Retailers See Improvement with Beer
Suppliers

FILED OCTOBER 8, 2009

Dear Client:

The numbers are in, and it's a rare glimmer of good news. The 2009 CM Profit Group annual retailer research report shows that there has been improvement across the board with nearly all beverage alcohol suppliers. You'll recall that CM Profit group surveys over 100 retailers each year on all major alcohol suppliers on a variety of parameters. E.J. Gallo Winery continues to hold the top spot among all bev-alc supliers, with retailers reporting comprehensive Category Management service and professional sales process as the reason why they continually score at leadership levels, says Tom Fox of CM Profit Group (and Beer Summit speaker/moderator).

Anheuser-Busch Inbev is a close second. MillerCoors shook off the transition blues of their JV and got scores higher than either company ever scored on their own. That's two of the top three suppliers being a beer company.

[Updated]. Constellation Wine settles in with the 4th spot, with Heineken USA and Bacardi in a virtual dead heat for the 5th spot. Diageo Spirits, Beam Global and Pernod Ricard are in a tie for the 6th spot. Among other beer suppliers Craft Brewers Alliance, Crown Imports, Mikes Hard Lemonade and Boston Beer are slightly lower than Heineken USA and are battling it out for the # 2 spot for High End beer suppliers.

While beer is still perceived as the # 3 beverage alcohol category behind Spirits (# 1) and Wine (# 2), beer had the biggest increase overall and is in a virtual dead heat with Wine for # 2.

Despite the improvement, chain retailers continue to indicate that there is a further need to improve in the areas of:

--understanding the retailer's goals, strategies and tactics
--developing presentations that both identify opportunities and offer up executional solutions
--developing promotional suggestions that are creative and help them drive traffic into their stores
--evaluating past programs (new items and promotions) to learn and improve the process going forward
--objectivity - retailers continue to be frustrated that most suppliers are not positioning their service to help them win.


A-B MEETING DOESN'T PROVIDE ANY BOMBSHELLS

As distributors filed into the Americas Center under a drizzling bleary sky in St. Louis on Tuesday, one could hear the murmurs and feel the general unrest: What bombshell would ABI drop on them now that they've had a year owning Anheuser-Busch. But unless you count them inking a deal with Lance Armstrong for Mich Ultra, the shelling never came.

One distributor said, "If they said it once they said it a million times, we are going to leverage our scale." That jives with our interview with Dave Peacock a few weeks ago: Scale is everything. And it makes sense: 50 share buys you a lot of seats at the table, and lets you chose which ones pay out.

Yes, Armstrong will appear in two television ads featuring the brand, and his image will be in outdoor, print and in-store advertising and possibly packaging. Lance spoke to distributors, saying he's not quick to jump on endorsements and tries to limit them due to time constraints, but Mich Ultra fits his lifestyle. "He's the perfect athlete to connect with adult beer drinkers who lead active lifestyles and also a balanced lifestyle," said marketing vice president Keith Levy to AP.


ABI SELLS BUSCH ENTERTAINMENT TO BLACKSTONE

Looks like our days of getting free SeaWorld passes are over. Anheuser-Busch InBev and The Blackstone Group announced today that ABI will sell Busch Entertainment Corp to Blackstone Capital Partners for "up to USD 2.7 billion." The purchase price will be comprised of a cash payment on closing of $2.3 billion and a right to participate in Blackstone's return on its initial investment capped at $400 million. The sale includes three SeaWorld parks, two Busch Gardens parks, and other entertainment attractions. (But the real question is whether ABI will get to keep the prime advertising real estate above the urinals saying SABMiller is foreign-owned).

This means that ABI is well ahead of their debt repayment plan. They had said they wanted to repay $7 billion in debt this year, and they have already succeeded in that. They also said they wanted to sell off $7 billion in assets, presumably to pay down the $7 billion in debt. Well, they are dang close to that as well. As the saying goes, don't bet against ABI, and apparently that credo still holds water.


COUPON REDEMPTIONS SKYROCKETING

As consumer goods companies fall over themselves to discount their wares, retailers have "gamely responded by sharing cost concessions," writes Nielsen. "But when retailers roll back prices en masse, two things happen: 1) no single retailer enjoys a competitive advantage from price cuts, merely maintaining parity with respect to traffic, and 2) category volume increases slightly, but not enough to offset the price decline."

Excluding beer, CPG package goods prices have nosedived in 2009, as prices went from being up over 5% to being up 1 to 1.9% starting in April. Last year's price leaders, according to Nielsen, became the biggest losers in 2009. Most economists agree that we can expect further contraction of the economy by approximately 2% for the remainder of 2009 and that waning consumer confidence will translate into less spending at retail and lower demand for manufacturers.

Coupon redemptions were up 23% for the first half of 2009. Coupons have shorter expiration periods, fewer multiples and flat values. The 80/20 rule still rules: 81% of units purchased with a manufacturer coupon were from just 19% of households.

BOTTOM LINE: So while consumers are looking for a bargain, the beer industry is taking an increase, which has some distributors worried about demand for premium beers, the bread and butter of the industry. If premiums can withstand the increase in this environment, then obviously the industry has been leaving money on the table for years. But if we see massive trade-down, look for a price button to be pushed at Super Bowl or Memorial Day.

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LESS THAN THREE WEEKS left to save $110 on your ticket to the Beer Industry Summit, which includes a craft panel moderated by Tom Fox of CM Profit Group, several leading execs from the big brewers and importers, a retailer panel, two beer receptions, a hot lunch, and a partridge in a pear tree. We have a nice resort booked (but inexpensive) near Pheonix called the Wildhorse. One distributor wrote of the Summit on our feedback form last year: "If I can only go to one event a year, this is the one. I was able to meet and speak to more top contacts [at breweries/importers] than at any other event I've ever been to." Check here for details: http://www.beernet.com/about_beersummit.php

Until tomorrow, Harry

"The way taxes are, you might as well marry for love."
-Joe Lewis

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THE BEER INDUSTRY SUMMIT to be held February 28 to March 1, 2010 near Phoenix at the Wildhorse Resort. More information here: http://www.beernet.com/about_beersummit.php

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