A-B Branch Warehouse, Delivery Reporting to Corp Logistics


Dear Client:

"To deliver greater value to our customers and better leverage our logistics expertise, the warehouse and delivery operations at the Wholesale Operation Division (WODs) will begin reporting to Corporate Logistics, effective March 15th," writes A-B in a memo to logistics employees. A-B is creating a new position to support this new arrangement, called 2nd-Tier Logistics Director, who will run all branch logistics in the US and will have responsibilities for "Zone support function for 2nd-tier operations in Canada."

This is a further integration of A-B's company-owned distributorship operations into the brewery. Historically, A-B branches were largely run as independent entities. Today, they are clearly being integrated into the brewery, and this development, along with the integration of branch sales into brewery regional sales, seems to demonstrate that A-B is moving toward vertical integration -- at least with its own branches -- to save costs and streamline logistics and production.

This new position will be led by Joaquin Schlottmann, who is transferring to the North America Zone from the global organization. From 2002 until October 2005, Joaquin was based in Sao Paulo and was responsible for sales and distribution for all operations outside Brazil. In 2005, after the AmBev Interbrew merger, Joaquin moved to Belgium where he initiated the WCCP implementation in Russia, Korea, Belgium, the UK and Germany. Since 2008, as Global Wholesaler Director, he has been responsible for implementing Route-to-Market and Wholesaler Management best practices in the top ten AB InBev countries.

Volumes Down, Margins Up for ABI in Q4

It's a new quarter but the same old story for our biggest brewer. AB InBev's organic volumes were down 0.7% for the year in 2009, while EBIDTA margins expanded by 2 points. In the fourth quarter global beer volumes were up 0.7%. ABI has proven itself to be, once again and even in tough times, a margin machine. La Maquina strikes again. But it has to be tough when all regions lost volume except Brazil.

It was a very weak volume quarter for A-B. Anheuser-Busch posted fourth quarter US sales-to-retailers down 4.1% due to a "softer industry," with shipments down 2.2%, and full year STRs down 1.9%. Full year market share remains at 48.9%, "on par with last year." A-B points out that it was cycling tough comparisons with the intro of Bud Light Lime in mid 2008.

In the fourth quarter, shipments were ahead of STRs as A-B "continued to balance capacity utilization, this time with a shift in volumes from" the third quarter to the fourth quarter. The year 2009 showed "a significant reduction of out-of-pattern distribution expenses." ABI achieved a remarkable $1.1 billion in synergies in 2009. They expect another $500 million in 2010.

ABI's outlook for 2010 globally is positive, but with gains skewed toward the second half. First half US and Russian sales are likely to be a drag because of poor weather in the US and destocking in Russia.

ABI says it is focused in 2010 on reducing its $42 billion of remaining debt leftover from the A-B acquisition. More after the call.....

North Carolina Distributor Merger

Greensboro-based I.H. Caffey Distributing is merging with Cunningham Wholesale in Charlotte and Rudisill Enterprises in Gastonia to create the formation of Carolina Premium Beverage. All are MillerCoors distributors, while Caffey also has Yuengling and the others have Corona, among other brands. The merger will be effective May 1, 2010. The new company will be headquartered in Caffey's Concord location. Chris Caffey will serve as ceo while Lou Cunningham and Ben Rudisill will serve on the board.

NAB To Intro Blue Light Lime, Made in Rochester

North American Breweries' Labatt USA is introducing a new product, which it will own (not Labatt Canada), called Blue Light Lime, to be made in their Rochester brewery. The company says it is hiring 50 new workers and adding a third shift at the brewery.

The new product combines the Blue Light recipe of Canada-based Labatt Brewing Co. Ltd. with a lime flavor created by Genesee Brewing. "Blue Light Lime is a proprietary new product that we own," said chief Richard Lozyniak. "In order to bring it to market quickly and quietly, the best and most confidential route was through our own brewery." The new brand will be available in the northeast next month.

Labatt Blue and Blue Light continue to be brewed in Canada, said Rich. "The Canadian heritage of the beers is critical to their success. Our plan is, and has always been, to brew them in Canada. Blue Light Lime is a very different scenario, where we wanted to quickly bring a new product to market."

Until tomorrow, Harry

"Every man has his follies - and often they are the most interesting thing he has got."
-Josh Billings

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