Sep 11 "hit on-premise business hard," Heineken CFO David Hazelwood told UBS Warburg mtg recently. So Heineken expects calendar yr depletions to be up 7%, tho depletions had been up 9% thru Aug. Since Heineken targets 7-10% depletions growth in US, said David, this yr will come in at "bottom end" of benchmark. Note too: Heineken will post smaller 5% shipments increase as it’s reducing distrib inventories. Suggests Heineken shipments will be about 4.8 mil bbls for the yr. Prices to acquire foreign brewers have "gone up to levels I hadn’t believed possible," said Heineken chairman-in-waiting Anthony Ruys. Heineken’s Cruzcampo purchase was "roughly" $175 per bbl, he said, and deal had "lots of synergies." Interbrew paid close to double that for Beck’s, "without synergies in my eyes so easy to achieve." Heineken brings its own intl brand to any deal, unlike South African Breweries and others, said Anthony. ("Is Beck’s an international brand?" he asked. "I leave that to you.") AB is only other big brewer with intl brand, he noted, and "they do tend to look at many, many things but so far they haven’t had a particularly spectacular track records in acquisitions." Said tho that AB is "extremely professional and very busy." Called both Interbrew and SAB "formidable" competitors. "Not every day, but at the right time, at the right price we are very much interested in acquisitions," he summed up. As Anthony takes over chairman’s seat early next yr, one other very hi-up change at Heineken: Mgmt Board Chairman Freddy Heineken, 78-yr-old son of co’s founder, will step down in Apr. But Freddy will hold on to his 50.05% controlling interest in Heineken Holding (which owns 50.05% of brewing co), plus his daughter Charlene, who will ultimately inherit his shares, is on the board. So no one expects any strategic shifts. Heineken's market cap is approx $15 bil.

"We’re on a roll and we’re looking to pick up speed, not stop." So said Fred Jaques, Labatt-Interbrew North America prexy, to INSIGHTS Seminar. He outlined Interbrew’s "global growth strategy to ensure that we emerge" as world’s #1 brewer. Interbrew is an aggressive consolidator, did 25 deals in last 6 yrs, Fred said. It seeks to grow with local brands it buys and through "leveraging local platforms to grow international premium brands" like Stella Artois, Bass and (soon) Beck’s. In 2000, Interbrew sold over 65 mil bbls, Fred said. That’s still about 40 mil bbls behind AB. But Interbrew has averaged 20% volume growth per yr since 96, far faster than avg 5% growth posted by top-10 intl brewers. In US, Interbrew sells close to 4 mil bbls thru Labatt USA (LUSA), but addition of Bass and Beck’s will give Interbrew another nearly 1.5 mil US bbls and would make Interbrew #1 in specialty beer mkt in US, ahead of Heineken, Fred said. It would have 3 of top 5 import brands. (Gotta note GBIC still has contract to import Bass brand and Fred didn’t say anything about a switch to Labatt USA. More details will be available when Beck’s buy completed in early 2002.) LUSA has 27 brands of top 100 imports. Sellin’ ‘em thru 692 distribs; 1/5 of them account for 80% of LUSA volume. Means top 140 or so LUSA distribs sold avg 310,000 cases in 2000 while the rest (about 550) averaged 20,000 cases or so. Tho some feel LUSA portfolio a bit unwieldy, Fred noted fastest LUSA growth over last 12 mos was in "markets where we have the broadest portfolio, in parts of the northeast and Chicago...compared to markets where you would say we’re more reliant on a single brand." LUSA doesn’t have a "US strategy" per se, said Fred, but "a multitude of sub-strategies" as its portfolio "looks different regionally."

On intl front, Interbrew "acquires for value," said Fred. It sees billions of EBITDA "out there in the consolidation game." Acquisitions necessary because "growth opportunities in most brewers’ home markets are very limited, either because the beer market is already mature, concentrated or both." As pace picks up, there will be fewer buyers out there and "fewer still will emerge as winners in this endgame." Tho many believe Interbrew overpaid for Beck’s, Fred vigorously defended the deal. "We absolutely disagree. The Beck’s brand we think is one of the last great global brands that will be for sale for a while. Beck’s gives Interbrew a 2d "global flagship" in addition to Stella Artois, Fred said. "We believe the 2 brands live very happily together." One has "on-trade focus" the other "an off-trade focus." They appeal to "different segments of the market." Going forward, Interbrew’s challenge "is to have several global flagship brands.... The US mkt is a great opportunity for us to unfold that strategy."

