“Once again Coors blows away the earnings numbers… despite negative US volumes and lower than expected pricing in the US,” wrote JP Morgan’s John Faucher, neatly summing up Coors’ current condition.  US shipments down 0.7%, sales-to-retailers down 0.6% in qtr but if you factor in July 4th, volume about flat.  Coors Light up slightly, Keystone Light  up mid-single digits, other brands down, it told Wall St.  And Coors rev per bbl up 1% factoring out sale of branches, down 1.5% compared to last yr when it had branches.  But net income up $19 mil, 37.5%, and EPS 24 cents more than Wall St consensus.  Coors made “solid progress” reducing US costs (down 2% per bbl) and Coors biz in UK beat expectations.  Coors has paid off $180 mil of debt already, cfo Tim Wolf told analysts. Coors' total volume way up because of Carling acquisition.  

Beer consumption in Germany up 1.2% for first half of yr. If gain holds up in 2d half it will be first time since 95 beer sales grew in 3d highest per capita beer consuming country. New products, which are mix of half beer, half soda helping boost industry, up 37%, (37 mil gallons sold) Jan-Jun according to AP.

Top-5 suppliers in c-stores had 95.1 share in 2001, according to ACNielsen. AB at 62 share in c-stores, over 20 share more than in supers.  AB’s 4 top brands had over half of c-store biz: Bud Light (22 share), Bud (17.3), Nat Light (6.8) and Busch (6.1).  Miller at 18.5 share, about 2 share under supers mark.  Lite #3 brand in c-stores with 7.8 share.  Coors Light ranked just 6^th in c-stores with 6 share.  Coors had 9.2 share in c-stores (2 less than in supers).  Modelo at 2.9 share, Pabst 2.6. So all other brewers/ importers battling over less than 5% of biz!  This data also from Miller's "Volume with Profit."

Coors stock price jumped 50% since its Oct lows, from 44 to 66. That’s even tho Wall St initially reacted negatively to Carling deal (in fact, stock fell at first). Then too, Coors US biz ain’t goin’ all that great (STRs up just a little more than 1%). But analysts underestimated Carling profits. Coors also just issued $850 mil in debt at 6.4% due in 2012. That was $100 mil more than was originally planned and it was 2x oversubscribed, according to Reuters. Meanwhile, Standard & Poor’s reaffirmed Coors debt rating of BBB+ with "negative outlook" which means higher debt level increases risk. Yet S&P also "expects Coors’ financial profile will strengthen as free cash flow is used primarily for debt reduction." Turns out Coors makes lotsa $$ from joint venture in Canada, Coors Canada (50.1% owned by Coors, 49.9% owned by Molson). Coors made $29.2 mil pre-tax in 2001 from joint venture, according to Coors annual report. That’s 15% of Coors total corporate pretax income in 2001. Not bad for a licensed biz. Meanwhile, Coors lost about $2 mil on Molson USA LLC (which is 50.1% owned by Molson, 49.9% by Coors) in 2001 with big volume losses. But Molson USA reversing course: up 1.3% in 1^st qtr 2002, according to Molson. Molson ceo Dan O’Neill said he expects Molson USA to gain 2-3% in 2002, but will be "just below break-even financially." Other tidbits: Coors recorded $5.6 mil of severance costs in 3d and 4^th qtr as it eliminated 115 positions in "restructurings."

Interbrew’s complex biz model and multibrand portfolio in its US arm Labatt USA leading to some problems. Most significantly, FEMSA, brewer of Tecate and other brands, filed suit in US District Court to block Interbrew integration of recently-acquired Beck’s into its Labatt USA subsidiary. LUSA is 70% owned by Interbew and 30% by FEMSA (Interbrew also owns 30% of FEMSA). LUSA can’t go forward with its Beck’s plans at least until May 10 hearing on legal issues (day after our deadline; more next issue). FEMSA also took highly unusual step: asked court to seal its complaint; court complied. So details unavailable at presstime. Most likely, FEMSA seeks injunctive relief to stop LUSA from going ahead with integration. Meanwhile, peak-selling season is fast-approaching; distribs INSIGHTS talked to have little sense of where Interbrew headed with Beck's.

