MillerCoors had outsized $63 mil, 36% gain in oper income in Q4, which drove $76 mil, 6% gain for yr to $1.29 bil.  But much of that Q4 gain  a result of mktg, gen and admin cuts in 4th qtr.  MG&A down $58 mil, 12% in Q4 and $59 mil, 3% for yr, tho MC said spending on brands in line with prior yr.  “The fourth quarter decrease was driven primarily by media investment phasing and lower pension and employee benefit-related expenses,” said MC.  So once again, MillerCoors achieved solid profit gain, with volume down 3% in 2013 and revs up just 0.5% to $7.8 bil.  

Pricing another big plus, up 3.4% for the yr, but just 3.1% in 4th qtr.  Then too, MC achieved good profit growth even while cost of goods sold per bbl up slightly more than rev per bbl. COGS per bbl up 3.5% for the yr.  Contract brewing volumes were down 0.1% for the yr. MC achieved another $102 mil of cost savings in 2013, “primarily related to procurement saving, logistics and brewery efficiencies.”

Brand notes:  MillerCoors premium lights down mid-single digits for yr, as previously reported, including Coors Light down low singles, Lite high singles. MC sez it held share of premium light.  Leinie up double digits, including Shandy up over 20%.   Blue Moon Brewing up mid-singles in 2013. Coors Banquet up high single digits, growing for 7thstraight yr.  Notably, Redd’s got 0.3-0.4 of total industry shipments in 2013 and 0.6 in 4th qtr, according to MC.  Crispin Cider grew STRS “at a strong double digit rate.” 

Letter to distribs last night from owner Dean Metropoulos (last one was from Dean and his sons), said “I do not make it a practice to respond to press speculations, but I want to expand on my previous letter.”  Those “speculations” are not identified but could refer to report in our flagship BMI that Pabst on the block. The letter presents a jumble of possibilities. 

First, Dean writes about what an “excellent financially sound” co Pabst is, in “great shape” and that it’s “an excellent platform for a roll up acquisition strategy.  We have closely looked at three ‘add ons’ which were not the right strategic fit.”  Metropoulos & Co has “consistently made” such acquisitions in 78 cos over last 30 yrs, sez Dean (editor’s note: but so far none in beer) and “we will continue to review strategic and sensible transactions.”  Pabst also “exploring several international opportunities” such as JVs, licenses and exports.  “To fulfill the above opportunities, we need a true CEO that has the vision, skill set and hunger to implement the organic growth efforts.” 

But finally, Dean notes “we have and currently are considering partnerships, the possibility of a public offering or other alternatives to increase our financial flexibility to aggressively pursue the above opportunities.”  Dean does conclude “we are committed to our unique brands, our company, our employees and certainly our distributor network” and asks “we not be distracted by issues that do not share our risks, investments and opportunities.”  He never says Pabst not for sale.  Pabst exploring many options, including that one.  

Glazer’s has agreed to exchange about a half mil cases of its beer brands in Mo, including Vt Hard Cider, Bell’s, Sierra, Odell and more with MC Mo and Ark distrib Heart of America for H of A’s Ark territory.  That alone would be interesting enough.  Deal a good fit for Glazer’s since it already sells several mil cases of beer in Ark with operations in Little Rock and Texarkana as well as numerous statewide craft brands.  Plus it has sold off beer brands in states where it didn’t have standalone beer operations.  But it’s what will happen after which makes this deal “one of the most convoluted I have ever seen,” according to a source.

Heart of America is purchasing statewide rights, but it only wants these brands in territories where it has operations.  So it is selling off the rights piecemeal to either AB or MC distribs.  Here’s the deal: there are 19 suppliers and you’ve gotta take all of ‘em.  Asking price 8.75x GP, including for some tiny brands.   Some distribs are scrambling to make deals and there’s lots of infighting.  Some don’t want to pay such high prices.  MC distribs don’t want AB distribs to get brands.   Not all AB distribs want brands.  Some distribs are willing to go outside their territorial footprint.  And of course there’s lots of resentment all around. One of ironies is some of this volume could potentially even go to Major Brands sez source, which is in a lawsuit with Glazer’s.

It’s been a long road, but not necessarily a winding one.  With news that MC megadistrib Andrews Dist will buy 5-mil-case Coors Distrib Co of Fort Worth, that means almost the entire Dallas-Fort Worth metro area will have been consolidated by Andrews in a series of step-by-step deals over the last decade plus.  First big one was Coors distrib Willow in Dallas in 2003, then Miller Dist of Fort Worth in 2008.  Plus other smaller ones along way.  This deal likely to have been very expensive, considering Coors Dist Co owner Larry Anfin’s long running aversion to selling and this prospective buyer.  More than $110 mil, sez source.  Andrews will now be well over 30 mil cases (including Corpus Christi) and there are only a few bigger distribs in MC system. 

