THANK GOD IT’S OVER
“The Worst Quarter in Memory”
As distributors wrap up their sales reports for Q1, many are reporting that this was the worst quarter for beer sales in recent memory. While Jan and Feb were riddled with bad weather on the east coast, Midwest, and Texas, March was even worse with Easter pushed into April this year, a lackluster St. Patty’s Day falling on a Monday, a depressing economy and a war keeping people indoors.
Q1 FORECAST. Look for Coors STRs to be flat to down 1% (with shipments down even worse considering distribs beefy inventory going into the quarter), Miller to be down mid-single digits, and A-B flat to up 1.5%. Despite tough quarter for everybody, imports still flying, particularly Heineken on the west coast and Corona everywhere. While Corona has seen some recent volume softness in retail scans, don’t forget that last year’s pre-price increase load in gave the brand tough comps.
ON-PREMISE WILL BE TOUGH. On-premise sales will continue to be sluggish as the wartime CNN/Fox News factor hogs the crucial evening hours. Soft economy also has an effect on how much people are going out. Look for brewers to watch their pricing closely, particularly the price gap between imports and domestic premium beer. It’s getting mighty thin, although we hear Heineken will be introducing an increase soon which will provide nice cover and peace of mind to brewers of domestic premiums.
COORS SHOWS NEW ADS AT SALES CONFERENCE. Coors showed distribs some great new spots at its annual sales meeting last week. Coors will continue its “Rock On” and ads some new funny spots, particularly “Wingman.” Coors at least acknowledged that it may have alienated women with Twins and so showed a “Here’s to Women” spot. Askew hinted that Coors needed to hedge against being overly sexual in their ads, although several of the ads still had innuendo. One distributor told Beer Business Daily: “If Coors sold beer with SEX last year, they sell beer this year with sex in lowercase letters.” Distributors who spoke with Beer Business Daily all liked the creative and believe Coors is on the right track (although compared to last year’s blockbuster energy-filled intro of Twins, this year was comparatively tame).
COORS GETS IT. Several distribs said “Coors gets it,” meaning they are eager to provide the pull with good advertising. Coors also will execute their NFL promotions better this year as they will have more planning time. Distribs bullish on Coors, although the brewer still has issues in Texas and Florida. Meanwhile Coors squeezed its way onto the Fortune 500 list with its Carling acquisition, ranking at 422.
TTB ADMINISTRATOR: “WE WILL HAVE AN ADVERTISING BRANCH.” Looks like the raunchy beer ads have finally caught the attention of the feds. TTB Administrator Arthur Libertucci told a group of on-premise beverage licensees in a speech in Las Vegas last week that the TTB has taken note of the “tone and content of recent TV advertisements for alcohol beverage products, including beer.” He said the TTB plans to take a “more proactive stance on enforcing advertising regulations and we will have an advertising branch that will pay close attention to national advertising campaigns, TV ads and print ads in nationwide publications…We will continue to work with the suppliers and urge them all to do the right thing, to advertise responsibly.” This is one to watch.
A-B TO BORROW A COOL $2 BIL. A-B registered to sell up to $2 billion in debt securities, according to a shelf filing Friday with the SEC. The company said it intends to add the net proceeds from the sale to its general funds and use the proceeds for general corporate purposes, including working capital, capital expenditures and repayment of borrowings. You’ll recall that Diageo also plans to issue about $2 bil in bonds. Are acquisitions in play? Naw, it’s probably more of a factor of cheap money. Interest rates are so low that it pays to borrow as much as you can even if you don’t need it.
HOW TO COMBAT STATE BEER TAXES? Demonstrate that they don’t raise revenue for the state. Jay Goldstein, president of the Pennsylvania Beer Wholesalers Association, stressed to a Penn newspaper last week that while beer taxes may look good on paper, they kill beer sales and therefore kill tax revenue. He pointed out that the 1991 federal tax increase drove up prices and the industry lost about 5 percent of its customers for the next three years, he said. “It touches on everyone, all the way to the consumer,” Jay was quoted as saying. “But it’s not going to produce the kinds of funds they are hoping for.”
SABMILLER HOSTS JOURNALISTS IN NYC, CHICAGO. SABMiller hosted a press junket for business journalists in NYC and Chicago last week to educate writers on beer tasting, its health benefits, and the history of SABMiller. Several execs from South Africa were in attendance, including their master brewer. I attended in Chicago . Did you know that SABMiller is one of the world’s largest Coke bottlers? Now you do.
BUT ONE CURIOUS EVENT has unfolded in the hours after the junket, as one of the PR firms that helped organize it essentially fired SABMiller. Cubitt Consulting of London issued a press release announcing that it could no longer work with SABMiller, citing “policy disagreement over international media relations activity.” What that could mean is anybody’s guess. The Guardian says the decision to quit is “believed to have been taken over the presentation of a substantial issue in the media outside Britain .” It’s rare that a vendor fires a client, particularly such a large and rich one. Bizarre it is.