Tensions between Interbrew and FEMSA had been building. For some time, FEMSA felt it didn’t get sufficient attention in LUSA and that its US growth could be better, especially given huge gains racked up yr after yr by its chief competitor Modelo. Adding Beck’s to LUSA portfolio exacerbated these tensions. Meanwhile, FEMSA brands up 9% in US in 1^st qtr, faster than 2001 growth rate of 7%. (But avg price paid for a case of Tecate down slightly in supers while volume up double-digits, according to IRI.) Total LUSA biz up 9% thru Apr, prexy Steve Cahillane wrote employees on May 3 (didn’t say if that included Beck’s for Mar-Apr). Gave almost no details about lawsuit but said: "we are still in amicable discussions with our Mexican partners." Another complex situation for Interbrew: its Bass brand currently imported by Guinness Bass Import Co. GBIC recently loaded distribs with lotsa extra Bass on favorable terms and Bass price significantly lower at retail. Looks like GBIC trying to live up to volume-based provisions in its importing agreement based on Diageo fiscal year which ends June 30^th. Finally, avg price paid for Beck’s also down in supers yr-to-date, and it has big nationwide rebate promo coming. To recap, avg prices paid for Beck’s, Bass, Tecate all are down in supers.

Tho Interbrew has played role of global consolidator to hilt, it is not interested in buying Miller, headlined Reuters. "We don’t want to participate in the mainstream market" in the US, ceo Hugo Powell told Reuters after shareholder meeting. "Our policy in America is to focus on the premium import business," he added. On top of it, "there are no contacts at all" between SAB and Interbrew, he told Dow Jones, tho he wouldn’t rule out a future bid. In US, Interbrew will "concentrate on boosting sales" of tiny but fast-growing Stella Artois, wrote Dow Jones.

That was $11.1 bil in sales in 2001 according to ACNielsen data. At 10% of all dollar sales in c-stores, beer behind cigarettes (39%), non-alc bevs (11.7%) and food service (11.4%). Yet beer sold in just 75% of c-stores in US. C-stores sold an avg 116 cases per week for avg of $2300 in revenue. Top pkg was 12-pk cans with 20.7 share of dollars. Followed by 12-pk bottle (15.7 share), 6-pk bottle (15.5 share) and singles (14.3 share). Top-10 beer SKUs at 26 share of volume in c-stores. Flavored alc bevs (counted separately) sold another $341 mil for 2.8 share of all alc bev $$ in c-stores. All data reported in Miller Brewing's annual book, "Beer is Volume with Profit."

Another busy period for world’s largest distiller.  Let’s see, in last week or so Diageo announced $2.2 bil sale of Burger King, consolidation of wine & spirits distrib network to 1 distrib each in little states like NY, Calif, and Fla, and next major RTD intro: Smirnoff Black Ice.  Distrib consolidation is just “phase 1” as Diageo calls it, involving about 30% of its volume basically handled by 2 distribs, Southern Wine and Spirits and Peerless.  “The consolidation of our brands in these distributors is only the first step in implementing new ways of working with” distribs, wrote prexy Paul Clinton.  Doesn’t affect beer and malternatives.  And as it intros Smirnoff Black Ice, Diageo takes another crack at getting guys to go for RTDs.  Big push in UK this fall, supposedly coming to US too.

Miller “reallocated” Gen Draft ad $$ to Miller Lite “until the agency gets its creative on track,” Ad Age wrote in front-page article this week about increasing pressure on agency J. Walter Thompson.  “We’ve really been pushing [JWT] to get the right execution,” a Miller spokesman said.   Gen Draft down 4% in supers yr-to-date, according to IRI.  

Imports up 7% in supers, but gained only 0.2 share to 11.6 for 4 weeks thru Jul 14, according to IRI as total beer category up 5.5%.   Several top import brands grew slowly while others up strong double-digits.  Number 1 Corona up just 3% for 4 weeks, apparently still feeling effect of  price hike.   Labatt Blue up 4% and Foster’s down 1% during this period.  (Yr-to-date, Corona up 8%, Labatt Blue up 3% and Foster’s up 3%).  Yet other top import brands had hot summer sales so far: Heineken up 14% for 4 weeks, Tecate up 24%  and Corona Light up 18%.  For 4 weeks, Corona Light  #3 import in supers. Each of those 3 brands (ranked 2, 3 and 4 among imports in supers) up 15% or more in supers yr-to-date. 

Once again, no share change for microbrews in supers in 2002.  They’re up,  but less than total beer biz in supers (3.7% vs 5.5%) thru Jul 14, according to IRI.   None of top 4 brands is setting world on fire.  Sam Adams Boston Lager is down 2%, Sierra Nevada Pale Ale is up 3.5%, Shiner down 5.5% (recent trends affected by Tex floods), Redhook ESB up 5%.  Meanwhile, Fat Tire up 36% YTD, tho up just single digits last 4 weeks.  And Widmer Hefeweizen shows vital signs: up 20%.   Top 2 Deschutes brands up 25-30% too.  Throw in all Sam Adams products, including Light, and brand family up 7.5% yr-to-date.