Bank holding co’s have “created a bottleneck which limits the supply of aluminum” and unfairly drives brewers’ costs up, MillerCoors global risk mgr Tim Weiner will tell Congress today. How much? “Record high physical aluminum prices have cost [MC] tens of millions of dollars in recent years.” It’s complicated. But based on MC press release, info from website 4-traders.com and reporting from NY Times over last few days, here’s the basic story MC and others tell: Goldman Sachs owns huge aluminum warehouses in Detroit and have stockpiled metal for several yrs. It also moves metal around from warehouse to warehouse, rather than shipping it promptly, upping storage costs. This ends up increasing aluminum’s price on the spot market and raises costs across the board. Indeed, “aluminum prices … have remained inflated relative to the massive oversupply and record production,” according to Weiner. “Only a tenth of a cent or so of an aluminum can’s purchase price can be tracked back to the strategy,” of Goldman’s “industrial dance,” according to the Times. But that adds up and “ultimately costs consumers billions.” Weiner is speaking at hearing today on behalf of MC, Coke, Dr Pepper Snapple, can-maker Rexam, plus aluminum producers Novelis and Ball Corp.

This is a broader story of regulation, and how banks seek less of it these days, tho big aluminum users seem to be seeking more. It also involves London Metal Exchange – which until last yr was owned by same banks that owned the warehouses, helped set prices and gets a piece of the higher costs – and heavy lobbying, natch. Goldman Sachs sez it’s doing nothing wrong; no one is charging illegality. Brewers got a new rule proposed to ease shipping delays last month but that hasn’t even been voted on and would not go into effect until 2014, if it passes. Sen Sherrod Brown of Oh is sponsoring today’s hearing on issue of Wall St owning warehouses and other assets related to commodities (copper, oil and other products involved). He told the Times: “Banks should be banks, not oil companies. They should make loans, not manipulate the markets to drive up prices for manufacturers and expose our entire financial system to undue risk.”

Though many beer folks celebrated recent TTB rulings about voluntary serving facts guidelines on alcoholic beverages, the discussion of what should or should not appear on beer labels is far from over. Last week, the Food Babe, a popular food blogger known for researching ingredients and alerting readers to products she deems unsafe, posted the “Shocking Ingredients In Beer.” Among those ingredients found in many mainstream beer brands is “GMO Corn” or other genetically-modified food products, a big no-no for the Food Babe and her anti-GMO constituents. While the post does not overtly advocate for regulatory changes, one of the movement’s basic tenets is establishing greater transparency from food and beverage-makers about what they’re putting in consumer goods. And the Food Babe is not afraid to name names: she lists and provides graphics with brand names and their offending ingredients. The free-flow of information available on the internet can quickly heat up these discussions among a growing population of vocal, information-seeking consumers. Alcohol producers have mostly escaped scrutiny from critics of genetically-modified foods, likely in part because such companies have been exempt from listing ingredients for so long (TTB handles beer labeling, not FDA). If posts like Food Babe’s get more traction (the post quickly rose to the top of the blog’s “most controversial,” where it remains), beer companies could come under greater scrutiny and may be tricky to maintain labeling status quo.

There were very few distrib transactions in 1st half yet many expected later this yr (as BMI noted). First one of 2d half closed last Friday. That was purchase of approx 200,000-case Gwyn Dist in Marion, Va, mostly Pabst, plus craft and imports, by 8-mil-case Blue Ridge Bev, owned by the Archer family, including NBWA chairman Bob Archer.

On top of all the new products MC rolled out this spring, MC will again intro several new products this fall. Several will be sweet, at least one higher alcohol and some will be craft(y?). So MC is sort of continuing along same lines as earlier this yr with Redd’s, Batch 19, 3d Shift etc as it attempts to transform its portfolio towards the high end and/or “play hard” in FMBs. The new brands this fall include Redd’s first line extension Strawberry, Leinie’s Orange Shandy and Steel Reserve Blackberry. All of those were mentioned during MC’s investor day last mo. But MC also coming with new Short Straw, a red farmhouse ale from Blue Moon and a Leinie’s Oktoberfest. How many of these brands will stick? And how much volume will they represent?

