ABI stock soared this morn as it beat consensus estimates on several measures, driven largely by better-than-expected US earnings/margin results. Sales were not so hot, but EBITDA up 4% to $1.8 bil in North America. And after 4 straight qtrs of margin declines, North American EBITDA margin jumped more than 100 basis points to 43. There were several reasons: ABI rev per bbl up 3.9% (4% for 6 mos), it reduced distribution costs nearly 6% as it now makes the Ritas in 3 breweries and it shipped 2 points ahead of depletions. Because shipments ahead of depletions, “there was less of a drag on operating leverage,” noted Bernstein’s Trevor Stirling. “Without this boost, we estimate that margins would have been broadly flat.”

US sales-to-retailers down 3.6% in 2d qtr, but shipments only down 1.7%. Compare to MC STRs down 4.4% and shipments down 5.3%. Yet ABI and MC results pretty similar for 6 mos. ABI’s 2d qtr differential between shipments and depletions “partly driven” by timing of July 4th holiday, said ABI. ABI estimates that “timing of the July 4th holiday negatively impacted the growth of our STRs by” 80 basis points in the 2d qtr. For the 1st half, shipments and depletions almost in line: AB STRs down 3.8% while shipments down 3.4%.

AB estimates that it lost 40 basis points of share in 2d qtr “with the share loss due primarily to the performance of our subpremium brands.” Bud Light family mkt share “increased” even tho Bud Light brand STRs down 4.7% in the quarter. That’s pretty steep drop for Bud Light, but Straw-Ber-Rita and Lime-a-Rita achieved a “combined market share of 1.1%” in Q2 based on STRs. Bud family mkt share “marginally down” with Black Crown “offsetting a share decline in Budweiser.”

Global ABI beer volume down 1% in Q2, 2.3% for half, but EBIDTA up 5.8% in 2d qtr to $3.9 bil and 3.4% to $7.3 bil for half. “We are particularly impressed by the margin performance in North America and volume resilience in Brazil,” said Jonathan Fyfe of Mirabaud Securities. “The beat was mainly driven by stronger than expected margin performance in the US,” said Bernstein’s Trevor Stirling. At presstime, ABI stock up 7% today and grew its mkt cap by about $10 bil to $154.5 bil.

Tho Bud continues to struggle through yet another down year in US, ABI’s expensive and extensive plans to make its iconic brand a global powerhouse, particularly in key China mkt were highlighted in lengthy Wall Street Journal feature Friday. Local brands rule globally (and increasingly in the US with craft), and rival SABMiller focuses on investing in local brands rather than make a global push, but ABI method can succeed because “American culture is something that travels. Budweiser is traveling with it,” said ceo Carlos Brito. In China, ABI “hopes to duplicate success” of Coke and “has enough firepower to try,” noted WSJ. “The potential is so huge,” in China, noted Brito, and so are the challenges there. ABI spent $1.4 bil “refurbishing breweries” and on other expenses in China in last 2 yrs and is now brewing Bud in 8 breweries across country. But logistically, top brand Snow (49% owned by SAB Miller) has huge edge with 80 breweries across China, “roughly twice” what ABI has. That’s helping Snow sell for less than ½ what Bud goes for at a Tesco in Shanghai, per report. While ABI volume in China was up 22% in Q1, Bud still had just 1.7 share and the top-10 is comprised of only local China beers, 2 of which are owned by ABI (Harbin & Sedrin.) A global brand could yield “true economies of scale in ways the industry has never seen,” with standardized packaging, noted report, while others remain skeptical. “We remain convinced beer is fundamentally a local business,” said SABMiller ceo Alan Clark. And while noting that global brands have historically higher prices, Credit Suisse’s Sanjeet Aujla recognizes that beer is “all about local,” and “globalizing beers misses the point.” Meanwhile besides its “bold move” in China, ABI has also launched Bud in Russia, Brazil and Ukraine in recent yrs while “deepening Bud’s distribution in nearly 90 countries” and doubling the number of Bud’s breweries globally, noted Journal.

In tuff yr overall, lots of attention paid to struggle of megabrands (like Bud and Bud Light) as well as success of some of AB new intros like the Ritas. But what about all the new imports that AB added to its portfolio, like Presidente, St Pauli Girl and Spaten? They aren’t big on the radar screen, but to those distribs who sell significant quantities of ‘em, they can’t be happy with the trends or what some say is AB’s lack of attention to these brands.

