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Beer Insights Extras

Extra beer business news, thoughts and insights from the publishers of Beer Marketer’s Insights, Insights Express, Craft Brew News, Beverage Business Insights and Alcohol Issues Insights.

#TBT - Beer Stocks in 2008 vs 2013

In today’s INSIGHTS Express we wrote about continued growth of beer stocks in 2013, including the immense success of Constellation and Boston Beer.  For a throwback we decided to look at an article we published in Jan 2009 about beer stocks the previous yr to see how 2013 stacked up against 2008 - when US beer volume reached its highest point ever.  Sales don’t always equate to higher stock prices, as we wrote in article dubbed “Tuff Yr for Beer Stocks Too,” in our first Insights Express issue of 2009.  Of course, this was in midst of the economic downturn, so stocks were down in most industries.  Now 5 yrs later, we’ve seen volume declines in 4 of last 5 yrs, yet  increased $$ sales and increased stock value.  Interesting to see how far many of these stocks  have come in just 5 yrs.  Take a look at the article below:

 

Tuff Yr for Beer Stocks Too (published Jan 5, 2009)  Beer industry stocks declined in 08, tho several did better than major indexes (S&P down 39% for yr, London exchange down about 2/3).  MolsonCoors stock price slipped 5.2% in 08 after 37% surge in 07.  SABMiller dropped 18% in 08, but has actually surged by almost 60% from its Oct lows.   Meanwhile, AB InBev sunk down to 10 Euros at its low, but since jumped back to over 17 Euros.  That’s still less than half its 08 peak (adjusting for new shares).  Heineken stock dropped 50.5% in 08 too; it had gained 23.7% in 07.  As for other alc bev stocks, the largest, Diageo, dropped by 34%.  And largest vintner (as well as half owner of Crown), Constellation Brands also fell by 1/3 to $15.77 in 08.  But it too surged 60% from Oct lows.   Craft brewers had rough 08 in mkts.  Boston Beer stock off 24.6% to $28.40 and Craft Brewers Alliance stock dropped 82% to $1.20 after closing 07 at $6.65.   So-called “vice” stocks, like alc bev, tobacco and gambling cos, are “often touted as great investments during economic downturns,” wrote Biz Week in article titled “Are Vice Stocks Losing Their Allure?”  In this downturn, “the naughty are still waiting for their reward.”  Biz Week concluded: “It remains to be seen if alcohol, tobacco and other vices continue to prosper as affordable luxuries for many people. Or if, desperate to cut costs, consumers decide to clean up their act.”  

 

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#TBT - Beer Wholesalers Have a Friend in Judge Sotomayor (5/29/09)

Beer Marketer’s INSIGHTS and our sister pubs have included scads of articles about the 21st Amendment over the years.  Most have probed whether this or that legal or policy decision supports or weakens states’ rights to regulate alc bev biz under the 21st Amendment, which ended Prohibition.  Modern debate got kicked off by vintner’s/consumers pursuit of direct shipping the product to consumers’ homes, bypassing wholesalers and retailers.  Many in industry viewed this as weakening states’ regulatory authority/oversight of the biz.  Over the years, debate over scope of states’ rights under 21st Amendment has occurred in US Supreme Court and other federal and state courts, not to mention numerous industry panels on deregulation, different business models and other policy questions.

In honor of Repeal Day, on this 80th anniversary of the end of Prohibiton and the ratification of the 21st Amendment, here's an article from a 2009 edition of Insights Express that re-examined a 2004 US Court of Appeal decision (later overturned by Granholm case) on the occasion of Judge Sotomayor's nomination to the Supreme Court.  Enjoy.

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Beer Wholesalers Have A Friend in Judge Sotomayor (published May 29, 2009)

Her views on the 21st Amendment vs. Commerce Clause may not be the hottest topic surrounding the nomination of Judge Sotomayor to the US Sup Ct, but distribs gotta remember she’s a fan of states’ rights under 21st Amendment.  A big fan.  Judge Sotomayor was part of 3-judge panel in US Ct of Appeals for 2d Circuit that upheld NY restrictions limiting direct shipments from out-of-state shippers.  That decision later reversed by US Sup Ct in Granholm, but it included some of the strongest language on record in favor of 21st Amendment’s grant of states’ rights to regulate alc bevs.  From beginning to end, judges embraced uniqueness of alcohol’s legal status in US.   Second paragraph of decision starts: “The 21st Amendment is unequaled in our constitutional experience – it repeals one constitutional provision and creates an exception to another.  The Amendment was not a narrow legislative delegation of federal authority; it was the will of a nation speaking through its constitutional process.”

The judges questioned analysis of other circuit courts in direct shipping cases that first determined whether laws violated dormant Commerce Clause, then whether 21st Amendment “saved” them.  This approach “is flawed because it has the effect of unnecessarily limiting the authority delegated to the states through the clear and unambiguous language” of 21A, 2d Circuit wrote.  Inquiry in these cases, judges wrote, “should not allow” Commerce Clause to “subordinate the plain language” of 21A.

