“We have two months of really aggressive education to do,” Coors ceo Leo Kiely told Financial Post after comments by Molson ceo Dan O’Neill raised doubts about whether Molson Coors deal will be approved by Molson’s non-voting shareholders. If synergies, scale and growth oppty of merger ain’t compelling enuf, Leo reminded (just like cfo Tim Wolf did at Prudential conference) that rival buyer would likely lose profitable Coors Light biz in Canada. “We have been sort of cast in a bluffing situation but the fact is we can take control of our brand.” Leo said too that shareholder expectations of cash offer before merger announced created challenge: “We got a hole dug for us.” Dan pointed to Molson’s need to partner: “You don’t want to be the last person at the dance.” If Coors had done deal with Heineken or Miller, he said, “we would be left with no leverage whatsoever.” Dan and Leo will meet with key fund mgrs who control lotsa Molson shares, Post reported.

Can’t have 2 exclusives for same deal, right? And so predictably enuf, Coors already sent out letter to its distribs “to advise joint Coors/Miller distributors that if you execute Miller’s Third Amendment [see Express #51] and then allow Miller to exercise exclusive negotiation rights upon the sale of your business, we believe you will breach the promises that you have previously made to Coors in your Coors Distributorship Agreement. In such event, Coors will take appropriate action necessary to protect its rights.” Sounds like these 2 brewers are on a collision course on deals.

Big Jun gain put total Massachusetts shipments up 72,000 bbls, 3.6% for 6 mos. Miller doing best; up 22,000 bbls, 11% thru Jun. Put ‘em back over 10 share. AB up 11,000 bbls, 1%, at 50 share. Coors down 3,000 bbls, 1.5%; its share slipped under 9. Heineken up 9,000 bbls, 7%; flat at 7 share. Gambrinus up 8,000 bbls, 8%. Boston Beer up 4,000 bbls, 4.9% thru Jun, after big 03 drop.  

Just as Miller launched new round of ads tweaking AB yet again, AB declared “cease fire” in battles, Ad Age headlined on front-page. This past weekend Miller broke 6 new ads which open with folks enjoying an AB product, then comes a whistle and a ref fires a penalty flag. Ref explains source of infraction (“Incomplete Beer,” “Illegal Use of the Brain” etc). AB also has new ads breaking to coincide with football season, but they are “back to basics,” wrote Ad Age. “We’re not responding” brand mgt veep Bob Lachky told Ad Age. Earlier responses were “necessary to level the carb playing field.” Now “there’s no need to respond to them; they’re responding to us.”  

“Merger Pitch Falling Flat,” headlined scathing Toronto Globe and Mail column today. Molson ceo Dan O’Neill seemingly unsuccessful so far persuading non-voting shareholders that Molson Coors a good deal (2/3 must approve). “Dan O’ Neill messed up,” article began. “He admits it…. He was sent out to persuade investors of [the deal’s] genius—and he failed.” Yikes. “There’s still a lot of skepticism,” Dan acknowledged, and “I don’t know” if deal will win “required support.” One big investment co with 4.5 mil shares has already decided to vote no, sez Globe and Mail. Others “muttering about casting ‘no’ votes.” One objection: public shareholders own over 80% of co but only get 3 board seats. Then too, “people feel there will be another offer coming,” Dan added, tho no sign of one yet. Dan apparently on own, not part of coordinated pr strategy with Coors. Ironically, soon after G&M stories hit, Coors cfo Tim Wolf took stage at Prudential conference to put positive spin on merger, focusing on synergy, scale, and growth opptys. Didn't mention Dan's comments, but reminded again that Coors would go it alone in Canada if rival gets Molson, immediately double its profits from biz there to about $100 mil, minus "modest" cost to set up sales force.

Citing weather, gas prices and Hurricane Frances, AB prexy August Busch IV said that thru Labor Day, AB sales-to-retailers down 1.2% in qtr-to-date. Down in Jul and Aug. But still up 0.8% yr-to-date. Weather “played a part,” said August, as trends worse where weather bad and gas prices “dampened sales.” AB reduced guidance for its full yr volume to +1%. Expects US beer biz to end yr up 0.6-0.8%. Earnings per share will only be up “mid-single digits” in 3d qtr, cfo Randy Baker said, because of beer biz shortfall and effect of hurricanes on Fla theme parks, but AB still expects 11% EPS hike for full yr.  

