Revs up, volumes down remains MillerCoors mantra. Combo of pricing/trade up pushed MC revs up 2% for 6 mos thru Sep, with Q2 and Q3 each up about 2%. Rev per bbl +3% for last 2 qtrs in North America too. No numbers on Q3 profits yet. Dollar trend held up despite much softer STR number in Q3, -3.7%, vs -1.2% in Q2, partly because of inventory build. And Q3 had incremental Fortune, Coors Light Summer Brew and Smith & Forge volume, plus growing Redd's and Leiny. For 9 mos, MC STR trend virtually identical to its -2.8% dropoff in calendar 2013. In Q3, MC above-premium biz up high single digits; no word on Blue Moon trend and MC took big hits in high end on "strategically deprioritized brands". Combo of high-end growth, new brands suggests MC's base biz off 5%+, a turn for the worse. Coors Light and Miller Lite each off low-single digits for 2d-straight qtr, tho an improvement from mid-singles losses in Q1. Premium biz off mid-singles despite continued Banquet growth. Below-premium biz also trended down mid-singles. MC shipments running ahead of depletions, down 1.7% in Q2 and Q3, off 2.1% yr-to-date, about 0.6 pts, 250K bbls ahead of depletions. Suggests there's extra inventory in MC system too. Lookin' at Q4 comp, MC shipments/STRs off 2.2%, 1.9% respectively last yr in final qtr.

Moving Miller Lite to all-white gettin' lotsa attention at MC and among distribs. Indeed, Lite up 0.6% for 4 wks thru Oct 5 in IRI multi-channel data. But tuff Coors Light trend, -3.5% in IRI multi-channel scans thru Oct 5, gotta be cause for concern. If that's natl trend it's tuffest time Coors Light has experienced for full yr anytime over last 20 yrs. Coors Light off about 2% back in 2003 and 2004, then racked up 8 straight annual gains before dropping 2.3% in 2013. Challenge for MC has always been whether it could sell both Lite and Coors Light. In no yr since JV have both brands posted gains. Over last 20 yrs, as combo, Lite and Coors Light peaked in yr before JV formed, at 35.6 mil bbls. Last yr, they sold just under 32 mil bbls. Depending on final figures for this yr, those 2 mega brands could be off about 5 mil bbls from peak volume.  

AB is its own largest distributor with 17 branches in 11 states, about 10% of its volume (130+ mil cases). Branches mainly in key urban areas, often with low share. Lately they are much in news, including a mention in a misguided NYT editorial on "monopolizing" beer, long article in Owensboro, Ky on AB's attempt to buy an 800,000-case distrib there and efforts to stop it (AB issued a long rejoinder) and several topical statements from top NBWA execs on branches. Misconceptions about AB expansion in branches abound yet at same time branches create very real problems for many of its indy distribs.

AB Bought 6 Distribs in 6 Yrs The most widely held misconception: that AB employs a strategy to grow its branch distribution to half its biz. If so, that would be one slow boat to China. AB has added 1/2 dozen branches since 2008 (out of about 72 distrib transactions, it sez). They totaled 25-30 mil cases or approx 2% of volume. And AB also sold off a few interests in distribs during same period. Seeming misconception still largely based on oft-misquoted 2009 comment by ABI ceo Brito when he said AB could theoretically own up to 50% of its distribution based on US law. Tho AB does want to get bigger in branches, Brito didn't say 50% was AB goal. Other big misconception is that AB branches restrict consumer choice. Can anyone seriously argue that in branch mkts like Seattle, Boston, NY, consumer choice is restricted? Consumers want choice and are getting it all over US. In many if not all mkts, there are several viable options for craft/other small players, beyond AB and MC networks. Those include craft-centric distribs, wine and spirits distribs, self-distribution and more. And against all these options offering so many choices, increasingly AB branches have tuff time competing with just AB portfolio.