As distrib advocates have argued for yrs, panel acknowledged that those who drafted 21A did so specifically “to allow states authority to circumvent dormant Commerce Clause protections, providing that they were regulating the intrastate flow of alcohol.”  That’s why they decided that NY’s law -- recall it forced out-of-state wineries who wanted to ship direct to set up bricks and mortar within the state – “falls squarely within the ambit of section 2’s grant of authority.”  Regarding that requirement, the panel concluded succinctly: “Presence ensures accountability.”  That presence requirement raises costs, they acknowledged and would “create substantial… problems” if it involved any product “other than alcohol.”  Here’s the kicker: “But business efficiency must give way to valid regulatory concerns in this unique area of commerce.”   A final hug: “Changes in marketing techniques or national consumer demand for a product do not alter the meaning of a constitutional amendment.”

This is the kind of language that distrib advocates would love to resurrect in legal strategies going forward.  Having someone on the US Sup Ct who has already signed off on it (Judge Sotomayor did not write the opinion) can’t hurt their cause.  Note: INSIGHTS was prompted to return to the 2d Circuit’s 2004 opinion after reading about Judge’s Sotomayor’s involvement in the case in Mark Brown’s Daily Industry News update this morning.  His source: www.fermentation.typepad.com, a pro-direct shipping site.

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Latest Relaunch: Drewrys Returns to Midwest Market

As 2013 continues, we keep seeing more revivals of once-lost brands.  The latest in this line is Drewrys, which closed up shop back in the early 1970s.  Chicagoland-based private investment firm Appletree Capital has relaunched Drewerys and started contract brewing in Lacrosse, Wis (likely at City Brewing, a common contract choice there and elsewhere), according to Crain’s Chicago Business.  Three brands debuted at the annual Brewfest in South Bend, Ind last month.  A spokesman for the brand explained that “retro beer is kind of coming back and there’s a lot of interest in that.”

 

Back on June 26, the following article appeared in Insights Express to catch readers up on similar brand re-introductions.

 

Legacy Brand Relaunches and Regional Brewery Revamps

 

Investors seem to be increasingly banking on historical and local cachet of a host of regional brands and old brewery buildings recently.  Narragansett ceo Mark Hellendrung expects to sell a million cases of ‘Gansett in 2013, he told the Boston Globe.  Other brands are turning to a craft-like “reinvention,” like Berghoff, which announced a lineup of newly-formulated beers including a seasonal Belgian wit and hoppier red ale that it’s peddling in Ill, Wisc, Mich and Ind and brewing at Stevens Point in Wisc.  If a brand isn’t getting a face-lift, the building that housed it just might be.  Recall that a new Christian Moerlein Brewing set up shop in one of the brand’s old Cincy buildings in 2010.  Another spot in the brewery complex is now occupied by brand-new Rhinegeist Brewing and a third company is also brewing in the area, according to AP.  In the late 1800s, that area of Cincy, called Over-the-Rhine, was home to 18 brewing cos.  A century later it was named America’s most dangerous neighborhood.  This month, Cincy City Council approved a plan that seeks to help solve OTR’s problems by making it a brewery district, hoping to attract other brewing cos.  Elsewhere, possible resurrection of old Oly brewery in Wash also in the news this week because a requirement barring production of alcoholic beverages at the site, instituted when Miller vacated the spot in 2003, has been lifted, according to Olympian.  Current landowners are hoping a new tenant will come in, use some of the space to brew, and the rest to build out retail, office-space and perhaps residential space too.  And startup Flat Earth Brewing moving into the old Hamm’s site in St Paul, Minn, earlier this mo.

 

(This article originally appeared in Insights Express vol 15, no 80 on June 26, 2013.  Subscribers with active Archives access can view and search previously published material at their leisure.)

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The Future of Crown: Especial, Draft, Piedras Negras

Insights Express vol 15, no 115 just went out to subscribers.  In it we examine two very different outlooks on the US beer industry: AdAge’s take on the “grim, but not irreversible” situation for big brewers and Santander’s big expectations for AB Inbev earnings in 2014.

Readers will also find notes on Crown Imports’ “Past, Present and Future,” based on Tom Wyness’ presentation at the Supply Chain and Operations Leadership Conference last week, held by Tamarron Consulting.  During the presentation, Tom reminded the audience of a number of factors impacting Crown’s future that we’ve written up in our various beer business publications before.  Among them:

- Modelo Especial: “Next year could be a big, big year” for the brand, Tom said, as he expects it to hit 50 mil cases “very, very shortly” and believes it’s on its way to being the 2nd-largest import brand in the US.

- Draft: a “wonderful tool for sampling,” Crown plans to pay more attention to its draft business, still just a tiny segment of its overall volume.

- Piedras Negras: over the next 3 years (as the supply-agreement with AB Inbev runs out for US shipments of Modelo brands) Crown will spend $500-600 mil to expand the already-enormous brewery on the Mexico-US border from being able to produce 10 mil hl to 20 mil hl (over 17 mil bbls) every year.  The brewery was originally constructed as easily-expandable up to 30 mil hl.

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