After mtg with investors in UK and US, SABMiller’s ceo Alan Clark also made the rounds with  media over last 10 days, adding some color to comments we quoted in Express last week.  In interview with WSJ today, he raised question about Miller Lite’s positioning and relevance to “modern consumers,” noting “we haven’t cracked it.”  Despite brand’s quality, problem “sits within the marketing.”  Re craft, “we can access that space,” Alan said, pointing to Blue Moon.  Besides, some big brewer brands go back over 100 years: “If there are stories about the authenticity and heritage of beers, we certainly have them.”  Brewing is art and science, Alan insisted, and SABMiller’s “capability and skill…significantly outweighs those of craft brewers.”  What SABMiller won’t do: replicating tiny brewery is “dead end for us because the economics just don’t work.” 

Another mktg point from Alan, quoted in South Africa’s Post: “Traditionally beer has been marketed to young males in groups, but social behavior has changed and mixed gender drinking is more the norm, women tend to be the gatekeeper to drinking behavior now…. We’re not saying beer is not relevant for young males, we’re saying we need to broaden the market.”   

On M&A, Alan reiterated he sees “plenty of room” for more deals, even as top 4 global brewers have about 60% of global volume.  “If you look at a map, the one that stands out is Asia, which is less consolidated.”  Tho SABMiller has several partners it could buy out and in position to do so, “from an M&A point of view we’re actually looking outside of those structures,” he told WSJ, “because we feel through the partnerships we’ve established solid positions in those geographies.”  Speculation about an ABI acquisition of SABMiller popped again last week with Societe Generale giving bid a 50-50 shot down road at $110 bil.  Alan responded same way his predecessor Graham Mackay used to, telling the Post: an ABI move “is something we cannot control, it is a matter for shareholders…. Our role is to maximize the value of the company and to ensure that value is in the share price.”  SG also posited possible SABMiller deals for partner Castel in Africa or (less likely) Diageo’s Guinness biz. 

Finally a peek into SABMiller corporate culture: In 22 years, Graham Mackay “never gave me a direct instruction,” Alan told WSJ.  When he goes to operations around globe he’s trying to “understand how deeply the team there thought through what the objectives and challenges are.  I’m not coming in to issue a perspective on which direction they could take.”  How often is Alan on the road?  About 60-75% of his time.  “It’s kind of an endless tour of the world.”  SABMiller has tight corporate calendar, and he’s a “slave to that corporate calendar.  It’s set 18 months in advance so I can always predict where I’m going to be what day of the year.”       

Another curve ball from fed cts.  Many industry observers thought residency requirements, even for highly regulated alc bev industry, were thing of the past, especially given global nature of biz these days. But that ain’t the case, at least not in Mo.  US Ct of Appeals for 8^th Circuit upheld earlier US Dist Ct decision that Mo can require that distrib principals be state residents.  Southern Wine & Spirits challenged the requirement as discriminating against out-of-state corporations and thus violation of Commerce Clause and equal protection rights.  But both cts rejected SW&S arguments across the board.

Appeals Ct relied heavily on its reading of US Sup Ct Granholm decision, which it said applied only to producers/products, not other tiers.  This will no doubt cheer distrib advocates.  Key: “If it is beyond question that States may require wholesalers to be ‘in state’ without running afoul of the Commerce Clause,” as Granholm suggests to Appeals Ct, “then we think States have the flexibility to define the requisite degree of ‘in state’ presence to include the in-state residence of wholesalers’ directors and officers.”  SW&S had argued state had “no good reason” to require residency, since distribs don’t pay excise tax, out-of-state co’s can be easily regulated and distribs don’t sell direct to consumers.  But those arguments “prove too much,” the court stated, “for the same could be said about why it is unnecessary for a wholesaler to even have a warehouse and registered agent in Missouri.”  Net-net: since a state can require in-state presence by wholesaler, the court decided, it can adopt residency requirements for them. 

Again, tho SW&S argued that state policy has to be “integral” aspect of 3-tier system and residency isn’t “integral,” judges pointed out “there is no archetypal three-tier system” that defines such terms and “states have discretion to establish their own versions” of 3-tier.  And again, “Granholm itself announced the unquestionable legitimacy” of the 3-tier system.  Besides, in adopting residency requirement, legislators could legitimately believe that resident wholesalers would be “more socially responsible,” more likely to respond to community concerns and easier to regulate by enforcement agencies, the court argued. 

