MolsonCoors jumped 4% to very near a 52 week high this morn, and still up 3% at presstime.  TAP had “big beat” of analyst estimates with “better expense control” and “lower taxes,” wrote Judy Hong of Goldman Sachs. Underlying EBITDA jumped 20% to $251 mil.  Yet MillerCoors’ STRs down 3.4%, MolsonCoors also down 5.7% in Canada (compared to 4% drop for ABI).  At least European volume up 5.6%. TAP’s intl biz unit lost $3 mil pretax for the qtr, better than the $5 mil it lost last yr. Stifel’s Marc Swartzberg “encouraged by” 1^st qtr EBITDA increase “and management’s emerging capital discipline,” and also continues to “see upside from improving capital allocation plus unreflected upside if ABI buys SABMiller.”  

MC ceo Tom Long pointed again to tremendous “churn” caused by new craft and other brands, especially on-premise, during conference call earlier today.  And reduced availability of premium lights, especially on draft, is key to segment’s “softness,” he said.  MC data shows that when premium lights lose tap handles and available only in bottles, volume takes 50% hit.  Its “Building with Beer” program is attempt to explain to retailers premium light’s much better velocity/profit story vs specialty beers, to get “more balance” on premise.  Getting premium light tap handles back is “really important to the recovery” of light beer segment, said Tom.  Given churn and despite MC’s own contributions to it, underlying trend hasn’t changed; MC down low single digits in early Q2, CFO Tracey Joubert said.  That’s despite better than expected distribution on Miller Fortune: 350K points of distribution in 3 wks, 80%+  in grocery/c-stores and 15% on premise, a “record for our system,” according to Ed McBrien.    

Other news: Coors Light Summer Brew now in mkt and will “sell out quickly,” said Tom.  He expects Summer Brew to “bring new energy” to Coors Light this summer (new ads coming too) and attract women/Latinos to the brand.  Coors Banquet will get one of its “biggest media plans ever” this yr, a 25% increase, including natl tv all year.  Redd’s draws 40% of volume from white wine/vodka, said Tom.  “We have work to do” on Blue Moon seasonals, he acknowledged, and MC craft biz “not immune to the churn” in specialty beers.  Still, Tenth and Blake’s Tom Cardella said mktg plans for balance of year on Blue Moon and Leiny are “extremely strong” and he’s confident 10^th & B biz will “strengthen.”  Rev per bbl increase of 3.3% in Q1 basically evenly split between improved mix and pricing, Tracey said, tho she would not break down reduction of mktg, gen and admin costs to separate mktg spend trend and “employee-related expenses.”  She did say mktg spend will increase over the course of the year.

US beer “industry performed better in April, driven in part by the timing of Easter,” said ABI ceo Brito on conference call this morn.  But he didn’t give AB trend (MC still down low singles -- see below).   AB’s been getting lower rev per bbl increase last couple of qtrs and increase in Q1 only half of last yr’s 4% increase.  Why 2 point difference?  About 1 point brand mix and 1 point package mix.  Last yr, AB got 1.5 points of pricing from trading up to higher priced brands, this year only half a point.  And AB’s 25 oz can had “huge” effect, “dilutive” at net rev per bbl line, tho “accretive” in gross profits.  So less mix shift to high end meant 1 point less rev per bbl.  And other 1 point “mostly package mix” and that was “mostly” 25 oz can.  Some “very good signs” that new Bud Light campaign “has lots of mileage,” said Brito, noting that it’s “really designed for the digital space.” Bud Light will get more support this summer with new executions as AB smoothing out spending to give it “more stable support” throughout yr.  That’s “something new,” said Brito.  

Despite easy comp and big AB inventory build, looks like US shipments barely up in Q1, less than 50K bbls, 0.1%.  Domestic brewers’ taxpaid shipments in Mar off 192,000 bbls, 1.3%, estimates Lester Jones at Beer Inst, giving back about 40% of Jan-Feb increase.  So Q1 taxpaids up 264,000 bbls, 0.6%.  But, as we reported yesterday, imports down 231,000 bbls Jan-Mar, so pretty much a wash for Q1.  Comp for Q2 pretty easy too: US biz off 1.1 mil bbls, 2% in Q2 last yr, but AB will be reducing inventories in 2d qtr, so expect its shipments to decline.  

MC continues to benefit from it growth in above premium, indeed, more so than AB.  While MC’s volume softer than AB’s in Q1 – shipments down 3%, STRs down 3.4% – it posted 8.4% increase in operating income and operating margin expanded more than full point.  MC’s rev per bbl outpaced AB’s, +3.3% on non-contract volume.

