Another big deal just closed. Magnolia Mktg, Coors/import distrib in New Orleans (owned by $1 bil+ alc bev distrib, the Goldring family) sold its Corona biz statewide in Louisiana for about $22 per case to 8 different Bud distribs. Magnolia and Miller distrib Delta (which at 1 time was part of a public co) worked out deal to merge awhile back, but Gambrinus withheld approval. In fact, Gambrinus so intent on moving brands to Bud distribs that it provided financial assistance to at least 1 Bud distrib. Simultaneously with Corona deal, Magnolia and Delta Bevs merged into new 7-mil-case Miller/Coors distrib. About 20+ Bud distribs acquired Corona so far in 2001, all in Gambrinus territory.

Blockbuster deal appears to be win-win. Coors gets a lot of cash for underperforming asset. Harbor (owned by Reyes family) gets a lot more mkt share, efficiencies and key brands, grows to about 20 mil cases. That's about half of Reyes family beer volume in US. Harbor paid about $40 mil for assets and inventory, but is leasing warehouse. Harbor acquires over 5 mil cases of Coors volume, 1.5 mil+ cases of Labatt (that Coors branch sold) to add to its 4 mil cases of Modelo brands and 6-7 mil cases of Miller products. But this behemoth also significant distrib of lotsa leading import and specialty brands.

Heineken USA resolved its tangled metro NYC distribution and legal battles. It had tried to go from 8 distribs down to 1 as part of "regional consolidation" plan. Recall: when Heineken terminated a buncha distribs under its interpretation of NY law (NY law since changed), distribs sued. As these disputes settled, HUSA lands up with 2 distribs for entire NYC metro area: Phoenix/Beehive almost 8 mil cases, Clare Rose around 2 mil cases. The 2 sell almost 16% of Heineken’s nationwide volume. The 5 distribs who sold their Heineken volume got $71.5 mil, $16 per case for about 4.5 mil cases.

Since Boening family had vast majority of this Heineken volume in 2 metro NYC distribs, Oak and Boening Bros, it got $62 mil. Both those distribs continue in biz, selling about 4 mil cases, mostly at Boening Bros on Long Island, which still has Miller. Both sell many import and specialty brands. The Boenings "ended up selling just their distribution rights in the Heineken brands back to Heineken for more than Heineken offered for their entire businesses one year prior," said atty Gary Ettelman of Ettelman & Hochheiser, which represented distribs in case. Transaction "structured as an acquisition of the wholesalers’ distribution rights," added atty Keith Hochheiser. So deal "acknowledges that wholesalers own a very valuable intangible asset." Heineken statement lauded this "completion of its metropolitan New York distributor consolidation" to "establish a consistent and effective distribution network." While Heineken statement talks of distribs who acquired its brands, settlement sez Heineken itself paid selling distribs. Don’t know what acquiring distribs paid Heineken.

Other sellers of Heineken brands were 3 AB distribs who split $10 mil. But 1, Clare Rose, a large AB distrib which Heineken had earlier terminated in 1 part of NYC, will now sell about 2 mil cases of Heineken. It will keep its Heineken volume in part of Long Island and acquire Boening Bros approx 1.5 mil cases of Heineken in rest. Amazingly, Clare Rose and Boening Bros had each received 90-day termination notices from Heineken back in Jun. Terminations were scheduled to go into effect Sep 17. But at 11th hour and just after gov signed strong franchise law, distribs and Heineken settled. Next step: most likely, long-contemplated "consortium" where Heineken will own unspecified piece of Phoenix/Beehive, its largest distrib, which also sells Miller, Guinness. Miller has option to loan up to $5 mil to new entity and could eventually convert that into equity.

