Dear Client:
Yesterday the TTB sent notice that they informed Illinois’ Skokie Valley Beverage Company that it does not currently hold a valid wholesaler basic permit “due to unreported changes in ownership and control, and that continued operations without a valid permit may constitute a criminal offense under Title 27 USC 207.”
Recall that Skokie, who carries Constellation, Pabst, NAB, LaCroix and specialty craft, announced earlier this summer that it would break up and sell its business to both Reyes’ Chicago Beverage Systems and Windy City outfits, as well as the Hand Family’s Lakeshore Beverage, to close August 1.
Apparently, Skokie Valley Beverage Company’s “lack of a valid basic permit came to light subsequent to joint operations that TTB conducted with the Illinois Liquor Control Commission in September 2017.” The agency contends said operations unearthed tied house violations — specifically, slotting fees for draft placements at three retail locations. Skokie has not admitted to these allegations.
MOLSON COORS CHIEF ADDRESSES MILLERCOORS REDUCTION, “SOFT” BEER MARKET AT BARCLAYS CONFERENCE
At yesterday’s Barclays Global Consumer Staples Conference event, Molson Coors chief Mark Hunter and CFO Tracey Joubert fielded the inevitable questions about their U.S.-side cuts. Recall, Tuesday the brewer said they’d reduce about 350 salaried positions at MillerCoors, or roughly 12% of that salaried workforce, to invest in brands, seeking growth after a tough Q2.
And so, Tracey explained on yesterday’s Barclays conference that they are examining cost base “to manage through sluggish industry demand, increased inflation, and ongoing share challenges.” After headcount reduction savings, “MillerCoors will emerge as a leaner, more efficient, and effective business with more flexibility to invest in building a first choice portfolio,” she said.
The first post-presentation question sought or more color on the reduction. Mark fielded that one. It’s not the first time they’ve done this, he says.
“As we went through the integration of the businesses [post MillerCoors transaction], we removed about 250 to 300 FTE [full time] roles,†he says.
“And clearly, as we’ve come through 2018, we’ve seen some incremental inflationary pressures, particularly on things like freight and aluminum. And if appropriate, really take another look at the shape of our organization.”
As for where they’ll cut that 12% of MillerCoors’ salaried workforce: “It’s not taking feet on the street out of our business,” Mark said. “It’s much more about really looking to streamline the business and a lot of the back office and support functions, and this will be completed over the course of the next six weeks.”
And he reminded: “We did something very similar back in 2014 in the U.S. business. We’ve had a similar cost reduction program in Canada in 2015. And as we consolidate our European business, we also had a pretty significant G&A cost reduction program there as well. So this isn’t unusual for our businesses.”
As for timing: “Some of it was contemplated, and we’ve moved at pace because we’ve seen incremental cost inflation this year. Although most of the benefit really flows through as we get into 2019.”
Later, asked to explain the a softer U.S.beer environment amid what seems a robust consumer environment, Mark put it into perspective ,with margins.
“…Certainly from a margin perspective, [the beer market] is actually stronger than it’s been. Consumers are choosing to spend more of their dollars in the above-premium segment, so drinking kind of less but better is probably the way I describe things, and that’s not dissimilar to what is also being seen for example in the spirit segment.
“So if you look at pure volume, then we anticipate volume in the U.S. to be probably down 0.5% to 1% give or take but we expect the margin pool in the U.S. to continue to expand because of the premiumization of the industry.”
BILL NEWLANDS ON WHAT HAS DONE ‽WONDERS†FOR THE CORONA FRANCHISE
Constellation brass also presented at yesterday’s Barclays event. President and COO Bill Newlands fielded the question they probably get asked the most publicly, after anything having to do with weed: how much those new Corona line extensions cannibalize.
The latest? They expected roughly 30% cannibalization from Premier and 50% cannibalization from Familiar. “Familiar has been about that, Premier has been even less. So we have roughly 75% incrementality,” said Bill.
And the lineup has done “wonders” for the franchise, he said. In the most recent 4 weeks, the Corona franchise is up 14%.
PREMIER ACV ALREADY AT 75%. “And in fact we’ll probably do close to twice the Premier that we expected,” he said. They’re already at close to 75% ACV with the product, much quicker than they expected.
Asked where Familiar is cannibalizing, Bill said “core” Corona and Modelo, and for Premier, it’s Corona Light and then Corona Extra. But in terms of shelf space, “most” of the Premier and Familiar sets are incremental.
THE TIME IS NOW FOR WEED, SAYS BILL. Moderator saved weed questions until the end. But we noticed a trend among Constellation brass’ answers: In each of the last few months, it seems they’ve been getting bolder about their U.S. prospects for cannabis products. Where they’d previously towed the line of “not gonna do anything until federal legalization,” Bill here echoed some of the bodler statements Rob Sands made back in June [see BBD 06-29-2018].
Bill believes there’s going to be a “big business” for weed worldwide. That’s why they partnered with market leader Canopy Growth, who has done a ton of research and “responsibility” work on the market, which is also valuable to STZ. But he also believes there “will be undoubtedly a market that develops in the United States; it’s already done so on a state by state basis here,” he said.
So: “There is a good expectation that we will be in a different place federally than where we have been in the recent past … in what could be fairly short order,” he elaborated. “So our view was there is a first mover advantage, there’s an advantage in a situation where brands can be created because we do believe this will be a branded business going forward and Canopy agrees …
“… That now is the time. Now is the time to be out front and create that opportunity for Canopy to continue with the market leadership they have in Canada, but also be prepared to enter other markets as aggressively as humanly possible where it’s legal.”
IMPORT SHIPMENTS GREW NEARLY DOUBLE-DIGITS IN JULY
Imports had a nice showing in July. Shipments for the segment were up 9% during the month, per recent Beer Institute estimates. And “each of the top five largest source countries increased” over the month, according to BI’s chief economist Michael Uhrich. Here they are:
Volume from Mexico grew by 9.5% during July
Dutch shipments jumped 13.2%
Belgian imports were up a whopping 23.5%
Canadian shipments grew a modest 2%
And Irish shipments jumped double digits, up 11.6%
With July’s solid performance now in the books, the YTD trend (again, through July) now stands at 5.5%.
BEER BRIEFS:
OHIO EAGLE SET TO ACQUIRE CLERMONT DISTRIBUTING. Ohio Eagle Distributing, an A-B shop servicing several counties in Southwest Ohio, has struck a deal to acquire Clermont Distributing, giving Ohio Eagle a firm grip on the Southwestern portion of the Buckeye State. The deal, which is expected to finalize next month, “will add 440 accounts to Ohio Eagle’s customer base and an additional 1.5 million cases of A-B products sold annually,” per company announcement.
BREWPIC: New Bud ‘n Beam combo ad in Florida Publix.
Until tomorrow,
Harry, Jenn, and Jordan
“You can’t make up anything anymore. The world itself is a satire. All you’re doing is recording it.” – Art Buchwald
BEER SUMMIT 2019 REGISTRATION OPEN. Join us for the 16th Annual Beer Industry Summit, January 27 – 28, 2019 at The Hotel del Coronado in San Diego, CA. We are offering an early bird discount of $200 off the full price if you register now. Speakers TBA.
Register here: https://www.beernet.com/beer_summit.php
Or give Jessica a ring at 210-805-8006. Looking forward to seeing you there.
———- Sell Day Calendar ———-
Today’s Sell Day: 4
Sell days this month: 20
Sell days this month last year: 21
This month ends on a: Fri.
This month last year ended on a: Fri.
YTD sell days Over/Under: 0
