Predictably, Mich AG (together with state distrib assn) said it would appeal recent fed ct decision that tossed state's ban of direct shipments by out-of-state retailers. But Crain's Detroit reported last week that while appeals process will go into 09, "some speculate the Michigan legislature may act to level down the retail market" and cut off sales by in-state retailers who can ship direct to Mich consumers. Mich distrib assn prexy Mike Lashbrook non-committal. Assn will "follow the state's lead," he said, adding assn not now working with legislator to cut off all direct retail shipments. But, with over half-mil alc bev retailers in US, Mike noted, "you could not set up a regulatory structure to deal with that," citing accountability and public safety concerns with trying to regulate that many outlets. Retailer reps, of course, fiercely oppose leveling down, say out-of state retailers "would love to pay Michigan sales tax."

In weird twist, industry critics/public health advocates at Marin Inst said AB InBev "just not a good deal" in release today. Why's that? AB leadership "compromised the financial security" of employees and communities that depend on AB biz. Marin, which has rep at shareholder mtg today, points to "loopholes" in agreement that would allow InBev to close breweries (despite commitment to keep 'em open) in case of extraordinary events. One of those potential events: higher excise taxes, vigorously promoted, natch, by Marin itself! In fact, Marin audaciously points to recent nickel-a-drink proposal by Calif Gov it backs, and sez state/fed taxes will "have to be increased." That means InBev "will close breweries and cut costs without mercy." (Odd that Marin would pick up industry mantra that higher beer taxes would eliminate jobs.) Marin also charged InBev has intl reputation as "an unscrupulous company, instituting cost-cutting measures whenever it sees fit." Sounds like Marin might miss the old AB, a huge target for decades. Meanwhile, InBev gets a glimpse of American style public health advocacy/hypocrisy.

In a note to AB employees day after big personnel moves last wk, Dave Peacock offered pep talk of sorts. Acknowledged that "uncertainty of not knowing the future organization has been hard on people." While AB has tried to keep employees informed, "many other decisions have not yet been made." Dave also cited "rumors that, before the change in control, departmental layoffs and staff reductions beyond those expected" from the early retirement program or attrition "will be made. We have not made any additional changes to the work force and we do not know details of the future organization yet," Dave wrote. AB doesn't "anticipate" more "organizational announcements" until after deal closes. While experts say "this period of time before closing is the toughest," Dave praised "professionalism of the AB team" and asked for its "focus and dedication."

ots of distrib tension at Calif assn meeting as so many situations in flux out there, oftentimes pitting distrib against distrib. Many MillerCoors distribs were waiting for ABC statement (see above) and lotsa negotiations in testy stage over disagreements about valuation, etc. Into this maelstrom, consultant Mike Mazzoni spoke about "Myth of the Gross Profit Multiple." GP "not a measure of value" but rather a "component" of valuation process, sez Mike. His objective: "get entire industry weaned off" GP multiple, which he also called a "crutch." Value measured by multiples of cash flow. Beer distrib values, in spite of increasingly perilous economic conditions, have gone up 20-30% in past yr. Some distribs now ask for 10-11x EBITDA and "frankly that's madness," sez Mike. "Anything over 8x" should not get done.

HUSA prexy Don Blaustein acknowledged economic challenges but said overall Heineken is "healthy" and cos "must still invest in brands." Even tho Heineken has "taken a couple of hits" in last weeks and mos, it is still "very healthy" outside of a couple of channels like c-stores. Brand Heineken has "a whole new platform" for mktg and selling that is in process of "being finalized." Meanwhile, Tecate and Tecate Light "still hot and expanding" as HUSA "has only begun to scratch the surface" on Tecate Light. And Dos Equis up 18.6% per yr in Calif last 3 yrs and has jumped 3 to get into top 7 in import rankings out there. Amstel Light, "reenergized" by new ad campaign, has much improved trends in a number of focus mkts.

