As expected, 4-wk period around later Easter holiday this yr boosted beer biz.  Volume up 2.2%, $$ sales up 4.6% in IRI’s multi-outlet plus c-store scans for 4 wks thru May 11, reported by Morgan Stanley.  For 12-weeks, volume +1.7%, $$ +4.4%.  Beer trend for 12 wks just behind wine’s +1.8%; spirits volume +4.3% for 12 wks.  Gotta note too that IRI scan trends have been more robust than overall beer biz all yr.  Keep in mind, on-premise still soft and AB/MC depletions down 2.6% and 3.4% respectively in Q1.   

Every top beer player posted gains for 4 wks: AB +0.7%, MC +0.2%, Crown +10.8%, HUSA +6.3% and Boston Beer +29.8%.  Boston’s beer trend nowhere near that strong as Lager +8% and Seasonals slowed to +4% (from up double digits previously). For 12 wks, AB eked out 0.3% gain, MC off just 0.2%, Crown and Boston rockin’ at +12.5% and +32% respectively.  HUSA +3.9%.

Look at 12-wk brand trends: Bud Light up 1.1% and Bud down just 1.8%.  Busch Light holding even and Mich Ultra up 11%.  Natty Light still -4%.  Miller Lite +1.2%, but Coors Light down nearly 2%.  High Life, Key Light and Icehouse each down low-mid-single digits.  Modelo Especial maintaining torrid 28% pace this period and Corona Extra up a strong 7%.  Corona Light up 2% (tho down 2% for 4 wks).  At HUSA, Dos Equis continues to drive the gain, +24%.  Heineken managed 0.7% increase.  But Tecate -4%, Newcastle -10%. 

While it looks like US beer biz down about 1% for 12 mos excluding AB’s Q1 inventory build,  running 12-mo gain for liquor in control states +1.1%, according to control state assn.  Adjusted figures for Apr show 2.3% gain, a slight pick-up.  Dollar sales for 12 mos up a healthy 3.9%, suggest near 3% increase in spirits mix/price. 

Long-time chief economist for Beer Inst, Lester Jones, is leaving BI but staying in beer.  He’ll take same position with NBWA, with whom he’s collaborated for years on industry economic impact studies and other issues.  He starts Jun 15.  Lester’s long been an invaluable resource for INSIGHTS and everyone else interested in US beer trends.  We missed his annual review of the numbers at last week’s BI mtg, not on agenda for 1^st time in memory.  And we’ll miss quoting his monthly estimates.  But we look forward to continuing our relationship and getting new insights via his work with beer wholesalers.  Lester will “track and analyze economic factors that impact the beer distribution industry and alcohol policy decisions at the federal, state and local levels,” sez NBWA, and “develop primary industry data including economic impact, tax impacts, sales and volume data.”  NBWA landed a good one and Lester landed well.    

Boston Beer will break $1 bil in revs by end of 2015 if it continues to hit or exceed average analyst estimates, according to Seeking Alpha take this morn. Current estimates put the co near $897 mil in revs in 2014 and $1.01 bil in 2014, with earnings per share jumping 22% to $6.34 this yr and another 19% to $7.57 next.  But SAM’s beaten and pushed earnings estimates consistently upwards.  Avg analyst estimate for full-yr 2014 just $739 mil late last July.  Boston actually hit that target in 2013 and current avg analyst estimate for 2014 is $150 higher.  Boston “beat analyst estimates by nearly $5 million,” in first qtr too, so “if this trend continues, you would think 2014 ends with more than $900 million easily,” perhaps as much as $925 mil, according to Seeking Alpha.  Looking further forward, Boston could pull in a billion in revs sometime in Q3 2015, “on a trailing 12 month basis.” Contributing to positive outlook: a “fine” balance sheet and consistent “reinvesting in the business” thru stock buyback program and capital expenditures.  The site’s “best case” scenario sees Boston hitting $1.1 bil in revs in 2015, pushing its market cap up around $3.6 bil.

Here we go again, and with gusto.  If this deal does indeed happen, it will have been the most-written about and analyzed in advance of any deal in beer industry history.  If not, then a whole lotta ink will have been spilled to not much purpose.  Yet this 75-page deep dive report by ISI's Robert Ottenstein (AB's former vp of investor relations) is significant as the most detailed and comprehensive rationale for AB InBev and SABMiller that has come across our desk. Basically, he sez it's good for everybody.

