February 11, 2013
Dear Client:
The Wall Street Journal and the New York Times, unsurprisingly, have opposite takes on the DOJ’s lawsuit to stop the ABI – Modelo deal.
The opinion page in the Wall Street Journal titled “The Most Uninteresting Lawyers” takes the DOJ to task. “Do antitrust lawyers drink beer, or for that matter grocery shop?” asks the WSJ.
“Antitrust law is allegedly to prevent firms from exercising monopoly power to abuse customers. But antitrust enforcers have difficulty finding actual monopolies. So they end up attacking proposed mergers like the AB-Modelo tie-up, in which the resulting company would serve all of 46% of the U.S. beer market.”
The key point of the editorial, and perhaps a key strategy by ABI attorneys, is that the DOJ has restricted the relevant market to beer only, when clearly beer competes for drinkers with wine and liquor. “By cherry-picking particular U.S. markets,” writes the WSJ, “the current Justice suit suggests that the beer merger would result in unacceptably high HHI scores. It’s a strange time to forecast a lack of competition, because this happens to be the golden age for independent U.S. breweries. The U.S. added 442 new brewers last year for an all-time high of 2,751, according to the Beer Institute trade association.”
Amid all this diversity, the DOJ “sees only scarcity.” But what about MillerCoors followiong ABI on price? “But if that happens in the future, other competitors can take the opportunity to pick up new customers. There are few barriers to entry in the beer market. Brewing is a mature technology, to say the least.”
Ending with a play on Dos Equis ads, the Journal states: “Americans don’t always drink beer. But when they do, they’ll enjoy plenty of alternatives without any help from the world’s least interesting lawyers who populate the Justice Department Antitrust Division.”
The New York Times also took to its editorial page, but took the opposite tack. The Times writes that “consumers will benefit from the Justice Department’s antitrust suit to block” the deal. The deal will leave MillerCoors and ABI controlling “more than 70 percent of the beer business.” The Times says that under the Bush administration, Miller and Coors and A-B and InBev were allowed to combine, which “severely reduced competition in the beer industry and led to higher prices.” In fact, says the Times, “beer prices started rising faster than the Consumer Price Index.” Completely ignoring that Crown Imports will be controlling Modelo’s brands here, the Times says that “competition will most likely disappear if InBev is allowed to own 100 percent of Modelo, which currently operates independently.”
DOJ VS ABI-MODELO GETS WASHINGTON’S SLOWEST JUDGE
In a stroke of bad luck for ABI, the case has been assigned to the slowest Washington federal judge. U.S. District Judge Richard Roberts also carries the largest backlog of unfinished cases and unresolved motions among his Washington colleagues, according to Bloomberg. He had 73 motions pending for more than six months — almost three times more than the next slowest judge — and more than 50 cases pending more than three years. “It helps the Justice Department,” said a professor to Bloomberg. “If they have a judge that is this slow — and obviously this is something they could not have prepared for — there’s no doubting this will help the government.” ABI may be more motivated to settle with the DOJ than wait. The deal has to close by December 31, although ABI can get a 90 day extension it it’s in court. But after that, ABI could be obliged to pay the $650 million breakup fee.
MIKE’S ROLLING WITH HARD CIDER LINE
Mark Anthony Brands is rolling out two flavors of cider this month: Mike’s Hard Smashed Apple Cider will be available in Crisp Apple and Classic Dry flavors, BBD has learned. The ciders will be available in 6 pack bottles and 16oz loose cans, and line priced with Angry Orchard and Woodchuck. Mike’s plans to partner with the satire website The Onion to develop a video spoof on “cider snobs”. Mike’s is positioning this cider as the anti-snob cider, a “cider with swagger.” Says the sell sheet: “These days it’s hard to find a cider that doesn’t have its figurative pinky in the air. Most ciders stick to the same stuffy story, whether it’s touting their old world style or throwing in every term from the Highbrow Handbook like ‘notes of ginger’ and ‘floral essence.’ Is this a wine tasting?…. We don’t have to pile on excessive adjectives to make our cider appealing; the taste wins you over every time.”
Interestingly, the sell sheet also cites research from IRI and shopper card data: When on feature and display, ciders generate +57% lift, beating crafts & imports. Also, over two-thirds of cider dollar sales are incremental to the beer category. That sure gets to the core of it.
WHO WERE THE TOP BEER SHARE GAINERS ON-PREMISE IN 2012?
Based on its database of POS transactions of 250 million checks from restaurants and bars across the United States, GuestMetrics is reporting that the largest share gainers in on-premise are Dos Equis, Stella Artois, Blue Moon, and Lagunitas. “Based on our data, Dos Equis achieved the largest share gain in the beer category at 30 basis points, followed by Stella Artois at 25 basis points, Blue Moon at 15 basis points, and Lagunitas at 10 basis points,” said GuestMetrics chief Bill Pecoriello.
While the top three brands are not so surprising, the meteoric rise of Lagunitas is noteworthy, particularly since they had product shortages last year. “In further analyzing the share gains achieved by Lagunitas, while it is true they made impressive gains in 2012 relative to 2011, the brand appears to be gaining momentum even beyond what the year over year comparison suggests,” said Peter Reidhead, VP of Strategy and Insights at GuestMetrics. “Throughout most of 2011, Lagunitas had a relatively static market share in our on-premise universe at around 10 basis points. However, by the third quarter of 2012, its share figure had doubled to around 20 basis points, and one quarter later, Lagunitas wrapped up 2012 with a 30 basis point share. Much of this was due to robust increases in the distribution of the brand. At the end of 2011, Lagunitas was carried in about 4% of our on-premise locations, but by the end of 2012, its distribution in our universe had doubled to 8% closing the gap with its off-premise distribution.”
Until tomorrow, Harry
“It was on my fifth birthday that Papa put his hand on my shoulder and said, ‘Remember, my son, if you ever need a helping hand, you’ll find one at the end of your arm.'”
-Sam Levenson
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