Meanwhile, Jake Leinenkugel spoke of "new flagship idea" in form of "classic amber" rolling spring 09 to go along with 15 other styles of Leinenkugel out there already. MillerCoors leadership understands "how substantial opportunity" is for Leinenkugel to be "one of natural leaders of national growth of craft" over next 5-10 yrs. Adam Firestone of Firestone Walker Brewing spoke of move towards more-and-more expensive and esoteric brews as similar to what he saw in wine biz (he sold his wine biz last yr) but "20 years behind." Several hi-end price tiers will develop. He has 1 brew he sells for $160 per case. And finally Bump Williams debuted his new venture Bump Williams Consulting, noting that beer's shelf space "under serious fire" from other growth categories, # of shopping trips "seriously reduced" because of fuel costs, but new products remain absolutely "lifeblood" for "future success."

Even as economy fell into a severe crisis, and beer prices went up in most of country, sales stayed strong in supers (tho both AB and MillerCoors total STRs down slightly in Oct). Beer volume up 2.8% nationally for 4 weeks thru Nov 2 in supers according to IRI, and $$ up 7.7%. Means avg price per case up 4.8%. AB $$ up 11.4% and gained 1.4 share. It's up 1.5 share of $$ last 13 weeks. Meanwhile, Miller Coors $$ up 2% for 13 weeks, but it lost 0.7 share of $$ (0.6 for 4 weeks). Crown and HUSA each lost 0.4 share of $$ last 4 weeks, even as avg price per case for each declined slightly. Big recent surprise continues to be Pabst. Believe it or not, its $$ sales up double-digits for 4 weeks and 7% for 13 weeks. Its volume up 2% for 13 weeks, according to IRI, even as avg prices up near 5%. Not bad. Craft also still growing $$ sales at double-digit pace and even import $$ up slightly, tho down 0.9 share for 4 and 13 weeks. Even tho this picture is just 1 channel, share shifts are telling.

A German newspaper reported on its website Friday that "German market leader Dr. August Oetker KG may buy [InBev's] local unit and Beck's beer brand," according to Bloomberg. InBev did not deny the story, but said no comments could be made about assets it might sell. An Oetker spokesperson also refused to comment. One analyst pegged value of InBev's German biz at $2.6-$3.3 bil, which would help InBev pay for AB deal. But Beck's is one of only 2 global brands in InBev's current portfolio (Stella is the other) and has been one of InBev's best brand-building stories. In its 3d qtr announcement, InBev touted its focus on fewer brands, including Beck's. It reported "volume of Beck's grew by 16% in the 3d quarter, driven by strong performance of the brand and its line extensions in its home market, Germany, in addition to solid performance in the US import segment." European analyst response was mixed, Bloomberg reports. A London analyst called the move "unlikely," given Beck's position in the InBev portfolio and its recent success. But a Dutch analyst called a potential sale "not a major surprise," calling Germany a "tough beer market and always has been, with a lot of excess capacity."

At the end of this momentous yr, both in the beer biz and the world-at-large, we wanted to reach out to all of you and send you our very best wishes. But as we do so, we temper our usual holiday good cheer with more-than-usual reflection. At year end, so many people lost their jobs, so many old friends exited the biz and the economy is not in great shape. Really, there's just a ton of change. In fact, a whole era has ended, the era of family-led US big brewer dominance. As more and more distributors consolidate, it often seems a way of life is vanishing there too.

Yet as we enter our 40th year of publishing at BMI, we are still optimistic about the opportunities and delighted to be part of the beer biz. The beer biz remains a great place to be, filled with wonderful characters, fun times and lotsa news. With change comes opportunity, so we remain hopeful that the future will be better than the past. In that spirit, all of us at BMI wish each of you a better tomorrow.

Here at BMI, we're beginning a new chapter too. We're offering an electronic version of our flagship newsletter Beer Marketer's INSIGHTS. Another change: Irene Steinman, my mother, will retire in Jan 2009 after 39 yrs, following my Dad a few yrs back. Her exemplary customer service and attention to detail will be missed. Jerry and Irene send their warmest wishes. In general, we remain very lucky as a company and as a family. Indeed, family, friends and health matter most. Have a very Merry Christmas and Happy New Year. See you in 2009.

. . . Next issue in 4 weeks. See enclosed flyer for details to switch BMI to e-mail.

Talk about a silver lining.  Dogfish Head’s prexy Sam Calagione aimed his #1 “takeaway” point at distribs during INSIGHTS Seminar: “Trading down can be a great thing.  I mean this is our opportunity to convince wine drinkers to trade down to better beer…. There’s a huge opportunity on-premise,” Sam believes.  Customers may not be buyin’ $100 wines, but “they can trade up to the world’s best beer for an incrementally small amount.” 

