Gov Pataki signed one of country’s strongest beer franchise laws on Sep 19. Parties agreed to a "chapter" amendment down the road, but most important provisions remain. For example, a terminated distrib must get "fair-market value" for brand distribution rights. Law defines that as "amount a willing seller, under no compulsion" would accept and "amount a willing buyer, under no compulsion" would pay. Now a supplier policy of regional consolidation must be multi-state, reasonable, "essential" disclosed-in-writing, etc. And a supplier who wishes to terminate now must pay first, the so-called "pay to play" option. This franchise law is "first to make unqualified recognition that a distributor has a protectable property interest in distribution rights," sez consultant Mark Rodman. In last yr, 2 of 3 largest states, NY and Calif have expanded franchise protections for beer distribs. Gov signed bill just as more interesting developments near fruition regarding Heineken’s NY metro distribution.

Beer sales perked up in Aug, at least in supers. Volume up 3.1% for 4 weeks thru Sep 2, sez IRI; $$ sales jumped 7.7%. Yr-to-date, volume up 1.3%, $$ sales up 6%. AB had best trend of top-3 brewers in Aug: volume up 3.3%, eking out 0.1 share gain. AB up 1.6% YTD. Miller trend improved: up 0.7%, for 4 weeks, still off 1.7% YTD. But Coors just even in Aug in supers, up 0.7% YTD. Imports up 7.3% in Aug, a point better than 6.3% gain YTD. Positive news for Pabst, Aug dropoff wasn’t double-digits, but it was close, down 9.8%. What about hot Smirnoff Ice? Grabbed 1.1 share of volume in Aug and run-up to Labor Day, 1.9 share of $. YTD, Smirnoff Ice had 0.8 share of volume, 1.4 share of $$. Mike's Hard had a half-share of volume, 0.8 share of $$.

Tho some feared ugly Aug taxpaid shipments dropoff since Aug 2000 was big gain, estimate came in down just 50,000 bbls, 0.3%, according to Matt Hein of Beer Inst. YTD taxpaid shipments off about 900,000 bbls, 0.7%. (INSIGHTS had reported bigger YTD dropoff thru Jul, but gotta note 2000 shipments total a moving target. It is constantly being revised as US govt updates "official" monthly figures for 2000.) And 12-mo taxpaid shipments down 2.2 mil bbls, 1.2% including tuff, tuff 9% drop in Dec 2000. Meanwhile, imports slowed in Jul: up 50,000 bbls, 2%; up 1.35 mil bbls, 11% YTD. If imports kept pace in Aug, means US beer biz up about 700,000 bbls, 0.5% thru Aug.

While domestic brewers’ shipments still sluggish, AB announced its sales-to-retailers (STR) trend improved: up 2.1% Jul thru Aug, up 0.9% YTD. Still expects 1.5% STR gain for full yr, which implies nearly 3% increase Sep-Dec. But that was before Sep 11, which puts all biz predictions/expectations on hold. Indeed, Heineken chairman said on Sep 12 he expected terrorist attacks to affect Heineken’s 2d-half earnings because of potential impact on NYC mkt (especially on-premise), US $ and global economy. Finally, beer volume up 2.2% in supermkts for 13 wks thru Sep 2, according to IRI; $$ sales up healthy 7% same period. No sign of increased discounting. Avg price paid for beer in supers up 70 cents/case 4.5% during summer mos to $15.82.

T. A. Zullinger sold in Pennsy, but it wasn't a Bud distrib (see 2 issues ago). Several smaller AB deals in Pennsy in last several mos include Bonini Tobacco and Bradford City Beers each selling to Crescent Beer, which even after 2 acquisitions is still about 750,000 cases. And Marcinek’s sold to Kleckner.

