Yuengling appointed its Connecticut distribs late Friday and it was again mix and match, with MC distrib Star (Gallo family) getting biggest chunk of state volume, while AB distribs HDI (Hartford) and Levine got the rest.  Yuengling looks to enter CT early this fall. After going entirely with AB network in several Southern states and OH, Yuengling has taken different tack in New Eng states, appointing MC distribs in part of Mass and CT as well as all of RI.   

Recall, Yuengling delayed CT entry for a couple of mos earlier this yr, which was “good for everybody,” said Yuengling coo Dave Casinelli.  Yuengling got to “better understand” the mkt and the appointed distribs will put more “energy and resources” into the brand.  There’s a lot of “low hanging fruit” amidst “a very cluttered landscape” and a fast-changing biz, said Dave. That allows Yuengling to get to a 3 share or more pretty quickly in most states it enters.  But as it chooses distribs, Dave looks for distribs that see “real potential of the brand” with a “much bigger upside” than that. Even tho Dave had characterized Mass as most competitive mkt Yuengling has entered in Boston Herald article last week, Yuengling is averaging 7-10 share across Mass, not the impression article created. 

“I’m not going to sugarcoat that [Massachusetts has] been a very competitive market, more competitive than any market we’ve seen before.”  So said Yuengling coo Dave Casinelli to Boston Herald.  Paper headlined that “Yuengling suffering a Boston beer bruise.”  Doesn’t have much in way of hard numbers, but claims Yuengling in “fight of its life to win over Boston beer drinkers.”  As we’ve noted in past, competitors have thrown sharp pricing and mktg punches since Yuengling’s intro earlier this yr in attempts to prevent high mkt shares Yuengling got early on in last big intro mkt, Ohio.  Herald’s evidence mostly anecdotal: 1) Boston Beer Garden buyer sez he went from 3 kegs on day 1 to 1 per week; 2) same guy took Yuengling off draft list; 3) mgr of Baseball Tavern in Fenway sez “novelty has worn off,” dittoed by other retailers.  Then too, “Yuengling faces three unique challenges in Boston,” according to Herald.  First is strong regional loyalty to New England brands.  Second is “mature and sophisticated” Boston beer consumer as city has two big hometown craft brewers.  Third is “rough and tumble arena ruled by distributors who play hardball” and “not afraid to influence pub owners to dump rival brands.”   Paper sez one distrib salesman hangs taps he’s taken from bars with his brands “on the wall of his office like trophies.”  “We’re big boys,” sez Dave, “completely fine” with competition, and suggests Yuengling brings out “the best and worst of everyone” in a mkt, given its potential to be “a very big brand.”    

With Constellation’s big draft push on Corona Light, Heineken USA touting potential of Tecate Light and now making significant bet to re-invigorate Heineken Light, top importers continue to see potential in import light segment that’s been stagnant for years (see below).  Looming intro of Guinness Blonde American Lager (a “lighter” version of Guinness?) can be seen in same context. 

HUSA’s  Heineken Light effort travels 3 tracks: 1) reformulation with Cascade hops (a flavor link to many popular IPAs); 2) redesigned packaging with more emphasis on Star bottle and slim can; 3) hiring celebrity spokesperson Neil Patrick Harris, of tv, stage, film and award show fame.  NY Times’ Stuart Elliot broke Harris story in today’s column, suggesting Harris will need to be “magician” as well to reverse brand’s “perilous position.”  Despite Harris’ outsized celebrity, campaign focus is “the improvement of the liquid,” insists cmo Nuno Teles.  “We are using a celebrity to enhance the creative idea, not be the idea.  The hero continues to be Heineken Light.”  Yet first “Best Tasting Light” ad (which plays off recent World Beer Championships award) on YouTube very much about Harris character spoofing regulation that brewers can’t show people actually drinking beer in tv ads.