Seven States Banned Branches For lotsa reasons, preventing branch expansion remains high priority for indy distribs in many states. Indeed, since 2008, distribs have passed legislation to prevent AB from acquiring or adding to branches in 7 states that are about 14% of total US beer volume. So as of now, AB would only theoretically be able to get to a little more than 1/3 of its volume as branches, unless laws change. That doesn't seem likely since as NBWA prexy Craig Purser pointed out during Oct 9 talk to NY distribs, "the trend is going in the other direction. There hasn't been a single state that has allowed them to buy." In ongoing battle over tiny Owensboro, KY mkt (which AB apparently didn't anticipate would raise such a ruckus), city liquor authorities originally granted AB license. But that got appealed and there is pre-hearing before full ABC in Nov. Some suggest AB has solid legal position to get license, but others note real battleground likely to be legislative next yr, where AB chances may not be so good. The 7 states that prohibited or limited branches include IL, OH, WI, NE, WY, ID and LA. Both IL and OH neighbor KY. Interesting to note that distribs still held upper hand legislatively in each of these 7 states, sometimes against furious AB (and occasionally MC) opposition.

Branches Often in Low-Share Mkts Tho AB nationally at 45 share, AB has less than 40 share in 8 of 42 reporting states that represent roughly 30% of US volume. Those states: CA, CO, IL, NJ, OR, PA, WA, WI (under 30 in NJ, OR, PA). AB has branches in 5 of those, including each where they are allowed. Most branch volume concentrated in craft-centric and/or heavy import mkts like CA, OR, WA, CO (all under 40 share). Or low share mkts like NJ, or big urban centers like NY/Boston. Branches are in 11 states out of 23 where they are allowed. All this lends some credence to traditional AB stance that it needs branches in some mkts where indy distrib would have difficulty maintaining profitable biz.

AB Distribs in Branch States Face Hurdles Attracting New Brands, Acquiring AB Distribs So why then are distribs so up-in-arms? One of biggest thorns in side for indy distribs in branch states is their inability to attract and/or retain key new brands, especially craft because of inability to have unified footprint. Craft brewers usually don't want to be with AB branch and AB doesn't want them either. So AB distribs, many declining with AB, are often shut out from best new brands. AB certainly not looking to facilitate indy AB distrib's portfolio expansion. But as mkt changes, and with AB volume down, that becomes bigger issue. An "often unstated reason" for AB distributors' objecting to expansion of branches, said consultant Mike Mazzoni, is that AB distributors in branch states believe that with the ABI right of approval, "They're out of the equation…. In many cases they realize it's grow or go but, in fact, it's not a level playing field." And they won't even look at possible deals, adds Mike, "because ABI has the trump card." "In fairness, AB typically pays FMV", but if there's "in effect only one buyer" the other side of the equation is that "there is the real potential that a selling distrib's value may be depressed because, by definition, this is not a free market system. The solution for both sides is an open market where all potential buyers compete for the acquisition. . . recognizing ABI still retains the right to approve the buyer." Another sticking point and this one goes way back; branches in key urban areas tend to have disproportionate influence in surrounding areas too, often depressing retail prices for example.

AB Branches Under Pressure Without Full Portfolio At same time, AB branches a challenged biz model in many of those mkts. With only the AB portfolio for the most part, branches at distinct disadvantage as consumer preferences shift to craft and variety in general. You can see that best in mkts like Colo where AB share dropped 7 points in 5 yrs, and Calif where it lost 5 share in 5 yrs. In mkts like SoCal and Seattle, AB branch with low share and smaller portfolio competes against giant MC distribs (Reyes and Columbia) that are reportedly growing volume, share and clout rapidly last couple of yrs. Then too, AB branches will also be taking same Monster hit that many AB distribs suffer, including as much as 1 mil cases at its Riverside branch. And 4 branches that have Constellation Beers portfolio could potentially lose them (up until June of next yr) as stipulated by DoJ agreement. So lotsa issues: distribs up-in-arms, declining volume, losing key brands and profit hits. Will any of this ever cause ABI to reconsider its branch stance? ABI likes branch biz and absolutely no evidence of that so far.  

This year's convention marketed 3-tier system hard, in NBWA officers' own speeches, natch, but even in how panels were put together or questions asked. One panel featured 3 hot craft brewers, none of whom apparently agree with BA's push for franchise reform (tho Lagunitas founder Tony Magee was the only one to specifically criticize BA's position), and all of whom sang system's praises, as did MC ceo Tom Long on panel and Constellation Brands Beer prexy Bill Hackett in video. A panel called Main Street Fueling Wall Street asked several industry types questions about many of NBWA's talking points, whether on benefits of 3-tier or the problems with branches and more. And NBWA's outgoing chairman Greg LaMantia sounded similar themes as when he became chairman, questioning "unnecessary attempts to make detrimental changes to effective state laws" by craft brewers or AB being its own largest distributor.