Crown Imports prexy Bill Hackett and AB brand mgmt veep Keith Levy joined Sam on panel.  Execs pointed to mixed signs in mkt.  AB sees trading up and trading down, said Keith.  Some consumers continue to seek out “affordable indulgence”; others looking at lower-price brands to get “similar pack size.”  AB picking up biz from both, he said.  At Dogfish Head, higher-priced, heavier-hopped 90-Minute IPA outpacing other brands in portfolio, at $10 per 4-pack, said Sam.  On other hand, Sam’s distribs tell him “people are going a bit more out of their way to get a discount at bigger stores.”  Bill talked lots about how price gaps that opened last yr between Corona and competing brands have taken toll on #1 import.  But that in turn helped fuel growth for Modelo Especial “driven largely by our Hispanic consumers that couldn’t bridge the [price] gap to Corona.”  At same time, some consumers continue to trade up, but to lower price point, i.e. brands like Bud Light Lime and Blue Moon.  AB, MillerCoors and others “played the price gap” effectively, said Bill.  Jury still out on latest round of industry price hikes, “but we expect” some gap issues “will resolve,” he added.  Crown focused on getting “back in proper alignment against competitive set before” any further increases.      

Tuff economy has had a “tempering influence” on high-end growth, Bill said, “but I think it’s short term.”  Why?  Trading up is “consumer-driven dynamic and that is absolutely going to continue,” an opinion shared by all 3.  When will craft hit oft-cited goal of 10 share?  Craft brewers not focused on specific timeline, said Sam, but “I think we agree that it is inevitable if we continue to do the hard, good work that we’re doing to turn consumers on to beers outside of the light lager category.”  Does Sam consider Blue Moon and Bud American Ale “craft” beers?  “I would certainly accept them in the high end beer category.  But…for a hard core beer geek like myself, I think there’s a big difference between quasi-craft beer commercialism and true craft beer existentialism.”  Bud American Ale “doing great,” said Keith, because distribs have “executed extremely well.”  Grabbed “about 9000 tap handles in about 45 days,” and “lion’s share” from competing brands.  Consumers don’t care if brands come from big or small brewers.  “They just want a great beer.”  Tho some AB distribs “thought we were absolutely out of our mind” to price Bud Light Lime higher than Bud Light, risk worked.  Turns out “probably one of the biggest paradigm busters of the decade was that you could charge more for Bud Light Lime than you could charge” for Bud Light.  Since Labor Day, BLL has “dropped off a little but it’s holding steady and probably a little less fall off than we originally anticipated.” 

How’s biz?  Crown lookin’ at flat to slightly up or down depletions in 08, said Bill, depending on how yr ends.  “Looking forward, we’re projecting to grow,” he added, with caveat that “growth is really going to be dictated by the state of the economy, and the recovery.”  Sam’s looking at 40% volume pop this yr, 50% in revs (sold 54,000 bbls in 07).  Expects slowdown next yr, but didn’t specify.  Keith on 08: “Mix was good, volume was good, share was good.  Based on our understanding of the consumers, based on managing a very broad portfolio, we’ve been able to use that portfolio across a tuff economic time and across a lot of occasions.  If we follow that map in the future we’ve got plans for continued growth.”  InBev Euro brands growing “north of 20%.”  Stella is “growth engine.”  

Recall last Nov, then-AB mktg veep Dave Peacock (now prexy) admitted to distribs there was issue with AB's "pull marketing." He acknowledged: "Not enough cover." "We're coming back out to tear it up," he promised. He wasn't kiddin'. Between traditional Olympic hike for Bud and new Bud Light Lime/Bud American Ale $$, AB spent $100 mil on mainstream media (does not include internet) on Bud family alone in 3d qtr, another $37 mil on other brands, according to TNS Media Intelligence. That was whoppin' $63-mil, 85% increase in AB media spend for 3d qtr. Followed slight cut in 1st qtr, increase in Q2. So for 9 mos, AB media spending up $75 mil, 29%.