Heineken USA  “sales to retailers declined by 0.6%, outperforming the total beer market and driving continued share gains,” reported Heineken.  But HUSA “sales to wholesalers” (shipments) down 1.5%, “partly reflecting stock build of the new Heineken bottle at the end of 2012,” said Heineken.  (INSIGHTS estimated 1.9% drop in beer, probably about right, since HUSA had big Strongbow growth).  Dos Equis and Tecate Light grew double digits, “offset” by “lower” Heineken brand volume.  Heineken brand declined 1.8% globally (following 5% growth in 2012), and 2.2% in the Americas.  US performance likely below that as Heineken showed solid growth in Mexico, Brazil.  Strongbow cider also declined 2% globally, but had “strong” growth in US as “innovation volume accelerated.”  Tho Heineken cites US share gains, HUSA several points behind what it had expected going into what proved a challenging 2013.

Soft Set of Numbers from Heineken in “Challenging” Yr  Citing “slower economic growth” in some key mkts, “adverse regulatory developments” and performance in “developing markets not as strong as expected,” Heineken’s intl results nuthin’ to shout about, but no big surprises either.  In “challenging year,” as chairman Jean Francois van Boxmeer put it, key metrics all pretty soft: group volume -2.7%, revs +0.1% (tho +0.8% in 2d half), operating profits +0.6%, net profits -2%.  These are all on “organic” basis.  Reported numbers different as new Asia Pacific biz boosted all but net revs, which got knocked back big time by a “revaluation of” Asia Pacific post-acquisition.  Better news: net rev/bbl up 2.7% from pricing and mix.  Lookin’ ahead, Heineken expects “improved organic volume performance” in 2014, rev growth  and higher rev/bbl, tho “more modest” increase than 2013.  Also expects to grow volume in Africa, Middle East, Asia Pacific and Latin America, but “lower consumption in Europe.”  No specific comment in earnings announcement on prospects for Americas.   

Now there’s eye-catching headline, tho it’s basically just speculation by Motley Fool columnist.  But it’s a new wrinkle, so we thought readers should know this columnist’s thinking.  “A number of factors” make “a deal like this likely,” sez columnist.  That includes that interest rates remain low, US cigarette smoking down, Constellation sales started to take off. “Finally, a partnership between Altria and Constellation would fit well with Altria’s share of SABMiller.”  Recall, Altria owns 27% of SABMiller, but to buy rest of SABMiller would be very costly, an additional $53 bil.  Constellation, with a mkt cap of $15 bil, would be far less expensive for Altria than buying the rest of SABMiller.  “Constellation has just started to turn itself around after years of stagnant earnings,” wrote the Fool.    Recall, Altria also already owns St Michelle wine co, which had $609 mil in sales in latest fiscal yr, and up 8.6% in 2013.  “Altria and Constellation would make a great fit, though I must emphasize that there is no deal being discussed as of yet,” he concluded.  While “I’m not saying that Altria-Constellation will happen… Altria is likely to go on the acquisition trail in the near future.”  

Last yr was “year of transition” for NAB in first yr of ownership by FIFCO, said FIFCO ceo Ramón Mendiola at North American Breweries sales meeting last week in Costa Rica.  FIFCO is still sticking to its “strategic plan” to double in 3-5 years (including acquisitions).  “We’re committed to that,” he said, so after a down 2013, FIFCO now looks to double NAB in 2-4 years.  “The clock is ticking,” said Ramón. Recall, NAB is currently searching for new ceo as well.  FIFCO is almost $1.1 bil in revs, public co listed in Costa Rica, with 95% share of beer mkt (and 25% ownership by Heineken), plus other bizzes in beverages, real estate, etc besides beer.  NAB is in part a diversification play for FIFCO and Ramón said even last yr, NAB “instrumental” in FIFCO’s 13% EBITDA increase.  

This yr’s NAB meeting had upbeat tone, a welcome brevity, some better plans on brands and charismatic presentation by ceo Ramón.  Wholesalers INSIGHTS talked to responded positively to Ramón’s talk of becoming a “butterfly,” a thing of beauty that nurtures others, compared to a “caterpillar” that just “eats and eats.”  FIFCO gives back over 6.5% of its net income in “social investment initiatives” and 97% of its employees volunteer.  Distribs responded favorably, even tho NAB’s 2013 #s not good (-4.6%) and 2014 ain’t off to great start either; this shows importance of tone.  But NAB will need to back that up with better results.

Compared to prior NAB meetings, fewer numbers given.  Seagram Escapes up 14.4% in 2013, and NAB has aggressive plans for growth of this brand in 2014.  It’s already almost a half mil bbls.  Now has new campaign and will be on natl cable tv on E, Bravo and the Food Network.  This brand has quietly grown each of last 4 yrs.  This yr, it’s stepping out.  About 90% of its volume consumed by females, INSIGHTS understands. 