Court also rejected other specific points made by SW&S.   A newspaper article quoting legislator that allegedly showed a “clear protectionist motive” was tossed because it came in late, newspapers are considered “rank hearsay” and it may have only been view of single legislator.  Tho supervisor of state’s division of alc bev control said he didn’t “think” that residency requirement affected distribution, court said his testimony “not as devastating to the Division’s case as” SW&S suggested, since it did not preclude legit state reasons for the residency requirement.  And fact that Mo had grandfathered another big out-of-state liquor distrib (Glazer’s) not enough to sink residency requirement.  Legislature back in 1947 “reasonably could have chosen to address incrementally the perceived ills targeted by the residency requirement and to accommodate preexisting business interests while keeping the floodgates closed.” 

Will Southern appeal to US Sup Ct?  Would Sup Ct even take the case?  Does this decision impact rash of supplier terminations in Mo earlier this yr, perhaps anticipating Southern would win and set up shop there?   Stay tuned.  What is clear: states’ rights to regulate under 21^st Amendment ain’t dead yet, especially when this decision taken together with recent cases upholding NY and Tex laws.  And another high level court agrees with distrib advocates that Sup Ct “drew a bright line between the producer tier and the rest of the system.”   

 A few seats remain for BMI publisher Benj Steinman’s Monday morning seminar at NBWA Convention in Las Vegas on the changing distributor landscape.  Register at  http://nbwa.org/convention.  We hope to see you there.    

Tho lotsa focus on “state-based” alc bev regulation, more and more it’s local communities making decisions about how alc bevs are bought, sold and marketed.  Trend is “more local control and less state control,” ex-director of Calif ABC Jerry Jolly told CLE Intl’s confab last week.  He and others gave of examples of cities, counties and neighborhoods adopting restrictions on licenses.  Two tweaks this week.  Numerous “distressed municipalities” in Pennsy may be given “special taxing authority” to adopt local drink taxes to escape what Pennsy considers “Act 47” status (cities with fiscal problems), reports Citizen Voice.  Several yrs ago, Allegheny County adopted 10% drink tax, then dropped it to 7%, to pay for mass transit.  Under new proposal, cities petition county court to add alcohol tax.  Pennsy Municipal League published report advising cities to consider “menu” of taxes, including 10% tax on retail alc bev sales, as well as taxes on sugary bevs, local services, sales etc, to pay off debt and/or for services.  Pennsy Tavern Assn already criticized proposal for potential of putting taverns out of biz, especially where tax levied in one outlet, but not across the street, if location in different municipality.  One key problem with local policy, Jerry noted: lack of “consistency” across state.

In Ky, effort by Louisville legislator to reduce problems she associates with late-night off-premise liquor sales led to ban liquor sales between 2 AM and 4 AM.  Doesn’t apply to bars/restaurants or beer sales in liquor stores/c-stores.  But distillers’ assn DISCUS wrote letter to city council members “urging them to include beer” in the ban, reports Courier Journal.  “Laws or regulations that discriminate against distilled spirits prevent the spirits industry from competing effectively in the marketplace,” DISCUS wrote.  Louisville’s county is only one in Ky that allows liquor sales up to 4 AM and ban affects just 55 stores, paper reported.  But same county has about 500 stores that sell late-night beer.

Even tho the beer biz has its challenges these days, it’s not for want of more folks wanting to sell beer and other alc bevs, especially in Calif.  Intriguing presentation at the CBBD last week by consultant Michael Brewer detailed that there are 60,000 stores that sell alc bevs and some 80,000 licenses, and fully 80 different types of licenses.  That’s a dizzying array of possibilities.  But Michael showed you ain’t seen nothin’ yet.   Everyone wants to get in on the action.

Here are a few examples of new types of accounts seeking licenses these days: arts & craft studios, salons, museums and public institutions, movie theatres, the Sacramento Zoo, university events. Michael helped the first 2 Starbucks in Calif get alc bev licenses, he assures there are more coming.  Then there are the value retailers, Family Dollar, Dollar General, 99 Cent Only.  They want to be one stop shops, “they want their customers to be able to get all the things they want” at their stores.  How about “corporate dining,” which increasingly wants to include alcohol as workplace and social life overlap?  Michael has gotten licenses for a lot of corporate hqs all over the state.  Even food trucks and mobile operations seek licenses, tho that’s a stretch at best.  But “people are trying to push those envelopes.” 