Looks like Coors mostly getting out of branch biz. Just sold its 3d branch this year, a 2.2-mil-case operation in San Bernardino. That followed Sep sale of 7-mil-case branch in Anaheim and spring sale of Okla City (sold Tulsa last yr). Coors sold 11+ mil cases in those 3 branches, which were making a couple mil $$ profit. Yet Coors got about $60 mil for these 3 branches. A recent Coors govt filing mentioned account receivable for Anaheim of $42.5 mil. Coors sold its San Bernardino branch to Premium Dist Co. Premium sold approx 1.5 mil cases it had in neighboring territory, split mainly between Miller Brands (about 1 mil cases of Coors) and Haralambos Bev, again selling Labatt USA products. Coors still has branches in Colo and Ida. Pennsy is hotbed of activity again. In Philly, 8-mil-case Origlio Bev (Coors, imports) agreed to buy over 3 mil cases from L&M, including 3 mil cases of Yuengling. So Origlio enters growing club of 10+ mil case distribs. Recall that Origlio is 50% owned by Honickman family, which will own part of 40+ mil cases. And that’s just in beer biz (most of family's interests in soft drink biz). The Honickmans also own 50% of Manhattan Beer (about 25 mil cases) and stake in Kramer Bev (over 4 mil cases). In western Pa, Fuhrer Dist (AB in Pitt; Coors and others in Pitt plus) recently signed contract to purchase 2 mil AB cases from contiguous Westmoreland. Price reportedly more than double other recent Pennsy AB deals which were in neighborhood of $4-$5.50 per case. Fuhrer adds 4 counties bordering Pitt and builds its AB biz to about 4.5 mil cases. Fuhrer has 9 counties for Coors, Yuengling, Corona and other imports. (About 7.5 mil cases.) Just a yr ago this time, following years of friction with AB that date back to when Fuhrer got Coors biz, Frank Fuhrer had told local press that he was selling his AB biz. After talks with several potential buyers broke down over price and no deal done, Fuhrer instead buying more AB volume. Some say Fuhrer ultimately aims to distribute AB in same 9 counties it has for other brands. To do that still needs to add about 4 mil more cases. That would create rare 16+-mil-case Coors/AB/Others behemoth. Makes it tuff for Miller in area. Meanwhile, may not be final chapter for Westmoreland owner Pete Wast. Several other Pennsy distrib deals reportedly in works. In neighboring Del, Standard Dist (Miller/Coors distrib owned by some members of Tigani family) sold 300,000+ cases of Corona to AB distrib NKS (owned by other members of Tigani family).

Corona "could very well be labeled a financial engine of consolidation," Gambrinus prexy Carlos Alvarez told national sales conference. It provides "opportunity to make certain transactions possible." But Carlos cautioned against some distribs making "very creative use of Corona values" to "unrealistically and unreasonably manipulate" total transaction prices. This "can be seen very clearly" and Gambrinus will be "auditing those deals in very detailed form." This was as close as Carlos got to specifically addressing shift to more Bud houses in Gambrinus territory, but message was oblique. Sales director Don Lake addressed loss of focus in some mega-brand houses. "We need more attention," Don said. Wholesaler "alignments" have "weakened focus" but Gambrinus "not complacently accepting dilution of effort." "Most portfolio expansions" result in "diluted focus" that reaches "point of diminishing returns," Don said, pointing to distribs that carry 200+ brands. Distribs will have to "get rid of unproductive brands" as they have "finite resources" and "not all cases equal in value." "Where is your future?" Don asked. Gambrinus will be "aggressive," "demanding" and it will "ask hard questions." In "mega-houses," distribs "must consider" measures to "insure focus." Suggestions included Modelo "team sales leaders," reporting to Modelo brand development manager and sales efforts applied against specific trade channels or ethnic groups. Gambrinus now mandates "brand development manager" for all distribs that sell 400,000 cases or more.

