillerCoors reported rev up 2% in Q3, also pre-price hike. Meanwhile, wine volume slowed amidst widely-reported trade down. Beer had 50.3 share of alc bev $$ in 08, up slightly, DISCUS economist Dave Ozgo estimates. Wine had 16.7, -0.1.

Volume-wise, spirits outgrew beer and picked up another 0.2 or so share of absolute alcohol volume to 31.5, we estimate. A coupla wine estimates floatin' around, from +0.7% to +1.6%. Means wine held or up 0.1 to 14.2-14.3. So beer off 0.1-0.2 in share of abs alc volume in 08, after averaging loss of nearly 0.7 share last 5 yrs. Spirits and wine slowdowns followed annual avg gains of 3.5%, 3.7% respectively for previous 5 yrs. Beer volume averaged 0.9% growth those 5 yrs. In all 3 bevs, trading up slowed or ended in 08. In fact, consumer moves to higher-priced brands within bevs, and from beer to wine/spirits "appears headed for a screeching halt," Deutsche Bank's Marc Greenberg wrote. Multiple whammy of tuff economy, on-premise softness, price increases "in teeth of a slowdown" and lousy mktg hurtin' high end, Marc believes. Silver-lining: this bodes well for big domestic mainstream beer brands as young-middle-age men stick with "old stand bys" and craft/import drinkers trade down, Marc sez. Meanwhile, folks at Goldman Sachs forecast a "3% decline in retail liquor sales" in 09 and "flattish" supplier revs.

AB InBev certainly can't be accused of sitting still. Several early 09 AB InBev moves underscored its continued focus on cost cutting, managing money (including huge debt load) as well as initial efforts to remake itself. In quick succession, AB InBev, announced a NY office, more job cuts, changed payment terms from 30 to 120 days, issued $5 bil in new debt, restarted asset sale process, and more. ABI extended payment terms from AB's old 30 days to 120 days for its top 500 vendors, wrote St Lou Post Dispatch. That doesn't make vendors happy (some already hollerin' on P-D's Lager Heads blog). "If you are not able to work with the change in payment terms, we may have to consider an alternate supplier," ABI wrote suppliers. "While we recognize these terms may be difficult for some of our suppliers, they are consistent with standards used by other multinational companies and we hope we will be able to continue working together." ABI told Lager Heads that decision "comes after a month-long review of our global payment policies" and "ensures" AB's "payment practices are consistent with those in place globally for AB Inbev. The new terms will help us better manage our business."

Meanwhile, many AB distribs still required to pay AB within 1-2 weeks, depending if exclusive. Subject of increasingly keen speculation: when and how much ABI will reach more into distribs' pockets as it is now doing with suppliers. Some distribs already talkin' about lower margins amidst new price hikes. St Lou will remain North American hq, but AB InBev will open a NY hq of about 110 people that will include offices for ceo Brito and cfo Felipe Dutra, and also enable ABI to reduce its Leuven global hq by up to 89 people (there will still be 70 people there or so). Some of top global functions like mktg, sales, legal, will reportedly move here, while Brito and Dutra will split time in US and Belgium. Tho AB InBev wants to keep Leuven as its global hq, most of profits in Americas, and it will theoretically have access to broader talent pool here too.

AB InBev also said it will close centuries-old Stag brewery in 2010 (acquired from AB) to capture synergies and because of difficult UK mkt conditions. Almost 200 jobs could be cut. ABI also cut part of its St Lou procurement staff but numbers remain unspecified. And of course, ABI officially "restarted" asset sale process, including its Oriental Brewery in Korea and theme parks, according to Fin Times, which could fetch as much as $5-6 bil between 'em, according to reports. But AB InBev also reduced some of pressure it faces to sell assets as it issued $5 bil in new debt. Recall, that ABI has to repay $7 bil debt facility this yr, initially reported to be funded entirely by asset sales. But "up to 50%" of that $7 bil "can be refinanced using debt capital raisings," RedBurn's Chris Pitcher wrote, having confirmed it with ABI. That gives ABI "breathing room," a source said. "In the long run, not being a forced seller of assets," Chris wrote, "will likely result in better prices being achieved during the deleveraging process." Brito originally said ABI identified 5 non-core assets and it could sell 2 or 3 to get $7 bil.

The potentials and pitfalls of a budding dialogue between beer distributors and public health advocates recently revealed themselves. In late November, Marin Institute's Michele Simon, who had spoken at NBWA first legislative symposium in October, wrote a letter to the Michigan House of Representatives that seconded the wholesalers' position on direct shipping. Marin supported a House bill that banned all retail delivery of alcohol direct to Michigan consumers. A US District Court decision handed down earlier in the fall tossed a Michigan law that allowed in-state retailers to ship direct but barred out-of-state businesses from doing the same. The legislature had to either open up the practice to all, or bar it completely. The wholesalers successfully lobbied the House to pass a complete ban, with the support of Marin and the state liquor control commission. (The state Senate also passed the bill.)

Marin's language echoed the wholesaler's longstanding position that direct shipping exacerbates the risk of underage drinking "because there is already ample evidence that certain controls, such as labeling boxes and requiring ID upon delivery, are inadequate to protect youth." A complete ban is "the most effective solution," Marin wrote. It also expressed concern about the state's ability to "keep out certain products that the state has deemed unfit for sale in the state." Wholesalers have also long argued that a strict 3-tier system with accountability helps prevent the distribution of tainted or otherwise dangerous products. In this instance, distributor and public health interests aligned and they worked together, just as NBWA president Craig Purser has suggested was possible.

Just two weeks later, a different issue arose, pointing the inevitably rocky road that this dialog will travel. Marin Institute made what has become an annual attack from public health activists on brewers' Super Bowl ads. Marin launched a campaign on the social networking cite You Tube, and a new website titled "Free the Bowl from Beer Ads." The organization is inviting young people to submit "anti-beer ads of 30 to 60 seconds to counter excessive Super Bowl Advertising." Marin charges that "Anheuser Busch and the NFL hide behind weak, ineffectual Beer Institute self-regulatory guidelines to justify exposing youth to exploitive alcohol ads