Look at the trends: St Pauli Girl, down 63,600 cases, 22.6% in IRI multi-outlet + convenience thru Jul 14, Presidente down 120,000 cases, 51%. Spaten family down 26%, Franzikaner down 25%; that’s about 30,000 cases between ‘em. Tho these brands represent only a tiny % of AB volume, the rapidity of the decline does make one wonder what AB’s strategy will be with these brands. Then too, some of the other brands, which used to be imports and which AB now makes here, are also not showing trends to write home about. Beck’s down 207,000 cases, 16%, Beck’s Light down 35,000 cases, 30%. But of course Beck’s Sapphire at 339,000 cases, so more than made up for losses in this timeframe. Bass also down 65,000 cases, 26%.

Still more papers to be filed by Earl Gaudio & Son, central Ill AB distrib seeking bankruptcy protection. Turns out Gaudio’s biggest creditor is Regions Bank, owed approx. $5.025 mil. Owes another $1.68 mil to Small Business Growth Corp (SBGC), which calls itself “Illinois’ largest SBA 504 Lender,” helping small bizzes expand. Both the bank and SBGC “purport to hold a Mortgage on” Gaudio’s premises, according to bankruptcy papers. Distrib also owes lotsa different banks/finance co’s for secured interests in trucks and other vehicles, tho in unstated amounts. Fed and state tax liens out there too. Gaudio asked for, and got court’s permission to allow it to use collateral and “post-petition financing” provided by guardian of Earl Gaudio’s estate (Helen Gaudio) of up to $750K to pay employees, keep biz running. Put together a 20-wk plan of forecasted receipts and expenses that shows approx $204K per wk from sale of AB products, $27K per wk from sale of other products. But projects expenses of $249K-$255 per wk, so losses will widen to projected negative half mil at end of period.

On positive side, Gaudio “has identified a buyer for certain of its assets” (that would be Skeff Dist) and is “working expeditious [sic] towards a sale of majority of its assets.” Sale is “best opportunity for the Debtor to maximize value for its creditors.”

In very tuff 1st half for total beer biz (down around 3%), craft brewers continued to shine and accelerated off bigger base. Volume up approximately 900,000 bbls, 13% in 1st half and $$ up 15%, according to Brewers Assn this morn. There were 2538 breweries operating in the US at the end of Jun and 1605 in planning. Almost 450 breweries opened in the past year.

Editorial today follows op-ed from Victory Brewing’s Bill Covaleski last month seeking significant revisions in Pennsy franchise law (see Express #78). Recall those changes included self-distribution up to 75K bbls, allowing brewers under 20% of a distrib’s biz to move without cause for fair mkt value and new tweak of brewers getting 10% fee when distribs sell brands amongst themselves. Now comes Philly Inquirer opining that “while there may be some room to improve the details,” of that proposal, “giving brewers more freedom from wholesaling monopolies is the right course.” PI further pricks PA’s “outdated state laws favoring brewer wholesalers” which it sez are “threatening to kill the buzz,” created by the “national microbrewing renaissance.” Editorial argues that PA laws have held back craft biz in state and will do so in future. Yet it also points out that there are over 100 craft brewers in PA now and that Philly is “one of America’s premier beer cities.” How did it get there, including highly renowned and widely copied Philly Beer Week, with such “incoherent” laws, as PI calls ’em? Wholesalers do provide “substantial” services in mktg/logistics, PI acknowledges, but the middle tier “wields disproportionate power under” Pennsy law. Push to reform Pennsy law just latest example of consultant Joe Thompson’s recent point that “protective” state laws getting more difficult to defend.

Beer eked out 0.2% volume gain for 4 wks thru Jul 14 in IRI’s multi outlet + convenience data. Dollar sales up much healthier 3.3% as all of gain in high end. Indeed, premium volume still off 2.4%, subpremium down 4.9% same period tho both trends better than yr-to-date. For 4 wks, imports +5.3%, superpremiums +3.4%, craft +18.4% and PABs flyin’ at +31%. Yr-to-date total volume still off 1.1% across channels; $$ sales up 1.6%. Premiums, subpremiums off 3% and 6% respectively YTD.

AB and MC volume trends each a point better for 4 wks vs YTD, but each still down in most recent mo. AB -0.9%, MC -1.7%. Crown up double-digits for 4 wks (+10.5%). Boston hittin’ it outta the park: +36.4%, pushing YTD gain to just below 30%. Heineken USA up 3.4% for 4 wks, double its YTD gain. Pabst scored tiny gain for 4 wks; off 2% thru mid-Jul. Each of the other top 10 suppliers down for 4 wks and YTD. Thru Jul 14, Yuengling -4.1%, Diageo -9.4%, NAB -8.6% and Mark Anthony -1.8%. Lotsa solid gains among top craft brewers: Sierra +10.8%, New Belgium +4%, Gambrinus +9.3%, Craft Brew Alliance and Deschutes each up 13%. Some outsized gains: Lagunitas +81%, Stone and Dogfish Head +50%, Bell’s +28%, Sweetwater +42%.