But as resilient as 3-tier system has proven, all is not roses these days in US beer biz. Some underlying tensions surrounding upbeat NBWA mtg highlighted by Ad Age article on it. Headlined: "Young Drinkers Have Abandoned Big Beer-Can It Be Saved?" Ad Age featured consultant Joe Thompson's clear-eyed comments on industry's volume declines as well as AB and MC concerns about millennials leaving beer (expressed in mtgs with distribs at NBWA). Joe even said distribs have to do more for big brewer's brands. Beer biz is going thru a series of wrenching changes these days. CBA prexy Andy Thomas called these "extraordinary" times and an "awakening," tho also "chaos, clutter, confusion and consolidation."

Interesting to note, how many folks stayed thru Tuesday at NBWA. There were lots of bankers hanging around, having dinners, chatting up potential clients. More craft players also had functions on Tuesday night (and CBA had its distrib meeting Wednesday morn). So there was lots still going on even after official NBWA was over. Then too, extended beer community gets together at NBWA meeting in part just to talk about all these rapid changes, as many folks are just trying to figure out where it's all going. And it ain't easy.  

How strong is Constellation volume trend? How about +8.1% depletions in Jun-Aug qtr and +7.2% in shipments. But shipments number knocked back about 150,000 bbls because of recall. Ceo Rob Sands noted a "light impact," especially since the beer will be (re)-shipped in next qtr. So, without recall, shipments would have been +10.9%, or the 4th straight qtr of double-digit gains. Constellation outperformed every other top 5 supplier in US by a factor of at least 8X. Over last 12 mos, Constellation's shipments up 1.3 mil bbls, 10.7% while US beer biz +0.8%. That's momentum. No wonder it's guiding to mid-single digit volume growth for next several yrs (and some analysts expect better). Accommodating that growth will cost a significant amount of money. But as Joe Thompson succinctly put it: "If you have the best hand at the poker table, you gotta bet it."

How much is Constellation betting on beer? A lot. Between original brewery expansion, just-announced expansion and just-announced deal to buy AB InBev's glass plant next to Nava, Constellation now expects full cap ex tab to be $1.9-2.3 bil. That's on top of $5.3 bil it spent to buy US rights and Nava Brewery. New investments pushed the operating margin goal and the $1 bil free cash flow target further into future. Nava now on track to be able to produce 21.3 mil bbls by end of 2017; original plan was 17 mil bbls. But that would have made capacity tight by last yr if Constellation grew 5.5% or so annually. Getting full control of Modelo portfolio adding to Constellation's income already. Beer operating income up 20% to $271.1 mil in qtr ending Aug, boosted by additional Jun week vs last yr, but knocked back by $9 mil reduction from recall, "net of recoveries." It may take time, but there will inevitably be "recoveries." No one's sayin' how much, but recall that Boston booked a "settlement" gain of $20.5 mil in 2011 from similar 2008 glass recall and that was for just 850,000 cases, not the 2 mil cases Constellation had to pull.  

Rarely has fickleness of stock market and its analysts so clearly been on display as on Oct 2, big news day for Constellation Brands. Just before mkt opened, Constellation announced: 1) expensive-but-necessary next round of investments south of the border to secure glass and production capacity to accommodate expected beer growth; 2) a fine fiscal 2d qtr. Later that morning on conference call, top execs repeatedly celebrated beer biz "momentum." Constellation's beer biz anything but hit-or-miss these days, yet it "missed" consensus earnings estimates by a few pennies per share. That sent stock price down 3% or so in before-hrs trading. Also spooked some analysts a bit. Pre-conference call reports emphasized "beer margin guidance disappointing" (Goldman Sachs) and "2Q Miss and Capex for Glass without Return" (Stifel). Throughout conference call, analysts probed cfo Bob Ryder about why guidance for operating margin in beer biz to hit mid-30's got pushed back 1 year to fiscal '18 when Constellation had earlier guided it would hit that mark by fiscal '17, and/or why margins wouldn't be even higher. Their disappointment was palpable. Bob became increasingly frustrated. Told the nth asker of same margin question that it was "past the belabored part." He noted several times that Constellation beer biz has best volume growth trend and will have highest operating margin in North American beer biz. "I'm thrilled with a mid-30s profit margin. I'm not sure why people are disappointed." What a difference a day makes. By mid-day, next day, STZ share price was running up almost 3%. And same disappointed analysts called earnings miss "transitory" (Goldman Sachs) and "upping glass margin benefits" (Stifel). Both expect 37-38% operating margins for fiscal '18, higher than current guidance. Other positive reports emerged same day.  

