Truth Squaders Speaketh

FILED MAY 12, 2010

Dear Client:

These are my favorite issues of BBD. Not just because our readers are the best and brightest in the industry and offer truly unique perspectives on the latest beer news, but because I get to take the day off (sort of) and turn over the BBD platinum keyboard to you. Emails from you are like getting little daily tablets from Mount Sinai. So while I'm heading to a pub for the rest of the afternoon to catch up on my market research, here are the best opinions on recent issues of Beer Business Daily:

ON A-B's NFL DEAL.

Strong opinions on both sides of this issue. Most non-AB distributors were apoplectic at the mere insinuation that A-B's $1.2 billion six year NFL tie-up was anything but a disaster, although a few regret losing it for Coors Light. Here are a few representative comments.

"Did AB Inbev really win? So if MillerCoors takes the $42 Million per year they ultimately offered and invests it into some intriguing and fresh TV ads for their priority brands every year, I'd rather go to that dance." -A. Distributor

"Harry, are you completely out of your brilliant but sometimes stupid mind??!! Spending over a Billion (that's million with a B) Dollars to sponsor one sports league when you already have most of the teams locked up is nothing short of insane. The passion is with the teams, not the league. You know what else you could buy with $1.2 Billion? Yuengling and New Belgium combined, and maybe throw in Gambrinus as a kicker." -A. Distributor

"Peacock and Levy have wanted back into the NFL for a long time. Sure it was expensive, but when you spread it over all those Bud Light cases, it's cheaper per barrel than MillerCoors was paying for Coors Light. And Bud Light could sure use the volume lift and exposure at retail..." -A Distributor

"They own football now. When you own football you own weekend beer sales for half the year. We might as well write off the Fall and Winter. Thank god we sell most of our beer in the summer." -A. Distributor

ON ILLINOIS SAYING A-B's ACTIONS WILL CRATER THREE-TIER.

This issue is one that distributors are very heated on, and I don't think the brewers quite get how heated they are (both red and blue-silver systems). A-B has consistently and repeatedly said that owning their Chicago distributor is a localized issue and not a signal that they plan to take over distribution wherever they can. But that hasn't tamped down many distributors' uneasiness as to why A-B is going to such expense to fight their way into holding an Illinois license. Regardless of the passions, what happens in the Illinois case could have ramifications on future case law. Will they win? That's very tough to handicap because you never know how judges will rule, but I give them north of a 50-50 chance. What are you saying? Here you go:

"AB-I is going down a rabbit hole and they don't know where it leads it seems to me. Comparing little wineries trying to get to consumers in Granholm to a huge brewery trying to hold a wholesale license in one of the biggest markets is like comparing oranges to orangutans. It's a big, big expansion of Granholm." -A Distributor

"I trust Peacock when he tells me there's no evil master plan in Belgium to flatten us. He's done nothing to lead me otherwise. But who knows what's going on in the minds of the bigwigs above him, ie Brito and Friends." A. Distributor

"ABI wants branches and MC doesn't. There's a conflict there. I wouldn't be surprised if they break ranks at some point....." A. Distributor

ON LABOY'S ANGLE ON THE HEINEKEN / CCM DEAL

Carlos Laboy isn't afraid to rattle cages. And he always brings a unique perspective to conventional thinking -- the conventional thinking in this case being that Heineken bought CCM for a steal from under SABMiller's nose. Many of you expressed surprise at the limited ten year time frame for Oxxo exclusivity. Competing analysts to Carlos, speaking on background, point out that Heineken really had little choice if they wanted to get this deal done. Oxxo was never for sale, and the Femsa controlling families had a strong preference to cut a deal with Heineken, a family run firm like theirs that they already had a strong relationship with. They can now be the number two shareholder in a family brewer with strong heritage ties rather than a number three (or four) shareholder in SABMiller, which has a more corporate structure. And of course, Carlos' thesis assumes ABI manages to close on all of Grupo Modelo, an assumption that seems to be hung up on something, as the arbitration is clearly delayed and they haven't been able to come to a deal. Why? One would assume that US antitrust issues come into play here. Sell Natty franchise and a brewery to take on Crown? Bring on KKR. But that hardly seems like a solution. So here I am saying I'm leaving this issue to you and yet I'm droning on and on while the pub waits. Back to you:

"Heineken and CCM are tighter than people think. I just don't see them [Femsa] doing that to them [Heineken]." A. Distributor

"Harry, whether it was a good deal or not, I'm just glad Heineken got the deal done for the sake of their US business. With the Heineken/Amstel business doing what it's doing, they had no other choice but to keep the CCM brands." A. Distributor.


BEER BRIEFS:

MOLSON COORS named its Chief People Officer Ralph Hargrow to the MillerCoors Board of Directors. Hargrow is replacing Dave Perkins, who was appointed President and Chief Executive Officer of Molson Coors Canada.

THE WINE INSTITUTE very shrewdly awarded House speaker Nancy Pelosi with their annual leadership award, just as they were on the Hill lobbying against H.R. 5034, the Care Act. Pelosi described California wine as "a product of our soil, a reflection of the sunshine, and an expression of the best California has to offer."

Until tomorrow, Harry

"Whenever the people are well-informed, they can be trusted with their own government."
-Thomas Jefferson

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