Quickening pace of consolidation keenly illustrated by rapid-fire deals, some just for brand rights, in last 2 weeks. First, in metro NYC Heineken settled all legal disputes with distribs and completed consolidation of its network there. About 4.5 mil cases of Heineken brands (7% of its US volume) changed hands for $71.5 million. Settlement stipulated that these payments were for "distribution rights." Then in Anaheim, Coors sold its 7-mil-case branch to Reyes family for around $40 mil. Already largest US beer distrib, Reyes family will sell almost 40 mil cases in 4 distribs. And in Louisiana, Corona went to Bud guys, this time in entire state. Almost 600,000 cases changed hands for $22 or so per case. That’s another $12-13 mil. Once Corona sold, Miller/Coors merger finally consummated in New Orleans too. That ain’t all. At presstime, Gold Coast distrib in South Fla announced that it had deal to buy J.J Taylor Corp in Miami. Taylor sells about 4.5 mil cases of Miller and imports there. It had made several acquisitions elsewhere in Fla earlier in yr and will still sell around 25 mil cases in Fla, Mass & Minn after deal closes. Presuming deal happens, Gold Coast will sell over 18 mil cases and $300 mil of beer. These deals show Miller/Coors distribs poppin’ up in more and more major metro areas; there’s new Miller/Coors distribs in Southern Calif, New Orleans and 1 coming up in Miami. (See below for more detail on these big deals).

About 37% of beer $$ are imports in Bennigan’s restaurants, vp mktg John Beck told a panel sponsored by NABI (National Assn of Bev Importers) at NBWA convention last mo. It’s just about same at Marriott restaurants, said Brian Yost veep of bevs for hotel chain. Imports no longer growing at rapid rates in these important on-premise chains (up 2% in Bennigan's thru Aug, said John). Beer biz in Bennigan’s is 72% draft. In avg Bennigan’s there are 20+ tap handles and 11-12 are imports. There are 23 brands mandated and 17 of them are high-end. Marriott’s mandates 10 imports, and 4 more are optional chainwide, including such left-field brands as Lindeman’s Framboise and Sam Smith’s Oatmeal Stout.

In 7-11, the avg store has about 100 beer SKUs, said Tariq Khan, head of assn of 7-11 franchisees, more if store in urban area. The #1 beer SKU is Bud 16-oz can and the #2 SKU is Heineken 24-oz bottle, according to Tariq. After Corona and Heineken, the #3 import package in 7-11 "pretty much across the country" is Smirnoff Ice. At N Calif supermkt chain Raley's, avg store also has about 300 SKUs and "every item has to pay for itself," said Bob Jennings bev mgr. In a world of category mgt, makes it "extremely difficult" for smaller import brands, especially if they don’t have promo $$$ and success behind them. The 300 SKUs is more than 5 yrs ago, because Raley’s is "overspaced" on craft beers and is "cutting back."

.........A Few Seats Remain: Beer Insights Seminar in NYC on Nov 4 only 2 weeks away -- now includes panel on malternatives/ready-to-drink beverages with execs from Guinness Bass Import Co, Mike's Hard Lemonade and Anheuser-Busch. Call to reserve your seat.

Ain’t often (more like never) that health experts suggest that not drinking could be "risky." But read Eric Rimm from Harvard School of Public Health: "The evidence indicates that the association between moderate alcohol consumption and lower risk of cardiac heart disease (CHD) is causal and that abstaining from alcohol could be considered a risk factor for CHD." Rimm wrote too: "evidence that moderate drinking reduces CHD risk is overwhelming and consistent, and with the exception of the link between smoking and lung cancer, few other associations are so uniformly reported in the literature." Wow! He was commenting on German study that found beer-only drinkers had much lower CHD risk than wine-only drinkers. Compared to abstainers, beer-only drinkers cut their risk of CHD in half. But wine-only drinkers reduced their CHD risk by only 5%. Risk reductions were same (45-46%) for those who drank over 10 drinks per week and those who drank under 10. (Only a few heavy drinkers in study.) Studies now "remarkably consistent," wrote authors, "and support the suggestion that the beneficial effects of alcohol consumption also apply to subjects who exclusively or predominantly drink beer."