Key “consumer insight” behind new effort is Consumer Edge finding that “40% of 21-27 year olds prefer a fuller flavored light beer,” according to HUSA release.  Nuno told NY Times that 40% “desire a light beer with full taste.”  Question remains: just how big is that desire?   Lookin’ at total volume of top 5 import light brands since 2006, when Heineken Premium Light launched, shipments in 2013 were 2.3 mil bbls, down about 200,000 bbls 8%.  So import lights about same 8.5 share of import mkt they were then, about 1 share of total US beer.  During that period, Heineken Light shed 200,000 bbls, 35% on its own (-320,000 bbls from 2007 peak).  Portfolio mate Amstel Light was off 380,000 bbls, nearly 60%.  Labatt Blue Light picked up 250,000 bbls, 5%, but it’s 4% below peak.  Tecate Light is growing fast and now around 200,000 bbls or so.  Corona Light has picked up 200,000 bbls, 25% during this period and, as noted, is focus of big draft push, which Constellation claims boosts package sales as well.  Yet IRI reports Corona Light up just 0.5% for 12 wks thru Jul 6 in national off-premise scans.

Gotta keep in mind too that domestic light beer segment under significant pressure in recent years, especially in key influencer on-premise mkt (see last issue), critical for import sampling as well.  And that’s while AB and MC still spending huge mktg $$ to support these brands.  HUSA will “spend more to market Heineken Light,” Nuno told the Times, but didn’t say how much.  Kantar Media reports HUSA spent just $127,000 on brand last year, down from $12-14 mil in 2009 and 2010, approx $5 mil in 2012 and 2013.  And that was huge dropoff from the $100 mil HUSA spent to establish brand during the 2006 thru 2008 period.                 

As more analysts look at potential deal between Diageo and AB InBev or SABMiller, more and more complications/ roadblocks seem to pop up, suggesting this chatter is driven more from outsiders than any compelling reasons for such a tie up.  Two key points of context.  First, for years financial analysts have suggested Diageo should shed its beer biz and focus on more profitable spirits.  But Diageo has always insisted beer is a critical part of its biz and “total beverage alcohol” culture.  In Africa especially, beer is key to Diageo’s route to market for spirits.  Secondly, Diageo’s stock has been in a bit of funk in recent years, convincing some that it must “do something.”  Hence the recent chatter about SABMiller-Diageo and a brief run up in its stock.  But it’s not clear that Diageo thinks that it must make a big move.  And others are starting to wonder.  A financial blogger in UK’s The Guardian today points out that Diageo’s share price has already “dropped back” as “analysts poured cold water on the idea of a merger with SABMiller.”  Noted that Societe Generale (SG) pointed out that a deal “is less attractive for SAB shareholders, antitrust issues in the US would very likely arise and the choice of top management might prove difficult.”  Tho SABMiller buying Diageo’s beer biz is “more attractive” option, again, Diageo “has been reluctant to consider a disposal” of its beer biz.  At same time, SG expects Diageo to struggle to continue expanding margins, given combo of foreign exchange issues and some specific US challenges, including weak on-premise pricing, softening growth in ultra-premium products and North American whiskeys competing more strongly vs Diageo’s vodkas. 

Meanwhile, ISI’s Robert Ottenstein did “very preliminary” dive into potential of ABI or SABMiller buying Diageo’s beer business. Such a deal “could make sense”; he favors ABI-Diageo.  But his analysis uncovers lotsa sticky issues that would not be easy to resolve.   Combination of Diageo’s sluggish stock performance, its sales and margin goals, relatively new CEO with his own ambitions and beer’s current “drag” on Diageo’s biz in US (DGUSA down half-mil bbls, 17% since 2008) and Western Europe are reasons Diageo would “contemplate” selling its beer biz, in Robert’s view.  ABI as purchaser “might make sense” since it would allow Diageo to focus on spirits, provide cash for acquisition and could “significantly enhance” its spirits route to mkt in Latin America, especially Brazil, given ABI’s strength there.  But would ABI really want to help drive (Diageo’s) spirits sales in Brazil?  On the other side, Diageo’s beer position in Africa could benefit ABI significantly there, “without going through the complexity and cost of a combination with SABMiller,” Robert writes.  But again this assumes some role of ABI distributing spirits there as well.  Meanwhile, tho Robert describes Guinness brand as “tired” in some regions, it would fit in ABI portfolio.  Then again, he also identifies a key “dis-synergy”: US distribution as AB distribs “would likely need to buy the rights to the brand from MillerCoors distributors.”  AB still has plenty of footprint issues with the InBev brands.  Tho Robert doesn’t think there’d be an antitrust issue with Guinness brand, he also acknowledges that this is “unclear.”  Recall, ABI had to divest Labatt brands in US which had smaller share of US biz than Diageo’s malt bev biz has now.  Robert also sees some other portfolio, strategic and financial benefits to an ABI-Diageo deal.   