In speech to Tennessee distribs yesterday, consultant Joe Thompson intro’d theme which he believes is further complicating picture for beer distribs and making status quo harder to maintain. He called it “blurring lines of accountability.” He included long-laundry list of examples including suppliers owning branches, self-distribution by craft brewers, brewpubs, intrusive contracts that give suppliers exclusive negotiating rights and ability to match last offer, cost transfer, margin intrusion etc. Yet he also pointed to distribs owning stakes in craft brewers, selling wine and spirits or non-alcs or distributing outside primary footprint. And just for good measure, he threw in retailers’ efforts at private label, direct shipments, off-premise growler sales, on premise private draft, etc. This all occurs against a backdrop where # of craft brewers now greatly exceeds number of distribs with about 900 distribs selling over 90% of volume and over 2500 craft brewers (with 1500 more in planning). In this environment, “protective laws are harder to defend,” said Joe.

“We’re constantly making exceptions to the fundamental nature” of 3-tier system, Joe told INSIGHTS, which is separation of tiers. “Look around, there’s more contradictions. Brewers want to be wholesalers. Wholesalers want to be brewers. Retailers want to buy from brewers.” All this puts stress on system. “It used to be we had easier arguments to defend and had to defend them less. Now we have to defend them more and they’re harder to defend.” With increased contradictions, there’s “multiplier effect. That’s what scares me. More and more, we’re arguing out of both sides of our mouth.”

Even amidst blurred lines, in recent yrs, beer distrib profits have increased strongly, Joe showed citing NBWA Distrib Productivity report. Net oper profit jumped from 3.9% of sales in 2005 to over 5% of distrib sales last yr. Joe estimates that will pull back to around 4.7% in 2013. Distrib costs as % of sales fell to about 18% on avg, down from 20%. And GP jumped almost 20% between 2005-2011, he said. So even amidst volume declines and supplier incursions into distrib margin, distribs increased profits substantially in recent yrs as they cut their own costs, added new brands and beer biz traded up.

An approx 1-mil case AB distrib, Earl Gaudio & Son Inc, with about a 70 share in Southern Illinois and an AB distrib since 1956, has filed for bankruptcy protection. This almost never happens. Separately, Vermilion County court has also approved sale of Gaudio to Skeff Dist Co, currently about 3.5 mil cases. This is long-running behind scenes battle between Earl Gaudio (91) and his son and grandson, but it erupted today with lotsa detail in Central Ill paper News-Gazette.

Here are a few details. Earl Gaudio filed motion requesting preliminary injunction to remove veep Dennis Gaudio and chief oper officer Eric Gaudio as directors and officers of the corp. The request “claims several other developments took place within the corporation without notice to shareholders,” sez News-Gazette. “On at least 58 occasions, the corporation bounced or failed to pay for product delivered by” AB and “incurred debts to Anheuser Busch,” “failed to pay Anheuser Busch $405,000 for products and procured a loan for payment to Anheuser Busch on a personal guarantee by Earl Gaudio, which was secured by ‘forgery fraud or concealment.’” That’s just for starters.

Also charges they created other bizzes, sold off corporate assets and more. This has been going on for over 1 yr. Why did AB allow this to go on for so long? Unknown at presstime, but could it be that AB hoped to prevail in its long-running attempts to be allowed branches in Illinois and thought it would be able to buy Gaudio too? Stay tuned.

Join us for the 20th annual Beer Insights Seminar, Monday November 11 at the Waldorf=Astoria in NYC. You won't want to miss this year's event. Just added: a unique panel that will include insights into industry data from several leading data co's, including GuestMetrics ceo Bill Pecoriello, IRI principal bev alc insights, Dan Wandel and Nielsen senior veep Andrea Riberi, moderated by BMI exec editor Eric Shepard. They join a top-flight program that includes AB sales vp David Almeida and Heineken USA president Dolf van den Brink, as well as outspoken Harpoon ceo Rich Doyle. Also on tap: a panel moderated by consultant Bump Williams including MillerCoors chief customer officer Kevin Doyle, Crown exec veep sales Bruce Jacobson and Boston Beer sales veep John Geist. As always, BMI's Benj Steinman will present an overview of industry trends. More speakers will be announced in coming weeks. The seminar is $1150 per person. Sign up for what's sure to be a jampacked and insightful day. Seating is limited. Click here for more info. Click here to register.