That ain’t all. Spanish docs found drinkers much more likely to report themselves in good health than non-drinkers. In fact, only 15% of heaviest beer drinkers said they were in fair, poor or very poor health, compared to 40% of abstainers........ Two new studies from US just reported that frequent moderate drinkers cut risk of type 2 diabetes (90% of all diabetes cases) by 40-50% compared to non-drinkers. Interestingly, study of males found they hadda drink almost every day to get risk reduction. Those who drank only once or twice per week didn’t get benefit. What’s more, "group with the greatest risk reduction consumed considerably more alcohol as beer or liquor than wine....... Finally, big US study found "moderate drinkers were almost twice as likely as abstainers to display a physically active lifestyle," far more likely to exercise regularly than abstainers and to exercise with more "intensity." Details on these studies have appeared in Alcohol Issues INSIGHTS, published by Beer Marketer’s INSIGHTS.

As AB reaffirmed its double-digits earnings growth target to Wall St, didn’t mention any belt-tightening to help ‘em get there. But some recent AB moves suggest a bit of that. First, AB announced to distribs that it will "consolidate" to 9 regions. That meant it’s closing 2 region offices. AB didn’t speak of cuts; instead it said it would "redeploy" sales folks to "critical areas" of "regional key account management" and "space management." Then too, 3 AB veeps (non-sales) leaving; staff reductions in other areas.

Tho Seagram put its spirits biz on block in Jun 2000, and by Dec Diageo and Pernod Ricard had agreed on deal to carve it up, it took FTC almost another yr to put kabosh on whole deal. Leaves Seagram in limbo, tho top execs like Edgar Bronfman Jr (remember him?) claim deal will still get done by end of yr. Some say Diageo will sell off key Malibu rum brand to get FTC OK. FTC ruled deal would create anti-competitive rum duopoly between Bacardi and Diageo (which could have #2 and #3 brands, Captain Morgan and Malibu) with 80% of rum mkt. "Proposed merger" would "create a dangerous likelihood of reduced competition and higher prices for consumers," said FTC official. Substitute the words "light beer" for rum and it’s clear that FTC’s rationale for nixing the deal threw some cold water on Miller and Coors getting together (hoped for by many). Light beer is a much bigger part of beer biz (43%+) than rum is of total spirits biz (10%) and if Miller and Coors were to combine, then top 2 brewers (including AB) would control about 95% of segment. But other implications too: "The FTC has a long history of rejecting mergers when also-rans take on the leader," wrote Biz Week. Cited recent deal between #2 and #3 in baby food. FTC nixed Heinz/Beechnut deal even tho #1 Gerber had over 60 share and growing. That stance didn’t change when Bush elected as some had hoped. If govt looking increasingly askance at duopolies, could this thinking be applied at distributor level?

Labatt’s import brands up 10% Jan-Jun, new prexy Steve Cahillane told distribs at recent sales conference. Labatt brand family up 10.5%: Blue Light up 34%. Mexican brands up 9.6%: Tecate +9%, Dos Equis +15%. European brands up 8%: Stella Artois up 89%. But Rolling Rock down 10.9% Jan-Jun. Domestic superpremium full-calorie segment "continues to experience difficulty in achieving growth," Steve noted, and LUSA "guilty of taking our eye off the ball in our home field" when it picked up Rock volume in expansion mkts. "We’ll fix it. We’ll do better," he promised. Tho Steve didn’t give overall trend, looks like LUSA total volume up 4-5% 1st half. Labatt expects to outperform import category in 2001 and going forward, and has "pledged significant efforts and resources" to "refocus" Rolling Rock, return it to growth, said Steve. Rolling Rock ads had "drifted to radio," but now headin’ back to television, said brand director David van Wees. New Rock ads got lotsa applause, even whistles from distribs. Ad weight, said David, "will be at least at Foster’s level, if not greater."

