State legislative wheels are turning rapidly as South Carolina seemingly bends over backwards to accommodate potential $31 mil Stone brewery that could employ several hundred people.  And Stone considering the move but also weighing other options.  State senator Luke Rankin said South Carolina Commerce Secy “told him that Stone … would move to” SC “if the legislature passes a bill to accommodate its operation,” reported Myrtle Beach Sun News.  Stone official response favorable, but far from definitive: “While we applaud the legislation in South Carolina and any like it, this necessary element is but one of many factored into our decision-making,” said Stone spokeswoman. 

So what happened?  Late yesterday a South Carolina House-Senate conference committee “reached a compromise” with SC beer distribs, who dropped their request to deny retail sales of other beers/wines from a brewpub, according to Rep. Rankin.  “SC law currently allows brewpubs to sell on site if they produce no more than 2000 barrels of beer a year.  The proposed legislation would raise that limit to 500,000 barrels a year,” wrote Sun News.  Head of Economic Development Committee for Myrtle Beach, which hopes to attract Stone, said he heard that Stone “played a large role in drafting the bill” under consideration.  So lots of political maneuvering going on, with craft brewers playing increasingly influential role. This fast-tracked bill could make it thru process this week, Rankin told paper. He added that he “doesn’t believe” Commerce Secy “would have made the comment about the company locating” in SC “lightly.” Commerce officials met with Stone in Calif a little while back, but so did other states.  

While Beer Inst and Brewers Assn seek to hammer out bill that would give excise tax relief across the board, conservative columnist Reihan Salam wrote advocacy piece for Slate provocatively titled “Alcohol Taxes Should Be Tripled.”  Salam believes, like over 2/3 of Americans, according to recent Pew poll, that “alcohol is more harmful to society than marijuana.”  That’s “a reason to regulate alcohol more stringently than we regulate” pot.  “Big Liquor,” in his view, is really selling “intoxication” and focuses on “minority of people who drink the most.”  Salam suggests “the war on booze deserves a second chance” and favors “Prohibition Lite.”  Principally, that entails raising taxes “to a point just shy of where large numbers will start making moonshine in their bathtubs.”  (He seems unaware of the growing popularity of home brewing and other micro-manufacturing under the current laws.)  That means at least a tripling of the federal tax to 30 cents/drink.  Inflicting an additional $12/month on a 2-drink a day drinker, he insists, “seems like a laughably small price to pay to deter binge drinking.” 

Also part of Prohibition Lite: 1) “drinking licenses” that can be pulled after violations; 2) lowering the minimum drinking age to “socialize older teenagers into drinking responsibly”; 3) more social mktg campaigns like those embraced by ex-NYC mayor Bloomberg to reduce the smoking rate.  A curve ball: not warning underage against binge drinking as dangerous, but making it seem “mainstream and thus lame.”  Salam’s piece is fact-challenged on current situation in UK, linking alcohol to tobacco and trends in beer pricing. Then again, it’s an advocacy piece, and another example of how the new pot debate is re-igniting old alcohol policy debates.

 More evidence of healthy beer sales and continued trading up in Calif.  Total beer volume there up 1.8%, dollar sales up 5.8% in IRI Multi-channel + c-store data yr-to-date thru Apr 27.  But all that growth and more coming from high end segments (including super premium).  They are collectively up 11%, 1.77 mil cases to 17.9 mil thru Apr 27 (out of 42.8 mil total Calif cases tracked by IRI).  That’s up 3.5 share of volume to 42. But $$ is where high end really shines. Calif high end $$ sales gained 3.8 share, zooming thru 50, to a dominant 53.6. 

Imports and craft together accounted for about 75% of all high end growth.  Imports now over 30 share of $$ and over 25 share of volume; craft now 11 share of $$ and 7.2 share of volume.  Cider providing a solid pop too, volume up 157% and $$ up 160%.  But still only 1 share of $$.  Superpremium slowed to mid-to-high single digit growth, and actually losing slight share of volume.  Meanwhile domestic premium has slipped 2.7 share of $$ to just 38.4.  And sub premium category is nearly non-existent in Calif as it dropped 8% of both volume and $$ sales thru Apr 27; now a mere 7.6 share of volume, 5.1 share of $$.     