Gambrinus will sell about 3.8 mil bbls or 52 mil cases of Modelo products out of over 100 mil total Modelo cases sold in US, and will be up 18% in 2001, based on 10-mo trends, director of sales Don Lake told natl sales conference. And 2001 caps 5-yr rise of 300% for Gambrinus Modelo volume. It is also 3d consecutive yr of double-digit growth for every Modelo brand in Gambrinus territory. Corona Extra will sell about 84 mil cases nationwide, 46 mil in Gambrinus territory. Corona 12-packs are #1 beer package in supers. Meanwhile, Modelo Especial will sell about 7 mil cases. Corona Light up 30% in Gambrinus territory and will sell near 6 mil cases nationwide, estimates INSIGHTS. Pacifico will sell about 3 mil cases (2.5 mil in Calif) and Negra Modelo at around 2 mil cases. Gambrinus still sees lotsa upside potential: execs focused on distribution gaps, underdeveloped convenience store biz and Corona Light opportunities. Modelo brands will receive about $25 mil in natl tv spending in 2002, about same as in 2001, said director of mktg Ron Christesson. But other local media spending will increase, in some cases "dramatically." Top 3 distribs sell over 30% of Gambrinus Modelo volume, according to numbers Don gave. Number 1 Manhattan Beer will sell 10 mil cases of Modelo products in 2001. Gold Coast will sell 4 mil cases in south Fla and Peerless will sell 2 mil cases in northern NJ. Modelo products have about 15 share in Peerless territory, Don added. Unstated, but Young Wholesale in Atlanta will sell over 1.8 mil cases and Reyes family in DC and Va will sell about 1.5 mil cases. Means top 5 Gambrinus distribs will sell over 19 mil cases, 37% of 52 mil Gambrinus cases of Modelo. (None sells AB.) Gambrinus, which sells Modelo in half of US, will sell over 8 mil cases of non-Modelo brands nationwide, INSIGHTS estimates. Moosehead and Pete’s each around 2 mil cases, said Gambrinus execs. Moosehead up double-digits; Pete’s still down in 2001, but up 3 mos in a row. Bridgeport up 29% on tiny base. Shiner Bock up mid-single digits.

"This year we're going to cross the border of 100 million cases" in US, sr veep/ceo sales & mktg of Grupo Modelo Valentin Diez told Beer INSIGHTS Seminar. That means Modelo's gain in US will be over 800,000 bbls, about 13%, even tho imports and total beer biz have slowed. Valentin pointed to unique structure including 2 separate importing cos plus a subsidiary co as keys to Modelo's growth: "We knew that 2 importers would give us twice the experience, twice the perspective and insight, more management focus in each market, a healthy amount of friendly competition, and sometimes, twice the problems." Modelo also established US subsidiary Procermex, a co to "act as Modelo's eyes and ears in the marketplace" and work with importers to "identify and manage opportunities and obstacles."

Modelo is taking a hands-off approach to distrib consolidation: "Whether Grupo Modelo favors or does not favor consolidation is of little consequence," Valentin told attendees. "In fact, consolidation is not our problem directly, since our importers are wholly responsible for choosing their wholesalers and it is they who must face the consequences for their choices, for better or for worse." When asked if he saw opportunity for AB-Modelo joint marketing of Corona in US, Diez said, "Not really... As we have a long-term agreement [with Barton and Gambrinus] and they continue doing so well, the only solution to working closely is through consolidation [of distribution]... but that's our importers' decision, not ours." Also mentioned "there is a renewal clause" in both agreements. "If it is not broken, why fix it?" Diez outlined "interesting challenges" that come with consolidation: "trying to survive in a house with hundreds upon hundreds" of SKUs not to mention fact that "many larger houses are not expert in hometown marketing" since "in many cases their lead brands have always been able to buy share so success for them is just making deliveries, and selling takes a back seat." Maintaining "ability and focus" in larger houses will "take extraordinary effort," he added. "Some products" in Modelo's "broad" portfolio, he said, "may be left on the pallet in favor of a quick sale and easy money," but "losing focus and commitment to any of our brands... would not be acceptable to our importers and certainly not to ourselves." Thru Procermex, "we will ensure that each of our brands receives the focus and execution it deserves in every house."