Get all the craft data and analysis you need in one handy volume with Craft Brew Guide.  This easy-to-use reference guide will be packed with a 10-yr review of craft shipments and share trends, a 10-yr review of each of the top 30 craft players, key on-premise and off premise craft trends for top brewers and brands, with new in-depth cuts of the data in several major metro mkts.  It will also include in-depth profiles of top craft brewers, key financial data of publicly available craft brewers, big brewers efforts at selling in craft space, plus exclusive analysis of craft M&A so far, examining key aspects of deals done and their place in overall beer biz.  Available digitally or in a portable 6”x9” volume, Craft Brew Guide gives you the best data and analysis on craft that you can find.  It’s published by Beer Marketer’s INSIGHTS, the leading source for beer industry info and publisher of Craft Brew News.  Click here for more information and to be the first to order this one-of-a-kind book, available April 4.

______________________________________________________________________________________

Final figures will be announced next week, but Boston Beer had a great year as sales, stock price zoomed.  So no surprise that Board granted significant bonuses to top execs for 2013 performance.  Prexy/ceo Martin Roper awarded $770K, 72% of potential.  Chairman Jim Koch got $316K, 80% of his possible bonus.  (Boston uses wide spectrum of measures to determine bonus, and they’re different for different execs, from depletions goals to service improvements, freshness and gross profits.)  Cfo Bill Urich and sales veep John Geist each got over 90% of their goals.  Bill picked up bonus of $200K, John got $188K, including “discretionary” $25K.  Finally, operations veep Thomas Lance awarded $146K.  At the same time, board set 2014 salaries for same execs.  Raises ranged from 0 (Jim) to 7% (John).  Martin’s salary bumped 3.2% to $764K, Jim will get same $395K and Bill got 4.9% raise to $428K.  John will get salary same as Bill with the 7% bump.  Thomas’s salary up 2.5% to $367K. 

These bonuses on top of some recent profitable stock purchasing/selling from top Boston execs, as we reported in our Craft Brew News sister publication Feb 7. For example, from Jan 13 thru Feb 4, in 16 trades, CEO Martin exercised options on 151K shares, acquiring 10K shares per day at avg price of $146.50 and selling 10K shares/day on open market at avg price of $215 or so.  Difference between his option price to buy and sale prices added up to $10.4 mil for Martin.  Then too, Chairman Jim swapped out 25K shares of his Class B stock for 25K shares of Class A back in mid-Nov.  Over next 2 mos, Jim sold approx 11K of those shares for avg price of about $237 per, for $2.6 mil.  And he still owned more A shares in mid-Jan than in mid-Nov (32.5K vs 20K).        

Distrib notes: Andrews Dist in Tex sold 27.7 mil cases, according to its website.  So when deal for Coors Dist of Fort Worth closes (within 60 days, said Fort Worth Star Telegram), Andrews will be close to 33 mil cases on annualized basis.  That’s about 27% of non-AB volume in big Tex.  Andrews Dist has more than 1100 employees and Coors Dist has about 210 employees.  Andrews also 680,000 sq feet of warehouse space in 4 facilities, before this deal. Andrews may build new facility in Fort Worth, said Star Telegram.  It bought 33 acres in Dec 2012 and could bring 2 Fort Worth facilities (each leased) under 1 roof.  Plans are for new 305,000 sq ft distribution center in 2-3 yrs, Andrews prexy Mike McGuire told the paper….. Winner Dist Co in Baltimore “will lay off 125 workers at the end of the month,” reported Balitmore Sun a little while back, as result of “plant closure” after warehouse “sold to another firm” spokeswoman for Balitmore County told newspaper.  Recall, Mitchell Dist from Miss is proposed buyer, but no further news since then.     