Total US beer shipments up 389,000 bbls, 0.6% in 50 states + DC thru Apr, reported Beer Inst’s Lester Jones yesterday.  And Calif and Fla continue to drive that bus; those 2 states up the same # of bbls as total US.  Calif up 269,000 bbls, 3.7% and Fla up 120,000 bbls, 2.7%.  (Editor’s note: Calif total beer biz relatively robust in early 2014, according to various reports, especially for craft & Constellation.)  But recall that AB shipped almost 5 points more beer than it depleted in 1^st qtr.  Don’t know how much of that it made up in Apr, but likely that these numbers still reflect as much as 3/4 of a million bbls of extra inventory for largest brewer, which has almost half the biz. So interesting to note that several small to mid-sized states showing outsized shipments gains of 4-6% thru Apr:  Ariz up 85,000 bbls; 6%, Oreg up 33,000 bbls, 4%; HI up 20,000 bbls, 6%; NM up 20,000 bbls, 4%; and Neb up 22,000 bbls, 5%.  Among big states not doing as well so far in 2014: Tex down 23,000 bbls, 0.4%, Ill down 40,000 bbls, 1.6% and Oh down 108,000 bbls, 4.3%. 

Beer $$ sales up 3.3% for 4 weeks thru 5/10 in Nielsen c-store data, wrote Judy Hong of Goldman Sachs in brief update.  That’s far better than 1.2% growth for 52 weeks, “partly benefitting from the presence of Easter (absent in the year-ago compare)” but “both periods also include Cinco de Mayo.”  And once again “STZ [Constellation Brands Beer Division] led the category.”   Up 21.3% for 4 weeks in c-stores “with robust growth on both the volume and the price/mix lines.”  Heineken USA also had “strong result,” up 7% “driven by Dos Equis.”  And so “these figures imply solid Cinco de Mayo holiday growth for Mexican imports” in largest beer channel.  Then too, Boston Beer $$ sales, excluding cider & tea, grew a very similar 20.9% on 18.1% volume increase.  MillerCoors $$ sales up 1.6% (on good price/mix), AB up 0.7%.  Both lost share.  Crown up 1.2 share of $$ in period, while AB down 1.5 and MC down 0.4, according to Judy (figures are rounded).  

Second-largest global brewer reported 1% revenue decline to $26.7 bil, and 1% gains in both lager volume (to 208.6 mil bbls) and EBITA (operating earnings before interest, tax, exceptional items and amortization) to $6.5 bil for fiscal yr thru Mar 31, 2014.  Those reported figures knocked back by “depreciation of key currencies against the US dollar.”  On organic constant currency basis, revs +3% and EBITA showed healthier 7% growth with margin expansion of 90 basis points.  Rev/bbl increased 2% across the board while cost of goods sold up low single-digits/bbl, at the “low end of expectations.”  Margins expanded by 100 basis pts or more in 4 of 5 regions, but took a 300-pt hit in Europe.  SABMiller doesn’t talk much about EBITDA, but that was also up about 1% to $6.6 bil and its EBITDA margin was just over 31, compared to AB InBev’s 39.8 for calendar 2013. 

SABMiller concluded a big cost savings initiative in fiscal 2014, booking incremental benefits of $175 mil for the yr and cumulative annual benefits of $496 mil/yr, about 10% more than originally envisioned when the program was launched in 2009.  CFO Jamie Wilson announced a new cost savings program that SABMiller expects will save an additional $500 mil/yr by Mar 2018.  While earlier savings were generated on a country-by-country basis, the current program will focus on more global oppys, Jamie said.   

SABMiller volume remains notably balanced on geographic basis.  Asia Pacific is its biggest region, accounting for 29% of volume.  It does 16-19% of its volume each in Latin America, Europe, North America and Africa. 

But over 1/3 of EBITA comes from Latin America and another 1/3 from Africa.  Europe, North America and Asia Pacific each account for 11-13% of EBITA.

Looking ahead, ceo Alan Clark said SABMiller expects trading conditions to “remain broadly unchanged” in fiscal 2015, “with growth continuing to be driven by our developing markets.”  He also expects low single-digit increases in commodity costs and currency movements to again impact results.  Jamie did not talk about specific M&A oppys, but with debt-to-EBITDA ratio down to 2.2 (same as ABI’s), SABMiller prepared to move if one arises.   

Domestic brewers taxpaid shipments eked out 60,000-bbl, 0.4% gain in Apr, estimates Lester Jones at Beer Inst.  That boosted yr-to-date increase to 324,000 bbls, 0.6%.  But recall imports down 230,000 bbls, 3.4% in Q1.  So known gain so far YTD just 94,000 bbls, 0.1%, and that’s including big AB inventory boost.