Labatt brands “stabilized” in 2013 and growing in recent mos, said Ramón.  Getting 21% more investment in “total brand” in 2014, including advertising up 43%. It has yr round programs and 2 innovations, Royale (6.1% ABV) and Prohibition series.   Genny now “completely profitable,” said Ramón.  Only key objective where NAB fell short last yr was on craft, where NAB “didn’t keep up pace with the growth of this category,” Ramón understated.  (Editor’s note: its Magic Hat and Pyramid brands were actually down 5% and 21% respectively in 2013.)  This yr, NAB will “reclaim our position” in craft.  At this yr’s meeting, NAB kept it simple and kept distrib’s attention.   “This year could really be our year,” closed NAB vp of sales and mktg James Pendegraft. 

Frigid weather in much of country in much of Jan sure didn’t help on-premise trends.  Volume down 7.4% for 4 wks thru Jan 26, according to GuestMetrics data reported today by Morgan Stanley’s Dara Mohsenian.  That followed 4.1% decline for previous 12 wks, 4% decline for calendar yr 2013.  AB volume took near 13% hit and 1.5-pt share drop to 24.4 for 4 wks. MC biz no better, volume -12.5%, share off 1.1 to 18.1.   Overall dollar sales down near 4% on-premise, with AB -10.3%, MC -9.5%.  Their combined dollar share dipped below 40 in this channel in 2013.  Even Crown took 1.6% volume hit for this period, tho it gained 0.3 share to 5.7.  Heineken off 9%, Boston Beer +16%.  Craft picked up 2.2 share, cider +0.6 share while premium lights dropped -1.8 share in Jan.  Spirits outperformed beer for 4 wks, but not by much: spirits volume -5.5%, $$ sales -2.9%.  See this week’s beer marketer’s INSIGHTS for lengthy report on 2013 on-premise trends from GuestMetrics data.    

After the kerfuffle over Pres Obama’s comments about marijuana in lengthy New Yorker profile, the US House Oversight Committee grilled the deputy director of the White House’s Office of National Drug Control Policy, Michael Botticelli.  He asserted that “the administration continues to oppose attempts to legalize marijuana and other drugs,” according to Yahoo News.  But when one committee-member asked Botticelli to point to any data that indicates marijuana causes levels of “unintentional deaths” that are “comparable” to prescription drugs or alcohol, he couldn’t.  The Rep pushed harder, asking if Botticelli could dispute that, based only on “deaths and illnesses,” alcohol, illicit and prescription drugs “are a threat to public health in a way that just isolated marijuana is not.”  “I don’t dispute that fact,” Botticelli replied.  

At same time, a new study of fatal car crashes found that the prevalence of crashes involving marijuana tripled from 4% to 12% from 1999 to 2010, reported HealthDay.  Authors of the study remind that “combined use of alcohol and marijuana dramatically increases a driver’s risk of death,” the paper wrote, but no indication of what portion of marijuana-related crashes also involved alcohol.  That’s just as separate study from same authors estimated that odds of a driver getting into a fatal crash doubles if that driver uses a non-alcohol drug.  Alcohol increases that likelihood 13x; combo of alcohol and non-alcohol drug increases the odds by over 23x.  Of the 5 non-alcohol drugs isolated, researchers found marijuana was associated with the lowest increase in risk.  Similarly, a just-published third study found that although crude data suggested pot had a “significant contribution to fatal crash risk, once it was adjusted by the presence of alcohol and drivers’ demographics,” pot’s relationship to fatal crashes “was no longer significant among either sober or drinking drivers.”  Clearly, many more miles to go in this research and debate.

MillerCoors is “moving a portion of the Miller Lite account” to WPP while Saatchi & Saatchi, owned by Publicis will remain on acct as well, reported Advertising Age.  Saatchi has had Lite biz for 21 months and remains “agency of record,” but WPP will also create ads for key summer selling season, noted cmo Andy England.  “We have selected work from both agencies to go into production and we plan to show all of that work to our distributors at our convention” in Mar, he added.  “We have no idea whether there will be life (for WPP) beyond this project.”  Mag noted that Lite move comes at time Publicis “moves closer to finalizing its merger” with Omnicom Group (which handles Bud Light), that could create a conflict.  Potential merger “certainly didn’t play into” decision on moving Lite work, said Andy.  “Like most people in the business, I have no idea how that is going to play out,” he added.  

White Lite Sticking Around ’til Fall; Early Spring for Discounts?  Release of original white Miller Lite cans has been extended to Sep 30 beyond planned run thru Mar given it “has prompted a remarkable renaissance” for brand, said Andy.  MC told distribs the white can will be part of “Miller Time for America” summer program that will add “new white aluminum pints and promotional secondary packaging” as well.  Co is crediting retro can for helping lift can STRs to +8.9% YTD.  Meanwhile, one midwest distrib pointed out he’s seeing rebate coupons for Lite, MGD and Miller64 that usually don’t appear ’til May or so.  One ad shows consumers can get $3 back on two 24-pks of cans or bottles; $7 on three 24-pks or $12.00 on four 24-pks.