Molson Coors’ CEO Peter Swinburn pointed out last week that co’s efforts to build above-premium presence and revs from innovation, plus focus on core brands, “delivered significantly improved results” in 2013.  Noted too that “strategically we are gaining momentum in the areas that will have the most impact on our financial results as markets begin to improve.”  But others focus on Molson Coors’ challenges in some tuff, slow- or no-growth mkts and less optimistic than Peter.   Indeed, WSJ column "Ahead of the Tape," published before results announced last week, headlined: "Molson Coors Could Use a Beer Buddy."  Cited Molson Coors' "glacial" sales growth in key mkts, plus volume focus in places like Montenegro, Bulgaria and Bosnia instead of "thirsty Asia, Africa and Latin America." Tho shares trade at 20% discount compared to peers, "a beautiful valuation hasn't even yielded [Molson Coors] a ticket to the deal pageant." Co wants to expand in emerging mkts, but oppys are "scarce and pricey." Column concludes: "Without a suitor or a growth story, Molson Coors is stuck on a slow train to nowhere." 

Goldman Sachs analyst Mitch Collett changed rating on ABI from “Sell” (since Oct 2012, missing big growth in ABI stock) to “Buy” principally because it anticipates a “large” and accretive acquisition by ABI,  “once it fully realizes Modelo synergies in 2015.”  How big? “We expect ABInBev to gear up its net debt/EBITDA to 5x providing headroom for US $145 billion of acquisitions.”  Holy Cow!  Already in the last 5 yrs, ABI did $80 bil worth of acquisitions, sez Goldman Sachs, and was “the most acquisitive company in European Consumer Staples.”  But in next 6 yrs, Goldman expects almost double that in deals.  But Mitch doesn’t name names as potential acquisition targets. 

But Goldman makes a couple of other interesting points, noting that “post-deal synergies have been a material contributor to ABInBev’s growth (42% of EBITDA growth over 2009-2013 has been derived from cost-cutting).”  ABI (and its predecessor companies) “has increased its EBITDA tenfold over the course of a decade thanks to a series of transformational transactions.”  ABI makes “a material investment approximately every four years before harvesting synergies in the subsequent period of deleveraging and synergy-led organic growth.”  But ABI “has consistently struggled to deliver volume growth,” which Goldman attributes to “its exposure to developed beer markets.”  US volumes “suffer from 1) a continued structural shift into spirits/wine; and 2) share gains for the craft and import segments driving market share declines for ABI and other mainstream beer competitors.”  Interesting analysis.

Goldman Sachs analyst Mitch Collett changed rating on ABI from “Sell” (since Oct 2012, missing big growth in ABI stock) to “Buy” principally because it anticipates a “large” and accretive acquisition by ABI,  “once it fully realizes Modelo synergies in 2015.”  How big? “We expect ABInBev to gear up its net debt/EBITDA to 5x providing headroom for US $145 billion of acquisitions.”  Holy Cow!  Already in the last 5 yrs, ABI did $80 bil worth of acquisitions, sez Goldman Sachs, and was “the most acquisitive company in European Consumer Staples.”  But in next 6 yrs, Goldman expects almost double that in deals.  But Mitch doesn’t name names as potential acquisition targets. 

But Goldman makes a couple of other interesting points, noting that “post-deal synergies have been a material contributor to ABInBev’s growth (42% of EBITDA growth over 2009-2013 has been derived from cost-cutting).”  ABI (and its predecessor companies) “has increased its EBITDA tenfold over the course of a decade thanks to a series of transformational transactions.”  ABI makes “a material investment approximately every four years before harvesting synergies in the subsequent period of deleveraging and synergy-led organic growth.”  But ABI “has consistently struggled to deliver volume growth,” which Goldman attributes to “its exposure to developed beer markets.”  US volumes “suffer from 1) a continued structural shift into spirits/wine; and 2) share gains for the craft and import segments driving market share declines for ABI and other mainstream beer competitors.”  Interesting analysis.