MC has broad, ambitious plan to focus on "quality beers, quality partnerships and quality citizenship," restore premium lights to growth and create new brands that "scale and stick," execs told distribs at mtg during NBWA convention. CEO Tom Long set out to dispel "some big misperceptions" about MC size and "even bigger misperceptions" about its premium lights. "We make quality beers as perfectly and consistently as anyone in the business," Tom declared, a fact "no brewing expert would dispute." (Right on cue, just a few days after Tom spoke, MC won gold, silver and bronze awards at GABF in American lager/light lager category.) But MC has allowed misperception that its size and natl scope "hinder" its ability to make great beer. In fact, MC size/scope give it "significant advantages" to brew quality beer. And that will become "bigger differentiator" for MC going forward. Indeed, MC will get "explicit" about quality and will "push for that same kind of transparency… for all brewers, large and small." Misperception that lights are "lesser beers" driven by craft brewers who equate quality with "stronger taste" and some "openly disparage" premium light beers as "inferior, attacking our strengths - lightness and refreshment - as weaknesses." And as premium light mktg stuck with lifestyle/humor messages, that "made things worse." New messaging will focus on quality, authenticity.

Premium Lights Gotta Grab Millenials CMO Andy England ID'd current issues with premium lights and millenials. "Premium lights may be under fire," Andy said, but "sessionability" is "new watchword" in beer and premium lights "invented sessionability." That's a big oppy. While light beer consumption among 28-34 yr-olds down since 2000, it's down considerably more among 21-27 yr-olds. About half of 21-27 yr-olds still drink light beers, not down much in recent yrs. But "what we've really lost is frequency" as millenials "drinking less alcohol overall and their choices across alcohol are far more fragmented." And you gotta get entry level drinkers, because "70% of consumers who drank beer at age 21 still drink it today. If they didn't drink beer at 21, only 30% drink it today."

How Will MC Attract Millenials to Miller Lite and Coors Light? Build on-premise biz, multi-cultural biz, get "right offerings in the right places for that target audience." That takes appropriate investment and MC "demonstrated with Miller Lite this year that we'll double down on strategies and ideas that work," noting "significant increase" in natl media buy in Sep. And in 2015, there will be "increased spending from us against on-premise, multicultural, digital, local and national media."

Coors Light Cold Refreshment message "resonates with beer drinkers," but MC's "communication" of it "has missed the bull's-eye." Even millenials "really like" ads,"but they don't find [them] persuasive." New ads dial up quality cues millenials unaware of: cold-filtered, never heat pasteurized, high country barley, Coors yeast and packaged cold. Key themes: "refreshment that never stops" and beer "perfectly engineered for those occasions that you just want to keep going." More aluminum pints will be available by next fall and MC will "clean up/revitalize" packaging. How about Coors Light Summer Brew? A "touchy subject," Andy said, "because we brewed too much this year and it's taken too long to go through the system." Still, drinkers "loved the beer," as did chain retailers who sold "way more" than expected, Andy claimed. Summer Brew got 0.2 share in Nielsen cross-channel data with single SKU and "priced about 20% higher than base Coors Light." Sold more than Mang-O-Rita, Raz-Ber-Rita, Shock Top Seasonals and Sam Summer Wheat during same period. So it would be "mistake" not to bring it back. Next yr, Summer Brew will be "line-priced with Coors Light in 12oz and singles… full strength and 3.2, with graphics closer to" Coors Light and designed to be sold between Memorial Day and Jul 4.

Miller Lite "is on the way back to greatness," Andy declared, "and it's been a long journey." Over last decade, "drinkers wrongly assumed" Lite's "blue look, the swirl logo" and identity were copied from Bud Light. Lite "struggled to find its voice." But that's ended with return to traditional white can. Miller Lite can trends improved by almost 7 points YTD, an additional $68 mil of distrib revs. So Miller Lite going all white all the time: bottles, secondary pkg, tap handles, truck decals, you name it: every "piece of visual communication that's going to touch the consumer."