MC volume trends all over the lot.  Best news in above premium, as it has been, but even some clouds there.  Above premium STRs up in high teens “outpacing” the industry, MC said.  Leinenkugel portfolio up double-digits and Blue Moon’s base Belgian White up low-singles, but BM seasonals down  double-digits, as were Henry Weinhard, Killian’s and Batch 19.  So 10^th & Blake off mid-singles.  Yet Fortune added incremental volume (0.3 share in Nielsen) and Redd’s is rockin’, doubling volume vs Q1 last yr.  Coors Light and Miller Lite each down mid-single digits.  Banquet continued mid-single digit growth.  MC didn’t give trends for Genuine Draft or its below premium volume, but not likely good news there.

Key to better financials: while rev/bbl +3.3%, cost of goods sold/bbl kept in check at +3.8% and MC cut mktg, gen & admin expenses by $27 mil, 6.4%.  (That’s about $1 per bbl, 3.4% we figure.).  So that boosted operating income $23 mil to just below $300 mil and widened margin to 16.6.               

AB shipments jumped a half mil bbls, 2.1% in 1^st qtr, ABI reported “due to contingency planning in advance of labor negotiations.”  Depletions down 2.6%, almost a point better than MillerCoors (-3.4%), even tho both IRI and Nielsen show AB trends about same as MC’s.  That’s still no great shakes considering really easy comps. AB going against 4% depletions and 5% shipments decline in last yr’s 1^st qtr. 

Nearly 5 point swing between shipments and depletions represents about 1 mil bbls of extra inventory in system at end of Q1.  AB gets about $148 per bbl, according to ABI’s numbers.  That means about $150 mil in extra revs, and if you apply ABI’s 40% US EBITDA margin, that also means almost $60 mil in extra EBITDA for the qtr.  That’s difference maker for ABI’s US biz.  US EBITDA up $25 mil, 1.8% in 1^st qtr overall to $1.377 bil.  But US margin contracted by 91 basis points to 40.3% “driven mainly by the timing of our sales and marketing investments.”   No US number given on sales/mktg investments, but North American sales and mktg expenses up $77 mil, 17% in 1^st qtr (while MC’s down—see below).  Meanwhile, AB’s US rev per bbl up 1.9%, including a brand mix contribution of approx 50 basis points, noted ABI, compared to 150 bps in 1^st qtr 2013. 

ABI reports total US industry depletions down estimated 1.7% in Q1, but still sez it “expects an improvement in the trend in US industry volumes” in 2014.  Not in AB’s 2d qtr shipments tho.  “We expect STWs to decline in” 2d qtr “as we make adjustments to inventory levels.”  Bud Light family share “was marginally ahead,” said ABI, with Bud Light STRs down “low single digits” in the qtr.  Ritas gained 25 basis points of share in qtr (before Straw-Ber-Rita lapped intro numbers) and high end also up 20 basis points.  Bud down approx 25 bps of share. And overall, AB figures it lost 0.4 share of volume in qtr.

Globally ABI’s  EBITDA jumped over $400 mil, 11% on organic basis to $3.9 bil.  Volume gained 4.5%, led by double digit gain in Brazil (weather, World Cup) and 9% gain in China.  

A glimpse of what once was at AB in Francine Katz trial in recent days as 3 prior ceos testified, including August Busch III, who was inimitably himself and brought back memories of what some would call AB’s glory years.  “In sometimes bristling” testimony, jurors and observers saw the strong personality of former chmn/ceo August Busch III rise to surface, per St Louis Post-Dispatch.  Other Twitter reports noted jurors were “getting a personal lesson from a business giant,” while another likened his responses to infamous “You can’t handle the truth” scene in “A Few Good Men.”  During testimony, Aug III praised work of Francine Katz and insisted her salary was based on market rate and not on her gender.  “If anything we wanted more women” in senior positions, he claimed.  Aug III said big pay disparity between Francine and her predecessor John Jacob was because Jacob was also his confidant.  “He could have named his own salary,” he was that valuable, Aug III insisted.  During testimony last Fri, Aug III commented that he had reservations about former prexy Dave Peacock, and when asked if it was an error for his son Aug IV to name Peacock prexy, Aug III responded, “That is correct,” per Post-Dispatch Twitter feed from courtroom.  Former ceo Pat Stokes took stand yesterday and this morning and also insisted Francine’s pay and compensation was based solely on comparable market rates for other PR execs. 

Questioning former ceo Aug IV this afternoon, Francine’s atty introduced docs that show market rates for 6 male execs ewho were not on strategy comm were higher than Francine’s. Aug IV praised her work at handling tough questions from activist groups at shareholders mtg and said he sought her advice during strategy meetings, yet he did not think she deserved title of chief communications officer that Jacob had when he left co. During trial yesterday, a compensation expert testifying for Francine said AB “inflated” exec titles with “global” and “group” to justify high salaries.  In his analysis, Francine deserved pay in $400-450K range annually, about $100K more than she was paid.  

