Increasing efficiency played a key role in sustainability-focused presentations at Tamarron’s SCOL conference last week.  And so did potential timelines for finding monetary and other returns on sustainable investments.  Manhattan Beer’s operations veep Mike McCarthy brought 3 vendors of “green” products who all argued that pairing long-term efficiencies and cost savings with currently-available incentives can drop ROIs well under 5 yrs.  Mike used his co’s efforts with natural gas (CNG) trucks, LED lighting and solar energy to illustrate potential savings.  Manhattan should have “close to 100 trucks” running on CNG by end of 2014, a third of its fleet. These trucks offer greater productivity (Manhattan’s not paying drivers to fill-up tanks) and more time on road (they break down less often).  Mike and CNG vendor underlined the need to rack up lots of miles (runs of up to 300 miles, often) to see ROI in 5 yrs or less.  After expensive installation of LED lighting, energy costs can be slashed by 65-70%, then remain stable each successive year.  While a single 450W halide lamp would cost Manhattan over $700/yr to run (based on local utility costs), one 94.5W LED bulb producing comparable light costs 75% less, under $150/yr.  Multiply by 200 fixtures and energy costs shift from almost $142K to $30K/yr. Add in $60-70K in incentives from utility co, and you’ve got yourself 1-yr ROI.  Further, LED bulbs last longer (50K hrs, some closer to 100K), don’t break as easily and competition is driving costs down.  Further defraying energy costs, Manhattan will have largest solar array within NYC limits at new Bronx facility.  Incentives to go solar particularly plentiful right now, including a 30% federal tax credit on any solar project.  State and local incentives can make ROI shorter than 5 yrs for adding solar, and 4 is average.  And since more companies will take incentives in coming years, each speaker urged to act now, before incentives dry up.

While there are always possible deals to be made, and SABMiller is keeping its options open for any potential opportunities, currently there is “no immediate pressure,” to make an acquisition, cfo Jamie Wilson told analysts in New York yesterday.  SAB is “very happy” with its JV partners so far and in no rush to buy anyone out.  He reminded that JV’s are usually put together “for a very strong” reason so there has to be an even better one basically for SAB to change those dynamics.  There are “better uses for our cash” at moment than spending big $$ on a buyout, he noted.   As for US mkt, ceo Alan Clark acknowledged the “complex” challenges MillerCoors is facing with “steady” decline in Lite trends, challenge from craft, among others, but acknowledged “we certainly didn’t arrive with all the answers,” for US team.  Lite isn’t an easy fix, but he pointed to success SAB has had turning around trends for other brands such as Victoria Bitter in Australia.  Asked about competitive concerns over ABI-Modelo deal, Alan said there are questions ahead about how to deal with issues such as pricing and possible line extensions from Crown, but “nothing that keeps me awake at night,” about challenge thus far.     

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Joint Revenue Comm in Wyo rejected two motions that would have increased state’s 2-cent/gal beer excise tax last week.  Also rejected motion to eliminate tax altogether, tho some say costs of accounting/filing exceed $265K beer tax brings to state coffers annually.  Hospitality assn and small brewers testified against hike.  Lead sponsor of hike promised to bring it back in winter session, reports Star Tribune.

Elsewhere, US District Ct judge dismissed challenge to ABI-Modelo deal brought by a group of consumers and activist Alioto law firm back in Mar.  She tossed each of the antitrust challenges broadly and in detail as “unpersuasive.”  For example: “Neither the plaintiff’s allegations, nor the revised agreements on which they rely, show ABI’s acquisition of Grupo Modelo will result in ABI’s control of Constellation or otherwise increase its percentage share of the beer market” in US.  ABI won’t control Piedras Negras or its employees, who will work for Constellation, judge noted, and ABI won’t “make any decisions” regarding the brewery’s operations.  AB distribs with Crown brands always “free to raise price,” so no more likely to do so now.  Plus, Constellation can “direct” them to sell.  No reason to think “firewalls” set up between ABI and Constellation are “inadequate.”  Raw materials agreement “can’t be altered.”  Plaintiffs misread agreement to argue ABI could “discontinue” slow-selling brands in US, but it actually “serves to protect Constellation” by barring ABI from doing so.  Nor does agreement give ABI oppy to hinder Constellation ability to “innovate.”  Finally, Plaintiffs provided “no support” for charge that ABI and Constellation would fix prices in US and any “threat of future price fixing…does not constitute a claim under the Sherman Act.”  So judge fully dismissed claims under fed laws, but actually left door open for Plaintiffs to amend claims under so far unidentified state statutes.