Draft, New Brands, Rockin Redd's MC decision to hold draft prices this fall "not easy but the right thing to do for the brands and the customer," asserted sales prexy Ed McBrien. What happened? Since Aug 2011, MC had lost 4900 handles thru May 2014. But since May, Lite's loss rate cut by more than half, and MC picked up 1,117 taps for Coors Light and 322 for Blue Moon. Asked distribs to "remind retailers" that MC made decision to hold price. ABI "upped the ante" by adding on-premise reps and "craft adding to teams daily." MC too will put "more feet on street" and take CatMan approach to on-premise with new team. Smith & Forge already #3 cider in less than 3 mos with 1 style, tho more coming, said innovations veep David Kroll. S&F is only cider that "skews male." MC moving it on-premise, ads coming in Jan, plus 12-oz 6-pk in cans. Fortune launched with "unprecedented speed," said David, is #3 new brand this yr. MC "didn't get it all right and Fortune did not scale to expectations." Still, Fortune carved out 2 footholds: urban millenials and spot in superpremium box dominated by ABI. Took 1 mil cases from Bud Lt Platinum, MC figures. Redd's + 79% yr-to-date, on pace to do 18 mil cases next yr.  

After 6 yrs under the leadership of Luiz Edmond, ABI named new prexy João Castro Neves in its most important and profitable zone North America, effective Jan 1. Did João appointment signal a shift in direction at AB? Or ABI? Or was this just part of normal executive rotation? ABI offered no clues. Oddly, even with change at the top of $14 bil unit that is over 1/3 of global ABI profit, ABI got remarkably little attention from mainstream media for this significant move.

Current NA prexy Luiz Edmond will move to global job as ABI's chief sales officer. And current chief sales officer Bernardo Pinto Paiva will move to João's current role. João is now zone prexy for Latin America North and CEO of ABI's Ambev arm based in Brazil. He worked closely for Luiz when Luiz prexy of Latin America North. All 3 positions are on ABI's 15 person executive board of mgt. About half of exec board of mgt, including each of these 3, are Brazilians born 1965-68. So each under 50. ABI ceo Brito is 54. Moves "reflect firm's culture of continuous career development by providing high performers new challenges," said ISI's Robert Ottenstein. "One could argue that changes for João and Luiz were somewhat overdue," he added. Both execs "are widely viewed as possible successors" to (ceo) Brito, according to Robert.

Luiz did the job he came to the US to do, "a terrific job at driving out costs," said Robert. He was driving force behind $2 bil+ per yr in incremental EBITDA that ABI got out of US after buying AB. Tho revs up slightly because of good pricing, volume declined over 10% in last 6 yrs, and earnings growth slowed. João represents "fresh set of eyes" on US as Bernstein's Trevor Stirling said on panel at NBWA. AB will go more for top line growth, during next period (see below). And João is "high energy, charismatic leader," said Robert. "For Anheuser Busch, this is constructive," emphasized longtime ABI watcher Brasil Plural's Carlos Laboy. João has "produced strong results," said Carlos, but he warned of "daunting" US challenges such as "core brands in decline" and an increasingly disadvantaged distribution network. João will set better "tone," source suggested.

Luiz is "expert integrator" at ABI, sez source; his move to global role could signal more M&A. "No question," added another, Luiz heading to NY means ABI "open for M&A." On other hand, not likely in nearterm. ABI "would want managers to first become comfortable in their new roles," said Robert, who still thinks AB has 50% chance of doing deal for SABMiller in 2015, as "we have always expected." If there's deal, Luiz "well positioned if Brito needs someone to work on significant M&A and business integration issues."

"More Top Line Driven Agenda" Coming for AB AB will "move now" towards "a much more productive agenda," Luiz said in meeting with AB distribs at NBWA. This will be "a more top line driven agenda than we have had in the past." There is "new global framework," said Luiz, "to grow the top line." If Luiz "had to pick one person" to follow him, "it would definitely be João" [Castro Neves] who is "great guy, smart" and "understands the US." AB will "move forward in much better shape than when I came here," Luiz added.

