Chef/restaurateur Mario Batali and biz partners ran afoul of NY state 3-tier laws that separate manufacturers/ importers and retailers of wine.  He settled with state liquor authority for hefty $500K fine and 6-mo closing of his wine market at Eataly on Fifth Ave. Turns out “the liquor authority charged that Mr. Batali lied or ‘suppressed information’ about the wholesale and manufacturing interests of his business partners,” Crain’s NY Business reported, offenses which could have led to losing the store license.  Instead, they’ll pay the fine, close the store for 6 mos and one of partners will no longer be named on the store license.  Recall, Dogfish Head also makes beer on roof of Eataly; that biz unaffected, as are Batali and his partners’ other restaurants in NY and elsewhere.         

Perhaps the long forecast blend of beer and soft drink distribution is beginning in earnest in 2014.  In the last 2 months, 3 of the top 30 beer distribs in US, Reyes Beverage Group, Phoenix-Beehive in NY and Crescent Crown in New Orleans have each added significantly to their non-alc holdings.  First, RBG announced it will start selling Coke in greater Chi area in early 2014, tho it still will keep beer and soft drinks separate.  Then came news that Phoenix-Beehive (largest Heineken, Guinness and Brooklyn distrib) will start selling Dr Pepper Seven Up products in part of its territory, outside the city (as reported in our Beverage Business Insights).  And late last week, Dr Pepper Snapple announced that it will close a distribution center in La and begin selling much of its lineup thru a couple of beer distribs, MC megadistrib Crescent Crown in New Orleans as well as Baton Rouge Beer, Miller/Heineken distrib in Baton Rouge, reported Baton Rouge Advocate.  Taken together, these developments in such short order seem to signify some shift in the wind. 

We recently visited 2 of Calif’s more esteemed and fastest rising craft breweries, Firestone Walker and Ballast Point.  They are each growing rapidly with an intense focus on their local mkts and expanding their breweries like crazy in a headlong onrush to meet demand.  The Future Is Now!  “These are the good old days,” sez Ballast Point’s sales and mktg veep Earl Kight. Firestone Walker is up another 30+% yr-to-date and expects to hit 200,000 bbls in 2014, up around 50,000 bbls.  And Ballast Point up around 70% yr-to-date, but because of capacity constraints (new brewery coming on line in 2d half), “only” expects to grow more than 40,000 bbls, 50% or so, to between 125-130,000 bbls.  So the two combined will grow 90-95,000 bbls in 2014.  Don’t forget, Lagunitas is looking for 50% growth, which would be an additional 200K bbls, and its Chi brewery coming onstream, plus Sierra hopes to grow double digits in 2014 (tho it started yr more slowly, it’s picking up now). That’s another 100K with its state-of-the-art 2d facility near Asheville already shipping beer.  Add it up and you get about 400,000 bbls of growth expected by just a handful of leading Calif craft brewers that were only about 10% of segment in 2013.  Thru the first qtr of 2014, it looks like if anything, craft growth and the craft phenom is accelerating yet again.  More details in Craft Brew News. 

Cans continued to build share of package mix in US, data from Lester Jones at Beer Inst shows.  Tho can volume down slightly in 2013 (-0.4%), package picked up another 0.4 share to 54.7.  That’s up from 48 share in 2006, last time can share had dipped.  Tho industry down 8.4 mil bbls, since 2008 peak, can biz expanded by almost 7 mil bbls during same five yrs.  Meanwhile, bottle biz down for 6^th straight yr.  Off 15.2 mil bbls, 17.5% since 2008.  Bottles slipped from almost 41 share that yr to 35.1 in 2013. 

Draft had been on pretty good run, up 3 straight yrs before 2013 and 6 of previous 7.  But draft dipped 2.1% in 2013, Lester estimates, and lost 0.1 share to an even 10.  That’s up a half point from 2008 as draft volume last yr about 300K bbls, 1.6% higher than in 2008.  Lookin’ at domestic/import breakouts, cans have even higher share of domestic biz, 60.1%, Lester estimates, compared to just 20.5% for imports.  Bottles are under 30 share of domestic beer (29.6) while over 70% of imports sold in bottles.  Draft slightly over 10 share of domestic biz just under 9 share of imports. Per usual tons of variation between states.  Cans as high as 71.9 share in Ark, mid-60s in Ala, Ida, Ia, Kans, and WVa.  Bottles near 50 share in HI, 44.7 in Conn, 44 in NJ.  Colo has highest draft share at 18.4, Pennsy at 17.5, DC at 17.4, Oreg and Minn each 15+.  Plastic still rare, just 0.2 share.

Bud half bbls down to $59.99 a picture showed, in what source said was AB’s 2d largest account behind Fenway.  That compared to $84.99 for Yuengling.  Meanwhile, in another major account, Kappy’s, Yuengling priced at $17.99 per case, while competitive premium and premium light 30 packs priced  at $21.99, priced slightly lower per 12 oz unit.   Yuengling is meeting its expectations in most of state, we hear.  But Yuengling coo Dave Casinelli decried some competitive tactics: “What we’re witnessing in Mass is at a level we’ve never seen anywhere else in terms of competitive response.”