After all the angst over ABI-Modelo-Crown deal, only 5 comments to DoJ.  And 1 came from outer space.  Only comment from beer biz: NBWA request for clarification of required notice when AB acquires distrib.  DoJ confirmed AB has to give 60-day notice if proposed seller has non-ABI brand from supplier that does over $7.5 mil gross rev in US and “the license to distribute the non-ABI brand generates at least $3 million in actual gross revenue.”   Some folks thought DoJ hadda be notified even for AB-only distrib deals.  Tho some small brewers voiced “concern” that ABI-Modelo would reduce mkt access, none weighed in.

Meanwhile, public health advocacy group Alcohol Justice complained that deal would lead to lower beer prices, increased consumption and alcohol-related harm.  AJ also said deal would strengthen AB InBev’s “already undue influence” in US and “undermine the 3-tier system” by driving consolidation.  But consumer advocacy group Food and Water Watch and antitrust atty Joe Alioto argued the opposite, claiming deal would lead to higher prices, since Crown would be controlled by ABI and/or too weak to “play a vital role as a price competitor.”  F&WW also had issues with ABI’s control over distribs and ability of “new market entrants” to get retail space.  DoJ rejected each argument.  Explained again that revised deal creates “fully independent competitor” to ABI in US “with the incentive and ability to price” on its own.  Also noted ABI would not increase mkt power, Crown will control its distribution/supply destiny, have firewalls to protect data, etc. 

Then there’s Minny atty Steve Uhr who charged that deal enhances ABI role in an “ongoing conspiracy to fix retail alcohol prices in scores of communities” in US.  He actually charges that ABI, along with Diageo, other industry members/assns, retailers and even public health groups have been in cahoots for yrs to raise prices by conspiring to eliminate drink specials/discounts.  Howzzat?   Through the Responsible Hospitality Inst, of course.  RHI works with industry, govt and communities to advance responsible bev service, public safety.  In some communities, bars have agreed to limit drink specials.  Cts and DoJ reject Uhr’s theory, point to a lack of “evidence of a worldwide conspiracy to fix alcohol prices.”  But DoJ assures that if such a conspiracy existed and hurt US consumers, it “would take appropriate action.” That’s a relief.  In the end, DoJ sticks to its remedy.  

Only a couple of months after Pabst prexy/coo Kevin McAdams promoted from vp of sales, he is in turn promoting a number of his key execs  from within, demonstrating mgt continuity (not always in evidence at Pabst in recent yrs).  Three of 4 involve naming new veeps: Rich Pascucci  named vp of biz development, previously he was sr director of business planning and distrib strategy; Bruce Muenter named vp of field sales east, previously he was gen mgr southeast; Tim McGettigan named vp of field sales west, previously he was gen mgr of pacific.  In addition, Tony Arena promoted to gen mgr southeast.  

Much talk about the runaway freight train that is Modelo Especial at Calif distrib meeting last week, with some distribs saying it will soon pass Corona in their houses.  Modelo Especial is easily the #1 growth brand in Calif foodstores, according to IRI.  $$ sales up 29.7% to $39.4 mil yr-to-date thru Aug 25.  That is almost half as big as Coors Light, which climbed 4% to $89.4 mil.  Modelo Especial growth as big as Straw-Ber-Rita, Black Crown and Lime-a-Rita growth combined in Calif foodstores.  And now here comes Modelo Chelada.   

Join us for the 20^th Annual Beer Insights Seminar on Monday November 11^th in New York City.  The day will be filled with presentations by top industry execs and thought leaders, plus plenty of time for networking opportunities.  Click here for more info.  Click here to register.

While beer biz improving slightly in latest retail data, spirits seem to be slowing down.  Liquor volume in 17 control states up just 1.6% in Aug, reports NABCA. And rolling 12-mo figure now +1.2%.  On other hand, liquor pricing seems to be strengthening.  Aug dollar growth was 4.8%, and for 12 mos, $$ +4.1%.