MillerCoors total net revs dropped $83 mil, nearly 3% in very tuff 2d qtr as shipments down over 5% and net rev per bbl up 2.6%. And so its operating income fell $27 mil, 6%. For 6 mos, revs down $60 mil to $4.54 bil and oper income down $31 mil to $692 mil. Since its 2008 inception, MC has more than doubled operating income to over $1.2 bil in 2012. And MC increased revs $300 mil, 4% to $7.5 bil, even tho volume declined every yr. But those kind of strong financial results are jeopardized in 2013, amidst steeper volume declines. At least, MC got off to much better start in 2d half (see above) but pressure is on to find big savings, and/or to better allocate resources.

Since AB and MC usually make same moves on pricing and have similar strategies on trading up their portfolios, it was somewhat surprising that MC got more than a point less rev per bbl than ABI in Q2 (up 2.6% vs AB's 3.9%). Analysts asked a number of questions about this on conference call. Of MC's 2.6% rev/bbl gain, 1.1% from mix (trading up), 1.5% from pricing. AB got 2.5% from pricing and 1.4% from mix. That was MC's lowest rev per bbl increase of last 6 qtrs. Sales prexy Ed McBrien pointed to increased price promotion activity led by "leading competitor" in economy segment in midwest and Fla in Q2. That's AB, yet MC harder hit. Differential also likely because AB got far more revs from new products, especially the Rita brands.

Yet MC also expressed much satisfaction with its new products as each of Redd's and Third Shift doubled from 1st qtr in Q2. In latest 4 weeks thru Jul 14, Redd's got 0.55 shareof $$ in Nielsen, compared to 0.3 yr-to-date. Third Shift only 0.1, but bigger than most craft brands, MC pointed out. Batch 19, Killian's Stout and Henry Weinhard collectively didn't even grab 1/10th of a share point. So a somewhat spotty new product track record. Still, expect a lot more new product activity from MC next yr, led by much-discussed (and much delayed) Miller Fortune, originally aimed at Bud Light Platinum. It just became official and MC hopes to debut with big splash. MC has already shipped Redd's Strawberry. Also has Leinie's Orange Shandy, Steel Reserve Blackberry in the hopper. And a cider named Smith & Forge aimed at men, which will only be available in cans. MC above premium brands up to 9% of its mix, with intermediate goal of getting to 16% in next 3 yrs.

Meanwhile, there will be a "softening of marketing spend" in 2d half, said MC ceo Tom Long, on conference call following big rollout spend on Redd's for example. Total mktg gen and admin costs held about even overall at $470 mil in 2d qtr. Up $15 mil, about 2% in half. MC has kept cost of goods in check (up a little more than 2% per bbl), but with increased profit pressure, something likely to give. For example, for how long can MC continue megabrand-level spending on Miller Lite (about $150 mil in ads)? Tho MC sez Lite ads "working," hard to see much evidence of that, as it's down high single digits. If that's trend for full yr, Lite will lose another 1 mil bbls and will have lost over 4 mil bbls and nearly 1/4 of its volume since MC's birth in 2008. Between Lite softness and changing world of mktg, spend may need to be rethought. Indeed, MC just underwent extensive "tournament of ideas" internal exercise where MC mktg teams had to compete for best ideas with a (hypothetical) huge reduction in available funds. Many good ideas came from it, INSIGHTS heard, which will contribute to "smarter" use of resources going forward, said source.