At Berkshire Hathaway’s annual shareholder conference in Omaha this past weekend, Warren Buffett “took a fair amount of time to praise” 3G Capital, his partners in Heinz (and key shareholders in ABI) and said he would like to work on “another big deal” with them, reported NY Times. “To learn more, Mr. Buffett recommended that investors read ‘Dream Big,’ a book about 3G written by Cristiane Correa,” said Times. Book sold 200,000 copies in Brazil, and author sold it in exhibition hall of Berkshire meeting, selling all 300 copies she had there.

“He is sort of in love with them,” author Cristiane told NY Times, regarding Buffett’s admiration for group that built InBev and took over AB.  “He was impressed” with how they pulled off AB deal and added that Buffett himself was surprised 3G found “as much room for improvement as they did” at AB.  Though there “aren’t many things in common” between BH and 3G, “there are between Jorge Lemann and Buffett,” who besides being “very modest, simple guys” are “both very rich” and “want to do big things,” she noted.  Asked about what she sees next for 3G, Cristiane said in Brazil “there’s been lots of talk about Coke or Pepsi.”  The Heinz deal was not expected and she noted “I think they can come up with something no one’s thinking of.”  She is confident “they’re going to do another big deal. I would bet on that, that something big’s going to happen.” 

Book has wildly admiring intro by noted biz writer Jim Collins of “Good to Great” fame, who sez their story “stands in the same league as great business visionaries like Walt Disney, Henry Ford, Sam Walton, Akio Morita and Steve Jobs.”  Again, a pretty striking disconnect between comments like this and distrib referenced above, who also talked about how such logistics issues never happened under old AB. 

“We expect inventory levels to return to 2013 levels by the end of June,” logistics veep Pablo Gonzalez wrote distribs, following Teamster agreement last week.  “This will imply inventory reductions through May and June,” he added.  Expected ranges in May are 21-23 days, Jun 19-21 days and July 18-20 days.  On lagers, minimum of 8 days and new max of 28 days (“range will take effect at the end of May”).  In response, one sizable AB distrib told INSIGHTS that AB still force-shipping product of brands not ordered or forecast, and his inventories won’t fully come down for mos. ABI has taken “one of the best logistics companies in the world and turned it into a laughingstock,” he added.  Many distribs have similar complaints tho that overall assessment harsher than many and it’s also in striking contrast to the way those in financial community view ABI (read on).  

Modelo Especial  just hit a new milestone in scan data. It is #2  import yr-to-date by about 10,000 cases; 6.395 mil to 6.386 mil scanned cases.  Volume passed Heineken in IRI multi-channel + c-store for 1^st time (Heineken $$ still ahead). Even with slightly slower growth in latest 4 weeks, Modelo volume up 25%, +0.3 share YTD thru Apr 20; $$ up 30%,  +0.4 share. 

Constellation’s Top Brands Each Up Double Digits Plus thru Apr; HUSA’s Mexican Brands Up Big Too Constellation Brands beer division’s impressive overall growth pace continued too; $$ up 17.5%, +0.7 share of total beer yr-to-date.  In fact, each of co’s top brands’ (5 in top 100) $$ sales outpacing 2013 trends significantly.  All up double digits plus YTD with exception of Corona Light (+7.5%): Corona Extra (+12%), Modelo (+30%), Pacifico (+14%), Negra Modelo (+10.5%).  That helped add up to total Mexican imports $$ up 17%, +4.2 share to 60.1 of total imports thru Apr 20.  Heineken USA’s Mexican brands also still up strong;  led by Dos Equis $$ +29%, +0.2 share.  And Tecate Light (+60%) has caught fire, continuing its 50% plus pace it enjoyed throughout 2013 which has more than offset slight decline of Tecate (-1%). 

Constellation Rang Closing Bell for Cinco; Stock Gains; Deleveraging; Growth Oppys  For Cinco de Mayo yesterday, Constellation Brands rang closing bell on NY stock exchange for 4^th yr in row and cfo  Bob Ryder told Bloomberg Radio that’s because with Cinco, “we kick off the summer selling season for beer,” adding modestly, “we tend to own Cinco.” Its stock price (STZ) up 16% this yr and 4x bigger than before “enormous game changer” of a deal to become “kind of masters of our own destiny” by owning Piedras Negras, said Bob.  “We had to double our debt load,” Bob acknowledged, “but that didn’t worry us at all.”  STZ gets about 50% return on invested capital in beer biz, which “generates tremendous cash flow.”  While Constellation still above 5x debt to EBITDA leverage, goal is to get to 3-4x, which “can happen in the next 18 months,” said Bob.  At that point, if co can “commit to staying in that leverage ratio,” then rating agencies should be “positively inclined” to “making us an investment grade credit.”  Meanwhile, growth oppys in beer abound. With Hispanic population growing 2-3% a yr, that’s “natural growth in our portfolio” plus draft, cans, distribution oppys, brand building, there are growth oppys “as far as the eye can see.”