The New and Improved Brito

Dear Client:

BRITO TRIES ON NEW MANAGEMENT STYLE

“Amid soft sales, a costly and complex integration with SABMiller, uneven currency exchanges, market share losses in its largest market, a stock price down 38%, and most of all a crippling $105 billion debt load that reduced their Moody’s rating just a few steps from junk and forced them to cut their dividend in half, ABI came limping into 2019 like a big grizzly bear with arrows in its back — still a huge force to be reckoned with, but weakened.”

That was our lede on January 14th, describing Brito’s challenges coming into 2019, entitled “Brito Claws Back“.  As it turns out, just a few weeks earlier on a conference call with top managers, he told them to “simplify their priorities and home in on their two most important targets: growing revenue and deleveraging,” according to the WSJ.

For him, that meant looking less at numbers and shortening meetings.  It also meant putting more marketing people in top positions, and diversifying leadership that was predominately male and Brazilian.

La Máquina, as we affectionately refer to him, also started exploring ideas outside the company, like at Harry’s.  No, he didn’t seek my counsel (though he could do worse), but the online razor company. He also got a three day crash course in AI, robotics, and blockchain.   “Now it’s time to scale up. Enough of pilots; enough of small initiatives.”

But if you thought La Máquina was done with cost cutting as zero-based budgeting falls out of favor, think again. “I’m not saying we’re cheap,” he told the Journal. “I’m saying we’re frugal. If you discover a part in your house that the light was always on, you’re going to turn it off, and maybe it took you two years to discover that, or a technology now allows that … the light goes on only if there is a stranger approaching.”

Brito is also looking to be a disrupter with their ZX division. Key example is the Keurig home cocktail maker. “That’s a disruptive way to go into hard liquor, spirits, right?” he said.  “You’re not trying to come with a big brand, compete with existing brands, you know, that have millions of dollars in support. You’re saying, no, I’m trying to solve a customer problem.”

A-B FILES MOTION TO DISMISS CORNGATE SUIT

Last week A-B filed its response to the MillerCoors suit over “CornGate.”

No surprise: It’s a motion to dismiss, “for failure to state a claim upon which relief can be granted.”

Recall  that MillerCoors is suing A-B over its Super Bowl ads needling Miller Lite and Coors Light for using Corn Syrup, where Bud Light does not.

MillerCoors claims these ads amount to deceptive advertising, and that they are suffering irreparable harm, having sought an injunction against the campaign [see BBD 03-21-2019]. The company contends that these ads meant to purposely create confusion with consumers, “particularly women,” as they would conflate corn syrup with high fructose corn syrup.

But A-B says the truth is their defense. In its lengthy memorandum in support to dismiss the suit, it succinctly says, of the count of deceptive advertising:  “MillerCoors concedes its beers are brewed with corn syrup,” and so, “such truthful advertisements do not violate the law.”

Where MillerCoors’ second count claims trademark dilution, says A-B’s memorandum: “The Lanham Act … does not forbid a competitor from using a rival’s mark to describe products in comparative advertising. For

these and other reasons, the Complaint should be dismissed.”

INJUNCTIVE NOTHIN’, SAYS A-B, WHO CONTENDS MC NOT THAT HARMED, PER ITS OWN MESSAGING.  In another document, a 50-page brief in opposition to Millercoors’ motion for prelim injunction, A-B says they have “failed to make the necessary showing to warrant the extraordinary remedy of a preliminary injunction.”

Why? One biggie: “MillerCoors’ motion offers a series of legal arguments that are contradicted by its own prior conduct and its current public statements.” In a nutshell: “After acknowledging that corn syrup is used as an ingredient in Miller Lite and Coors Light, MillerCoors asserts to the Court that it is misleading for Bud Light to identify corn syrup as an “ingredient.”

Further, where MillerCoors says it’s misleading to say its beers are “made” or “brewed” with corn syrup, A-B says the company uses “those precise

words itself.”

Further, “MillerCoors also contends that it will be irreparably harmed if consumers learn that Miller Lite and Coors Light have corn syrup as an ingredient even though it has told the marketplace that it has benefitted from the ads.” In its Behind the Beer blog, for example, MillerCoors has said that Miller Lite actually has picked up share among total beer since the new A-B campaign.

Thus, “it is impossible to square MillerCoors’ suggestion of irreparable harm with what it is telling consumers and the market.”

MILLERCOORS’ ANSWER. MillerCoors VP of communications Adam Collins issued a statement after A-B’s motion.

“We are very confident this routine motion will be denied, in part because an executive of Anheuser-Busch has openly admitted their campaign was designed to mislead the public. We are looking forward to making our case in court to stop Anheuser-Busch from confusing consumers by fearmongering over a common beer ingredient – one they actually use in a number of their own beers.”

MillerCoors’ motion for a preliminary injunction is set for a hearing in the middle of May.

We’ll keep you posted.

A-B VET TONY SHORT, NEW CANARCHY CEO, WILL HELP LEAD THE COLLECTIVE TO THE MILLION BARREL MARK

As CBD reported yesterday, A-B vet Tony Short is joining the leadership of CANarchy, the Fireman Capital-backed consortium of craft brands, including Oskar Blues, Perrin, Squatters, Cigar City, and more.

Tony spent 24 years formulating and executing wholesaler strategy at A-B, “honing distributor relationships, and gaining invaluable beer industry knowledge,” per company announcement. He eventually became VP of business and wholesaler development.

That deep knowledge of the middle tier, and his relationships within, will serve CANarchy well as it looks to add partners and get to a million barrels in the next couple of years, CANarchy president Matt Fraser told BBD.

In fact they’re already at a run rate of 500,000 barrels for the next 12 months, he said. That’s having finished 2018 at about 421,222 barrels.

“We’ve grown so rapidly,” Matt said, and they’re “pretty lean” at the top. Getting to “the next stage” — that 1 million barrel mark — means adding to that leadership team.

And Tony’s distributor experience will be valuable for keeping distributor share of mind, we suggested.

“Absolutely,” said Matt. That’s “huge.” But, already, in seven of their top eight distributors, “we’re the no. 1 or 2 biggest craft supplier.”

“Tony’s got fantastic, deep relationships with a lot of our distributors,” says Matt. So he’s adding to their focus there.

And what about new partnerships? Matt said the collective has “varying gaps” in areas like the Pac Northwest, the Chicago area, and in the Northeast. Their strategy is “to really be as local as possible in as many markets as possible,” Matt said, but they look for “good people, good brands,” and “the utmost quality” in potential partners.

Until tomorrow,

Harry, Jenn, and Jordan

“For beautiful eyes, look for the good in others; for beautiful lips, speak only words of kindness; and for poise, walk with the knowledge that you are never alone.”  -Audrey Hepburn

———- Sell Day Calendar ———-

Today’s Sell Day: 15

Sell days this month: 22

Sell days this month last year: 21

This month ends on a: Tues.

This month last year ended on a: Mon.

YTD sell days Over/Under:  0