A combo of AB InBev and SABMiller has “strong industrial logic” and is a “win-win for the major players,” wrote Robert in intro to report he calls “Dreaming Big.”  Robert sees positives across the board for all involved, not only ABI (from synergies, size, growth, earnings) and SABMiller and its shareholders (who get approx 20% premium and minority shareholders, including Altria, could boost dividends by 60%).  But winners also include Molson Coors, which he assumes will buy rest of MillerCoors “at an attractive price” and Carlsberg (possibly Heineken), as purchasers of SABMiller’s eastern European business. Tho many points at least somewhat familiar, Robert has dug deep into the numbers and makes persuasive case.  Lotsa planning to be done of course, and he doesn’t expect bid very soon (certainly not before World Cup) but he puts a 30% chance on deal over next 12 mos, 50% by end of 2015.  As result of his analysis, Robert has upgraded TAP to “buy” and upped stock price targets from ABI/BUD, SAB and TAP.

Among signs Robert sees that suggest ABI preparing an offer: recent language in ABI documents that indicate importance of “external growth” and oppys for same, plus note that dividends could be restricted “temporarily” if there’s an acquisition so that ABI could “deleverage”; ABI has previously leveraged up to 5X debt to EBITDA for AB deal and ratio is less for ABI-SAB, he figures, under 4X including synergies; stock moves that make a share swap for SABMiller’s Latin American biz easier; recent movement of key atty to ABI’s “global M&A effort in NYC.”  Then too, it’s been 5 yrs since a big deal and ABI’s culture “demands significant new opportunities for its legion of high performers.”

Among details, Robert puts a purchase multiple of 14.4X SAB’s EBITDA, before synergies, in a combo cash/stock transaction worth approx $116 bil (in same range as others’ estimates), after selling off US/China bizzes.  Robert sees $2 bil synergies from deal.  Recall, early speculation had been of limited synergies from ABI-SAB, but Robert’s figure even higher than the $1.6 bil Stifel’s Mark Swartzberg put on ABI-SAB last fall.   Molson Coors would get rest of MC for approx 10X EBITDA, Robert assumes; CR Snow buys SAB’s 49% stake in China brewer for 14X EBITDA.  Possible complications include: 1) question whether ABI-SAB “too big to manage” (Robert does not think so); 2) potential for value “leakage” in sale of MC to TAP; 3) what happens in eastern Europe and SAB stake in Turkish brewer Efes; 4) soft drink relationships (Coke vs Pepsi) and; 5) potential stumbling block with Castel, SAB’s partner parts of Africa.  But in Robert’s view, “transaction is feasible, attractive and reasonably likely.”   

Following over 10 hours of deliberations over past 2 days, a St. Louis jury found in favor of Anheuser-Busch in sexual discrimination case brought by former exec Francine Katz.  Nine of 12 jurors sided with AB that Francine’s salary/compensation was not lower than other strategy committee members because of her gender.  Francine was seeking $14.4 mil payment from AB; $9.4 mil in wages she felt she was entitled to during her tenure with co and $5 mil in interest.    

Guinness is sold in 100 countries.  It is brewed in 50 countries (our May 9 edition said sold in 50 countries).   Also in May 9 article on Oreg, we reported that distrib Young’s gave $63K to side opposing privatization.  Turns out that was a regular contribution for distrib assn’s candidate PAC.  By the way, privatization side still in court trying to get a ballot title approved.  Still hasn’t happened and time’s running short because ballot title needed to start getting the 88,000 signatures necessary before Jul 3, distrib assn’s Paul Romain told Express.

The Beer INSIGHTS Spring Conference is coming up in a few short weeks,  June 9-10 at the Ritz Carlton in Chicago.  It’s sure to be another provocative and insightful event.  Click here to check out the full agenda. 

Our room block at the Ritz at a special discounted rate is only available for a few more days (until May 19^th). So if you’re planning to stay at the Ritz, get your reservations in soon.  Also, not many seats remain so reserve your spot soon.  Seating is limited.  The last couple of conferences have filled to capacity.  Note that on our innovations panel, Heineken USA vp of consumer market and intelligence Steve Tramposch will replace cmo Nuno Telles.  We look forward to seeing many of you in Chicago. 

