Crown up 7%, to Import Somersby Cider
Constellation to be Largest US Bev-Alc

FILED OCTOBER 5, 2012

Dear Client:

Year-to-date, Crown's Modelo portfolio is growing at a 7.2% rate while all other imports are up by 2.9%, and the overall U.S. beer market is up by 1.2%.

"The [fiscal] second quarter marks the 10th consecutive quarter that the Crown business has outperformed the U.S. beer industry and the import category," said chief Rob Sands on the conference call.

ON A-B/MODELO/STZ DEAL. "We remain excited about the prospects of owning a 100% of Crown imports as it will enhance our participation in the U.S. beer market which is one of the most attractive sectors in the beverage alcohol industry," said Rob. "This transaction represents a significant milestone in the history of the company and the next transformational step in the evolution of our business, as it will solidify our place in the U.S. beer market for the long-term. It will also make Constellation the largest multi-category supplier for beer, wine and spirits and the third largest total beverage alcohol company in the United States on a volume basis. The deal is progressing as planned and is still expected to close during the first quarter of calendar 2013."

NEW CIDER COMING. Not to be left out, Crown will begin importing Somersby hard cider (owned by Carlsberg) soon.

CROWN INCREASING DISRIB PER CASE MARKETING CONTRIBUTION

A few years ago Crown started advertising in high-profile programming, like the NBA, MLB and the NFL, increasing its media budget by 24%. "This direction has provided our rich portfolio the voice it deserves - along with the proper platform for continued success and growth," said Crown in a note to distributors, obtained by BBD.

So Crown is increasing their Distributor Marketing Contribution by a nickel per case (from $0.25 to $0.30) on Modelo products beginning January 1, 2013, and will increase that amount by $0.02 per case on January 1, 2014; and by $0.02 per case on January 1, 2015 (which will result in a marketing contribution of $0.34 at that point in time).

CIDER ON FIRE, BUT STILL SMALL

The cider market is growing by 66% in the second quarter, according to figures from Lester Jones at the Beer Institute. This gain in volumes brings year-to-date growth to 57% for the first six months of 2012.

Domestic cider is up 72% while imported cider is up 20%. Still, cider is only about a 6 million case equiv yearly market. My favorite beer brand, Bud Ice, is by comparison larger than the entire cider market. But the margins are good and it's growing like crazy, so this is the category to watch. Greg Hall (former Goose Island brewmaster, now cidery owner of Virtue Cider) is all over the press -- spotted him featured in the American Airlines magazine even -- the Johnny Appleseed of our time.


CONVENIENCE, VARIETY, COLD, IMPORTANT

According to a recent survey of alcohol consumer behaviors in the United States, among all weekly beer drinkers, low prices on major brands (74%) and a large selection of major brands (68%) are the most important factors when choosing a store to buy beer, after convenient location at 84%, according to a survey of consumers conducted by our friends at Consumers Edge Insight (whose chief, David Decker, will be speaking at our Beer Summit in January).

Having a large selection of cold beers is also very important, cited by 70% of beer drinkers. Among all weekly beer drinkers having low prices and a large selection of craft brands are of secondary importance (54% and 51% respectively), not surprising given the smaller size of the craft segment.

However, among weekly drinkers of craft beers, the criteria for choosing where to buy beer are quite different. Having a large selection of craft beer is just as important as having a convenient location, each cited by 81% of craft beer drinkers. Offering the lowest prices on craft beers is important to 76% of them. However, a retailer's mainstream beer offerings are still very important to the vast majority craft beer drinkers (81% of whom also consume other segments of beer at least once a week). 69% of craft drinkers say a large selection of major brands and 67% of them say low prices on major brands are important, says Consumers Edge Insight president David Decker.

"Retailers need to balance the needs of different segments of beer consumers," said David. Competitive prices and large selection of major beer brands are important to nearly all beer drinkers, along with a large selection of cold beer. However, craft beer drinkers place such a high value on a large selection of craft brands that retailers that can make their stores destinations for their large craft beer selection may find that they don't to be as price-competitive with other retailers on those craft brands.


PIPING ALL HANDS:

ESTABLISHED well-respected brewery is seeking a National Accounts executive for the Southeast. Qualified folks, send resumes to admin@beernet.com and put "Catman" in the subject to be considered.


Until Monday, Harry


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