Interestingly, AB nearly doubled Bud support YTD to $95 mil, even as Bud continued down low single-digits. But after 24% cut in Bud Light spending in Q3, support for #1 brand up just $4.6 mil, 4.7% YTD. AB put $31.4 mil into brother brand Bud Light Lime for 9 mos ($23 mil in Q3 alone), and "Bud Light" mentioned in every BLL ad. AB also put over $10 mil behind Bud American Ale launch. And after cutting Michelob support in 1st qtr, jacked it up in Q2 and Q3. So Michelob family also got $12.5-mil, 45% boost YTD. Bacardi support also jumped on low, low base. All in, AB spent $336 mil for 9 mos.

That was $103 mil more than MillerCoors spent on mainstream media same period. Spending increased substantially YTD behind critical Miller Lite brand, but its volume down. And, you guessed it, opposite happening with Coors Light. It's sellin' strong despite double-digit spending decline YTD. Overall spend for MillerCoors dropped $18 mil, 17% to $85 mil in 3d qtr, 15% less than what AB spent on Bud family alone over the summer. Still, MC kept pedal to metal behind Miller Lite: spending up $4 mil, 21% in Q3, +$15.5 mil, 25% YTD. And MC jumped MGD/Light support with big boost for MGD 64 rollout. But MC slashed Chill spending $16 mil in Q3. High Life spending flat in Q3, down 12% YTD. Miller Legacy media spending still up $10 mil, 8% for 9 mos. At Coors, only Banquet support up YTD, according to TNS. After nearly 30% cut in Q3 spending behind Coors Light, Silver Bullet support down $16 mil, 19% for 9 mos. That's while brand growing at mid-single digit rate. Despite 3d-qtr cut in Banquet spending, 9-mo total almost tripled, up $9 mil, 175%. TNS also reports big spending pop for "various" Coors brands; could be some of that is for Coors Light. Also looks like Coors simply evened out some of its media buys. Despite 19% Q3 cut, YTD spending for Coors Legacy brands off just $1.6 mil, 1.6%.

Mixed media spend trends for smaller suppliers. Crown cut support for Modelo brands in 3d qtr following increase in 2d qtr. For 9 mos, Modelo brand support up modest $1 mil, 2%. Heineken USA spending down $11 mil, 12% for 9 mos, tho new ad campaign just announced for Jan. Boston spending up 11-12% in Q3 and 9 mos. Diageo cut spending 8-9% same periods. Total mainstream media spending for beer up $73 mil, 11% YTD, TNS reports. Ran outta room for TNS table. An expanded version posted at: www.beerinsights.com.

Never seen cuts so deep in beer biz as those AB and MillerCoors have implemented in late 08-early 09. AB InBev and MillerCoors will be stronger financially as result, but changes portend 2 very different cos. Each will have about 30% fewer salaried employees in 2009 than in 08. AB will also undergo radical shift in corporate culture. That's exemplified by powerful symbolic action already underway: gutting of 9th floor. AB's formerly opulent inner sanctum, rarefied terrain for its top execs, will be dismantled, replaced by InBev's "open environment" with big uptick in # of execs there under far less fancy and hierarchical conditions.

Between early retirement of over 1000 AB salaried employees and further forced reduction of 1400 announced Dec 8, AB will reduce its salaried workforce by about 2500 people (of 8600). In addition, AB will not fill 250 open positions and 415 contractor positions "will be eliminated." Cuts heaviest in IT and engineering. Lots of overlap in IT, we hear. Hundreds of engineers previously worked on capital improvement projects. Cap ex were around $1 bil annually. But AB InBev likely to scale those back considerably. Just remember that mountain of debt. Less affected: mktg and sales, tho details of changes in sales not yet public. There's considerable rejiggering yet to come. In all, AB InBev will have over 3000 fewer positions in US alone just from what's announced already. AB anticipates one-time $213 mil cash outlay associated with US cuts, on top of several hundred mil already announced in conjunction with early retirement program.

MillerCoors also reduced salaried workforce by 900 people, out of about 3000 employees, a similar % cut. Big difference: Miller and Coors putting 2 cos into one with tons of overlap, especially in sales force. That's where majority of its cuts are. In contrast, not nearly as much overlap at AB InBev. At ABI, 75% of those 1400 salaried folks will be from St Lou (over 1000). In any case, sad times for many at both cos.