“The commentary for a while has been that perhaps the age of [brewer] consolidation is coming to an end,” SABMiller CEO Alan Clark told investor mtg in UK yesterday.  But he added: “We do not agree with that.”  Alan didn’t mention targets, natch, but “going forward, we think there will be further opportunities for us.  Whether they meet the financial criteria we have set or not we shall see over time,” echoing predecessor Graham Mackay’s standard point that deals can be pricey.  Alan also noted again that M&A “less important on our agenda” than organic growth. 

Other details from mtg, provided by analysts atNomura.  Exec comments confirmed some “concerns” Nomura has for SABMiller and global beer.  Namely: “less punchy volume growth plus more emphasis on price, but with margins under greater pressure the [SABMiller] model looks more challenged.”  In addition, Nomura flagged signs of discounting in Europe and “the evolution of business models to deal more with craft,” in US and elsewhere, “is also going to involve more cost,” it pointed out.  Going forward, Nomura see less oppy for volume growth than in past.   SABMiller didn’t give targets, but Nomura sees about 2% growth over next 5 yrs for global beer with SABMiller volume growing 2.9%.  SABMiller strategy is mix of premiumization where possible, more emphasis on high end in mature mkts, including separate sales forces for imports/craft, but also focus on “affordability” in Africa and Colombia. At same time, no new cost-cutting programs on horizon.  Put it all together and Nomura “more cautious” on potential for margin expansion than SABMiller’s 20-50 basis-point guidance for fiscal 2014.  (Sources: Nomura, just-drinks.com, National Post)

ABI North America vp of corporate  affairs James Villeneuve had been in that key role since deal to buy AB (and had joined Labatt in 1986). He will leave at  yrend.  James “critical in building great teams as well as positively advancing the reputation and interests” of ABI and the beer industry, said ABI.  Current govt affairs veep Mike Roche named as his replacement as vp of corporate affairs.  

Walmart is definitely serious about getting bigger in beer, at almost any price apparently.  A “rare glimpse” at Walmart’s pricing strategy found markup on 36-pk of Coors Light and Tecate to be just 0.6%, reported Bloomberg, after reviewing internal documents.  And Corona 24-packs at just 1% markup.  In comparison, same store had markup of near 30% on 20-oz Coke, 32.5% and 16.6% on 2 brands of popular breakfast cereals.  “This is nothing new that we’re investing in price in adult beverage,” said spokeswoman Deisha Barnett, who also noted markups are decided by market.  “Grocers have long invested in this to drive traffic,” she added.  Meanwhile, its gross margin fell to 24.7% at end of Jul vs 31.4% at competitor Target, noted Bloomberg.   Recall at summit at Bentonville HQ last yr, chief merchandising officer Duncan MacNaughton told alc reps it would be discounting their products as it worked towards goal to double alc sales by 2016. Since then, it has cut prices “on a range of mainstream and craft beers,” while doubling # of alc buyers to 12, and “cleared more shelf space” for alc promos.  Lots of distribs will likely be paying close attention to Walmart’s NBWA presentation in a couple of weeks.

“I did a lot of research,” consultant Joe Thompson told Brooklyn Brewery’s distrib conference.  Joe talked to 100 distribs, made 300-400 retail visits in effort to “get myself into the 21^st century.”  Joe also said he “went out and looked at some of the more progressive systems.”  His conclusion: “Distribution model has to change to accommodate expectations.” 