What about SABMiller-Diageo?  Robert sees that as “less likely,” even tho it might be a “better fit” in the US as “just under 2/3 of MillerCoors distributors also sell Diageo brands.”  And MC has the excess capacity to brew Diageo’s malt bevs. Guinness would also give SABMiller “its first truly global brand,” Robert points out.  Africa poses different challenges, including potential “concentration issues” in several countries.  Then there’s SABMiller’s current relationship with Castel (beer) and Coke (soft drinks) in Africa, and again this assumes some role of SABMiller distributing spirits there and/or possibly in South America.  And ISI “had a hard time engaging SABMiller about any potential interest in distributing spirits except to say that the firm remains a beer and soda company” and that CEO Allan Clark “has increasingly highlighted soft drinks as an area of opportunity.”  Net-net: ABI’s position in Brazil and other countries in Latin America make it a “more compelling partner” for Diageo, in Robert’s view.  Yet, “it takes two to tango.”  And these stars would need to take some difficult steps to make the dance happen.

Two South Tex MC distribs, Capitol Bevs in Austin and Wright Dist in Bastrop, teamed up to buy 600,000-case Saunders Dist in La Grange in new partnership to do deal that’s expected close at end of Sep.  Saunders just outside of Austin sells Coors, craft and imports, while Wright sells Miller and other brands in territory.  So this deal for Saunders, tho small, is another MC consolidation.  And it’s in a growing area east of Austin. 

But the bigger news is the new entity formed to do this deal.  It’s called Capitol Wright Distributing, LLC, combining strengths of 7-mil-case Capitol with approx 3-mil case Wright.  For now it’s just for this deal.  But recall that Capitol, Coors, import and craft distrib in Austin, is building a 500,000 sq ft warehouse.  That breaks ground this fall and will be finished in 1 yr.  When that’s done, “there will be a complete merger” of Capitol Bev and Wright at that point in time, with both families staying in the biz, said Capitol vp/gm Dell Boothe. They will sell in 14-county area, including booming Austin and areas east and south.  

“It is with a heavy heart that I report to you that long time beer man and legendary WBDT member and distributor, Mike Hopkins Sr. passed away on July 14,” wrote current Wholesale Beer Dist of Tex prexy Tom Spilman to members.  “Mr. Hopkins was a legend at the State Capitol during his tenure as Executive Vice President at WBDT from 1976 until 1989 when he became a distributor in Brenham, TX,” added Tom. “Mike was a mentor to so many including yours truly,” said Tom. 

Indeed Mike was one of the most dynamic, forceful and sharpest of all state assn execs thruout the 80s, then he became an AB distrib in 1989.  Unsurprisingly, Mike built a very successful biz there too, now run by his son Mike Hopkins Jr.  “Mike was a brilliant lobbyist” said Beer Marketer’s INSIGHTS founder Jerry Steinman, “who played an important role in improving laws for beer wholesalers in Texas and making NBWA a much stronger association.”  Mike also was an early mentor to current BMI prexy Benj Steinman, teaching him the ropes about what was really going on in the beer biz.  His many invaluable lessons stay with us until this day.  We’ll miss him for many reasons, including his incredibly agile mind, his warmth and his can-do spirit.  

Industry changing fast but distribs’ assessments of supplier response to these changes remained relatively static in recent yrs, latest Tamarron Survey of distribs found.   The 279 responding distribs representing 38% of industry volume now have avg of 31 suppliers, up from 13 back in 2005.  They now carry 3.3X as many brands (208 vs 63) and 3.5X as many SKUs (929 vs 268).  And that’s while US volume virtually unchanged since 2005, down over 8 mil bbls since 2008 peak.  (Tamarron doesn’t ask/report about rev/profit trends.)  But most striking aspect of the latest Tamarron Survey of distribs’ assessments of their suppliers: virtually no change over last 5 yrs in new feature, that is distrib ratings on what Tamarron describes as 3 most important beer biz mega-trends: expanding brand allegiance, buying local and brand engagement. As a non-Tamarron consultant (Joe Thompson) likes say about why industry’s been down 4 of last 5 yrs: “what’s changed?”  Certainly not distrib rankings of their suppliers on these key matters. 