Luiz Reflects AB underwent "major transformation" in last 6 yrs, Luiz said. Whereas before sales "absolutely relationship driven," now AB has "much better understanding of data" and "clear accountability." While there was "anxiety" about mktg approach, "look at the high end, look at what we're doing with connections," Luiz said, adding "we were able to bring a lot of innovation.... When I reflect, we really made some progress. We have to do a lot more." He praised "much stronger panel system," noting that the "level of communication" with wholesaler panel has "never been so good" and that dialogue "very constructive." AB and wholesale panel "have built more trust" in the relationship.

"Ghosts and Threats" But more broadly speaking, "people see a lot of ghosts and threats that I just don't see," said Luiz. ABI is "trying to operate under the same rules" as it found when it came here, hasn't sought to change any laws. But some see AB "as almost an enemy" and "that is a misinterpretation," added Luiz. People are "attacking us, calling us things that we are not." AB "never threatened anyone" as it wants to "preserve the business. We like the business a lot." So it's not about "changing the framework dramatically." It's "never going to be...taking money from one pocket to the other is not going to solve problems." And yet Luiz said "the more we keep being pushed into the corner" then "the more you take the risk of getting pushed back." Luiz said that's "not a threat" but those kinds of issues were "one thing I was not able to solve" and "eliminate from the room," he added, seemingly with some regret. At the same time, Luiz added: "I really appreciate the support I have had."  

Fed Tax and Trade Bureau has issue of category management "under active consideration and we hope to have a notice of proposed rulemaking out for comment this fall," TTB's top exec John Manfreda told industry attys at CLE mtg last week. That's potentially big news and follows in wake of uptick of talk about trade practice violations in states. Big brewers, distillers and vintners invest tons of money into CatMan. AB and MC boast vast, vast majority of all captaincies in beer aisle, especially in chains, each of course claiming it comes up with best plan for retailer in question and beer biz in general. But small brewers (and others) claim that CatMan locks them out of space, isn't necessarily what's best for "beer" (or the retailer) and simply gives better placement to the Captain's crew. While big brewers tend to focus on velocity per pt of distribution, recall Lagunitas coo Todd Stevenson argues craft under-spaced in big brewer schematics since craft provides much more incremental profit than highly featured premium beers. Could CatMan actually be considered illegal inducement under tied house laws? Certainly, suppliers provide very valuable data to retailers via IRI, Nielsen, other expensive metrics.

History goes back to early 90s. TTB created exception to tied house laws that "providing a recommended shelf plan or shelf schematic…does not constitute a means to induce" under fed law. Intent then was apparently to allow suppliers to provide modest tool and broad guidelines for retailers. But apparently some warned TTB was opening Pandora's Box to allow powerful members to control store shelves, one informed source tells INSIGHTS. And big suppliers jumped in big time across beer, wine and liquor. TTB was supposed to monitor/study progression. In 2013, TTB opened investigation of CatMan, including subpoenas. TTB reportedly concluded CatMan/schematics should be revisited via its laborious rulemaking process, which would necessitate action by Treasury Dept. If Treasury/TTB does act, likely to be very controversial, given big players' investments and fact that CatMan is now "way of life" for both suppliers and retailers, as one observer noted.

Lotsa considerations here. Big suppliers and retailers believe CatMan perfectly legit, a natural evolution of biz and big investments necessary to make proper "recommendations." Besides, retailers can reject recommendations. Others see those investments as inducements. That's even tho it's very difficult to prove that a competitor's product "excluded" due to CatMan. And those who believe CatMan is illegal inducement further fear "what's next" if Treasury/TTB does not act. In any case, these wheels move slowly at fed level, tho some states are taking a closer look at supplier-retailer relationships on their own, including how retailers may be bad actors via their demands. Also, industry itself acting to end certain practices (i.e. coupons in Calif) that invite abuse.  

Recent CLE conference on Wine, Beer and Spirits Law in DC included gentlemanly debate between two industry experts over "golden case" theory. Andy Christon presented his familiar case for "golden cases." In his view, core brands in distrib portfolio soak up most of the overhead while "incremental golden cases," a.k.a. "bolt on brands," require "little additional investment" or direct costs. As result, their "marginal effect" on profits is "magnified" and such brands have higher value/case than core brands. Andy gave example of golden case brands being perhaps 5% of volume, 7% of gross profit, but up to 34% of cash operating profit. Direct expenses for such cases, in this analysis, "may average $1/case or 17% of GP." So far, far more profitable than other cases. As result, these brands fetch very high prices/multiples in deals. Andy also noted that AB distribs may incur similar significant "adjustment to profit" if they lose Monster at 1X GP in contracts.