The “major problem” that Joe sees in the current “structure” is that it “does not allow sufficient time for selling ‘value added’ benefits efficiently and effectively.”  He repeated a litany of criticisms from suppliers that basically amount to saying that distrib salesmen are just order takers.  Joe more or less agreed, showing a chart that detailed how a pre-salesman spends his time.  He makes 50 stops per week, on behalf of 650 SKUs and representing 50 suppliers.  That amounts to 1 minute per supplier per stop, Joe said.  So the trick is to free up time-to-sell. 

The way to do this is to “transition the ordering process from pre-sales to the retailer,” either with web-based selling, tel-sell, or Twitter.  Then Joe pointed to a system that he had seen “using this process” applying it to 12,000 accounts.  Those accounts went from -7% at the beginning of the year to “now they’re even.”  (While Joe did not say, this sounded very much like Reyes Beverage Group’s natl call center.)  Under this new system, the pre-salesmen can only sell “value added benefits.”  Value added benefits include “selling multiple displays...multiple locations, out-of-section…. Cross merchandising programs, POS placement, custom localized POS… Develop in store relationships…mini-business reviews… Hand sell” and many more.   Joe called the system he had seen “amazing” and he added: “It works.”  

To move to this system, will take “a gigantic attitude adjustment.”   While some suppliers will be “apprehensive and cynical,” it will both “lower costs and make you more effective.  Retailers will love it,” sez Joe.  Presently retailers look at pre-sales system as a lot of “overpaid labor.”  And Joe said “a majority of the pre-salesmen are order takers and won’t make the cut.”  These changes “will literally transform the industry,” said Joe. 

“A confluence of events” has come together to create the need for “major change.” (Those include volume declines, sku proliferation, distrib consolidation, etc).  Joe also sees the need for some franchise reform.  “Either take control and do something about it,” said Joe, “or legislatures, craft brewers, AB and MillerCoors, will do it for you.”  The change may take 5-7 years, but 75% of distribs will embrace and gradually suppliers will too, according to Joe. After Joe’s speech, Brooklyn cofounder Steve Hindy said “when I read this presentation I was kind of shocked.  It really calls for a dramatic change in how things are done.”  

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Now that it’s the 3d largest beer marketer/producer in US, Crown Imports “positioned like we’ve never been positioned before,” according to biz development veep Tom Wyness last week.  Tom led attendees of Tamarron Consulting’s Supply Chain and Operations Leadership Conference from Corona’s “very humble beginnings,” when surfers were 1st “importers,” to a co that’s “running with the big dogs in the industry now.”  Back in 1982, Crown, then Barton Beer, imported 692K cases.  Tom had been working for Nabisco, when he took an interview with Barton as a favor to a friend.  At the end, interviewer (now consultant) Mike Mazzoni asked him “when do you wanna start?”  But when Tom told him “I’ve got a job,” Mike skeptically asked “selling cookies?” and 12 days later Tom was working with Mike and Bill Hackett at what would become current Crown Imports.  Now, as Tamarron prexy Greg Hopkins noted in Q&A, Crown has had one of “most consistent leadership teams” in big beer biz.  

Brewing at monstrous Piedras Negras brewery, “new dynamic” means “few limitations on what Crown can do to continue to build on the beer business,” Tom argued.  To help service this huge new asset, Crown’s put in offices in San Antonio, still 162 miles from the brewery since Crown couldn’t convince “talent” to re-locate any closer.  Tho many have questioned “how are we gonna pull this off,” Tom’s “confident” and pointed to “Constellation’s expertise” in winemaking (similar to beer-making, he claims), the co’s experience making beer and cider in Canada.  But he contrasted that with Crown’s “only experience” making beer: a tiny Mr. Beer kit. Also of interest has been a consistent difficulty establishing “seamless transportation” between Mexico and the US, which “still is a challenge, even today.”  When Greg asked about “border issues,” Tom pointed to being “concerned” with drug activity.  To help, Crown hired a 25-yr vet of FBI whose career largely focused on the Mexican border.