“Crown is gonna emerge as a major player,” IBG founder Joe Thompson told Mich & Ill distrib mtg last week.  They’re “hotter than a pistol,” and U.S is set to have “3 (major) competitors instead of 2….  That’s a good thing,” he added.  Recall Crown is already 3^rd largest supplier in the U.S; up 5.7% to 13 mil bbls in 2013, while each of AB and MC down 2.5-3%. But Crown at just 6.3 share of total shipments, still way behind MC (27.8) and ABI (46.9).  In last 3 yrs, AB and MC dropped 9 mil bbls while Crown gained 1.7 mil bbls.

Meanwhile there’s a “structural/incentive problem,” said Joe “for ABI and Miller Coors (“probably to a lesser degree”): profits are up, but volume continues to decline in challenging US mkt.  If primary job is to increase shareholder value, it doesn’t matter as much if they’re losing volume and still making profit numbers.  So “we’re asking them to overinvest in aging brands, as opposed to underinvest in export brands.”  When Joe was in talks with a senior exec at ABI, negotiating for potential sale of a distributorship he was told: “‘why would I invest $50 mil in this distributorship at 6% ROI when I can invest $50 mil in Asia at 25% ROI.’…And truth is, I wouldn’t, and that’s what they’re doing.” “Unless these dynamics change, I think we’re gonna be hurting on volume (not profit).”  ABI makes its money, on “milked back” equity value of the brand: “harvesting equity.”  “Everybody focuses on their cost-cutting…but they’re really good at finding brands that have fat companies that have more equity in the value of their brands.”  “Problem is right now they’re getting close to having all the equity milked out and now they’re going to have to start putting something back in.” 

Beer volume down 1.3% last 4 weeks thru Feb 8 in Nielsen all-outlet + convenience.  Trend’s seemingly getting slightly worse as yr goes along, now encompassing both week before and after Super Bowl. Premium lights down 3.7%, below premium brands down 5% and superpremium brands down 6% (such superpremium softness is new).  Craft, FMBs and ciders continue to rock.  This continues to look mostly like a continuation of last yr’s trend, not just a manifestation of weather.  Weather is worse than usual in many parts of country, but better than usual in West and tourism is up in Fla for example.  “Lots of puts and takes” as MC ceo Tom Long put it on MC conference call last week when declining to use weather as excuse, even as MC reported its own low single-digit decline. 

Per usual, plenty of moving pieces in Molson Coors results, and co focused on Q4 rather than full year in comments.  Overall picture is soft volume trends across mkts, but financial results helped by incremental central Euro biz plus cost savings, debt reduction.  US volume was -3% in 2013, Canada -2%, international -6.6% and pro forma Europe flattish.  Recall tho that Molson Coors did not have Starbev for 1st half of 2012, so reported volumes for 2013 benefited by 6 mos of incremental volume.  Molson Coors reported 8.5% increase in worldwide volume to just below 51 mil bbls, but looks more like -1% apples-to-apples.  

 At same time, Molson Coors reported net sales +7.4% to $4.21 bil, underlying EBITDA up 5% to $1.47 bil and 3.2% increase in underlying cash flow to $892 mil.  CEO Peter Swinburn summed up the yr: "Regionally our US business improved results, especially late in the year" (see above), "Europe performed well in a difficult environment, Canada struggled , and International made significant progress toward its goal of profitability by 2016."  Peter also cited "particular challenges" of Lite in US, Coors Light in Canada.  Canada biz is challenge, where Molson Coors also goes head-to-head with AB InBev.  In addition to volume being clipped 2% in Canada to 7.1 mil bbls, net sales dipped 4.6%, and operating income down 15.3% to $361 mil.   

Change from +0.5%  in 2012 to down almost 2% in 2013 for total industry sales-to-retailers was “not planned or budgeted” and that led to “less than expected” results in 2013, said Heineken USA prexy Dolf van den Brink.  But still HUSA gained share as its sales-to-retailers declined 0.6%.   In particular, HUSA gained in tuff on-premise mkt, especially in 4th qtr when Dos Equis ramped up to 15% growth on-premise and Heineken lager had 3.4% dropoff.  Recall,  beer’s on premise biz down 4-5% in Q4.  