"I like the idea of golden cases," said consultant Sam Kursh. "It's quite attractive, even to an economist. The problem is I can find no data to support it." Sam cited NBWA data to suggest that sales, delivery, warehouse costs increase with distrib size tho occupancy/mgt costs can be reduced. Then too, distribs can only add supposed golden cases "to the tune of their capacity." If buying distrib has no "excess capacity" on its trucks and/or in its warehouse then it can't "reap the benefits" of bolt-on brands. Sam also has a "logic" issue with golden cases. If distrib has 10 lines and each the same size, golden cases would suggest line 10 worth more than line 9, line 8, line 7, etc. So, tho concept "interesting…. I'd like to see more data. It doesn't really make sense," Sam concluded.

Who's right? Small volume brands, especially craft, have indeed traded for very high values/multiples in the real world. But litigation history in recent yrs hasn't gone well for golden cases. Most recently, Sam and Andy on opposite sides in Ohio diminished value case. Judge sided almost entirely with Sam, as INSIGHTS reported, when Sam (and the fed ct judge) valued Labatt/Genny brands at 2.5X GP vs Andy at 9X GP. Similarly, in NJ case over AB InBev import brands a few years ago, jury used recent mkt multiples there, rejecting much higher valuation put forth by expert who used a golden case approach. Net-net: 3d valuation expert on panel, who does not have beer experience, pointed out that courtrooms and negotiations are very different environments. In courtrooms, experts expected to provide supporting data. "If you don't have data, you get hammered." In advisory role, (or negotiation) expert can say "this is my experience" without back up.  

Beer volume just flat for last 13 weeks thru Sep 7 in IRI multi-outlet + convenience, bringing yr-to-date gain back to 1.3% (beer down slightly in all channels). AB and MC volume drops each steepened over summer, especially MC. AB down 1.1%, but MC down 2.8% for last 13 weeks in IRI. That compared to flat and down 1% respectively yr-to-date. AB lost 1.3 share of $$ and MC lost 0.7 last 13 weeks. Megabrands mostly softened over summer, especially Coors Light. Coors Light down a shocking 5.5% nationally for 13 weeks. Can't recall ever seeing such a soft number for Coors Light over 3-mo period. Until last yr, it easily had best of megabrand trends. This yr, it is softest of top 4 brands. Bud Light did best. It was flat, while Miller Lite down 1.5% and Bud down 4% same period.

Another change in 2014: new brands ain't providing same lift for AB. Last yr's star, Straw-Ber-Rita, suffered one heckuva sophomore slump this summer. Down 56%. That's while Lime-a-Rita down 50%. Bud Black Crown down 55% too. This yr's new Rita variants did very well, but could not make up for decline of those brands. Meanwhile, MC getting big incremental volume from new brands this yr. Yet it was still down 2.8%. Fortune, Summer Brew, Redd's Strawberry, Redd's Variety Packs and Smith and Forge accounted for over 2% of MC volume for 13 weeks. Means all other MC brands down about 5%. That's tuff apples-to-apples trend. Redd's Apple Ale still up 11.8% for 13 weeks, tho up 1% for 4 weeks.

Even Constellation and Boston growth slowed, tho their trends still pretty stellar. Constellation volume up 8.5% and Boston up 25%. That led to substantial $$ share gains for each; Crown up 0.7 share of $$ and Boston up about 0.5. Heineken volume up 5% and Yuengling up 6.5% for 13 wks. Other leading beer suppliers struggled to stay even tho, some not close. Pabst down 2%, Mark Anthony flat, DGUSA down 7%, NAB down 7%. That's top 10. Many craft brewers still flyin' in period; Lagunitas up 59% and Stone up 48%.

Some other key brand trends: Mich Ultra up 8%. Each of Corona Extra and Heineken up near 3% over summer. But Modelo Especial up 18% and Dos Equis up 20%. Sam Adams Boston Lager, down 4.5% for 13 weeks, while Sierra Pale up 4% and NBB's Fat Tire up 16%. Meanwhile, Angry Orchard continued to truck along at +76%. At least, industry still trading up. Premium and subpremium brands lost 2.4 share of $$, while craft gained almost 1 full share, imports gained 0.7, cider 0.5 and FMBs 0.4. Craft volume growth "slowed" to 15%.