Phase one of western PA Fuhrer Wholesale’s “ongoing $18 million physical expansion at the wholesaler’s south side campus…wraps up this week,” reported Pittsburgh Post-Gazette.  That includes a new office building adding 23k sq-ft of office space for the 280 employees of the $245-mil annual revs co.  “Phase two of the construction project is a 38,000 square-foot expansion of the wholesaler’s Anheuser Busch Warehouse,” expected to be “completed by Jan 1,” owner, Frank B. Fuhrer told paper.  Currently,“we’re pretty maxed out,” he said.  In last few mos, Fuhrer has partnered with 3 fairly sizable regional craft brewers – Deschutes in Apr, DuClaw in late Feb, and Left Hand Brewing this mo.  “Regional craft brands seem to do very well,” Frank told paper, adding “that’s where a lot of the consumer loyalty is.”  Indeed, Pennsy’s seen an onslaught of regional craft brewers entering (at least parts of) the state in 2014, including some pretty big players: Bell’s, Great Lakes, Coronado, DC Brau, and (nearly natl) Shiner Beer.

Then too, Fuhrer “still tangling” with MillerCoors, after losing initial battle in court for the right to carry some of MC’s above premium offerings.  (Fuhrer is one of biggest distribs in US with both AB and MC brands.)  “Suit claims that MillerCoors and related companies wanted the wholesaler to create a new, Coors-specific corporate entity in order to gain permission to sell MillerCoors’ new craft beers, including Batch 19,”  reminded the paper.  Fuhrer has sold Coors products in Pittsburgh area since 1988, and has been exclusive distributor in the area since 1997, tho currently Batch 19 and other MC above premium products are being carried by “smaller area wholesalers.”  Ultimately, “Fuhrer wants those distribution rights,” and “appeals court could issue a decision by the end of summer,” sez paper.  

Here are a few more odds and ends from BI mtg.  AB ceo Luiz Edmond shared great phrase, that “beer is the original social network.” He added: “Social media is an enabler for better beer occasions.”  As lowering or holding fed excise tax remains top priority, Luiz reminded that when beer taxes jumped 200% in Russia, volume subsequently fell 18%.  In Ukraine, when taxes boosted 180%, volume fell 17%.  MC ceo Tom Long returned to theme he’s sounded in past about improving beer per capita consumption.  As Americans reach “age of ascension” (21) “not enough are adopting beer.”  If the industry doesn’t “get them from [age] 21-25,” it won’t get them at 25-30.  And “if you don’t get those first 5 years, they drink half as much beer the next 10.”  Net-net: beer biz “needs to recapture a generation.”

What’s #1 on ceos’ wish lists?  HUSA’s Dolf van den Brink: “Netherlands winning the World Cup.”  (Luiz just patted Dolf’s back and shook his head.)  Luiz said “grow the industry.”  Constellation Brands Beer Division’s prexy Bill Hackett: “I’d like to see the industry unite, get our act together.”  Message from Congressional staffers and DC vet, said Bill, “couldn’t be any clearer: ‘get your act together before you walk in here.  Otherwise you are an open target.’”  Tom wants to “collectively ensure over the next 5 years to” make beer the “clearly preferred beverage of choice for 21-25 yr-olds.  If we do that” there will be “another decade of growth.”

Panel of DC insiders was remarkably skeptical of anything being accomplished by Congress over next few years, tho current debates, especially over tax policy, will set up eventual resolutions.  So brewers and their allies need to “stay vigilant and stay involved.”   Read some of their comments: 1) “there’s no momentum for tax reform right now”; 2) tax equalization is “absolutely something to worry about since it raises revenue.”  Congress will have a target and “anything that brings in revenue we’re throwing against the wall and see what sticks.”  There will be willingness to “hit a lot of industries to bring [tax] rates down.”   3) On prospects for major legislation during balance of this Congress, “a voice of optimism doesn’t look good right now….  Not a lot of optimism for the next Congress,” so “next real opportunity” for major legislation is 2017.  “Compromise is a negative word in DC right now.”  Kinda puts industry bickering in different context.  Lots more details in beer marketer’s INSIGHTS.