In addition to industry softness, Dolf noted pricing as factor in Heineken trends: “We did take quite some pricing” in big mkts and that “affected second half” for Heineken brand, “led to slowdown” and “higher priced features.”  But Dolf talked of HUSA’s “digital leadership” with Departure Roulette, Heineken Karaoke, which “improved” brand health considerably in 2d half and, most recently,  Newcastle’s ad spoofing Super Bowl ads, which got 10 mil views. 

What Went Right: Dos, Tecate and Strongbow Highlights in 2013 Dos Equis continued to grow to around 1.5 mil bbls, showing 20%+ growth in Nielsen scans.  Tecate franchise “back in black” for the first time since 2008, led by Tecate Light, which grew 40% or so in Nielsen, almost 50% in latest 4 weeks.  Then there’s Strongbow, which grew 82% in Nielsen last 12 mos, but up 121% last 4 weeks.

Strongbow is showing early signs of emerging as another sizable winner in rapidly mutating cider segment.   Angry Orchard is still absolutely flying, up 230% last 4 weeks, but other leading cider brands turned from plus to minus;  Woodchuck down 10%, Mich Ultra Cider down about 20%, even Crispin down 5.6% last 4 weeks and Hornsby down 42%.  All this is before Strongbow “relaunch,” including new packaging, new marketing, new line extension debuting this yr for Strongbow.  Last yr, Strongbow changed distribs in 50% of its volume and is now 97-98% in Heineken USA and ready for more growth. 

Looking Ahead:  “I feel much more bullish about 2014,” concluded Dolf, after 2013 review.  Pointed to regional Dos-a-Rita launch, in Southwest mkts with big majority of Dos Equis volume, for which HUSA is ratcheting up its forecasts as launch gets closer.

“Our strategy to migrate our portfolio” to above premium brands “is working,” said MC ceo Tom Long on conference call, noting that 13.7% of MC revs in 2013 came from above-premium brands, up more than 3 points.   At same time, “stabilizing” premium lights critical as they were 56% of MC volume in 2013.   MC will “play harder” in subpremiums because they are 1/3 of portfolio.  Both Keystone Light and Miller High Life will get natl tv advertising for 1st time in yrs.   “Is it fair to say you’re playing some defense against spirits,” asked Santander’s Tony Bucalo.  “Yes,” answered Tom. 

So far, 2014 off to sluggish start “down low single digits,” said cfo Tracy Joubert.  When analyst asked how much of decline could be blamed on the weather, Tom Long said “very, very difficult” to parse out how much is weather as there are “puts and takes all over the place,” noting good weather and good Coors Light trends in West. 

Innovation Pipeline Lotsa innovation coming, including just launched Miller Fortune, Smith & Forge Cider coming Mar 1st, Coors Light Summer Brew, Redd’s Variety Pack including Hard Iced Tea and more.   Coors Light Summer Brew is “low risk,” said cmo Andy England, “line priced” with Coors Light, but because it’s in 10 oz can, price per ounce will be higher.  Redd’s “outpaced Rita franchise” in Q4, said Tom and “sourced over 90% of volume” from outside MC portfolio.  It’s going from “strength to strength” in 4th qtr and beginning of this yr.  

No Comment on Pabst; “Delighted” With Original Can Asked if above premium focus would mean that  MC not interested in potential Pabst acquisition, Tom said:  “I’m afraid I won’t be able to comment on that.”  MC “delighted with the impact of the original can.  We’re encouraged.”  Can biz more than 2x the size of bottles for Lite.  Lite had flat share in Nielsen in latest period, while bottles continued to decline at same rate they had been.  On-premise remains “very difficult” with “no halo effect” there from Original Can. But Original can  “feels like it’s got some real legs.”  MC really likes the “authenticity” cues of being original light.  “Where else might we go with it?” asked Andy.   “What we’re learning will inform pretty much everything we do,” he said.  “It seems to have struck a nerve and that’s a beautiful thing.”