While consumers “losing loyalty” to brands and expanding their personal brand portfolios, suppliers need to manage their portfolios” to meet these trends, Tamarron points out about mega trend #1.  But avg score for suppliers of 3.10 in 2010 (3 is “good’) on building brand allegiance, via strong portfolio/brand/innovation strategies, setting SKU priorities (including discontinuations) and investing adequately, inched up to only 3.12 in 2014.  Similarly, on issue of buying local, scores for suppliers collaborating with distribs to “clarify and localize” strategies, POS, local plans and mkt expertise, plus local investment levels, avg score of 2.90 in 2010 rose to just 2.93 this yr.  Suppliers did a little better on 3d mega trend.  When it came to brand engagement – relevant selling info, training, product knowledge and brand activation – avg score rose from 2.88 to 2.99.  Still nuthin’ to shout about.  At same time, higher % of distribs now rated supplier relationship good to excellent (82%) compared to 75% in 2010.  And higher % of distribs now expect relationship to improve going forward.            

Despite all the added complexity and volume challenge, Tamarron reports other consistencies in distribs’ attitudes as well.  For example, “most distributor respondents see themselves as buyers” or holding pat over next 2-3 yrs and “very few see themselves as divesting, merging or sharing resources.”  Indeed, over half (53%) say they’re most likely to acquire during that period, 41% expect to stay the same and just 6% expect to sell, merge or share resources.

Boston Beer Continues to Get Highest Marks, Followed By Crown, MillerCoors  As noted, ABI distribs participate less in Tamarron survey than others.  Of 279 respondents in 2014 survey, 113 are AB (and that includes a bunch without core brands), 221 are MC, 182 Pabst, 180 HUSA, 170 Crown and 160 are Boston.  Even Sierra has more distrib-respondents than AB, at 115.   Over half of distribs (54%) sell below $50 mil, only about 12% sell $150 mil or more.  Avg volume sold by respondents: just below 4 mil cases in 2014, down from 2013, but about the same as in 2011-2012.  Boston Beer consistently rated highest among top suppliers, scoring ‘A’ or ‘B’ marks from 94% of distribs on relationship, from 89% on performance.  MC’s scores were 86%/71% respectively, Crown 82%/84%.  Those have been top 3-rated suppliers for last 5 yrs, tho “with a tremendous overall improvement, both MillerCoors and Crown tightened the gap between Boston and themselves” over this period, Tamarron points out.  For HUSA, Sierra, Mikes, New Belgium and Craft Brew Alliance, scores are in 60s and 70s.  AB percentages are only in the 20s.  Boston had highest overall score of 3.66, just ahead of MC’s 3.60.  Pabst had lowest (2.58) tho that was just 0.07 lower than AB’s.  Six of 10 suppliers improved in 2014.

On heels of MC decision to hold prices on premium light draft this fall, the deepening on-premise challenges for premium light beers a major finding of just published survey of 400 bars and restaurants across US by CLSA’s Caroline Levy.  All 3 premium light beers on tap in just 18% of accounts surveyed, while 31% had no premium light tap handles at all (many accounts that didn’t carry these brands on tap did have premium light bottles available).  And another 34% carried just 1 premium light on tap.

Interestingly, Bud Light still by far the most available draft, in 57% of accounts surveyed, compared to 36% for each of Miller Lite and Coors Light.  CLSA’s Caroline Levy called these levels “lower than expected as bars are diversifying their draft selections in an effort to meet expanding consumer tastes.”  Brand Bud draft available in just 18% of accounts.  So Bud much less available than Shock Top, which was on tap in almost half of bars (48%) or Blue Moon in over 1/3 of accounts (34%).  The other brand that was most available: Guinness Draught in 45% of accounts. 

“Universal appeal of Guinness, along with its lofty perch as a must-have tap handle for many bars nationwide” leads Caroline to speculate those attributes “could make Diageo’s beer business an interesting acquisition target for either BUD or SABMiller.” Since it’s only 0.5 share, sez Caroline, “an acquisition would likely not raise antitrust concerns.” Left out of this is that total Diageo Guinness USA is actually more like a 1.3 share, that there’s no indication Diageo is a seller or that ABI would be allowed to buy something so large.  Plus Guinness Draught itself is increasingly under pressure from craft stouts.  Still, this survey offers yet more evidence that premium lights face big uphill battle in key channel.  Constellation and Boston Beer are winning there too.