Following 7.4% drop in Jun, import shipments trend mirrored domestic brewers in 1st half: down 338,000 bbls, 2.3%. So import share of shipments held even at just below 14. Gotta note: Commerce Dept data on imports compiled by Beer Inst hasn't always aligned with importer figures due to timing, inventory, other factors. For example, Mexican trend clearly better than +1.2% reported by Commerce, given Crown/HUSA trends. Meanwhile, import depletions trend much better than shipments, up 0.8% thru Jun, we understand. And Jul hadda be big given huge Crown growth (see above).

At retail, import volume up 2.2 mil cases, 2.6% YTD thru Jul 28 in IRI's multi-outlet + c-store database while mainstream biz (premium + subpremium) shed over 22 mil cases. Imports at 11.1 share in IRI, up 0.4. Dollar sales up 3.8% and just under 15 share, up 0.3. That's while avg import price up just 33 cents/case equivalent YTD, +1.2%. Scanner data may be more accurate reflection of import trend, but some "alignment" issues here too. For example, IRI's import segment still includes brands now made in US: Fosters, Bass, Becks, Red Stripe, etc. Imports lag double-digit increase for craft, big pop in PABs, so imports lost share of high end so far in 2013. Consultant Bump Williams notes "some mature import brands aren't getting the pull through they used to," but he also sees "great wholesaler execution on imports, knowing the craft drinkers also drink import brands."

Import mkt remains much more concentrated than overall beer. Top 3 imports have over 54 share of imports in scanner data, even more if you tease out brands now made in US. Top 10 have 80 share. Current import growth really driven by 4 brands. Modelo Especial up 1.7 mil cases alone, 17% for 7 mos. Next: Dos Equis, +656,000 cases, 18%. Corona Extra +583,000 cases, 2.5%. Stella picked up 419,000 cases, 15.5%. That's 3.4 mil cases between 'em. Only other top 10 import up is Corona Light, +115,000 cases, 2.6%. So Corona/Light each held share of import biz in these channels, while other gainers gained share. Heineken down 2% YTD. Tecate off 4%, but Tecate Light up nearly 40% and its 211,000-case gain offset Tecate loss. Plus, HUSA's Beers of Mexico up 276,000 cases, 86%.

Labatt Blue/Light combined for nearly 400,000-case loss, down 7%/10%. Newcastle Brown down 8%; Seasonals +7%. Dig below top 10 and trends just as mixed. While Tecate Light screaming, Dos Equis Ambar +16%, Negra Modelo +5.4%. Even or up slightly YTD: Pacifico, and Guinness Draft. (With Extra Stout and Black Lager, Guinness franchise down slightly.) Heineken Premium Lager -10%; so is Amstel Light but Amstel not even in top 20 anymore. Several of AB's former import brands getting whacked: Bass (-26%), St Pauli Girl (-22%) and Beck's down 16%, but with Sapphire, franchise +150,000 cases, 11%. Over at MC, ex-import Fosters up, but every major Molson brand down, most of 'em double-digits. Still imported, but also down: Peroni -4.4% and Pilsner Urquell -24%. So it ain't imports driving Tenth and Blake's gain. Ironically perhaps, with exception of Stella, Top 2 global brewers not doin' so great in US import mkt.

Pricing trends also all over the lot. Avg case price for Corona Extra +29 cents, 1%, to $29.58; Heineken price up just a few pennies to $29.84. But Modelo Especial avg price up nearly $1/case to $26.43. And it's still smokin'. Dos Equis Lager up 43 cents, 1.5% to $29.71; Stella up similar 56 cents/case, tho to significantly higher $34.87. Indeed, avg Stella price a buck higher than avg craft price. Labatt brands gettin' hurt despite 35-37 cent price declines that put 'em at $18-$19 per case. That's a buck lower than avg domestic premium. So, among top 10 imports, price range goes from $18.33/case (Blue Light) to Stella's near $35. Importers, especially Crown, have always been mindful of price gap between imports and premium beers. But gotta keep an eye on price gap with crafts too, Bump notes. Indeed, import pricing going forward could be a "negative," sez Bump. "I think there is a very fine line to taking price up for profitability vs gouging and if that gouging threshold is hit, I think that import shopper will hop right into craft beer."