>No one expected good US brewer trends when 3d qtr numbers came in. And there was no September surprise. Taxpaid shipments were down 230,000 bbls, 1.5% in Sep, estimates Lester Jones at Beer Inst. That put 3d-qtr taxpaids down 200,000 bbls, 0.4%. And it pulled YTD taxpaid trend back to +1.1 mil bbls, +0.8%. Then too, 3d qtr 04 shipments were a half-mil bbls, 1% lower than 3d qtr 02.

No top brewer put up good numbers in 3d qtr

. AB eked out tiny gain in domestic shipments; including exports, we estimate AB shipments dead even. AB reported 3d qtr STRs dropped 1.3%, as beer biz in general hit wall in Jun and never bounced back. AB’s soft qtr dropped its YTD shipments increase below 1%, to 725,000 bbls, 0.9%. AB’s 12-mo gain also dipped below 1%, up 825,000 bbls. What’s more, AB said it expects full-yr 2004 shipments to be up just 0.5%. That implies near 1% drop for 4th qtr, goin’ against just 0.5% gain last yr. Miller string of quarterly gains ended at 3. It dipped 75,000 bbls, 0.8% in 3d qtr, following 3%+ gain in 1st half, we estimate. Miller’s 12-mo increase, including big 4th qtr 03: 1.2 mil bbls, 3.3%. Coors reduced dropoff rate to 0.6% for its 3d qtr. Coors 3d qtr STRs down 0.3%. Coors hasn’t posted significant volume gain -- over 75,000 bbls or 1%+ -- since 4th qtr 2001. For 9 mos, Coors down nearly 400,000 bbls, 2.2%. Pabst dropoff steepened to about 8%, we estimate. While top 4 domestic brewers collectively down in 3d qtr, imports up 400,000 bbls Jul-Aug alone.

Most big importers lookin’ much better than big domestic brewers. Modelo's 3d qtr exports (most come to US) up 200,000 bbls, 7.5%. For 9 mos, Modelo exports up 582,000 bbls, 7.6%. How about Heineken? After comin’ out of gate fast (up 9% Jan-Jun), it said it expects full-yr shipments gain of 3.5%-4%. Implies flat-to-down 2d half. Looks like Heineken hit by same summer blues as big domestic players. InBev depletions up 5% thru Aug, ceo Simon Thorpe said recently, excluding Mexican brands, but including Beck’s. FEMSA reported just 1.4% export shipments increase in 3d qtr, (most of that LUSA’s Mexican beers in US), tho depletions up 8% as distribs drew down inventories. For 9 mos, FEMSA exports to US up nearly 200,000 bbls, 14.6%.

For 12 mos, US taxpaids up 2.1 mil bbls, 1.2%; imports up 5%. But tuff comps comin’. As result of Miller’s big Dec last yr, 4th qtr taxpaids jumped 1 mil bbls, 2.5% Oct-Dec 03. If Miller holds on to all or part of 500,000-bbl increase thru end of year, it will score first apples-to-apples gain in over a decade and could be neck-and-neck with AB in race for who’s up more in 04. Note too: imports put up double-digit increase Oct-Dec last yr. Barton expects to slow down, given buy-in last yr before price hike. Heineken also expects to be soft. And FEMSA not likely to run up shipments in advance of Heineken takin’ over FEMSA brands from LUSA. Adds up to tuff road likely for imports in 4th qtr too.