Not much change in top brand trends, and IRI trends better than all-channel trends. Bud Light off 2.3% YTD, Coors Light +1.5%. Bud and Lite each off more than 5%. Corona +2.1% and Mich Ultra +4.7%, but Natty Light -8% and Busch -7%. Busch Light doin’ best among major subpremiums, off just 1.2%. But High Life down almost 12%, Key Light -7%. Modelo Especial kickin’ along at +17%.. Bud Light Ritas grabbed just under 1 share of volume, 1.6 share of $$ YTD.

While Crown continued to outperform total industry depletions trends by around 5 points in 1st half 2013, it was up just 1.5 mil cases, 1.8%. Even more interesting, Crown got its growth primarily in its 3 largest states: Calif, Tex and Fla. In fact, Crown up 7.6% in Calif, 6.3% in Tex and 9.3% in Fla thru Jun. Amounted to 2.5 mil case, 7.6% jump in those 3 states that represent 40% of its total volume. Probably not a coincidence that those 3 states represent 55% of the Hispanic population in the US. Each of Calif and Tex had Hispanic population that was at 37.6% of the state total in the 2010 US Census. And it’s still going up.

Since Crown portfolio (especially Modelo Especial) skews heavily Hispanic, being a Crown distrib is a pretty good place to be in one of those 3 states, even with tuff overall biz. In fact, “Crown volume increases and corresponding import margins are saving this year from being a disaster,” one distrib commented. And Modelo Especial still growing at about a 30% clip in southern Calif, believe it or not. But what if you’re not in one of those states? Crown biz in the whole rest of the US down 1.1 mil cases, 2.2%. And it’s down in over 30 states, including a 10% drop in hard hit Illinois, 9% in Wisc, 11% in Minn. So Crown is still winning in total US in 2013, but mainly because of its strength among Hispanics in a few key states.

Pabst promoted Kevin McAdams to prexy and chief operations officer, after less than a yr as sales veep (Kevin previously with Red Bull), replacing ex-AB exec John Coleman, who came on board in Feb 2012. John will stay with Pabst in a “very senior advisory role,” owner Dean Metropoulos told INSIGHTS, for a yr or more, looking at both international and entrepreneurial opportunities.

Kevin will be the 4th president of Pabst in the 3 years since the Metropoulos company bought Pabst. Two have been named Kevin (McAdams and Kotecki) and two named John (Cochran and Coleman). But the Metropoulos family remains unwavering in its commitment to Pabst and “very hands on,” said Dean. Pabst up a couple of points yr-to-date, according to Dean and Pabst Blue Ribbon up 9% (IRI shows Pabst down 2% and PBR up 7%). Other focus brands like Lone Star, Rainier, Natty Bo and Oly up “very well,” several up double digits, sez Dean. Kevin is an “excellent execution guy,” added Dean. There hasn’t been a lot of news coming from Pabst in recent mos, but the Pabst Blue Ribbon brand has continued to be extremely solid in a very difficult environment.

A total premium light trend this soft simply hasn’t happened before. And it’s a big double whammy for MC, leading to its worst overall shipments and depletions trends since the JV’s inception. In 2d qtr, premium light STRs “declined high single digits with Coors Light declining mid-single digits and Miller Lite declining high single digits,” SABMiller said in quarterly update this morn. Recall that earlier this yr consultant Mike Mazzoni had called light beers a “real sore spot” in the industry (in Beer Marketer’s INSIGHTS). That’s gotten more sore since, these numbers show. And MC sez it gained share in premium lights!

In “a challenging environment with significantly cooler weather in most of the country,” MillerCoors revs down 3%, sales-to-retailers down 4.4% in 2d qtr (selling-day adjusted) and shipments down 5.3%, reported SABMiller. That followed 3.3% drop in 1st qtr. So MC STRs down close to 4% in 1st half. MillerCoors shipments down nearly 900,000 bbls in 2d qtr and about 1.2 mil bbls, 4% in 1st half.

MC’s subpremium portfolio declined mid-single digits too. The bright spot: MC’s above premium portfolio, which grew double digits “driven by new product offerings” like Redd’s, Third Shift “as well as continued strength of Tenth and Blake led by the double digit growth of Leinenkugel’s Summer Shandy.”

Globally, the qtr was unusually soft for SABMiller too. Lager volumes down 1% on organic basis and rev per bbl up 2%. SABMiller ceo Alan Clark said: “Our first quarter revenue growth was held back by unseasonably cold and wet conditions in many of our northern hemisphere markets, which negatively impacted beer consumption. This was offset by continued growth in our Latin America and Africa divisions.” At presstime, SABMiller stock down about 3.5% today.