Coors-Miller distrib consolidation move in Mo led to recent arbitration decision affirming Coors’ contract rights. Coors/Stroh distrib HL Paul got purchase offer last yr from Miller distrib Bluff City, but didn’t meet with Coors to discuss potential sale, and "refused to engage in meaningful negotiations with Kohlfeld Distributing, the assignee of Coors rights," per Coors contract, wrote Mo arbitrator. These actions breached contract, he just ruled. Key point: Coors contract gives it exclusive first right to negotiate over sale of non-Coors brands as well as Coors brands, subject to other suppliers’ approval. "Any reasonable reading" of contract, arbitrator wrote, "shows that the term ‘Sales Transaction’ had to mean something different from Coors Business only." HL Paul "reluctantly conceded this at the hearing." Some thought Coors right vis-?-vis competing brands could be challenged. Not so in Mo. What happens now? Arbitrator gave Kohlfeld 15 days to inform Paul it wants to buy biz and get info "subject to appropriate Confidentiality Agreement." Then Kohlfeld gets 30 days to make offer and Paul has to negotiate with Kohlfeld in good faith. Can still sell to Bluff City if Kohlfeld’s offer "not equivalent in price and other terms." If Paul accepts Bluff City offer, Coors has to consider Bluff City’s application to become Coors distrib "in good faith." At recent NBWA seminar, wholesaler atty Michael Dady said only clause in suppliers’ contracts near impossible to beat is arbitration clause. If it’s there, distribs will arbitrate, according to Michael. Elsewhere in Mo, Miller-Coors consolidation proceeds. Miller distrib in Joplin (Frank Evans Dist) merged with Coors distrib in Springfield (Clear Creek) to form The Beer Co.

Latest rounds in case that never ends: two Fla judges just took themselves out of any further Maris proceedings, including Judge "Buzzy" Green, who presided over state trial. That’s 3 judges who have quit the case so far. Means Fla has to find someone new to hear Maris’ defamation suit. Before leaving case, Judge Green took a few parting shots at Maris attys and referred a lengthy report detailing atty misconduct by both sides to Fla Bar Assn for sanctions. Judge Green didn’t give reason why he jumped. Maris side had tried to get Green disqualified in late Aug, based on statements Judge made to and about Maris attys and for kicking lead Maris atty Willie Gary off the case. In his order sending atty misconduct charges to Fla Bar, Judge Green noted that attys for Maris and AB had been cited for contempt during trial. "The record is replete with inappropriate in-court conduct of counsel. By far the most egregious conduct was by [Maris] Attorneys Gary, McClellan and Socias," judge wrote. Court has "limited power" to sanction attys, he added, then whacked Maris attys again: "A fine or short period of confinement may well seem an acceptable price for someone seeking publicity, or in exchange for a large jury award." Maris attys focused on this statement as reason why Maris could not get fair hearing from Green. AB countered, arguing Maris motion wasn’t timely, and was "transparent" tactic to help Maris appeal. Green denied motion, then left case.

Meanwhile, the "special master" appointed by the court to look into charges of atty wrongdoing on both sides filed report that concluded atty actions "irresponsible and unprofessional." His specific recommendations: 1) have Court admonish AB atty Peter Moll for not disclosing a dinner he hosted for some AB witnesses; 2) refer several actions by Maris attys Willie Gary and Madison McClellan to Fla Bar grievance committee, including "overstatement and misrepresentations" to court, "improper statements" to media, "defiance" of one of court’s evidentiary rulings. Also ruled Court should use its "contempt power" to deal with Gary’s harassment of 1 witness, his "vulgarity" and violations during closing argument. After judge got this special master’s report, he decided to just send it all off to Fla Bar Assn for "appropriate action."

Over last 5 yrs, distribs with over 50 share better able to hold down costs, maintain higher profit per case and establish higher value than distribs under 30 share, annual survey by broker/consultants Ippolito Christon shows. Chart below includes data from survey of 60 distribs, about 6% of total beer volume in US in 2000; 2001 data estimated. Note high-share distribs held operating expenses even 97-2001 while low-share distribs faced 15-cent/case increase in operating expenses. Low-share distribs’ costs per case were already higher. Meant hi-share distribs widened profit gap between them and low-share distribs, even while low-share distribs had slightly higher gross profit per case, presumably from high-end brands. High-share distribs had cash operating profits nearly 30 cents/case, 40% higher than lo-share distribs.