Labatt brands expected to pass 1.6 mil bbls in 2001, +12%. Labatt Blue alone will outsell "entire Molson family," said brand director Devin Kelly. Big opportunity for Tecate too, said brand director Victor Melendez, since 13% of US population now Hispanic, 35.3 mil, and 21 mil of them Mexican-Americans. Labatt USA boosting tv budget for Tecate 52% next yr (89% of Tecate ads in Spanish language). Labatt aiming to make Stella Artois a "future power brand" and "gold standard" of Euro brands, "a slot we believe is up for grabs as Heineken seeks to broaden its appeal to maintain its trends," said brand director Stephen Ward. Stella hot (tho on small volume) in several big cities. Look at some 9-mo trends: NYC +105% (and over 60% of Bass draft volume there); Philly +48%; Boston +82%; Chicago +206%; San Fran +152%; DC +82%. Labatt will send Stella to Fla, LA, and elsewhere next yr. "If we come talk to you, please be prepared to discuss co-op investment... An opportunity like this doesn’t come along very often," Stephen told distribs. Key reason why LUSA focusing more on European brands: they're 50% of import margin pool, said Stephen.

Tho EU cleared Interbrew (LUSA parent) purchase of Beck’s while distribs at mtg and Beck’s hadda be on minds of many distribs, not much said about it there. "We expect that Interbrew’s acquisition of Beck’s will be finished in the 1st qtr of 2002," said Steve. What about US? "We will discuss with Beck’s management the best way to leverage our common skills and resources after the closing. The goals will be quite simple: maximize the growth of the Beck’s brand here in the US market. But again, those discussions will not take place until the deal is completed early next year." Bass deal "nearing conclusion," he added, "and a very positive one for Interbrew." But Steve reminded that "although Labatt USA has recently taken over the management of the Bass Brewers business in the US, the Bass brand in this country continues to be imported and marketed [under] the pre-existing contract with" GBIC.

Another strange qtr for Coors. Got upside earnings surprise as net income up tho Wall St expected it down in 3d qtr. That’s even tho volume stayed sluggish. Coors got better profits even while costs of goods sold per bbl rose faster than revs. Coors gross margins contracted in 5 of last 6 qtrs, noted Andrew Conway of Morgan Stanley. But Andrew sees "margin contraction" nearing bottom; raised rating on stock. Cost of goods sold per bbl up 2.8% compared to 2% rev per bbl hike in 3d qtr. So why are Coors earnings up? Well, Coors mktg expenses actually $19 mil below last yr for several reasons, including "timing of booking marketing-related expenses" vs last yr, wrote Coors. "Actual pressure against the market," said cfo Tim Wolf, "did not change" and "media spending virtually the same" as 3d qtr last yr. For 9 mos, Coors mktg, gen and admin expenses up 1%. Coors also had $18 mil of "special charges" related to outsourcing Information Technology, etc. But it got a $23.7 mil gain on sale of its 7-mil-case Anaheim distrib (that’s "gain," not what it got paid). Coors has sold 3 of 6 branches in last 2 yrs. Excluding special charges and gains on sale of distributorship, Coors oper income flat at $148 mil for 9 mos.

Coors STRs up "marginally" domestically in 3d qtr, exports down. Coors had "significant sales softness" for 2 weeks related to Sept 11 attacks, prexy Leo Kiely said. "Carve" those 2 weeks out of qtr and STRs up 1%, with Coors Light up 3%. Sales have "rebounded" since then in Northeast. Thru 9 mos, STRs "particularly soft" in Tex and southern Calif, noted Leo. Nationally, Coors Light and Keystone Light "growing" while Zima, Original Coors, Killian’s down. Coors Light "really has clawed its way back," said Leo. Trends on brands that are down "appear to be improving" too, tho "it’s too early to claim a solid turnaround," Leo added. Some "progress" on Molson, still down, but "some bounce" and "beginning to see slowdown in declines," following summer intro of programs. Coors sees "much more modest" rev per bbl growth in 2002, but "more confident on cost side."