Ain’t pretty.  Another tuff yr in nation’s biggest beer mkt, especially for big brewers.  AB off 59,000 bbls, 1% thru Jun in Calif even as it intro’d Bacardi Silver.  But Miller down 103,000 bbls, 6%, including 3 new malternative intros. Meanwhile, Coors off 38,000 bbls, 3% for 6 mos.

“Sales weakness in the US is continuing” and Coors “will substantially increase marketing  & promotional spending in 2003,” wrote UBS Warburg’s Caroline Levy.  She downgraded stock after talking to distribs who apparently gave her an earful:  “We sense a growing concern that Coors has little chance of truly re-energizing its business.”  Caroline now forecasts flat volume and just 1% rev per bbl increase in 2003.  “Many distributors particularly in the Southwest… commented that Coors does not have an effective marketing program to reach the expanding Hispanic-American population,” she added.    

Joint Committee of the States, which represents regulators from control states and open states, “unanimously voted to indicate its support for the direction” BATF is taking to "correctly" reclassify malternatives.  Aug 6 letter to BATF noted that “because of the high volume of alcohol-based flavors in the flavored malt beverages, some states will be forced to either change their statutes or change the current taxation and distribution policies and treat these products as spirits.”  Urged BATF to move “as quickly as possible.”  JCS also supports “mandatory alcohol content labeling” for all malt bevs.

AB suggesting 45-cent price hike to retailers (70-30 split) on Sep 30 on Bud and Bud Light in Fla.  That’s about a 3% jump.  Taking similar 45-cent increase on subpremiums, but amounts to 4% increase off lower base.  No draft for now. AB suggesting over $2.00 per case, 12% front-line increase on Michelob products (50-50).  However, increase not as big as it appears, because AB offering significant quantity discounts on 10 cases and 25 cases.  So not that much incremental Michelob family rev in Michelob’s biggest mkt.  More details in Beer Marketer’s INSIGHTS.

Miller had sought to terminate a home d (NY’s unique 4th tier) that sold some of its acquired brands last summer.  But distrib Garal  just won dismissal of a Miller claim against NY franchise law.   TRO that distrib got last Nov is still in effect too.  Miller had argued that amendments to franchise law invalid and don’t apply but state court judge disagreed. “Miller knew that its contractual rights were subject to alteration by state law,” he wrote.   Then too: “The Court rejects the claim that the amendment constitutes special interest legislation.”  Judge called amendments “rather modest remedial changes.”

Domestic taxpaid shipments started off 3d qtr strong; up 400,000 bbls, 2.6% in Jul, according to estimate by Matt Hein at Beer Inst.   That put domestic beer biz up 1.25 mil bbls, over 1% for 7 mos.  So far, domestic beer biz has healthier trend in 2002 than any yr in last 10,  except 1999.  Of course, most of that 2002 domestic growth comes from  malternatives. …….. Imports Slowed in 1^st Half  While domestic shipments doin’ better than usual, import growth tailin’ off a bit.   With a 3.6% drop in Jun, imports up about 570,000 bbls, 5% in 1^st half.  That’s skewed by Smirnoff Ice production shifted to US in 2002 (it went other way last yr), but still a slower import trend.  

Remember 1^st Maris lawsuit, Fed Court trial that largely revolved around whether AB’s ban of public ownership in equity agreement was antitrust violation.  Back in Sep 2000,  District Court jury upheld AB view that it’s not anti-competitive.  Maris appealed (and won its state lawsuit on different issues in interim).  US Appeals Court just ruled District Court did not err by granting "directed verdict" in favor of AB on question of whether it had mkt power.  Reason: relevant mkt for analysis is ownership of beer distribs: AB share in that mkt less than 3%.  Maris tried to argue that AB’s 48 share of beer mkt should be included.  But judges ruled: “Maris has not identified a valid economic reason why Anheuser Busch’s alleged market power in the beer market should create market power in the different market for the purchase and sale of equity ownership in beer distributorships.”  As for state trial, 1 yr later, “Marises haven’t collected a nickel,” said Maris atty Madison McCellan in early Aug.  Could be 6 mos or more before state case “works its way through the appellate courts” wrote Gainesville Sun.  

Diageo will terminate several distribs of Goldring family in Tex, Ariz and La (well over $1 bil in revs with all suppliers, 5^th largest in US) effective Sep 15, 2002.   So this decision involves over $400 mil in revs.  In a statement last week, Goldring family said it was offered a new contract by Diageo, but “stringent conditions” of contract included “huge quarterly payments back to Diageo as well as other added costs.”  Diageo also demanded “additional and exclusive manpower” that would “have given them an unfairly dominant position in our companies.”  (Editor's Note:  Will Diageo eventually extend these demands to its malt bev brands?)  “Diageo appears intent on suffocating the entrepreneurship of one of its greatest assets—the wholesaler,” chairman Bill Goldring had previously written his other suppliers.   Bill estimated that “rebate” demanded by Diageo (reportedly over $3 mil per mo for his family’s cos) would “cost the wholesaler 50% of his profit.” “Moving the wholesalers’ profitability back decades,” Bill added “suppresses his excitement and motivation to build brands.”  So now Glazer’s will distribute those brands in Tex, La, and Ariz, while Goldring family has already picked up Brown-Forman brands from Glazer's in Tex and La.  At least 1 financial analyst, giant bank HSBC, thinks all these distribution moves will result in  “considerable disruption” for Diageo.  HSBC reiterated “sell” on stock, following news of Goldring termination.

The public outrage / media attention over radio contest which culminated in 2 people having sex in St. Patrick's Cathedral got highly-rated shock jocks Opie and Anthony fired. Also generated negative PR for Boston Beer, sponsor of "Sex for Sam III" contest. Turns out CEO Jim Koch in studio at time of incident. While nat'l media largely left Boston Beer alone, it's having tuffer time in its own backyard. Following flurry of articles, Boston Beer in damage control mode. Made statement calling Jim's appearance on show a "serious lapse of judgement." Jim apologized in Boston Herald, and also made personal phone calls to Catholic leaders and bar owners. Still, 27 Beantown bar and pub owners boycotting Boston Beer for "kicking Catholic church when it's down" and demanding additional apologies in major Boston and NY papers. Today, Boston Beer took out ad in Boston Globe. Jim acknowledged his actions "cast a shadow" over his co's "hard earned" rep, and wrote, "I hope... over time we will earn your respect again."

For 1^st time since intro, Smirnoff Ice down nationally in IRI data for 4 weeks thru Aug 11.  Down 3%.  Smirnoff cyclin’ big #s from last summer, plus clutter from all those new brands had to take a  toll. But slight decline is culmination of steady slowdown in 4 wk trend.  Down 3% for 4 weeks thru Aug 11, up 9% for 4 weeks thru Jul 14, up 31% thru Jun 16, 40% thru 5/19, 59% thru 4/21, etc.   So will Smirnoff reverse course or is party already starting to be over?  Meanwhile, GBIC wants to cut price on Captain Morgan in yet another effort to get it to move.  Stuck under 0.1 share in latest scanner data.