Exceptionally bullish report on Constellation this morn as RBC Capital Mkts raised its target price on Constellation stock to $100 (stock currently at $85, up 2% today), “based on higher assumptions for the beer business,” wrote analyst Nik Modi. “We now expect 10%+ annual volume growth over the next 3 years…. Modelo Especial can continue its torrid +20% annual growth for multiple  years,” said Nick.  (Editor’s note: Modelo Especial up 18% in 2013.)  “Its velocity is better than other brands that have far better distribution,” added Nick, “which justifies incremental shelf space in coming years.”  He also cited “favorable demographics and increased marketing spend” as playing a “role in our upwardly revised assumptions.”  Modelo Especial almost 29% of Constellation Brands Beer Division volume last yr.  

Key to Modelo Especial’s upside in Nick’s view: Modelo Especial velocity per point of distribution is increasing, and already equal to or greater than Heineken’s yet it is much less widely distributed. Especial available in 47%  of outlets, compared to 70% for Heineken, 40% of c-stores, compared to 80% for Heineken.  These “velocity led shelf space gains” will lead to much bigger volume, sez Nick.  “With its growth profile and velocity, we believe retailers will be at a competitive disadvantage if they do not give more shelf space and points of distribution to Modelo Especial.” It is much more fully distributed in Pacific region and still “shows the best distribution adjusted growth…. In fact growth here has been better than the national trends.”

But Nik goes further, estimating that Corona “can grow 5% per year as the brand continues to ride favorable demographics.” Corona (57% of volume) is growing even faster than that for last several mos in scan data, but the last yr it got 5% growth was in the mid-2000s.  And it is 12% below its peak.  Corona Light “can grow 10%,” according to Nick “as the brand begins capturing on-premise opportunity.” And both Pacifico and Negra Modelo “are showing early signs of Modelo-Especial-like emergence (increasing sales per point of distribution).”  Nik believes that they can grow 20% or more. Some of his projections seem a bit rich given current trends, but Constellation Brands beer division grew STRs 10% in qtr thru Nov.  And reportedly up double digits in Jan-Feb too.  So track record is at or very near double digit growth for last 6 mos.  In sum, “with sustainable double digit volume growth, we believe Constellation’s beer business deserves a multiple closer to Craft beer players,” concluded Nik.  

Following our recap of recent good news for AB earlier this week, including labor agreement, one sizable distrib wrote: “Meanwhile, wholesalers have 50-60 days of inventory on their floors ‘just in case.’”  Is this widespread, all in or just on certain brands?  ? Send comments to This email address is being protected from spambots. You need JavaScript enabled to view it.This email address is being protected from spambots. You need JavaScript enabled to view it.

Just days after AB announced that it had reached agreement with Teamsters in US, seemingly sans brewery closure, ABI globally announced it would shut its 3d plant in 2 yrs in Russia as “increased regulation hurt sales,” reported Reuters. Beer down more than 25% in Russia since 2008 (AB volume down about 10% in US in same time period). AB’s statement referred to “context of a general decline due to increased tax and administrative burden.... These actions are aimed at improving the efficiency of production, logistics and cost management.” 

Phusion Projects’ Four Loko made legal headlines once again as it settled complaint with San Fran city atty and 20 state attorneys general to curb its marketing efforts to ensure they don’t appeal to minors.  Phusion insisted it broke no laws and “disagrees” with alleged violations but agreed to settlement as “a practical way to move forward and an opportunity to highlight our continued commitment to ensuring that our products are consumed safely and responsibly,” by 21+ yr-old consumers, said prexy Jim Sloan.  Phusion agreed to shell out $400,000 payment to 20 state AGs and San Fran atty and to list of restrictions, all aimed at preventing underage consumers from drinking the product. Phusion agreed to: only use actors age 25+ and who don’t appear to be under 21; not promote on college grounds, or use logos, mascots or names of any college/ university or student organizations; not promote to distribs, retailers or consumers mixing Four Loko with caffeinated bevs.  Meanwhile, Phusion still in court battles in liability suits over alleged deaths from consumers drinking Four Loko, and with insurance co’s over whether they’ll cover for any potential damages.  Latest numbers ain’t so hot either.  Phusion volume off 10% for 52 wks thru Jan 26, IRI scans show, tho improved to -8% for 13 wks.  

SoCal  Paulaner late yesterday announced biz agreement with Harbor Dist (a unit of Reyes Beverage Group) “to carry its full portfolio of beers throughout Southern California,” including LA, San Diego “and their surrounding communities.” But while RBG in much of SoCal, it is not known to sell “throughout.”  Asked about this RBG had no further comment.