Overall, beer volume off 0.3% for 4 wks including Jul 4 holiday weekend, tho $$ up 1.9% in IRI multi-outlet + convenience data reported by Morgan Stanley.  That’s a slowdown.  For 12 wks, beer volume +1.1% in IRI scans, $$ +3.5%.  Meanwhile, wine and spirits continue to outperform.  Spirits volume up 2.5% for 4 wks, 4% for 12 and 52 wks, while $$ running up 4-6%.  Wine volume up 1.2% for 4 wks, 2-3% longer term while $$ up 4% for 4 wks, 5-6% for 12 and 52 weeks. 

Constellation Brands Beer Division and Boston Beer trends slowed a bit over 4-wk period thru Jul 6, but not much.  And those 2 cos were still big winners in beer.  CBB volume still up 8.1%, $$ up 10.8% thru holiday period, while Modelo Especial fired along at +23% (volume), Corona Extra +3%, Pacifico +10%.  Yet Corona Light flat and Negra Modelo down 2.1% for 4 wks.  Boston Beer boasted a 25%+ volume gain, 28%+ $$ increase, but not so much beer-driven this period.  Sam Seasonals up 8.5% and Boston got incremental pop from Rebel IPA, but Sam Lager -4.6% for 4 weeks.  

In battle of top 2, both soft over 4^th.  AB volume down 1.8% vs MC’s -2.5%.  But MC dollar sales eked out 0.1% gain while AB $$ -1.4%.  Four of AB’s top 5 brands down for 4 wks, tho Bud Light off just 0.2% and Mich Ultra +8%.  Bud softened: -5.6% vs just -1.7% for 52 wks.  Each of MC’s top brands down for 4 wks: Coors Light -3.5%, Lite -1.6%, High Life -3.9%. At HUSA, Dos Equis’ +20.4% drove overall volume gain of 3.7% for 4 wks, but Heineken edged up 1% too.  Tecate -9% tho and Newcastle Brown/Heineken Prem Light each down double digits. 

By picking and partnering with brands she supports and publicly taking down those she doesn’t, polarizing personality/blogger Vani Hari, the Food Babe, has built quite a brand and a biz, based on recent deep-dives from Ad Age and Charlotte Observer.  Recall Hari called on major US brewers to disclose ingredients on their websites (which they quickly did) last month.  But seeking transparency doesn’t always mean being completely transparent.  A piece of the blogger’s profit puzzle includes paid speaking gigs, natch, as well as Food Babe-branded eating guides sold on her site for about $18/month.  But “affiliate marketing” makes up an unknown portion of the brand’s earnings.  It works like this: Hari posts content about brands she supports, points readers to places they can buy those brands and gets a cut of the purchase.  Those cuts can be up to 20-30% depending on private agreements, according to Ad Age.  Her site is one of many affiliated with Amazon, as some links send readers-cum-shoppers directly to the online mega-store, the Observer reports.  And those branded eating guides also instruct users to consume “approved brands,” likely providing Hari with another slice.  Not exactly an objective, independent source, Hari has also come under the payroll of bigger brands, like Chik-fil-A, for consulting work after initially pushing for change in the co’s ingredient supply.

“Transparency” on Hari’s blog comes in the form of a short note at the end of posts that push affiliate brands.  But Hari wouldn’t comment to Ad Age about how many brands she has a relationship with or how many guides she’s sold.  She also wouldn’t explain why the Charlotte, NC-based blogger incorporated her Food Babe LLC in Delaware in August of 2011 after launching the blog just 4 months prior.  Her growing fan-base (well over 600K on Facebook, 63K+ on Twitter providing mounting website page-views) is often countered by a growing group of critics including scientists, dietitians and longtime food/drink advocates alike.  Many scientists point out that Hari’s argument are sometimes based in fact, but then get blown out of proportion for concerned followers to the point of being “misleading,” according to the Observer.  Meanwhile, her work telling people what to eat and drink replaces that of trained dietitians, sez Ad Age, and folks like longtime alc bev/beer industry critic Michele Simon of Eat Drink Politics are not impressed with the Babe’s “headline-grabbing quick wins” that may even pander to “very powerful industry players,” per the Observer.  Look out for a longer take on the implications of the Food Babe’s success on our blog later this week.