	Shipments (000)		Chg		Shipments (000)		Chg		Shipments (000)		Chg
	3d 04	3d 03	bbls	%	9mos04	9mos03	bbls	%	12mos04	12mos03	%
AB	27,700	27,700	0	0.0	80,650	79,925	725	0.9	104,075	103,250	0.8
Miller	9,750	9,825	-75	-0.8	29,475	28,950	525	1.8	38,825	37,585	3.3
Coors	5,922	5,960	-38	-0.6	16,903	17,284	-381	-2.2	22,069	22,607	-2.4
Pabst	1,990	2,165	-175	-8.1	6,005	6,435	-430	-6.7	7,720	8,260	-6.5
Other Dom	3,693	3,665	28	0.8	11,067	10,576	491	4.6	13,771	12,903	6.7
Dom Total	48,845	49,090	-245	-0.5	143,485	142,530	955	0.7	185,650	183,790	1.0
Imports	6,700	6,250	450	7.2	18,670	17,819	851	4.8	24,514	23,121	6.0
Total	55,545	55,340	205	0.4	162,155	160,349	1806	1.1	210,164	206,911	1.6
(Taxfree)	950	1,000	-50	-5.0	2,765	2,910	-145	-5.0	3,755	3,980	-5.7
US Total	54,595	54,340	255	0.5	159,390	157,439	1951	1.2	206,409	202,931	1.7
All brewer figures except Coors are BMI estimates of shipments, including taxfree/exports. Import figure estimated for Sep 04.

If you think you saw fewer beer ads in 1st half of 04 than in past, you’re probably right.  So suggests Jan-Jun media spending data from tnr/media intelligence/cmr.  They track spending in 10 media; some suppliers say the reported figures are low.  Only 2 big beer suppliers spent more those 6 mos vs same period last yr: Miller and Labatt USA.

AB cut major-brand spending $15 mil, 7% Jan-Jun, before a Summer Olympics bump.  Spent more on Bud Light (+$12 mil, 17%) and Bud (+$2.5 mil, 4.3%), but slashed spending on Busch brands, Bacardi brands and even Michelob family.  Mich Ultra got $28.1 mil, +40%, but spending for other Michelob brands got whacked.  Miller eased off accelerator in 2d-qtr spending, following 85% jump in 1st qtr.  But still spent about 5% more Apr-Jun.  YTD thru Jun, Miller media spending up $37 mil, 35%.  Support for Lite-alone dipped $3.6 mil, 5%, but Miller spent incremental $10 mil on joint Lite/MGD ads and zoomed MGD spending by $30 mil, 217%.  (Didn't get much for that MGD investment so far.)  Miller also tripled High Life/Light spending.  Shifted $6.5 mil out of malternatives.  Look at AB/Miller spending gap Jan-Jun.  AB had outspent Miller on major brands by $110 mil in 2003, and by $100 mil in 1st 6 mos 2002.  In 04, gap narrowed to $58 mil.  Coors really cut media spending in 1st half.  Even with $11.4 mil Aspen Edge intro spending, major-brand support down $12 mil, 13%.  Coors nearly eliminated spending on Zima and Killian's, and took huge slice out of Coors Orig.   Even cut Coors Light spending by nearly $5 mil, 7%.  Spending for Modelo and Heineken brands down 9-10% each; 2d-qtr reductions were even sharper.  Diageo cut spending nearly 30% on malt bevs for 6 mos, tho it jumped 2d-qtr spending 50%.  Boston spending off 27% YTD, but it plans 2d-half boost.  LUSA was outlier.  Upped spending nearly $11 mil, 50% for 6 mos.  That excludes Beck’s which more than tripled media $$ to $7.9 mil Jan-Jun. 

Interestingly, looks like distillers shifting media dollars (from print to cable, as Ad Age recently reported), but not necessarily spending more.  In fact, of top-10 liquor brands, only Jim Beam got more media $$$ in 1st half this yr.  And big liquor brands still advertised much less than big beer brands, especially in 1st half of yr.  Absolut was only top brand with over $10 mil media support.  Bacardi, Capt Morgan, Jack Daniels, Jose Cuervo, Crown Royal and Grey Goose all in $6-8 mil range.

Duplicating the results of a 2001 study from North Carolina, Canadian researchers used actual BAC data from college students in Ontario to suggest their colleagues in the US (and elsewhere) misuse the term

That’s current state of a lot of beer execs INSIGHTS talked to in last couple of weeks. Following a sluggish summer overall, they’re by-and-large coming off a crummy Oct (to be expected with 2 less selling days). Distribs also express more uncertainty about their suppliers’ plans. So far, we’ve heard hardly any raves about fall industry meetings, including AB, Miller, Coors, Heineken. It’s a searching period for most major players in beer biz, where they’re looking for new answers amidst slower than expected growth.